Analyzing the Impact of Globalization on SMEs and Global Business

This essay provides a detailed analysis of the impact of globalization on Small and Medium Enterprises (SMEs) and international businesses. It begins by defining globalization and its influence on various aspects of business, including the economy, environment, and society. The essay highlights h...Read More

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Introduction
Globalization has become the main factor in the present business world. This
phenomenon impacts the business life, economy, environment and society in different ways. Due
to global changes in the currents world, change in economic and business activities, political,
transport and communication and development of technology force enterprises to struggle for
survival by changing their strategies and going beyond their borders. Globalization is termed as a
natural process that results from the growing and rapid process of generalization of the character
and process of production. It is a worldwide trend whereby economies in different continents go
cross borders to connect with each other. An organization is no longer limited within their
borders and can implement several business activities globally. However, the entrance of firms
in the global market is inevitable because of globalization. This essay discusses the impact of
globalization in SMEs and other companies in general.
Globalization has enabled SMEs to access the global market. The SMEs were not able to
access the global market for lack of internet connection. The internet connection hindered SMEs
to access buyers and suppliers across the world (Uhlaner, et al., 2013, pp.593). Now every
customer can access different products or services being sold using a smartphone. This increases
the revenue of any small business beyond what they were able to produce before globalization
took effect (Wirtz, Tuzovic and Ehret, 2015, pp.571). Networking and internet have made it
easier for SMEs to compete globally due to the flow of information despite the physical location
of the seller and buyer. Additionally, globalization allows international companies to hold
meetings from headquarters and branches among managers relieving them travel expenses and
time.

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Globalization has led to competition among SMEs and international companies.
Companies enter global strategies to maintain or gain a competitive advantage in foreign markets
and to evade competition in the local markets. International competition is big and is growing at
a faster rate with more multinational competitors who win markets worldwide (Chen and Zhang,
2013, pp.43). SMEs and other companies enhance their competitive position by stopping
competitors in international markets or premature entrance into the domestic market of their
competitors in order to suppress its development. The increase in speed and prevalence caused
by globalization opens opportunities for the companies to perform on the international markets.
The managers, therefore, come up and develop strategies for internationalization that helps them
to transform their firms into globally competitive enterprises (Olimpia and Stela, 2017, pp.31).
The managers seek to link the supply, marketing, production and other activities based on the
international markets. SMEs and other companies face challenges and pressure when they
compete globally which requires the companies to cut costs to prevent consumers from regarding
their services and products as too expensive. The companies in the developing countries are
forced to locate production facilities in areas where production costs are lower. For SMEs and
other companies in developing countries to preserve the tastes and preferences of customers,
there should be differentiation of products, distribution channels, government regulations, and
management of human resources. The tactics and strategies for differentiation of services and
products in local markets create extra costs which can lead to increased costs for the company.
Globalization in developing countries has led to the development of markets.
Communication and information technologies, widespread cultural exchange, international
tourism development, along with improved living standards in most developing nations have
resulted to the emergence of a group of customers in different regions and countries (Palacios-

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Marqués, Soto-Acosta and Merigó, 2015, pp.27). The different regions and countries share the
same purchasing power, lifestyle, educational profiles including dreams for high-quality
products. This, with the combination of liberal trade and availability of global distribution
channels paves way for great opportunities for SMEs and other organizations that want to offer
their services and products to the global market. There is a large market potential outside the
local market hence SMEs and other firms go out on the foreign markets to generate sales and
grab opportunities for profit which cannot be realized at domestic markets.
Another impact of globalization is the availability of remote staff. In the past, SMEs and
other companies in developing countries used to have physical staff only. Thanks to
globalization since employees can work in an office from any part of the world. Example
employees may be carrying out the same tasks but in different regions of the world but
coordinate their duties through the internet (Ford and Håkansson, 2013, pp.1019). They can carry
out a conference meeting and discuss ideas from different parts of the word. In addition,
companies can have digital marketing agencies which conduct marketing strategies away from
the headquarters. This has given SMEs flexible and reduction in cost while raising their revenue.
Globalization has led to foreign investment. Foreign investment provides capital,
resources, and technology to a country that will support the economic development of the host
country. Foreign investment leads to employment both directly and indirectly. However,
developing countries use specific or general trade policies to be less or more welcoming to
foreign investments (Bloom, et al., 2014, pp.2863). Globalization has also created employment
where work such as software development, accounting, customer support, marketing, and
insurance are offered to developing countries. People from different parts of the world are
provided with job opportunities globally (Castillo, et al., 2014, pp.391). Developed countries

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prefer giving jobs to developing countries since costs are cheap. Most developing countries lack
capital for development which hinders the growth of local industries and hence low employment
rates. Therefore, the global nature of businesses has enabled developing countries to obtain
gainful employment opportunities.
Globalization has acted as a business equalizer. Both the developing countries and
developed countries have become a bit more equal. The internet gives both SMEs and other
developed companies a business access to business information and marketing tools and any
other tool that can make them competitive, larger, and more established companies. An example
is the introduction of Uber and other technologies in developing countries. Globalization has
made the business world more equal making small businesses to gain popularity where they
would not have been able to before.
Globalization has led to expenses in the business world. The common drivers of
globalization are global consumer habits, rising development costs, and trade liberalization,
pressure from foreign competitors in the domestic market, need for economies of scale, and
development of information and communication technologies (Trigueros-Preciado, Pérez-
González and Solana-González, 2013, pp.109). Because of the desire to introduce investment in
research, new products, achieving economies of scale, development, and innovation, reduction in
costs and cheaper raw materials; firms are forced to organize activities considering the global
market. This explains why firms decide to situate production activities in nations where the cost
of developing and producing goods and services are smaller.
Globalization can negatively impact small SMEs in developing countries because of the
opening borders. This leads to mass immigration which means that the country suffers the loss of

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its best business talent. This leaves SMEs with smaller sources of human resources to choose
from. More so, the international business climate has also risen due to globalization (Love and
Ganotakis, 2013, pp.13). The enhancement of communication and information technologies have
imparted to the process of globalization and also provided instruments that facilitated the process
of globalization. Markets that are coming up also recognize the technological, economic benefits
and growth opportunities that globalization provides them.
Globalization has negatively impacted the developing countries and other developed
countries. It has caused environmental damage because of the high rate of production among
SMEs and other companies to meet the daily growing global demand (Ivars and Martínez, 2015,
pp.1465). When production is high, more natural resources are put to use and they can be used
up before the regeneration of others. The rules and regulations in developing countries on
environmental protection are not strict compared to the developed countries. This implies that
some of the multinational companies set up other companies in developing countries to take
advantage of the situation in developing countries by manufacturing products that are harmful to
the environment.
Job insecurity is another negative impact of globalization. The risk of job insecurity is
increasing in developed countries hence globalization has led to companies outsourcing jobs to
developing countries (Lange, 2013, pp.1107). This has resulted in fewer jobs in the developed
countries. Outsourcing happens because businesses need to manufacture their products at a
cheaper rate where the manufacturing wages and costs are lower than more developed countries.
Conclusion

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Globalization has negative and positive impacts on SMEs and other companies. People
want what is good to outweigh the bad but long exposure to globalization is something that
businesses cannot evade. Globalization has positively impacted SMEs and other companies in
developing countries positively in the following ways; access to global market through internet
connection where SMEs can access buyers and suppliers has led to competition between SMEs
and other international companies, and development of markets through communication and
information technology. Globalization has also led to the availability of remote staff which has
enabled employees to work from any part of the world. It has also led to foreign investment
which provides capital, resources, and technology to the country where investment is being done.
Additionally, globalization has acted as a business equalizer in the business world. On the hand
the negative impacts of globalization include, a rise of expenses in the business world, mass
immigration because of the open borders, environmental damage, and job insecurity.

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