THE IMPACT OF GLOBALIZATION ON MANAGEMENT IN DEVELOPING COUNTRIES

ABSTRACT

Globalization is the term used to describe the growing worldwide interdependence of people and countries. This process has accelerated dramatically in the past decades largely due to advances in technology. With  the  advent  of  globalization,  trade  barriers  between  countries  have  come  down,  movement between countries has become easier and world’s major financial markets have been integrating. This growing worldwide integration has produced diverse  consequences –  economic, political, cultural, environmental and otherwise. These consequences may be beneficial or detrimental. This work examines the effects globalization has on developing countries. The instrument for data collection was the questionnaire. The analysis and findings highlight the two-fold impact of globalization on developing countries. Finally, this work recommends implementation of sound policies in order to moderate the adverse effects of globalization while consolidating its benefits.

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

The term globalization covers a wide range of distinct political, economic and cultural trends. It has become one of the most popular topics of debate around circles. The term could be said to be synonymous with economic liberalization, westernization and internet revolution. Social theorists are of the view that globalization refers to fundamental changes in the spatial and temporal contours of social existence, according to which the

significance of space or territory undergoes shifts in the temporal structure of crucial forms of human activity.

The term globalization has been used by economists since the 1980s although it was used in social sciences in the 1960s. However, its concepts did not become popular until the later half of the 1980s. Since the mid 1980s, social theorists have moved beyond the relatively underdeveloped character of previous reflections on the compression and annihilation of space to offer a rigorous conception of globalization.

Human societies across the globe have established progressively closer contacts over many centuries, but recently the pace has dramatically increased. Jet airplanes, cheap telephone service, email, computers, huge ocean-going vessels, instant capital flows, all these have made the world more interdependent than ever. Multinational corporations manufacture products in many countries and sell to consumers around the world. Money, technology and raw materials move ever more swiftly across national borders. Along with products and finances, ideas and cultures circulate more freely. Many politicians, academics and journalists treat these trends as both inevitable and welcome. But for billions of the world’s people, business-driven globalization means uprooting old ways of life and threatening livelihoods and cultures. Intense political disputes will continue over globalization’s meaning and its future direction.

Globalization has become a major topic of discussion and concern in economic circles of the mid-1990s, it is like an unstoppable reality and most citizens of the world will have to plan their future within this reality. As a terminology, it covers a wide area of human activity mainly driven by recent quantum leap in the technology of computerization and telecommunications, what is often referred to as information technology.

What is Globalization? There seems to be various ideas and definition on globalization, in fact no universal definition of globalization has emerged. In most cases it is used interchangeably with internationalization and liberalisation. Globalization, the growing integration of economies and societies around the world, has sparked one of the most highly

charged debates of the past decade. Critics of globalization have argued that the process has exploited people in developing countries, caused massive disruptions and produced few benefits. Supporters point to the significant reductions in poverty achieved by countries that have embraced integration with the world economy such as China, Vietnam, India and Uganda.

Contemporary analysts associate globalization with deterritorialization, according to which a growing variety of social activities takes place irrespective of the geographical location of participants. As Jan Aart Scholte observes, “global events can via telecommunication,

audio-visual media and the like occur almost simultaneously anywhere and everywhere in the world” (Scholte, 1996: 45). Globalization refers to increased possibilities for action between and among people in situation where latitudinal and longitudinal location seems immaterial to the social activity at hand. Business people in different continents now engage in electronic commerce; academics make use of the latest video conferencing equipment to organize seminars in which participants are located at different geographical locations. In this sense of the growth the term, globalization refers to the spread of new forms of non-territorial social activity.

Recent theorists also conceive of globalization as linked to the growth of social interconnectedness across existing geographical and political boundaries. Since the vast majority of human activities are still tied to a concrete geographical location, the more decisive facet of globalization concerns the manner in which distant events and forces impact on local

and regional endeavours. (Tomlinson 1999: 9). Globalization refers to those processes whereby geographically distant events and decisions impact to a growing degree on local university life.

Globalization must also include reference to the speed and velocity directly of social activity. Deterritorialization and interconnectedness initially seem spatial in nature. Yet it is easy to see how these spatial shifts are directly tied to the acceleration of crucial forms of social activity. The linking together and expanding of social activities across borders is predicated on the possibility of relatively fast flows and movement of people, information, capital and goods.

There have been various ideas and definitions by different intellectuals, scholars, economies, social and political scientists.

Globalization as defined by Allansare –Ouatera (1997) is the integration of economies through out the world through trade, financial flows, the exchange of technology and information and the movement of people. The extent of trend towards integration is clearly reflected in the rising importance of world trade and capital flows in the world economy.

An increasingly large scale of world GDP is generated in activities linked directly or indirectly to international trade. And there has been a phenomenal growth in cross-border financial flows, particularly in the form of private equity and portfolio investment, compared with the past. In addition, the revolution in communication and transportation technology and the much improved availability of information have allowed individuals and firms to base their economic

choices more on the quality of the economic environment in different countries.

Globalization as defined by OECD (1993) is a process ‘by which markets and production in different countries are becoming increasingly interdependent due to the dynamics of trade in goods and services and the flow of capital and technology.

Scholars like Ghai, Robertson Feather Stone and Ake, see globalization as the restructuring of global capitalism, characterized by the increased profile of international financial institutions, corporations and information technology. In the sociological and cultural realm it is possible to see elements of an emerging “global culture” which Tade Akin-Aina argues, have combined to create new conditions of proximity, intensity, and even almost intimacy with what used to be external faraway worlds.

Globalisation, according to Omolayole (2000), is the process by which the world has been made to shrink to a point that accessibility of ideas and products of every nook and crannies of the world is no longer a problem. They constitute the “army of the champion” of globalization supported by most of the government of highly industrialized nations.

Globalization has become a process of regarding the world as a single economic market, and the ultimate in the push for and all pervading market economy in the world. However, trade liberalisation is the international process by which countries that belong to the trade organisation work towards the lowering or removal of trade tariffs and barriers or the setting of

a quota for certain goods from some countries.

Globalization, according to Omoweh (2000) is the transcendence of the economic, social, cultural, political environmental constraints across territories. Globalization does not really mean crossing or opening up borders, but the transcendence of borders.

Globalization according to Ipei Yamazawa (2000) is very much the “mega trend” of the current world economy, and the process is irreversible. Owing to rapid technological progress in information, communication and transportation, private enterprises have intensified their efforts to do business across national borders and constructed production and distributing networks

on a global scale. The trend towards globalization involves both large enterprises as well as their small and medium sized counterparts in industrialized countries. To developing countries as well, this process has become inescapable.

Globalization as described by Akpotor (1999) refers to the rapid integration of economies and markets world wide, intensified financial flows, the information revolution and cross cultural currents. However, Mitlleman (1994) explains that it involves the dissemination of the economy, polity and culture of one sphere into another, if this is so the human endeavour to influence or dominate has been evident throughout the ages.

In common usage, the notion of globalization encompasses a wide range of phenomena from economic activities to the international of culture, communication, technology and tastes.

According to Gidens (1996), he explains it as not just an “out there” phenomenon, it refers not only to the emergence of large-scale world systems, but to transformation in the very texture of everyday life. It affects even intricacies of personal identity. To live in a world where the image of Didier Drogba is more familiar than the face of one’s next door neighbours is to move in

quite different contexts of social action from those that prevailed previously.

From the different definitions of globalization, one can deduce that globalization can be a powerful and dynamic force for strengthening co-operation and accelerating growth and development. At the same time, it is accompanied by global constraints and amplified disturbances in the supply and movement of production factors. That is why Amin (1998) described it as a process that has led to a trend in which information, events and ideas, corporations and commodities, identities and lifestyles move with such rapidity today that time and space have been compressed, tastes and consumption homogenized creating a different world, but one still characterized by inequalities, unevenness, social exclusion and polarization. Globalization can be a threat to a weak or capriciously governed state, but it also opens the way for effective disciplined state to foster development and economic well being and it sharpens the need for effective international co-operation pursuant of global collection.

1.2     Statement  of the Problem

There is apparent doubt as to the precise effects of globalization. There seems to have emerged two extreme views about it. One argues that it is a threat, leaving only destruction in its path especially for developing economies; whereas the other prophesies that globalization

is the greatest thing to happen. This has initiated the need for this research. The major reasons therefore for this research is to find out the effects or implications of globalization on developing countries and the practice of management in such countries.

What are the Demerits and merits of Globalization on developing countries? Globalization has its upside and downside. Globalization brings benefits through greater access to global resources and markets, enabling countries to achieve economic progress beyond the limits imposed by domestic resources and market. The ability to reap benefits from globalization depends on a country’s stage of development, its economic competitiveness, and the flexibility and adaptability of its institutions and policies to global trends and development.

On the downside, globalization increases exposure and vulnerability to global disturbances in supply of factor resources, markets as well as the intrusion of global norms, practices and values. The economies of developing countries at this moment cannot compete with those of the advanced countries that have the advantage of high technology, advanced management skills, efficient infrastructure support services and highly stabilized systems.

As globalization appears inevitable and irreversible, the response is not to reject it, but to take advantage of the opportunities of others and mitigate its undesirable effects. Responses to globalization differ between countries. Policy responses can be at national, regional and global levels. A balanced approach to globalization is needed in order to enable developing economies to take advantage of its benefits and avoid its demerits.

Since economic development is transmitted from advance to modest economies through

movements of capital and technology. The rate of growth of developing economies and the speed of the process of catching up were far higher in the last few decades of the 20th Century than were before World War II.

Developing economies can no longer reverse the trend of globalization and carryout their development. It is important to recognize that globalization is not a zero-sum game, it is not necessary for some countries to lose in order that others may gain. But to take advantages of this trend, countries will have to position themselves properly through the right policies. Also national efforts need to be complemented by intensified international co-operation in order to manage the risks, overcome the challenges and seize the opportunities created by globalization.

1.3     Objectives of the Study

The primary objective of this research is to critically review the positive and negative effects of globalization on management in developing countries. i.e. it’s implications for the conduct of economic policies in developing countries. Aside from reviewing its potential benefits, risks and challenges, it will also do the following:

(a) Examine the impact of Globalisation on developing countries.

(b) Review the effect of Globalisation on the practise of Management in developing countries

(c) Examine the role of International Financial Institutions in a global economy

(d) Determine the problems and prospects of globalization for developing countries.

(e) Determine the strategies developing countries should consider in order to maximize for

themselves the benefits of globalization, while minimizing its adverse effects.

(f) This work will also look at the effect of Globalisation on such key Management issues as:

i.  Human resources, training and development ii.  Resource allocation and capital flight

iii.  Technology

iv.  Process and product improvement

1.4     Research Questions

The research questions for this work include:

(i)  What is the impact of Globalization on developing economies?

(ii) How has Globalization affected the practice of Management in developing countries? (iii) What positive impacts can International Financial Institutions bring to bear on a Global

economy

(iv)What strategies do developing countries use to maximise benefits of globalization as well as minimise their adverse effects?

(v) What are the effects of globalization on human capital development, resource allocation, technology and product improvement?

1.5     Significance of the Study

This research study aims at identifying the benefits and true risks of the trend of global integration and in turn determines the correct policy responses. This study is also expected to bring to awareness a balanced view to globalization which is needed to enable developing countries take advantage of its benefits and avoid its ills.

This research study is meant to sensitize both the public and the government on how developing country can best or acquit the human competences and created assets that increasingly define competitive advantage in global economy. Finally, this research study is expected to stimulate research interests in other aspects of globalization in general and developing countries in particular.

1.6     Scope of the Study

This study will concentrate on the implication or effect of globalization (negative and positive) on developing countries, it will consider its effect on investment, trade, science and technology flows.

This research will consider what developing countries stand to win or lose from the growing flows of international direct investment, cross border transactions and technology transfer and other co-operate business ventures that feed the growth of increasingly border-less global economy.

This research work will consider the place of human resources development in globalization not forgetting its effect on small business in a global world dominated by mega-corporations. This study will also look briefly into the effect of globalization on poverty alleviation.

1.7     Limitations of the Study

This research study is more of a pioneering work. It is meant among others, to be the ground

work for other similar studies. The limitations associated with this study being an exploratory work are time access to published work and more especially the restriction of this study to developing countries.

1.8 Definition of Terms

Management

The act of getting people together to accomplish desired goals and objectives. Management comprises  planning, organizing,  staffing, leading or directing, and  controlling an  organization

(a group of one or more people or entities) or effort for the purpose of accomplishing a goal – Gomez-Mejia et al (2008)

Globalisation

Describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and execution. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through  trade, foreign direct investment, capital flows,  migration, and the spread of  technology. However, globalization is usually recognised as being driven by a combination of economic, technological, sociocultural,

political, and biological factors. The term can also refer to the transnational circulation of ideas, languages, or  popular culture through  acculturation –  Moore et al (2009).

Economy

An economy consists of the realized  economic system of a country or other area, the  labor,  capital

and  land resources, and the  economic agents that socially paticipate in the  production,  exchange, distribution, and  consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution,  history and  social organization, as well as its geography, natural resource endowment, and  ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions – Fehr et al (2005).

Economic Policy

Refers to the actions that governments take in the  economic field. It covers the systems for setting interest rates and  government budget as well as the labour market,  national ownership, and many other areas of government interventions into the economy.

Such policies are often influenced by international institutions like the International Monetary

Fund or World Bank as well as  political beliefs and the consequent  policies of  parties – Hoover

(2008)

Capital Flight

Described as when  assets and/or  money rapidly flow out of a  country, usually due to an economic event that disturbs  investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic strength. This leads to a disappearance of  wealth and is usually accompanied by a sharp drop in the  exchange rate of

the affected country (depreciation in a variable exchange rate regime, or a forced  devaluation in a fixed exchange rate regime) – Kar et al (2008).

Technology

Technology can be most broadly defined as the entities, both material and immaterial, created by the application of mental and physical effort in order to achieve some value. In this usage, technology refers to tools and machines that may be used to solve real-world problems – Wise (1985)

Process Improvement

A series of actions taken by a Process Owner to identify, analyze and improve existing processes within an organization to meet new  goals and objectives. These actions often follow a specific  methodology or  strategy to create successful results.

Infrastructure

Infrastructure is the basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function – Sullivan et al (2003).

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