Globalization: Threat or Opportunity?

October 23, 2016 © Copyright Glomacs

It was a lovely lazy spring day on the East Kent coast. I was having a chat in a fish and chip shop with the owner. He was proud of his hometown, how busy it was even in the low season. He was optimistic having plans to open another restaurant and seemed rather confident that business would continue to surge, regardless of the economic climate. His meals were very popular with locals, including many students, as well as French tourists.

I went back a few years later, after the big recession swept across the world. This time he was rather subdued. His plans to open a second outlet have evaporated. Students no longer came because the nearby university shut down its local campus due to cost cutting. Fewer tourists came and even the locals ate out less because of the squeeze on their budget.

globalization-threat-or-opportunityAnother few years passed by. This time people were learning to deal with the shock of the results of the referendum on Brexit (to those of you, who spent the past few months on another planet, Britain’s departure from the European Union). The pound sterling has significantly depreciated in value against both the US dollar and the Euro. This time my friend in the fish and chip shop just shrugged, he seemed rather confused. On the one hand the cheap Pound attracted many French tourists, and Brits who have decided to spend their holidays at home due to the weak Pound. On the other hand, his costs have gone up due to more expensive imports. Even some goods made in Britain became pricier because of their import content. This price increase was caused not only by the weaker Pound but also by rising labour costs in China. In addition, his chef, whose secret batter recipe made him invaluable to the business, was thinking of leaving as he was a Spaniard worried sick that he would have to leave the UK. He was seriously concerned about replacing him. His energy costs were not increasing but his son was now working less, as his employer, an oil company, cut his work hours as a result of low oil prices. His cousin, up in Halewood near Liverpool is not complaining though. As it turns out, he has a well-paid job in the Land Rover factory, which is turning out cars in three shifts to satisfy Chinese demand. Go figure.

We live in an interdependent world; no village, region or country is immune to events in the global environment. The ever-closer of integration of input and output markets, and national economies exposes producers as well as consumers to changes in the global environment. Competition can materialise from anywhere due to the extraordinary decline in communication and transportation costs. The only constant in our dynamic world is change. It is crucial for organisations to keep abreast of events and try to make sense of their environment but this is a real challenge in a world of information overload. Through thorough analysis of the political, economic, socio-cultural, technological and legal environments businesses need to identify those factors that are relevant to them by assessing them on two criteria: the level of the impact on the organisation and the event’s probability of occurrence. Some these events have a high probability of occurrence with low impact. Yet the totally unexpected can wreak havoc. Who would have expected on the eve of April 13, 2010, the massive logistical nightmare that resulted from the eruption of the Eyjafjallajökull volcano in Iceland that shut down European airspace overnight for four days?

A close examination of relevant environmental factors will draw attention to opportunities and threats. Assessing a firm’s strategic profile in terms of its opportunities, threats, strengths and weaknesses serves to highlight the organisation’s distinctive resources and competences, which will enable it to gain a competitive advantage. In our rapidly changing environment organisations need to enhance their capability to change, innovate, adapt and learn.

Organisations are mobile, outsourcing their less efficient activities to lower-cost external producers while keeping their value-drivers in-house. Production today depends on a highly complex globalised supply chain. I am writing this article on a computer whose parts have been supplied to its main producer by companies from 20 countries that employ 1.6 million people. The aircraft manufacturer Airbus relies on a global network of 7700 suppliers from over 40 countries. The list is long. The ever-increasing interdependence between producers, markets and national economies has led to a trend towards global production and global competition. Intensifying levels of competition has many victims; manufacturing jobs have shifted from developed to less-developed economies. Technological advancement can lower costs and enhance quality for producers. For people it creates demand for new jobs and professions replacing old ones. Businesses of all sizes, including that fish and chip shop in East Kent, need to continually adapt to the constantly evolving environment. Individuals have to continuously develop and enhance their capabilities and skills in order to be employable and function effectively and efficiently as entrepreneurs or as managers and employees within organisations.

Although the integrated global economy inevitably causes strains, its benefits are large and permanent. Overall, globalisation stimulates economic growth, lowers the prices of inputs and outputs and has lifted millions of people out of poverty.

The opening of markets and the rapid diffusion of information, knowledge and capability are combining to change our view of our business potential and the ways in which we do business. As a manager you need to:

  • Appreciate the driving forces of globalization and the ways in which these affect business decisions
  • Appreciate the new challenges that are encountered in global development
  • Appreciate the different demands of operational management in a global structure
  • Be able to design effective transnational systems and prepare your teams for cross-regional working
  • Understand the basic direction of global business and cope with continuous change in the business environment

Join Dr. Robert Mikecz on this GLOMACS Training to get the following guaranteed benefits:

  •     Understand how and why the world economy is changing
  •     Clarify the changing role of international financial institutions in globalization
  •     Demonstrate the specific management challenges in a global structure
  •     Identify the key factors for success in building a global organization
  •     Lead their teams in contributing effectively to the process of globalization

Dr. Robert Mikecz is a Senior Consultant with Glomacs specializing in International Business, International Management, Cross-cultural Communication, Strategic Management, International Economics, Economic Geography, and International Political Economy.

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