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Globalization Affecting the Role of Leaders in Organizations

Introduction

Globalization is influencing leadership because of the way it affects society through its processes. Because the transformations brought about by globalization are not always easy to identify precisely and promptly, they may be hard to take in and even where they are detected, be hard to cope with. Globalization has caused changes in the political, social, and economical aspects and therefore the scope can be considered wide. These changes affect organizations in a diverse number of ways and leaders need to analyze them effectively before responding. Globalization has affected the organization’s culture, work structure, and even people, and is forcing leaders to realign their decision-making process as well as how they respond to issues. Because an organization is a constituent of society, it is influenced by the changing factors in society. Economic, social, and organizational characteristics have been focused on a large scale on globalization, high technology, privatization, and decentralization. The violent changes have caused organizations to encounter instability and confusion, as they look into ways of gaining competition, self-sufficiency, and sustained effort for continuous improvement of service and product quality (Pergamon, 1997). An organization is comprised not of one aspect-itself-but that to succeed in business, it must take into consideration the client and the customer. The client and the customer are both exposed to external factors some of which are beyond their control. Therefore, because their response towards these factors is at times unpredictable and will determine their response towards the organization’s offers, the issues surrounding the organization are also hard to assure sometimes. This is evident in the current global market environment characterized by high competition. Strict and prudent managerial decisions and management strategies are required to be able to respond to global effects, whether political, economic, or social. Strategic management is of importance in the face of changing global factors. Managerial decisions have been focused on managerial evaluation and follow-ups rather than operational control, promotion of proactive than reactive management, as well as cutting the organizational levels; to confront the new market scenario.

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Globalization

The study of globalization is complex because of the many factors involved. A multidisciplinary approach to the study of globalization has been proposed by Guillen (2001), and this takes into consideration anthropology, politics, management, economics, and sociological issues (cited in Aminu, & Kui, 2008). Globalization is a process through which social geography is transformed marked by the growth of super territorial spaces. Globalization has caused economic, political as well as social changes which have had a direct impact on people and the way they respond to issues. The ideologies of the world order and “global compression” have created a viable climate for globalization (Roland, 1992). The western experience has had a say on the globalization theory, course of its change, as well as the globalization itself. Among the things that globalization seeks to achieve, homogeneity has been a key focus, with interest in venturing into common goals and systems amongst countries. Globalization has particularly arisen in the following aspect; the spread of technology, access to global capital, opportunities for individuals, the spread of human rights, and increased national income through comparative advantage. These represent the pros of the processes. In the market environment, globalization has led to the abolition of trade barriers, exchange restrictions, and capital controls, as examples (Scholte, 2005; cited in Aminu, & Kui, 2008) but has also led to political interdependence across nations (Hirst & Thompson, 1996; cited in Aminu, & Kui, 2008). The interest of global organizations such as the WTO, IMF, and World Bank in the creation and maintenance of global capitalism and promotion of primacy of states and economic interests has played a role in globalization (Bello, 2002;). Thus the organizations within these states may stand to lose or to benefit from the whole process. The interaction of different brands of national or regional capitalism each trying to meet the specific economic, social, and cultural demands of its citizens, to result in global capitalism, is important in understanding how the organization in these regions and states respond (Dunning, 2001; cited in Aminu & Kui, 2008).

What is evident is that the factors of globalization or the effects brought about by it are interplaying to result in a new business environment that is challenging the existing one, and which calls for new ways of approach. The spread of human rights has resulted in the emphasis of observance of rights at the workplace, improvement of workers’ salaries, and improvement of the working conditions. Through the championing of the human rights, many workers are now aware of the actions to take incase there is exploitation and deprivation at work. The worst scenario about it is that the field is also dynamic in that new waves of democracy and rights at the workplace, such as equal rights to women, compensation, obligation to insurance cover, women leadership, and rights to the disabled among others have risen over time. An example is the tremendous changes in the women roles and leadership positions they occupy in Africa (Igunbor, 2005). There is an emphasis on the role of women in corporate leadership and management. This has poised new challenges to the management pertaining making new adjustment to the existing workforce composition, new rules for hiring, retrenching, and compensation. This has been facilitated more by the explosion of the media through technological advancement. While this may be perceived as a benefit to the employee in terms of the associated benefits, and to the companies, because through observation the workers’ rights some have been able to reap benefits as so in the case with it such as good publicity and social rating, it has presented new challenges to the organization because it represents an additional cost of production. Globalization has challenged not only leadership in the business but also the social institutions. Globalization has increased the importance of privatization and weakened social welfare (Tierney, 2007). It has increased women’s access to education, challenged institutional borders, and brought competition in the area of education, according to this author. Globalization is faster in the apposed financial markets but slowest in labor and agricultural markets according to the Asian Partnership for the Development of Human Resources in Rural Asia (2004). The globalization of the market is partially tied to the player dominating the market. A fast globalization process will occur if the market is dominated by a rich country or corporation, whereas little opening or even more tightening may arise where the dominant is a poor corporation or country. This further implicates the roles of leadership because market leadership by others (whether rich or poor nations) influences the organization.

Globalization has been touted as bad because of a number of reasons. As it emphasis the increase of competition of the work force, it has led to international dislocation of people from one place to another in such of employment or to take up employment opportunities. This has resulted to unfair treatment of those local people lacking skill or capital. Weak institutions and companies have been unfairly treated by the systems of globalization. They have faced unfair competition even in the local environment because globalization has encouraged the opening up of the market. Leaders for these organizations are also faced with difficulties of managing this competition because the larger firms have bigger influence such as large base of resources; competitive advantages such as economies of scale hence can introduce lower prices, and at times may be having better public rating or publicity than local firms. More over, the problem has been exacerbated in the developing countries, by the governments’ aggression and need to attract foreign investors because the governments improve business environments to favor international investors. Globalization has further led to loss of cultural integrity (Hoang, & Liao, 2002) amongst the consumers, which has disrupted traditional consumption trends. In a way, these have made leaders of organizations to make new moves concerning analyzing the new trends, and responding to the new patterns, which has resulted to more costs such as in market research and increase of promotions. Another adverse effect of globalization is the destabilization of global capital markets (Hoang, & Liao, 2002).

An analysis of the case of China and Vietnam indicate that globalization could have a benefit to the growth of the developing countries. In addition, enhanced sovereignty of domestic governments may result from globalization. Some of the negative impacts of globalization include some multinationals exploiting their workers. More capital flows may cause the domestic institutions to face more risk. Another negative impact of globalization is threat of social instability (Hoang, & Liao, 2002). These are issues that the leadership should be geared at solving. In an analysis by Hoang, & Liao, (2002), globalization and privatization allowed workers to earn income according to their efforts and therefore fixed the incentive problem that made many state-owned enterprises to fail in China. The impetus to increase efficiency and effort was brought about by competition which in turn was partly due to globalization. Improvement in the managerial and leadership of organization has also appeared with emphasis on performance of staff, competition, and increased demand to perform.

Globalization has brought about expansion and access to innovation which has boosted local sector, whether economic, political or social. More specifically, the agricultural emphasis of economy in China was boosted by globalization (Hoang, & Liao, 2002). The movement from command to market-based economy has helped China to incur economic growth (Fishman, 2006; cited in Aminu, & Kui, 2008), which has also come partly as a result of trade liberalization (Stiglitz, 2006; cited in Aminu, & Kui, 2008). The leadership roles in the current global set up as pertains organizing of company resources, directing of resources and workers, strategic planning of resources and leadership has been challenged by market liberalization which has brought competition.

The Role of Management and Leadership

One of the challenging aspects of management is the organization of staff and workforce in the current dynamic world, to enable an organization not only take advantage of them but also empower them to offer proper services to the organization. The workforce is also being faced by the effects of globalization such as need for more rights, resistance to exploitation fueled by the human rights movements, openness to information about employment, availability of employment options, among others. The workforce is also changing because it is operating in a changing cultural setting where access to information is improved. The managers therefore are being faced with a challenge to know how to handle the workforce amidst these changes. A new focus on the cross-cultural issues affecting companies locally may become more important in the future as the workforce is being slowly but surely influenced by international tastes. In deed, human beings are product of globalization (Schirato & Webb, 2003; cited in Aminu, & Kui, 2008).

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The impacts of globalization on management and leadership of organizations can be perceived as emanating from the changing roles and functions of management and leadership, as well as the presentation of new challenges, strengths and opportunities in the business arena, as opposed to the traditional roles and factors. Organizations exist to make profits and therefore any economic changes either internationally or locally may influence them. When global factors come into play to influence a local organization, leaders are forced to look ways through which they can minimize the negative impacts as well as through which they can harness maximum benefits. Globalization has brought about economic changes both in the positive and negative aspect, and therefore forced organizations to adjust appropriately in the way they manage their resources. The managerial roles in the current global village have been challenged not only by competition, but also by dynamic business environment. Globalization has come by with rules and regulations that cut across national boundaries, and which dictate the action of organizations. Such legal aspects are those pertaining the financial reporting, and performance of businesses and which influence the economic needs of a company. In the recent past, global economic downtown has had devastating effects not only on countries’ economies, but also business economies. Leaders in these organizations are therefore faced with challenges as they try to observe these rules and legal aspects of trade in the market. They must be limited sometimes in their decision making. There is therefore the need to investigate how globalization affects the economies of countries and hence the economies of a business. A business-based or economic-based definition of globalization has been provided by Marquit (2006; cited in Dana, 2009). It has been described as the extension of production and services on a vastly greater international scale. Because the forces in globalization tend to result in borderless systems, leaders of organizations are forced to make decisions aimed at monitoring the processes or their impacts and responding to them. Daft & Marcic (2006; cited in Dana, 2009) have theorized four stages of globalization, namely, the domestic, international, multinational and the global stage according to Dana (2009; cited in Dana, 2009). The domestic stage is characteristic of initial foreign involvement and cultural sensitivity is not considered important, while in the international phase, the stage is export-oriented, of multi-dimension nature and has importance of cultural sensitivity. In this phase, there is positing for competition. International explosion of international operations characterize the multinational stage in which the importance of cultural sensitivity exist. The global stage is characteristic of several good ways to conduct business and cultural sensitivity is of critical important. During these four stages, there are important things concerning strategic realignment of firms so as to ensure healthy competitiveness, healthy survival and expansion among other indicators of success.

The company managers must understand the ability of their firms and the resources available for effective competition or success within every level. Even strategic organization of the resources, whether human or capital, is important aspect of management. The managers must understand the factors that they must engage in operations that they can control and not those they cannot.

The idea of the existence of the difference between the roles played by managers of small firms and those played by the larger firms has been captured by (Daft and Marcic (2006); cited in Dana, 2009) who also theorizes that larger firms are at a better position to benefit more from globalization than smaller firms and will be better placed to engage in these four stages. However, there are advantages that are open to both the smaller and the larger organizations pertaining performance of business. In particular, technology has allowed even smaller firms to participate and venture into international markets (Boone & Kurtz, 2005; cited in Dana, 2009). Dana has brought out the issue of resources as well as skills available for the managers in the performance of their role. According to the author, managers of the small firms do not consider leadership and information-processing roles more important than the managers of large corporations. Therefore this represents the difference and finally the overall performance advantage between big and small firms. However, the spokesman role which deals with the selling of the company outside, and the entrepreneurial role which is essential for activity and creativity, may be shared with equal importance among the managers of big and smaller firms.

Managers of smaller firms need to venture into strategic ways for performing international businesses. These include exporting; outsourcing; franchising and licensing; and direct investment.

The market challenges in the current environment are also dynamic in the sense that the market is also dynamic. Many risks are coming up, with the dynamic nature of the market at the global perspective, and leaders must adopt new and quick ways to minimize these risks. Leaders must weigh between overcoming the market challenges at the local level, and looking forward to exploring opportunities presented by the existing climate, even if it is outside the country. It is not easy to minimize these risks because, in particular, firms must analyze various markets of interest to be able to determine which markets have lesser uncertainty and resemble their domestic markets (Armario et al., 2008; cited in Dana, 2009).

Leaders are being forced to explore between options that will best give them competing and survival ends. The global market is dynamic because of the globalization effects that have resulted in dynamic cultures, political and economic changes. The options that exist include formation of mergers or joint ventures with other companies so as to gain more market coverage, and acquisition. Yet the decisions surrounding the merging and acquisition are not simple. The leaders must know what firms to strategically acquire for their benefits, or which they can merge with.

In the global perspective, the current trend is favorable of outsourcing because of the ability of technology, but driven by other benefits. One of the importances of outsourcing lies in the minimization of the cost of labor. With the world tending to become a global village, company managers have been lured by globalization effects and its forces to open up and look in other sources of labor other than domestic sourcing. However, companies are faced with other challenges in this respect such as political complains that outsourcing labor has contributed to lack of employment and where physical movement of employees to the country of employment; rise in social upheavals. Therefore the manager must make decisions that must ensure the corporation gains whether by becoming politically loyal, or by exploring new initiatives such as workforce outsourcing. However, the application of information technology within an organization cannot be considered a simple task. Implementation of technology is itself a process limited by the ability of the company among other issues. The manager must understand at what technological level the organization is, as well as which one it is moving to. In theory, there are four technological stages, namely, the initial stage, looking for inward benefits, and the global stage, and each has its own advantages and limitations which the leadership must understand. The problem is not only what technology to use, even in the midst of many options, but that technology on the global perspective, is dynamic.

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Reference

Aminu, M., and Kui, L. (2008) The interpretation of globalization amongst Chinese business leaders: A managerial and organizational cognition approach. Web.

Asian Partnership for the Development of Human Resources in Rural Asia (AsiaDHRRA) (2004) Asian NGO Leadership amidst globalization. Web. 

Dana, L. (2009) Politics and the Economy-Globalization of small business. Web.

Dunning, J.H. (2001) Global Capitalism at Bay? London, Routedge.

Fishman, T. (2006) China lnc: The relentless rise of the next great superpower. London, Simon & Schuster.

Guillen, M.F (2001a) Is globalization civilizing, destructive or feeble? A critique of five key debates in the social science literature. Annual Review of Sociology 27: 235-60.

Hirst, P. and Thompson, P. (1996) Globalization in question: The international Economy and the possibility of governance. Cambridge, Polity Press.

Hoang, N., and Liao, J. (2002) Economic effect of globalization in developing countries: An analysis of Vietnam and China. EDGE Final Paper. Web.

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Igunbor, D. (2005) Towards effective women’s leadership in a globalized world. Web.

Roland, R. (1992) Globalization: social theory and global culture. London, Sage

Schirato. T. and Webb, J. (2003) Understanding globalization. London, Sage.

Scholte, A. (2005) Globalization: A critical introduction. London, Macmillan.

Stiglitz, J. (2006) Making globalization work. New York, W.W. Norton & Company.

Tierney, W. (2007) Academic leadership and globalization. Springs. Vol. 17 (4) Web.

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