This paper is a reflection of the module about the global environment of business. No doubt, such tendencies as globalization and the continuous extension of corporations are gaining popularity and have already revealed some results. In this paper, the results of globalization and its positive and negative consequences are discussed through the case of Zambia and the condition of its economy. In addition, the paper touches on the nature of multinational corporations and the peculiarities of their performance depending on the country – in this case, Zambia. The paper concerns boundaries and limitations which multinational corporations face in Zambia and other countries of the world. Moreover, both financial and economic aspects that may play the role of obstacles not allowing the corporations to evolve sometimes are reviewed in this paper (Rossana, 2011). The process of the corporate management making decisions on entering new national markets and the factors that affect this choice is also included in the paper.
My main expectation of the module was to understand the economic processes from a practical point of view and see how the state of the economy influences all the spheres of society’s life. My purpose was to get a reasonable theoretical basis accompanied by how this may happen in reality and which consequences are caused by which actions and then analyze Zambia. I am interested in it because I have faced all the typical features of living in a country with a developing national economy. Knowing that people have been aiming at solving global problems for decades, I want to know why it may not bring results and how to change it if the previous measures failed.
Regarding the terms essential for a complete comprehension of the module, the list of them is the following. Globalization is a “process by which the world economy is transformed from a set of national and regional markets into a set of markets that operate without regard to national boundaries” (Anwar, 2002, p. 419). According to Sengenberger (2011), the employed comprise all persons who reported in a labor force survey that they worked as paid workers or self-employed workers for at least one hour during the reference week. The labor force is the number of employed people, plus the unemployed who are looking for work (Amadeo, 2020). Other definitions seem more familiar and thus do not need mentioning.
Regarding the order of the topics reviewed, it would be the following. Firstly, I would review the topics related to the phenomenon of globalization and its history. Then I will discuss various effects that globalization has had on the national markets, their development, people, life quality and values, and economic processes. This paper reviews most of the spheres of society’s life affected by globalization. The article also discusses the difference between developed and developing countries experiencing globalization and different points of view on the effects of this phenomenon. In addition, the paper contains my opinion on the way globalization has already affected and may affect Zambia in the future.
First and foremost, the module has provided an opportunity to dive deep into the history of the economy and understand which events lead to which changes. For instance, one of such massive alterations was the shift between Keynesian economics that prevailed in developed world countries in the 1950s and 1960s and free-market economics of the 1970s (Johnson and Turner, 2003). Troubles of the international economy that could not maintain its well-working state anymore appeared to play the role of a trigger for such a fast and unpredictable change, which scheme seems overarching (Daraban, 2010). However, unlike developed economies, developing ones were not as willing to admit the advantage of barrier-free interaction with the global market (Johnson and Turner, 2003). Nevertheless, the tendency for openness was becoming more and more widespread, implying decreasing the importance of the state for the national economy.
Entering the course, my purpose was to learn more about Zambia’s national economy and understand it better in connection and comparison with other national economies and their international interaction. Therefore, I realized that it was essential to understand the most critical factors in every national economy, which affect economic processes the most (Guy, 2009). Concerning my country of origin, Zambia, it is not an example of successful economic changes and following the innovations. As the country cannot be called economically developed, there are almost no reasons for international corporations to enter the national market of Zambia. The economy depends drastically on the agricultural segment, which is why even drought can strongly affect it and decrease the tempos of economic growth (U.S. Department of State, 2020). Consequently, it is evident that globalization causes both positive and negative consequences depending on the stability of the national economy, its independence, capacity, and potential (Anwar, 2002). This fact portrays that every global change touching on most countries should be reviewed thoroughly before being implemented.
Globalization is far more influential than it is commonly assumed. For instance, it does not include the economy-related changes only but also involves alterations in the condition of the society, the role of an individual in the world’s system, and further behavioral aspects (Ali, 2001). To be more exact, a world that treats globalization as a beneficial phenomenon does not concern how it changes people’s lives – and whether they want it or not (Cole, 2004). It appears that the word is trying to follow controversial concepts at the same time: globalization is already a symbol of the century, whereas localization is also discussed and implemented widely (Cole, 2004). One of these concepts implies restructuring the whole world’s economy and creating a new international one from their parts, while another one states that every small region must be independent, thus they contradict each other.
For a more detailed overview of globalization’s aspects and effects, it is necessary to consider all the spheres it involves. For instance, in addition to the globalization of production, there is a change in the labor market as a repercussion (Marks and Kotula, 2009). With the appearance of the production facilities’ distribution among regions of the world with the lowest income level, substantial international corporations strive to use these opportunities up to the limit (Thanopoulos, 2014). Consequently, people in less developed countries are “exploited” by these corporations, which increases poverty and decreases the life level in general, not allowing the countries to experience economic growth (Anwar, 2002, p. 414). The list of countries familiar with this economic conjuncture includes Zambia.
Zambia’s national economy is considered to be rich in natural resources. That is why it is “heavily dependent on copper mining and rain-fed agricultural production” (U. S. Embassy in Zambia, n. d.). Although there are almost no barriers for international corporations to enter the national market, every one of them may affect it drastically due to its relatively small capacity and the number of marketers. In addition to the low life quality level in Zambia, huge companies understand that the market is not likely to meet the expectations of the management (U.S. Embassy in Zambia, n. d.). Therefore, although most people would immediately think about when the effects of globalization on developing countries are mentioned is economic growth, the situation is not that simple. In fact, the management of huge international corporations has to consider a wide variety of aspects, indicators, and characteristics of the national market the company is planning to enter.
Generally, corporations tend to choose the markets of the countries with emerging economies for their extension. The main features which attract giant corporations in these countries are “access to vast markets, natural resources and relatively cheap talent” (Singh, 2012). There are such companies present at Zambia’s national market as Nestle, Michelin, Procter & Gamble, and many more. The most attractive sphere of Zambia’s economy appears to be overtaken by gigantic international companies, too. Copper mining, one of the most substantial for this resource-oriented economy, is controlled by Mopani Copper Mines Limited. MCM is managed by Swiss and Canadian-origin companies, while the Zambian government owns nearly 10% of the company (Mopani Operation, 2019). In other words, as Zambia is dependent on the resources mined at its territory, the presence of foreign companies has made it possible for Zambia to develop. On the other hand, most of the profit does not stay in Zambia and cannot contribute to living conditions, infrastructure, and economic growth.
Emerging markets are considered attractive for the corporations’ managements because they provide low labor prices, and the market which is almost free of influential players. That is why Nestle entered Zambia – the significance of the agricultural sector provides the needed amounts of raw materials, while the people working in this sector are used to meager incomes (Ougaard, and Leander, 2010). Theoretically, entering new markets requires analyzing their cultural context, history, traditions, and habits to develop a suitable marketing strategy and market the products appropriately (Singh, 2012). According to Cheng (2009), “a firm must own valuable specific resources that will provide it with competitive advantages” compared to competitors. However, the poorness of people in some developing countries and the complete lack of some products may lead to a situation when the company does not have to alter its usual marketing policy (Gupta, 2013). Weak economics are exposed to this effect, which traces a more notable decrease of products’ quality and payments amount.
Regarding the positive outcomes, globalization contributes to the economic growth of different countries. Calderón et al. proved that “economic growth serves as an effective “pull” factor for foreign investment; and in turn, FDI helps increase domestic investment in the future,” which would not have been possible without globalization (2004, p. 17). Globalization has also contributed to the appearance of supply chain management, which nowadays is an instrument of logistics business that cannot be imagined with (Delfmann and Albers, 2000). Therefore, it continues providing a considerable number of workplaces and ensures timely supplying to most countries of the world (Pan, 2017). Awuah and Amal (2011) also claim that globalization is generally positive as companies’ cooperation, institutional setup, and the state’s policies are experiencing changes to improve when corporations enter the market. However, to my mind, the observed phenomenon cannot relate to positive effects only.
The effect of globalization on Zambia is more than debatable and controversial – it has not changed the situation, making Zambia a donor of copper for foreign entrepreneurs and bringing no functional changes to the conjuncture. The issue of the controversy of globalization has touched on many more countries and regions of the world. Stiglitz (2017) claims that the phenomenon has not brought the expected results and thus has not redeemed itself. Assessing the effects of such an extensive phenomenon is a complex procedure, and something is left unnoticed in the end despite all the effort.
However, the longer globalization exists, the more consequences of it are analyzed, and understanding is improving. Stiglitz says that humanity has overestimated the potential positive effects of globalization on the economy of various regions of the world and believed in its ability to stimulate the developing economies too much (2017). Practically, creating new jobs that were assumed to appear shortly after globalizing the production and providing better income than the previous structures has not been brought to reality (Stiglitz, 2017). The “aggregate well-being” that economists forecasted to grow and expand all over the world is still inaccessible concerning all parts of the world.
In contrast, it increases the risks of individuals and corporations losing security, acceptable price levels, and workplaces. Globalization, in this case, also contributes to the unfairness of the competition between giant international corporations and small local firms (Melvin and Norrbin, 2017). The last-mentioned ones, in most cases, have to lose their success because of higher expenses on production and distribution than the corporations have. At the same time, the quality of corporations’ products suffers because of their constant desire to minimize expenses. That is why in the end, average individuals experience more negative effects than anybody else. They are exposed to losing their jobs because of a cheaper alternative option and losing income and getting poor quality and unfairly high prices.
Overall, only one thing is clear and undisputable about globalization: wealthy entrepreneurs created the idea for maintaining their financial wealth. Historically, western countries have benefited from globalization, understanding that “external integration of economy accompanied by aggressive international trade orientation is the major route” for intensifying the wealth for national economies (Kunnanatt, 2013). In connection with this fact, there should not have been any positive attitudes towards the globalization concept at the beginning of its development because it is too alike with colonization. According to Hartungi, who has reviewed the probability of developing countries benefitting from globalization, their “government… should still seek limited protectionism” because other patterns lead to devastating consequences, and the country is likely to become more flawed than it was (2006, p. 736). This point of view appeals to me more because it seems closer to reality and aims to improve the condition of developing countries’ national economies.
There are more factors of globalization’s effect on human society around the world. For instance, Mitchell, in his research, reflects on environmentalism and the way it may be affected by the corporation that enters the national market (2010). In my opinion, this regards all the people’s values, not only their attitude to the environment. The research has shown that giant corporations that provide a considerable number of workplaces in a host country affect the employees’ vision via their corporate culture, attitude to the responsibility of the business. From one perspective, this may be effective and lead to positive consequences such as decreasing pollution or even introducing new laws on environmental state. From a different point of view, such a connection might cause a more frivolous attitude of the population to global problems because it contributes to corporations’ profits. In other words, globalization, in this case, is as beneficial as it is damaging.
Gopinath’s view on the pros and cons of globalization reflected in a World Economic Forum article is clear, and I agree with them (2019). For example, Gopinath states that “the biggest losers from international trade are always those whose skills have a cheaper competitor in a different market,” reflecting the actual situation (2019). However, she emphasizes that the effect of previous globalization waves was successful, so it generally has a positive effect on the international economy (Gopinath and Parker, 2019). I cannot entirely agree with this statement because it leads to an argument that the effect experienced by the population of western countries is more significant than the population of developing countries with unstable economies.
Nowadays, when the influence of globalization has been observed for some time, economists are working on a new way of ensuring the economic growth of developing countries. According to Landefeld et al., “collaborative work has been ongoing to develop integrated and consistent methods for producing the national income” (2008, p. 214). Therefore, globalization has not fully succeeded in reaching its primary goals.
Another essential aspect of globalization is interrelating financial markets (Das, 2010). The consequences are alike: “theoretically speaking, integration of financial markets can potentially foster growth,” however it is not proved to happen in reality (Das, 2010, p. 320). Globalization influences all economic processes, including inflation and currency rates changing (Catão, 2007, Chamberin, 2007). Globalization may also contribute to debts of developing countries to the developed western ones (Avadhani, 2009, Oner, 2010). Moreover, the inflation in the countries where the production of huge corporations has been moved may have faster tempos than in the developed countries themselves because the economy is not ready for such production amounts (Agarwal, 2009). Overall, the effect of all globalization’s aspects should be reviewed and described together in order to highlight the wrong decisions and not repeat them.
To conclude, I would like to emphasize the benefit the module has brought to my present and future life and professional performance. It has allowed us to perceive the global interactions of the countries and their vast corporations, assess the effects of economic and social globalization and localization, and structure the topics in the consciousness. Moreover, it has illustrated vividly that people’s intentions to improve some aspects of life and provide the growth of indicators may be the opposite of the outcomes of implemented measures. In other words, this module gave me an understanding of the necessity to plan, structure properly, and test thoroughly the consequences that the measures may trigger.
The module has allowed me to overview such economic phenomena as global cooperation, market barriers, employment, and more, which are vital for understanding macroeconomics in general. Furthermore, it has revealed and proved that developing countries and their emerging economies are attractive for international corporations not because of the willingness to help but due to their cheapness (Huang et al., 2017). Thus, the interests of corporations do not contain anything despite the desire to increase the company’s profits and reduce the amount of expenditure. That is why in most cases, people and their attitude to such changes as globalization are not addressed and considered, resulting in poor quality of life and low-income levels.
The module has provided me with the instruments of analyzing the economy, using which I now can analyze my country of origin, Zambia. It is a developing country with a resource-oriented economy that depends on copper mining and the agricultural sector. Zambia, like other developing countries, provides international corporations with a cheap labor force, resources, and free market in combination with people’s low quality of life and desire to get any possible job. Therefore, these alike countries with unstable national economies serve as a resource base for the companies of developed countries, which tend to exceed their authority and break limits on their way of increasing profitability (James et al., 2012). Based on the materials of the module, I can claim that this is the most prominent and notable negative effect of globalization, which proves that only the developed countries benefit from this phenomenon. Less affluent and stable countries have to suffer, having almost no access to the money made on their territory and hence not being able to change the infrastructure, expand cities, or provide the needed accommodation.
Overall, the module has had a powerful effect on my perception of macroeconomic processes and the role of economic agents in them. The key to the learning process during the module was understanding that the knowledge I was getting was practically oriented. Due to this connection with reality, it was highly beneficial because there always was an opportunity to check one’s assumptions upon the actual state of things. However, now I feel the necessity to obtain more instruments of mathematical origin to be able to conduct a more thorough and detailed analysis and make reasonable predictions. Combining the understanding of macroeconomic processes with the instruments that allow measuring the effects of different economic changes, I would be able to analyze national economies and the international economy complexly.
Reference List
Agarwal, O.P. (2009). International Financial Management. Himalaya Publishing House, India, Mumbai. Ch. 6 & 8
Ali, A. J. (2001). Globalization: The great transformation. Advances in Competitiveness Research, 9(1), pp. 1-9.
Amadeo, K. (2020). Labor force and its impact on the economy. The Balance. Web.
Awuah, G.B. & Amal, M. (2011). Impact of globalization. The ability of less developed countries’ (LDCs’) firms to cope with opportunities and challenges. European Business Review, 23(1), pp. 120-132.
Anwar, S. (2002). Globalization and national economic development: Analyzing benefits and costs. Journal of Business and Management, 8(4), pp. 411-423.
Avadhani, V.A. (2009). International Financial Management. Global Media, U.K., Horsham. Ch. 1 & Ch. 3.
Calderón, C., Loayza, N. & Servén, L. (2004) Greenfield foreign direct investment and mergers and acquisitions: Feedback and macroeconomic effects. World Bank Policy Research Working Paper. Web.
Catão, L. A. V. (2007). Why real exchange rates? Finance & Development. 44(3). Web.
Chamberin, G. (2007). The Balance of Payments. Economic & Labour Market Review, 3(9), pp. 44-51.
Cheng, Y. M. (2006). Determinants of FDI mode choice: acquisition, brownfield, and greenfield entry in foreign markets. Canadian Journal of Administrative Sciences, 23(3), pp. 202-220.
Cole, K, (2004). Globalization: understanding complexity. Progress in Development Studies, 3(4), pp. 323-338.
Daraban, B. (2010) Introducing the circular flow diagram to business students. Journal of Education for Business, 85, pp. 274-279.
Das, D.K. (2010). Financial globalization: a macroeconomic angle. Journal of Financial Economic Policy, 2(4), pp. 307-325.
Delfmann, W. & Albers, S. Supply chain management in the global context. Management in the Global Context, Working Paper No. 102, Dept. of General Management, Business Planning and Logistics of the University of Cologne, Cologne 2000. Web.
Gopinath, G. & Parker, C. (2019). An economist explains the pros and cons of globalization. World Economic Forum. Web.
Gupta, M. (2013). Globalising times and multinational corporations. International Journal of Management Research and Reviews, 3(11), pp. 3807-3811.
Guy, F. (2009). The Global Environment of Business. Oxford University Press, Oxford. Ch. 2 & Ch. 3.
Hartungi, R. (2006). Could developing countries take the benefit of globalisation? International Journal of Social Economics, 33(11), pp. 728-743.
Huang, S., Ye, G., Zhou, J. & Jin, T. (2017). Institutional contexts, institutional capability and accelerated internationalization of entrepreneurial firms from emerging economies. Nankai Business Review International, 8(2), pp. 231-262.
James, J., Marsh, I.W. & Sarno, L. (2012). Handbook of exchange rates. Wiley, U.S., New Jersey, U.S. Ch. 2. & Ch. 5.
Johnson, D. & Turner, C. (2003). International Business. Themes and issues in the modern global economy. 2nd ed. Routledge Taylor & Francis, New York. Ch. 1 & Ch. 2.
Johnson, D. & Turner, C. (2003). International Business. Themes and issues in the modern global economy. 2nd ed. Routledge Taylor & Francis, U.S., New York. Ch. 9 & Ch. 10.
Kunnanatt, J.T. (2013). Globalization and developing countries: A global participation model. Economics, Management, and Financial Markets. 8(4), pp. 42-58.
Landefeld, J.S., Seskin, E.P. & Fraumeni, B.M. (2008). Taking the pulse of the economy: Measuring GDP. Journal of Economic Perspectives, 22(2), pp. 193-216.
Marks, M. & Kotula, G. (2009). Using the circular flow of income model to teach economics in the middle school classroom. The Social Studies, 100(5), pp. 233-242.
Melvin, M. & Norrbin S. (2017). International Money and Finance. Elsevier Science & Technology, Amsterdam. Ch. 1 & Ch. 3.
Mitchell, M. (2010). An institutional perspective of the MNC as a social change agent: the case of environmentalism. Journal of Global Responsibility, 1(2), pp. 382-398.
Mopani Operation. (2019). Mining Data Solutions. Web.
Oner, C. (2010). What is inflation? Finance & development, 47(1), pp. 44-45.
Ougaard, M. & Leander, A. (2010). Business and Global Governance. Routledge, London and New York. Ch. 1 & Ch. 2.
Pan, Y. (2017). Strategic motives, institutional environments, and firm’s FDI ownership. Multinational Business Review, 25(4), pp. 307-327.
Rossana, R. (2011). Macroeconomics. Routledge, UK, Oxon. Ch. 1 & Ch. 2.
Sengenberger, W. (2011) Beyond the measurement of unemployment and underemployment. ILO. Web.
Singh, D. (2012). Emerging economies and multinational corporations. International Journal of Emerging Markets, 7(4), pp. 397-410.
Stiglitz, J. (2017). The overselling of globalization. Business Economics, 52, pp. 129-137.
Thanopoulos, J. (2014). Global Business and Corporate Governance: Environment, Structure, and Challenges. Business Expert Press.
U.S. Department of State. (2020). Investment Climate Statements: Zambia. Web.
U. S. Embassy in Zambia. (n. d.). Zambia Country Commercial Guide. Web.