The Challenges of Globalization: Managing Global Economy
Globalization has brought enormous challenges to global economy. The global market is more competitive than it was before the advent of globalization. This has also brought in a number of problems to international business communities that need to be addressed. World leaders have engaged in economic forums to find solutions to problems facing world economy.
World Economic Forum (WEF) and World Trade Organization (WTO) are tasked with the responsibility of managing the world economy. WEF engage businesses and governments as well as civil society in working together to improve the state of the world business. They strategically help stakeholders in meeting and building a sustainable economic growth, improve social welfare and mitigate global risks, (World economic forum, 2012). In efforts to promote global economy, the forum and WTO are currently spearheading efforts to promote trade between nations, restructure capitalism and infrastructure development. They have undertaken to bridge corporate gender gap and promote gender equality. This is aimed at tapping the talents of women for global economic development and increase a nation’s competitive in the global market. WEF and WTO enhance cooperation between different sectors, industries and disciplines across the globe. They also promote the growth of entrepreneurial enterprises for they drive social progress and economic growth. They have partnered with companies and governments to fight corruption which is hampering equality in social and economic progress. They promote fair trade among nations by assessing and improving the nation’s ability to compete in international trade.
The WEF is engaged in developing sound financial system in a number of countries. Financial system plays an important role in global economic growth and the forum is working with stakeholders to develop a sound global financial system. They are also engaged in efforts to promote agriculture and improve food security. The forum has been in the forefront to improve agriculture in developing countries. The demand for agricultural products is increasing and there is need for sustainable agricultural production through investment, innovation and policy which can be realized through collaboration of all players in the sector. WEF and WTO have engaged players in energy sector to address challenges affecting global energy. They collectively seek to develop a sustainable energy for the world to foster economic growth. They have engaged in ways of promoting education for economic growth and promotion of global information technology which is the driver of global economy. They have devised ways of managing disasters, both natural and man-made because of their negative impact on global economy; these include terrorism and diseases like foot and mouth. All this efforts involve all players including developing nations, aimed at promoting fair distribution of global wealth and growth, (World economic forum, 2012).
Most multinationals have engaged in different cross-border cost effective strategies. This includes product development strategy which entails innovation of products to suit new markets. For example, Starbucks coffee company had to adapt its business to local tastes in the Asian market. This increased their sales in those markets and led improved growth of their business. The entry strategy of joint ventures and use of company subsidiary, for instance by Starbucks to enter the new markets. Joint venture strategy helps in reducing capital investment in the new market and reduces business risks. Pricing strategies are used by firms to penetrate new markets. This involves charging relatively lower prices than their competitor to attract customers into buying company products, as done by Nestle Company in Bangladesh. Global multinational enterprises (MNEs) use cost effective promotional strategies in their cross border businesses. For instance, the use of internet, social network and advertisement in marketing of Nestle milk in Bangladesh. Most MNEs are engaged in international ethics to win customers and increase business growth in respective countries. In order to overcome food boycott, Nestle food had to sign up a UN global compact in the year 2000 to mend its image. This ensured its compliance to set ethical principles and this improved its reputation and business performance. Managing culture is a strategy used by MNEs in doing their business. Culture influence communication and businesses communicate to customers. MNEs adopt cultures of nations they operate in, for instance, Starbucks had to separate their coffee shops into two sections, for men and ladies in Asian market in line with their culture.
Most MNEs are using internet and social network like facebook and twitter to market their products to the public. This is cost-effective marketing promotion with a global coverage and popular amongst young groups of the population. Records from internet advertising bureau indicate that over 4 billion British pounds are spent every year in online advertisement. Most firms have changed to using online marketing because of its wide coverage and they also target relevant customers.
According to Donaldson, MNEs should not deceive customers into buying their products like was the case for Nestle. Managers should not market harmful products to clients and should comply with international standards and laws of the country. The use aggressive marketing and enlisting the help of health care workers unfairly influenced people into buying formula milk. They also used lies in their adverts to influence mothers into buying powder milk; this is contrary to Donaldson use of moral language in marketing products. Managers of Nestle ought to have followed moral standards in their marketing activities. I believe lying to public is contrary to laws Bangladesh. The company managers should have followed the laws of the land and this could have improved business performance for the company. Accordingly, Nestle managers should have adopted an international business ethics which emphasize justice and moral rights. Justice demands that you be fair to all humans and it’s the moral duty of managers to act in the best interest of customers and the company. Their actions destroyed the image of the company not in the interest of the company and the customers. According to moral language suggested by Donaldson, their marketing decisions should comply with the code of ethics of the company and the country they operate in as well as manager’s personal ethical beliefs. Stating that artificial milk is better than breastfeeding milk is quite misleading and unethical. Company management immorally took advantage of illiteracy of the population to market their products in least developed countries (LDCs) which is against good ethics. They also took advantage of the poor population in LDCs to produce and sell formula milk so cheaply to attract more customers and large sales which is unethical. The company went further and broke the provisions of UN global compact it signed; breaking the very standards they put in place was unethical. This attracted protests from health authorities both locally and internally and led to the boycott of its products which affected their business performance. We can therefore say that, good business ethics is useful to the growth of MNEs business.
Conclusion
Globalization has impacted on the way to conduct international business. Global business has become competitive and dynamic. It is however faced with challenges. Unfair business practices against developing countries should be checked to enhance fairness in global business. With some governments providing subsides to their firms, this creates unfair playing field in the global market. These however are addressed by WTO and WEF to bring fairness in global business. Culture impacts on international business and managers should be able to adapt their business accordingly.
References
World economic forum. (2012). Economic growth. Retrieved on 11th July, 2012 from http://www.weforum.org/issues
