Effects of Globalization in Management

By: Prapanna Lahiri

The concept of globalisation means an increasing flow of goods and resources across national boundaries resulting in emergence of a complementary set of organisational structures to manage the expanding network of international economic activity and transactions. In the obtaining global economy, firms and financial institutions operate beyond the confines of national borders. In such a world goods, factors of production and financial assets would be almost perfect substitutes everywhere and national states no longer remain distinct economies. Globalisation shows a trend towards integration of four components of a global economic system namely globalisation of production, markets, investment and technology.

Globalisation presents developing nations with opportunities for economic growth while simultaneously subjecting those to highly competitive contexts where playing fields are not always level. This has resulted in what has become known as the digital divide. No country remains an island unto itself but forms part of the emerging global village. Newer technologies continue to make the world a smaller place.

Management executives now need to become more conversant with alternative strategic management processes that are more effective in dealing with the associated uncertainty, instability and discontinuous change. In the increasingly free market economy successful business enterprises will, henceforth, function in a global marketplace where accent is on profitably meeting constantly changing client needs, expectations and aspirations. Furthermore, enterprises will, in future, be forced to take cognisance of environmental or ecological impact of their business operations too. Environmental activists have increasingly begun focussing on the ecological issues following disaster situations that has materialised consequent upon indiscriminate economic development.

In the global investment scenario, the views of international investors have a greater influence on domestic stock prices. The veracity of this observation has been amply demonstrated by the volatility of exchange rate of the domestic currency against the US dollar. In the reality of global integration of markets, production, investment and technology, the concept of strategic threats and opportunities associated with the global economy is to be clearly understood and strategically managed.

A significant shift has occurred in the area of management practice due to globalisation. Corporate Man Management has been impacted by considerations of skill and cost advantages that drive globalisation. Personnel Management (Theory X) approach of yesteryears has been replaced by more practical Human Resource Management (Theory Y) approach. Organisational structures defined by ‘hierarchical positions’ have given way to more democratic flat decentralised organisation structures driven by core competencies and problem solving skills. The new generation leadership styles can no longer be straight jacketed as “good or bad” styles. A variety of time specific and industry specific leadership styles have evolved to achieve predefined organisational objectives. Economic liberalisation has resulted in more contractual and outsourced employment reducing organised sector employment. Free trade has ensured that countries specialising in the production of certain goods and services efficiently, at lesser costs, will produce them while importing other commodities. The savings thus gained can be diverted for other more productive jobs. The challenge to management is to adapt to this changed global environment.


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