Advantage and Disadvantage of Globalization Essay Essay

Globalization is a significant idea that has assumed a significant part over the earlier hundreds of years in business measures. In various regards, globalization impacts organizations, the climate, world economies and social orders. Those for the most part affected by globalization are essentially all enterprises. Hierarchical changes are likely because of dynamic innovative advances, quick rivalry and trade of information. To react to these powerful changes organizations are needed to perceive the different components of the significant impacts of globalization. Several years prior administration master peter Drucker anticipated what worldwide firms would resemble, clarifying that they would have been coordinated together and overseen through systems not by their owners.

Globalization can be characterized as the fuse of public economies into the world market. Mix is accomplished through global direct speculation, exchange movement, income and the headway and spread of innovation (Rick, 2013). Markets where it is predominant and explicitly far and wide are monetary business sectors, for example, credit and currency markets, protection markets and capital business sectors. Ware showcases for instance gold, oil, espresso and tin. Item showcases for instance shopper hardware and engine vehicle. Globalization comparable to business can be depicted as the interaction permitting speculation and monetary business sectors to do business universally fundamentally because of liberation and better correspondences.

The act of work relocation further works with decrease of geological predisposition. For example numerous nationals from Eastern European countries have to a great extent relocated toward the Western for better salaried positions. Likewise it empowers associations with less specialists to enroll workers (International Organization for Migration, 2010). For example the United Kingdom employed residents from Eastern Europe to fill in empty nursing positions. In any case work relocation is a serious argumentative issue. Some are concerned that free movement of individuals across the world can make additional pressing factor for certain countries (Revenga, 1999). Nations like America have reacted by endeavoring to control the deluge of foreigner specialists. Furthermore globalization has worked with the assembling and dissemination of products across the globe. With the ascent in economies of scale, creation is absolutely tweaked. Better specialization prompts discounted item costs for shoppers and lower creation costs.

Another benefit of a worldwide world economy is it presents more prominent rivalry. Neighborhood syndications were shielded by absence of competition. By and by globalization means organizations confronting more prominent contest from unfamiliar ones. Globalization of broad communications has diminished world space extensively (Economy Watch, 2010). Numerous individuals are aware of the current world news through different electronic and print media. Progression in worldwide correspondence network results to simple progression of imperative information not exclusively to individual’s yet at business levels as well. Majority rule sentiments are immediately spread among countries across the globe. Financial globalization steers up the hypothesis of open economy. This requires new ideas and thoughts to be imported from abroad. Employing and enrollment in the fare inclining countries for the most part offer great pay rates by around 15% contrasted with the import situated occupation nations. (Muendler, 2004)

Globalization has clearly profited numerous organizations across the globe; anyway these benefits accompany hazards. One of the significant detriments of globalization to organizations is raising dangers connected to between dependence across business sectors. As countries keep on depending on one another, a destructive monetary shock in one country can without much of a stretch spread to other people. For example a decrease in auto deal in the United Kingdom was felt across other European business sectors in light of the fact that a large number of the vehicles bought in the UK were imports structure the EU zone. The 1990s Far East emergency was incited by the decay of some Japanese monetary credit banks. Most present model is the slump of America’s sub-prime lodging area which created a world emergency on the planet banking framework. Banks across the globe endured a decay of resource esteem additionally diminished by acquiring among one another. Because of the emergency it’s anything but a liquidity issue and set off an extreme breakdown on the planet economy. Over customization for instance, over reliance on assembling a restricted measure of items for the worldwide market is another drawback connected to globalization. A sudden decrease in worldwide interest for one of the products can toss a few economies into passive state. A few underdeveloped countries endure by over redoing in a confined scope of products like the travel industry and agribusiness area.

Karl Marx in his socialist proclamation advised that little organizations will be wiped out of the market by bigger organizations in an industrialist setting. Concurring Marx, the annihilation on homegrown endeavors prompts ascent of syndication and culture change which somewhat fluctuate across countries. Visiting the current China, it is difficult to debate Marx’s slants. The advanced landscape is covered with worldwide organization brands like McDonalds, KFCs, Starbucks and Pizza Huts. Likewise a visit to the a Chinese store show is practically like retail chains in the US, with the same world brands, for example, Gucci, Chanel, Coach, Armani showed in planner shops. (Thoenig and Verdier, 2003). Then again at a sharp look, present worldwide associations are not near depicted as threatening industrialist that Marx predicted. Items are profoundly redone to provide food for nearby shopper taste. Organizations have made imparted significant relations to unfamiliar countries to work on their deals. Indeed, even as some little organizations as portrayed, endure because of worldwide brands, there are ones that have sidestepped being disposed of by greater brands. In China for instance, there are a various and fruitful bistros and cafés even with the surge of American bistros chains. These neighborhood cafés won by offering nearby menu delights like Peking duck, noodles, dumplings than unfamiliar eatery come up short on the information to get ready. Exercise for little organizations is to make items unique in relation to contest. (Leo, 2010)

Because of globalization champ and free arise. From this reasoning disparity is probably going to rise where the hole between the rich and the poor extends particularly among non-industrial nations. Another peril connected to globalization is the over guideline of products through general marking (Rodrik, 2009). For example, countless worldwide PCs apply Microsoft windows working framework. Clearly normalization as contended by many, offer a great deal of benefits anyway pundits bring up that it’s anything but a decrease in item proficiency and making boundaries of entering neighborhood and more modest business sectors. Huge partnerships impact and force is likewise disadvantageous. To empower them to adjust their venture interest in possibilities of positive country laws between countries. They can maintain their business as homegrown syndications of work, modify compensations contrasted with the unregulated economy principles (Feenstra, and Hanson 2003). Pundits of globalization likewise bring up that it is disadvantageous; attributable to unbiased exchange, there is a high probability of losing nearby work markets.

A few specialists contend that at present we require an alternate kind of globalization. There should be strategies to guarantee that all nations profit with the beneficial side of globalization. Created countries should help more unfortunate nations by offering better training principles and exhibiting to them how new developments work. Globalization has advanced freeing off man made snags, empowering quick normalization of stages and cycle, by incorporating and connecting countries that had at first lived independently. Globalization has made new resurgence carrying incredible freedom to a greater number of people than any advancement previously (Rodrik, 2011)

Globalization Essay

In this developing society, globalization is being talked about more frequently. But what is globalization? And what is its impact on the individual corporation? In fact, globalization is not a new word. The earliest forms of globalization were based on business, the international exchange of tangible goods. Take silk as an example, since 110BC, there was some merchantmen engaged in international business between China and Middle Asia, and even to the Mediterranean Sea. Their route was called the Silk Road, which is very famous and is considered to be a sign of early international business and globalization. The early globalization was based on trading, therefore previous theories were also focused on this issue. One of them is Adam Smith’s absolute advantage. He believe that replacing the restrictive mercantile system with free international exchange would led to reduction in levels of poverty and would stimulate social and moral improvement in all participating countries. Smith reasoned that countries should specialize in production of goods for which they could achieve a low unit cost of production and import them if it is cheaper to do so than to produce them domestically. However, Smith had not considered the situation where two countries might both benefit from trade exchange with each other even where one holds absolute advantage over the other in the production of all goods. Based on this, David Ricardo presented his new theory (David Ricardo , 1817)-theory of comparative advantage. And that has become one of the most important concepts in international trade theory. In his theory, the choice of which commodity each country should specialize in is not determined by a simple comparison of the cost of production between countries, as defined by the cost of labour. This comparative advantage is considered as the one of the most common theories in the world because it includes an important factor of production-labour, which is one of the most important factors in international business environment. The theory of comparative advantage is more flexible and more adapt to the modern complex global environment, as well. However, international business is only a part of modern globalization. And in the new age, as there are different focus on the issue, there is not an universal definition of globalization(Jan Aart Scholte 2002 ). Someone define globalization as a concept, refers to both the compression of the world and the intensification of consciousness of the world as a whole. (Robertson,1992). However, this concept does not include maybe the greatest connotation of globalization- its impact on economy. Economy globalization, stands for the globalization of business, investment, finance and production, in other words, it is the best collocate of the production element in the whole world. It is rooted of the great evolution of productivity and international labour distribution, which forcing the more span of ethnic and country boundary. There are two main views on the globalization. Deglobalization, on the one hand, is one kind of the aspects that has been resistance to globalization. In the contemporary world the use of the term “globalism” as a negative comment on what has with equal pejorativeness been described in ideological terms as ‘one-worldism’ or ‘cosmopolitanism’ is not uncommon in political and other campaigns, and of course there is a quite long genealogy of such terms. Their view mainly based on some negative effects of globalization, such as globalization would accelerate the gap unbalance of the world economy, expend the gap between rich and poor countries; it would cause the pollution of the environment in developing countries; globalization must shock localA  culture as well as local economy. But we have to be very conscious of the fact that negative gestures, gestures of opposition, are typically expressed in contemporary terms and in reference to contemporary circumstances. People who hold this view often come from developing countries, which means they may experience more negative effects rather than positive ones. However, we should view the issue completely, from both side of the globalization. ‘Globalization is here to stay, one cannot back away from that fact, but today’s new order can be tapped for the advancement of the entire world economy through peaceful economic efforts.’

Lawrence R. Klein (2005)A  Nobel Laureate 1980

Globalization, firstly, is a better way to distribute the capital, technical, product, market, resource and labour all over the world. Secondly, globalization offers great opportunity for developing countries to benefit themselves through their advantages. Thirdly, globalization would accelerate the foundation and development of grand world culture. Moreover, globalization has significant positive effects on the coordinate of international politics as well as international conflicts. In itself globalization is neither good nor bad. Its economic impact can be both welfare-enhancing and dislocating. (Dilip K. Das: 2008)

Factors that influenced globalization:

The most important one is economy. As mentioned before, the earliest aspect of globalization is based on multination good exchange. Different countries have different advantages, they can exchange their own advantages with each other, benefit the both sides, by the measure of international trading. This concept had been rooted in almost all the businessmen and had great effect on their activities. In this day and age, multinational corporations cannot be limited in one region or area, because they need more resources, which are not only high quantity, but also high quality and low cost. In order to meet this demand, they have to go abroad, seeking for new, better material. Meanwhile, the domestic market often being saturation, or have less profit than before, so they have to explore new markets. And foreign country would be their new cake, no matter whether the companies want to do so. And these multinational corporations have effectively promoted the development of globalization. A BMW car, for example, maybe have its engine made in German, and the tires made in UK, final assemble in Greece, and sold to American. It is because different country has different advantage, so that big company synthesis these advantages all together and make its profit max, and cost minimum, as well. In this way the globalization is more common and necessary in present society. Politics is also one of the factors that impacts globalization. Recent decades have witnessed major growth of planetary-scale regulation through transgovernmental networks and accompanying global administrative law (Raustiala, 2002; Slaughter, 2004; Kingsbury and Krisch, 2006). Kinds of international trade agreements and organizations have great effects on international trade. Take WTO as an example, there are ten benefits which are being listed officially, as a positive effect of their trading systemA A  (10 benefits of the WTO trading system https://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b00_e.htm), that are: 1. The system helps promote peace; 2. Disputes are handled constructively; 3. Rules make life easier for all; 4. Freer trade cuts the costs of living; 5. It provides more choice of products and qualities; 6. Trade raises incomes; 7. Trade stimulates economic growth; 8. The basic principles make life more A A A A A A  efficient; 9. Governments are shielded from lobbying; 10. The system encourages good government. Despite there are many advantages of global politics, which impact on international business, we cannot ignore the negative effects of politics. Almost every country has some kind of domestic protective politics. These are meant to prevent domestic industries from being beaten by foreign companies. one simply explain is raising the tariff of import good until it is more expensive than domestic one, often by the measures of high tariff or set some limitation of quantity of import good. Yet for all of this institutional innovation and expansion, global governance today still falls far short of needs. However, much more and much better transplanetary regulation is needed to ensure that globalisation impacts positively on core attributes of a good society such as cultural vibrancy, democracy, distributive justice, ecological integrity, material well-being and peace.( Jan Aart Scholte : 2007) Technical also plays an important role on the globalization. For example, the invention of airplane, had greatly improved the globalization. People can easily go anywhere on the earth by airplane. With the help of airplane, there are more and more communications between different countries. However, modern technical has some negative effect on poor countries. That is, developed countries hold their core technical, secretly, and benefit from it. While developing ones only have to become the factory of richer ones. Then although developing countries benefit from the production, the gap between two groups has became even larger.

Globalization effects on the factors:

Globalization has greatly accelerated the global economy as a whole. As mentioned before, globalization is based on the international business, and, globalization itself has its own aspect on the economy. When it comes to individual companies, as a result of the global changes of labour, capital, and other produce elements, globalization is both an opportunity and a threat, in the swot analysis. On the one hand, globalization provides a broader chance-from resource to sale- to local companies, which means companies can achieve profit maximum and cost minimum. However, on the other hand, globalization will introduce more competitors to the local companies. And some of the competitor may be a great threaten to local ones. international corporations are happy to see this because it is more convenience for them.( Edelberg, Paul B:2005) For example, they can offshore their manufaction department to Africa or Asia, where the cost is lower, and keep the design department and core technical in their nation land, for a high productivity and the keep their advantages. On the issue of the country, globalization is an undoubtedly trend which every country must experience and adapt to. (Lawrence R. Klein, 2005, Nobel Laureate 1980) As same as aspects on individual companies, globalization has both positive effects and negative on the countries’ economy. Globalization and international production distribution gave a great opportunity to “third world countries”, which means developing countries can benefit themselves by make good use of their advantages, such as low cost labour and a more free policy. It is what we all can see that a lot of regions developed fast in the past 30 years, for example east Asia, including Chinese Taiwan, Korea and other regions, all their achievements can be contributed to the spread of globalization. Meanwhile, developed countries had also benefit from the process of globalization. Companies from developed countries have more advantages compared with companies from poor ones on average and therefore globalization provide the strengthen companies a platform to lead or even dominate the global market. And that means the country as a whole can benefit more than before. On the controversy, people who antiglobalization have their reasons. Their mainly sustainably reason is that globalization which would import foreign capital that would have greatly influence on ethnic capital and local industry as well as local environment pollution(Bond, Patrick: 2005). Also globalization can raise the risk of the change of the economy in globalization because the feeble changing economy is much more tightly linked with the global and can easily being shocked by the fluctuation of the global market. What is more, globalization threatens the dominion of economy of the country, and expends the gap between developing countries and developed countries. Not only are developing countries suffering from globalization but also the developed countries. The offshore of factory has made a lot of people lost their job in developed countries, and the cost of labour keeping a high lever therefore local products have less competition advantage. And this would cause a lot of local companies closed during the great influence of low-price and high- quality import goods. Globalization is also promoting the technical development. It is what we can all see that the human genome (the full collection of genes in a human being) is being accomplished by the scientists all over the world. It is hard to image to finish the job without the information and experience exchange inter-countries. Thanks to Globalization, there is now a platform for scientist all over the world to get useful information, publish their new founding, and get feedback, from all over the world. Moreover, the influence of globalization on the politics is increasingly represented. Regulations of international organizations are more and more influence on the local policy. An agreement of global emission control regulations would lead a great change in the regulation for local automobile factory, for example. In the global village (Marshall McLuhan,1960), the boundary of the countries is becoming weaker while the interact among countries is more weight than ever before.

Part 2

NIKE, the world’s biggest sports and leisure products company, which can be defined as a multinational corporations (Hood&Young 1979) , had experienced a globalization way. Phil Knight, the foundation of NIKE, who had finished is MBA at Stanford University. During his study, he had a lesson which changed his life. After the lesson, Phil wrote an essay with the title “Can Japanese sport shoe challenge Germany sport shoes just like Japanese camera challenge Germany cameras?” After that essay, Phil found his way. And after his graduation, he went to Japan to seek opportunity. At one exhibition, Phil met the producer of tiger sport shoe, and Phil claimed he was an American who from” blue riband” in US. And he was wonder in the Japanese sport shoe. At the same time, the tiger company was just looking for their agent in US. Therefore tiger gave the dealership of tiger in US to the young man. After that, Phil went back to US immediately with the dealership and met Bill Bowerman, his former coach in university, and they established the genuine “blue riband” company, which is the former company of NIKE. Tiger is very popular in USA market and the new company benefit a lot from this. Meanwhile, “blue riband” accumulated cash during that period. After that, tiger company covet the great profit in USA market and required to buy 51% stocks of “blue riband”, otherwise they would stop supplying shoes to USA market. “blue riband” refused the requirement and finder their new partner with their own design. In the end of that year, Phil named his company NIKE, which comes from the Greek legend. The first time the name and the swoosh appear together is 1972. In 1980’s Moscow Olympics, the first player who wears NIKE won the gold medal, at the same year, NIKE established its first branch in Netherlands. In the next Olympics, 58 players who NIKE sponsored won 65 medals and Carl Lewis won 4 gold. In 1997, NIKE established two customer service in Seoul and Tokyo. In 1998 NIKE made a 10-year-agreement with Brazilian national football team, preparing for the 1998 world cup and made the special boot for Ronaldo, which is a silver one and became famous during that world cup. In 2000 Sydney Olympics more than 2000 athletics in 25 items wearing NIKE. In 2002 world cup NIKE sponsored 8 teams including the champion Brazil and the best shooter Ronaldo, with 11 goals. With the unstoppable effort, NIKE had occupied 33% of the world market in1979 and even 50%in 1981, which is far ahead Adidas. Since 1970s, NIKE has established a new model-virtual production. NIKE does not have one factory, while he makes use of his trademark, design and development, through special permit to have a mass production in the regions where the cost of labour is cheap. The company itself devotes all the resources into demanding research, product design as well as marketing. The method of this special production is now being copied all over the world. With the unstoppable effort, NIKE had occupied 33% of the world market in1979 and even 50% in 1981, which is far ahead Adidas. To be more precise, we should consider the expending of NIKE’s global production.

  • Year 1964 Phil Knight and Bill Bowerman devoted 500dollars to import “Tiger” to USA.
  • Year 1978A  The company changed its name to NIKE formally.
  • 1970s’ NIKE was mainly produced by two Japanese companies-Nippon Rubber and Nihon Koyo.
  • Late 1970s’A Because of the high cost of Japanese production, NIKE was trying to produce in USA and seeking for other producer and supplier.
  • Early 1980s’A Korea and Chinese Taiwan had became the main manufacture place. In1982 86% of NIKE shoes were made in the two regions.
  • Late 1990s’A Indonesia, China, and Vietnam became the main manufacture place.
  • Year 2001 NIKE is manufactured in 51 countries, in more than 700 authorised factories, and by more than 500,000 workers, including:

74 factories and 175,960 workers in China; 30 factories and 104,514 workers in Indonesia;A  62 factories and 47,962 workers in Thailand; 12 factories and 43,414 workers in Vietnam. (Richard M. Locke. 2002) The case of NIKE is adequately indicated the importance of global working distribution. For the multinational corporations like NIKE, international distribution and agency authorised manufacture can effectively reducing the cost of production as well as making their operation more flexible. And for the companies in developing countries, devote in such a distribution system can get approach to international market, therefore benefit them. Also we can see how FDI influence NIKE’s development in the past 20 years. Nike Company get its first profit from international business, and first mainly rely on Japanese company to product. After that, Nike was seeking for better environment for product all over the world, including USA, China, and other countries. Now Nike production is mainly based on the authorised factories in east south Asia. The development of globalization gives companies like Nike a great opportunity to achieve the goal of cost minimum and profit maximum. In the economy globalization, countries all over the world can develop their preponderant industries and through the exchanging in international market, to get economical profit. And finally promoting the development of the countries and benefit the citizens. And not only companies in developed countries can expand rapidly but also the companies in developing countries. ‘It concludes that, going by the available evidence, globalization on balance is a welfare-enhancing force’. ( Dilip K. Das. 2008)

References:

David Ricardo: 1817, ‘essay on the external corn trade’ Jan Aart Scholte : 2002, ‘What Is Globalization? The Definitional Issue – Again’, CSGR Working Paper No. 109/02 Roland Robertson:1992, Globalization awrence R. Klein: 2005, Nobel Laureate 1980 Dilip K. Das: 2008, ‘Winners of Globalization’, CSGR Working Paper, 2 Raustiala, K. (2002) ‘The Architecture of International Cooperation: Transgovernmental Networks and the Future of International Law’, Virginia Journal of International Law, vol. 43, no. 1 (Fall), pp. 1-92 Slaughter, A.-M. (2004) A New World Order. Princeton: Princeton University Press. Kingsbury, B.W. and N. Krisch (eds) (2006) ‘Symposium on Global Governance and Global Administrative Law in the International Legal Order’, European Journal of International Law, vol. 17, pp. 1-278. 10 benefits of the WTO trading system https://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b00_e.htm Jan Aart Scholte : 2007, ‘Civil Society and the Legitimation of Global Governance’, CSGR Working Paper, Edelberg, Paul B:2005, ‘globalization is good for American’, Fairfield county business journal, 7/4/2005, vol44, issue27, 30-30, Bond, Patrick: 2005, ‘globalisation/commodification or deglobalization/decommodification in urban South Africa’ , Policy Studies, Vol.26, Issue 3/4, 337-358 Marshall McLuhan: 1960 , Explorations in Communication Richard M. Locke: 2002, ‘The Promise and Perils of Globalization: The case of NIKE.’ Dilip K. Das: 2008, ‘Winners of Globalization’, CSGR Working Paper, 2.

The Growing Awareness of Human Rights through the Lens of Globalization  Essay

 The Universal Declaration of Human Rights is considered a monumental document in human rights history. It was created after the Second World War. After World War II ended, the international community vowed never again to allow atrocities like those of the war to happen again. It was created by representatives of multi-cultural backgrounds from all areas of the world. This was the first time that nations agreed on an inclusive statement of basic human rights. The declaration was adopted by the United Nations in 1948 at the United Nations general assembly in Paris. It stated for the first time that fundamental human rights should be universally protected.

Global legislation regarding the topic of human rights has, in many ways, been successful in making the world a better and more peaceful place. Global governments are striving to promote human rights domestically and abroad, and are collaborating with multinational institutions to achieve this. The UDHR has greatly influenced the development of human rights laws internationally. It is responsible for advancing regional political structures protecting basic human rights, such as the European Convention of Human Rights. Since its inception, the declaration has also been regularly utilized by other countries. Maskara, Shreya. “How Effective Has the Universal Declaration of Human Rights Been in 70 Years?” Qrius (Formerly The Indian Economist), 22 June 2018, qrius.com/how-effective-has-the-universal-declaration-of-human-rights-in-70-years/.

The world’s response to mass atrocities has seen the greatest progress, even though actual enforcement is not always consistant. The US in particular leads in creating governmental processes to prevent, predict, and respond to mass violence against civilians globally. Such actions include trainings to help American diplomats to recognize the signs and risks of mass violence and improve collaboration among federal agencies. There is still much work to do however, and this is one way the UDHR falls short. In the years following the tragedies of Bosnia and Rwanda, many of the world powers who apologized for their lack of action and effective response to genocide during the 1990s, and have yet to organize themselves sufficiently to act early and effectively to prevent or stop mass atrocities in the future. One example would be the massacres now going on in Syria. The United Nations needs to do more to intervene and rescue Syrian Citizens who are now currently trapped by the Syrian armed forces.

Article 25 in the UDHR expresses the fundamental right to adequate health. After adopting the Universal Declaration of Human Rights, another crucial goal to provide people with the right to basic and adequate public health care is strongly promoted, and significant resources have been devoted to the challenge. Realistically speaking, there are still many governments in the developing world that fail to provide adequate health care and living conditions for their population, their citizens can suffer unnecessarily from diseases and ailments that are routinely treatable or even preventable in more developed nations. In order to improve conditions in developing nations the focus needs to be, and has been, on some fundamental improvements. Access to and distribution of clean water, cultivating and maintaining sufficient food supplies, access to vaccinations and medications, basic preventative health care, pre and post-natal care, as well as basic health education. Thanks to the Universal Declaration of Human Rights, efforts are being made and some improvements are resulting. The Food and Agriculture organization of the United Nations was formed to improve and increase agriculture to help with global famine and malnutrition. There’s also the Global Fund, which was established in 2001, to combat Tuberculosis, Malaria and AIDS, by way of allocating funding to nationwide projects in nations with higher disease rates. UNICEF, which is the United Nations Children’s fund, strives to improve children’s welfare around the world. This organization promotes education programs aimed at reducing infant and child mortality rates by means of intervening in nations where children are suffering from malnutrition, disease and the effects of war around them. Most notably, the World Health Organization was also formed in 1948 to secure that all people have access to the highest possible level of health. WHO actually defines the term health as, “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity?” “Home.” World Health Organization, World Health Organization, www.who.int/. The WHO strives to improve the practice of healthcare and create standards for the international community. “ .” United Nations Security Council Resolution 660 (Condemning the Invasion of Kuwait by Iraq), S.C. Res. 660, 45 U.N. SCOR at 19, U.N. Doc. S/RES/660 (1990)., World Health Organization, hrlibrary.umn.edu/edumat/studyguides/righttohealth.html.

The UDHR states in article 1 that all human beings are created free and equal. Across the globe women’s rights and voices are now in the forefront and gender equality is making strides in developed countries like the US. However, women still lack equality in much of the Islamic word. Religious separatists are still being persecuted and some political freedoms are denied. While there still needs much improvement globally for basic equal rights violations the effort put forth by the UN is notable.

Although the Declaration is important in the history of human rights today as we know it, it has many weaknesses that prevent the each article from fully being implemented and recognized. One notable issue is that the Universal Declaration itself is not legally binding; it does not have the force of a binding treaty. The emphasis seems to be more on western societies.

One political issue that was involved in trying to force countries to comply with the articles of the UDHR was the issue that not all nations agreed nor signed it. Eight countries in total elected to abstain from signing the declaration; Belorussia, Poland, Czechoslovakia, Saudi Arabia, South Africa, Ukraine, the USSR, and Yugoslavia. It has been criticized that the Declaration didn’t apply to women, homosexuals, or members of select political, religious, economic and social groups. In the case of the right to seek asylum, it was made clear that this right “does not apply in the case of prosecution genuinely arising from non-political crimes or from acts contrary to the purposes of the United Nations. “ In other words, it’s of the concern that anyone involved in crimes against peace, war crimes, crimes against humanity or acts that directly contradict the very principles of the United Nations should not be granted the protection.

Overall, I believe that the Universal Declaration of Human Rights is monumentally important. It’s when we came together as a whole to attempt to define and protect basic human rights. Without it, atrocities like those seen in World War II would run the risk of repeating. Although not all countries have agreed to its terms, the heightened awareness the declaration gives to the subject of human rights helps to keep the ideals in the forefront. Improvements do need to be made to better address and protect those not clearly defined in the Declaration. I’m confident, however, in today’s global climate the subject of Human Rights will continue to evolve and improve.  

Globalization May Actually Save the World Essay

Climate change is quite literally the most pressing issue facing our planet. The human race’s lack of respect and consideration for our Earth has caused the planet in its entirety to warm significantly, causing drastic and sporadic changes to the world’s climate. We as inhabitants of the Earth are now faced with the increasingly urgent issue of cleaning up the mess that we have made in order to preserve our home from irreversible destruction. Action must be immediate and drastic, and it will require all earthly inhabitants to come together and face this crisis in unity. Fortunately, we are in the midst of an era of nearly complete global interconnectivity through globalization. Though not necessarily good or bad overall, globalization is going to be a crucial tool if we are to work together to revive the planet that we all share.

Globalization, according to Manfred B. Steger in his book titled Globalization: A Very Short Introduction, emerged as a buzzword in the 1990s because it described the “increasingly interconnected nature of social life on our planet.” Though it can be defined in a multitude of different ways, globalization is essentially a process that is gradually connecting the entirety of Earth’s population. It can be seen in many forms, such as the nearly immediate spread of information around the world through the internet, the development of a unified global culture, and the cooperation (or conflict) between citizens and leaders of countries.

Globalization, however, is a “contested concept,” and there is no consensus on whether or not it is inherently beneficial or not for our society as a whole (Steger). Though there is no straight answer as to whether globalization is good or bad, it can be said for certain that it benefits society in some ways. Cooperation amongst leaders in our globalized society, for example, could actually be our saving grace in working to reverse the effects of climate change.

There are several international organizations that serve our Earth as a whole, perhaps the most well-known example being the United Nations. Organizations like these exist for purposes that are important to the whole world and include people from many different countries whom all work together for a common earthly cause. There are also large meetings and conferences between leaders of many different countries to discuss issues that impact the whole planet. Just recently, for example, the World Economic Forum held a conference in Davos, Switzerland to discuss the future of globalization, according to Gloria Pallares in her article “5 climate change takeaways from Davos 2019.”

Over 100 governments and 1,000 businesses had representatives attend the forum, where inequality and climate change were the primary topics of discussion. The World Economic Forum published their annual risk report before the meeting took place and it warned of the dangerous road that lies ahead of us if action is not taken to resolve climate change, stating that “Of all risks, it is in relation to the environment that the world is most clearly sleepwalking into catastrophe.” The document determined that the five environmental issues at the top of the list of concerns were extreme weather events, failure of climate-change mitigation and adaptation, natural disasters, biodiversity loss, and man-made disasters (Pallares).

Another global organization, the Intergovernmental Panel on Climate Change, published a report in October 2018 that highlights the urgency of our planet’s situation, shares Klaus Schwab, founder and executive chairman of the World Economic Forum, in his article titled “Globalization 4.0 will help us tackle climate change. Here’s how.” The special report warns that we only have 12 years to act in order to avoid dangerous, irreversible climate change. Schwab explains that while this seems daunting, it is possible if we use globalization to our advantage.

It will require an unprecedented amount of collaboration between the public and private sectors, as well as large and systemic transformations within industry, technology, and the design of consumer products. In order to succeed in transitioning our global society in a way to prevent dangerous levels of climate change, our “international community,” as Schwab refers to it, must embrace a new agenda for climate action and work together to meet and exceed goals set in the Paris Climate Agreement (Schwab). It is only if our planet in its entirety can work together to make the transition that climate change can be kept under our control. Without globalization as we know it, this would never be possible.

Climate change is the most crucial issue of our time. We are currently standing face to face with the possibility of the total destruction of our planet and it is now our job as people of Earth to work to slow, and hopefully reverse, the damage we have cause to the place we all live. Globalization, which is essentially long-term development of an interconnected, cohesive earthly community, has already contributed to the process of saving our planet through international organizations that address the problem. We now face the daunting task as a globalized society to work together to transition into a more environmentally-conscious populous, and we only have 12 years to do it before irreversible damage has been done. Utilizing the advantages of our global community to implement radical worldwide change is the only way to successfully make this transition. As it turns out, globalization may actually be our biggest tool in the daunting task of saving our world as we know it. 

The Controversial Phenomenon of Globalization Essay

Globalization is the global integration of international commerce, investment, information technology and cultures. Are what government policies designed to open up economics domestically and internationally to boost development in poorer countries and raise living standards for their people that drive globalization. These policies have, however, created an international free market that has mainly benefited multinationals in the Western world to the detriment of smaller companies, cultures and ordinary people.

The controversial phenomenon is globalization, it does not leave many people around the world indifferent. In my view, this means that both positive characteristics outweigh the negative. Unable to overestimate the positive impact of globalization. Globalization of the economy as a whole provides a serious basis for solving universal human problems. In addition, it contributes to international competition, arguing at times that globalization will lead to competition in the prefect. It now leads to new areas of competition and tougher competition in traditional markets. Globalization processes are beneficial in the global economy, especially for consumers, as competition gives them more choices and lower prices. Based on research, globalization simplifies global business management. This is due to the advances in technology, transport, communication, education and trade regulations provided a more then fair environment. This appeals to more people. Participation in international business and international trade. Global managers face many challenges because of high industry competition, good industries need to be able to satisfy and maintain their products. Companies benefit from economies of scale in the company as management costs are reduced. The company must ensure that they can survive in the marketplace. Globalization is a very wide and important debate, and often leads to many discussions about it.

I spent some time researching what it is and how it might affect developed and developing countries. Globalization has many advantages for the world at international level, but it also has a negative effect. Globalization In short, points to the whole effort to make the world community one village. Goods that can now be found only in western countries throughout the world. Now in developed areas, scientific advances and industrial progress in developed countries can benefit from the improvement and growth of their areas. Given the positive attributes of the term and meaning behind globalization, it also has its downside as discussed earlier. Companies and people around the world are involved in the process through investment, outsourced production and international trade. All of these are supported by information technology in order to bring together the economies of different countries. Only through globalization do people, services and goods move around the world freely, in a way that is connected and smooth. Globalization has reduced internal trade, allowing different countries to take advantage of competitive production advantages. This means that if two countries produce the same product but say country D produces the product at a lower cost than country C, country D produces and exports the product to country D as an example. There is no doubt that globalization was good for many developing countries that now have access to our markets and are able to export cheap goods. Globalization has also been good for corporate multinationals and wall streets.But globalization has not been good for working people (blue or white collar) and has led to the continuing deindustrialization of America; free trade is supposed to reduce barriers such as tariffs, value, added taxes, subsides, and other barriers between nations. This is not true. There are still many barriers to free trade.

As though the many benefits Globalization has attributed to the economy, technological advancements, and trade, (ect). Not everyone has showed similar favor in the term globalization, there have even been anti-globalization movements or counter- globalization movements. Participants base their criticism on many topics. One of the popular following is the oppose multinational corporations having unregulated political power. Many anti – globalization activists do not oppose globalization in general and call for a form of global integration that provides better democratic representation, human rights advancement, fair trade and sustainable development and therefore feels that the term ‘ anti – globalization’ is misleading. Supporters believe that, at least in the late 20th century, the ‘ ruling elites ‘ sought to exploit the expansion of labor markets for their own sake; this combination of Bretton Woods institutions, states and multinationals was called ‘ globalization. In response, different social movements emerged to challenge their influence, which were called ‘ anti-globalization.  

Effects of Globalization Towards our Culture Essay

Impact Of Globalization On Culture Essay

How does Globalization Affect Cultural traditions? Globalization is very synonymous to us for the past few years. It can be defined as a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. Globalization also has made a vast change in every angle of humans life and one of it is, our cultural tradition could be affected due to the globalization process. Culture is what people eat, how they dress, the beliefs they hold and activities they practice. Globalization has joined different cultures and made it into something different. There are three things that could be affected: Food culture, traditional attire, and traditional performing arts. First and foremost, Globalization is the fundamental cause of food culture to be transformed. As we know, food is the oldest global carrier of culture and It reflects the culture and identity of particular races or nations. For instance, “Nasi Lemak resembles the food culture of Malay. Any change in the food that we eat, in its preparation, the way it’s served and consumed diminishes the traditional beliefs of the people.

Today, someone in America can be eating Japanese noodles for lunch while someone in Malaysia is eating classic Italian meatballs. How did this phenomenon happen? It shows that Globalization has caused the spreading of culture throughout the world and food is one of it. People of a particular country not just eat their own foods but also other foreign foods. However, this circumstance could harm our food culture. As there are various kinds of foods, people tend to look for other food different from their own food, for example, fast food like McDonald’s. This could lead to the abandoning of our own food and consume more foreign foods and then, deteriorate the culture and identity of particular ethnicities. Hence, we could say that, Globalization affects cultural tradition in food. Furthermore, Globalization has also spread the foreign fashions throughout the country.

Foreign culture especially western culture seen by many peoples as the deals. They feel that international culture as good for them. As a result, they tend to follow these cultures and we can see many people started to wear jeans, skirts and what not. As Globalization has made the trade became global and faster, cloth products from foreign countries can easily enter this country. So, people can easily get foreign clothes in various supermarket all over the country. As time goes by, people that wear others attire is increasing gradually while on the other hand, the traditional attire are less worn and only be worn in certain places or events, not so frequent as before. As a conclusion, Globalization does affect the traditional attire of particular ethnicities as they tend to wear foreign clothes as it is regarded as international attire. In addition, another effect of Globalization is the deterioration of traditional performance arts due to the entrance of a lot of foreign influences in performing arts. One of the kinds of performing arts is music. Every ethnic or nation have their own traditional music and it is part of the culture. But, in this Globalization era, traditional music and songs have declined gradually.

People nowadays tend to look for modern music like Rock, Pop and RnB rather than hearing to traditional songs. They are also attracted to foreign artists such as American artists as they bring modern music that fulfills the need of people in this century. Not just that, local artists also tend to follow western styles of performance when performing on the stages. When this occurs, traditional music will slowly forget by people as they lured with the international music style. For instance, “wayang Kulit” is a very happening and famous performance in Malaysia before, but now there is too little performance of this cultural art. So, we could say that foreign performance arts have made traditional performance arts are being left aside.

As a conclusion, It is proven that Globalization caused foreign cultures can easily diffuse to culture in many countries and started to transform them to be different or even vanished them. It is also undeniable that Globalization does affect particular ethnic cultural traditions as people acknowledge the foreign cultures as they think it is good for them. At the same time, their cultural tradition could be abandoned as they practiced more foreign cultures than their own culture.

Globalization Research Essay

Globalization

This is the process of integration and more interaction among the people, different governments, and companies due to spread of international investment and trade with the help of enhanced information technology.(we have to ensure that worldwide market is embedded in all shared practice and values that shows global social requirements and that the worldwide economy shares all the benefits brought by globalization) Globalization is basically an economic progress in integration with cultural and social aspects.(No generation has had the opportunity, that we have now, for building a worldwide economy with no one left behind, it is the best opportunity with profound responsibility) Globalization has brought both positive and negative impact in most countries on political, cultural, and economic states of the economy, the most important merit of globalization is the reduction of the level of unemployment in the economies.(Baylis, John, Patricia Owens, and Steve Smith, 2017)

Historical occurrences of globalization have been trending for decades, whether it is generating growth and development or the possibility of not depending on which point of view one takes about globalization. Europeans nations and Americans are the full-time beneficiaries of the globalization even thou some of the experts argue that it does not do well in the developed countries or it may be resulting to social inequalities and promoting poverty in developed countries.

This era of communication democratization and a free flow of information e.g. the internet platform where people are able to produce products, distribute it in various forms to many different people at once leading significance loss of distance. Globalization has led to compression of countries boundaries due to increase in trading activities around the globe, as a result, there was formation of organizations such as World Trade Organization, legal international institutions, and increased dialogue among political leaders. A political leader has tried to make their image great in the global market.( Antunes, Ctia, and Karwan Fatah-Black, 2016)

Benefits

Positive effects

Globalization process has affected the environment, political structures, cultural change, economic prosperity and development, and the lifestyle of humans in the society around the globe. The competition brought about by globalization among the organizations in fighting to meet the demand of the customers globally with the ability to distribute them; this has led to increasing in time of completion of products in relation to other organizations around the world. This has made business and organizations to maximize on more customers than the opponent’s business and this leads to satisfaction of needs of customers thru providing quality products and services and raising the living standards of the people creating economic stability.

Exchange of cultural activities which are of benefit to a country is picked, welcoming the civilization has enlarged the societies. Globalization has promoted foreign investment in different countries which has resulted in the infrastructural development and increased employment opportunities and promoting foreign exchange rate. Globalization has promoted global markets due to ready, wider markets in the world with the demand for products increasing the transaction levels across borders. Globalization has created and widens foreign trade around the globe making available things that were found only in developed markets can be accessed by other countries in the world.( Bartsch, Fabian, Petra Riefler, and Adamantios Diamantopoulos, 2016)

Negative effects

Globalizations have negative effects to the developed counties such as fluctuation in prices of commodities due to large supply sources, job insecurity as only the skilled and experienced are mobile and can be hired at any place at any time around the world, capital flows, fluctuation in currency, and promotes terrorism due to immigration of people freely without boundaries on entry to different state.(Fukuda, Katsufumi, 2016)

In conclusion, I go with globalization as a good awareness as it has brought the world to a global village, where trading activities can take place in a blink of a second. Globalization has promoted development in different countries, due to an enhanced exchange of information and communication, an intense competition which brings quality products to the customer, raising the standards of living among the people, and promoting development.

Reference

1. Baylis, John, Patricia Owens, and Steve Smith, eds. The globalization of world politics: An introduction to international relations. Oxford University Press, 2017.

2. Antunes, Ctia, and Karwan Fatah-Black, eds. Explorations in History and Globalization. Routledge, 2016.

3. Bartsch, Fabian, Petra Riefler, and Adamantios Diamantopoulos. “”A taxonomy and review of positive consumer dispositions toward foreign countries and globalization.”” American Marketing Association, 2016.

4. Fukuda, Katsufumi. “”The effects of globalization on regional inequality in a model of semi-endogenous growth and footloose capital.”” Asia-Pacific Journal of Accounting & Economics 24.1-2 (2017): 95-105.

5. Filatotchev, Igor, R. Greg Bell, and Abdul A. Rasheed. “”Globalization of Capital Markets: Implications for Firm Strategies.”” Journal of International Management 22.3 (2016): 211-221.

What is Globalization? Essay

Globalization is the process or the tendency of integration and increasing interaction among governments, companies, states, people and countries driven by growth of ideas, culture and international flow of funds. The process is driven by investments and trade internationally and helped by information technology. It is affected by cultural and social aspects. In certain fields like business it resides in the economic interaction and integration of world markets. It involves technology, capital, data, services and goods. Back in 1820’s, that’s when large-scale globalization was globally felt for the very first time. It is traced from those years. Globalized societies offer forces of web that summon people, beliefs, markets, cultures and practices onto larger proximity to each and one another.

According to Maria Jerskey book on Globalization, she clearly states that as we all step into an era of increased and more global connection, we should be ready to accept much participation as that’s what the age entails (Jerskey, Maria, np). The large number of people from different destinations worldwide access information that’s far and beyond their nation borders and opportunities to make contributions on own opinions and insights. This is aided by the internet access via mobile phones and electronic computers. Failure of an investing bank was witnessed in the US as a result of unwanted subprime loans, this is said to have altered globalization in that it depressed the interbank lending globally, e.g. collapse of Iceland economy impacting the British consumers due to their deposits located on the Iceland banks. A problem or an idea in a single entity affects the globalization of all participating constituents (Jerskey, Maria, np). The unexpected Arab Spring outbreak impacted on globalization in the Middle East adversely in 2011, none had predicted such would have to do with Tunisia. To understand keenly our connected world on matters regarding globalization we require different skills and this is what promotes globalization due to the unique roles each plays. Via al-Jazeera Tunisia citizens managed to get the information on protests going on within their country, thanks to globalization.

A major paradox to this age of connection and globalization, it has become so easy in sharing important information from very different parts of the globe (Jerskey, Maria, np). Vietnam’s war was transported by air from Asia, edited in the USA and later broadcasted. This supports sharing of information via satellite. Print media’s pace has accelerated a lot, with publishing of fresh and new information in-form of news break. This is evident growth since papers have much fresh stories as compared to years down the line. A rise in the internet connectivity will lead to understandings globally, hence new ties will be built and maintain existing ones. Search engines have also developed over time, however they can only tell us what we all want to grasp and not the information we really need (Jerskey, Maria, np). Those who are expected to thrive with globalization according to the articles are the ones who learn to view broadly and find solutions to emerging mysteries globally.

In other words it is said that sharing arguments to do with globalization is like having arguments against the laws of nature. It is stated that at least 34% of all the shoes and clothing in the United States of Americas are products of China (Ritzer, George, np). This globalization is very beneficial to individual country economies all over the globe. This is possible due to the increased economy competition hence less conflicts between nations and states, this promotes the distribution of equal wealth portions (Ritzer, George, np). It embraces net benefits for a nation as a whole. It associated with much benefits namely, promotes technology innovation as a result of the competition that calls for improve or adoption of new technology available in the world market to keep up pace in developments. More and more global companies are boosted and grow at a rapid rate (Ritzer, George, np).

Globalization is the root of the interdependence between nations. However, the same rise of different state poses threats to the international sovereignty, this is the core reason behind xenophobic leaders in the globe. This same reason has impacted several aspects of our modern life and still in being a thriving force in the economy globally (Steger, Manfred, np). It is net beneficial and unstoppable to the entire globe’s economy, it is ranked as the best common solution into maintaining and shaping world economic growth.

In conclusion, the long run benefit of globalization is much inevitable even though the bumps all along its ride are termed as uncomfortable. The vision still focuses on its major benefits that are the backbone for today’s very rich and stabilized economy. The global cooperation that exists between nations enabling and supporting international business and trade to improve individual’s status of life and the country’s financial and social growth.

World Reserve Currency Moving with Globalization Finance Essay Essay

Over the past several decades, the U.S. dollar has enjoyed its status as the world’s most important and dominant reserve currency. Every major government and financial institution in the world now holds significant quantities of U.S. dollars as part of their foreign exchange reserves. However, are we seeing that the dollar’s role as the world’s dominant reserve currency may be coming to an end? But before getting into the details of Reserve currency and its evolution, let us take a walk into the fact that might draw the end of period of the dominance of US dollar. In 1965, the United States of America was the largest creditor nation in the world. Today, it is the world’s largest debtor nation. Figure 1: Brother, can you spare a couple billion? The most widely quoted figure for the debt of the United States is called the national public debt. U.S National Debt Clock in Manhattan quotes the figure currently at $12.311 trillion [2] . It has increased from $2.6 Billion to $12.311 trillion in the past 100 years. We will start analyzing this first by understanding what exactly is a reserve currency, its evolution and why does it matter?

World Currency

In the foreign exchange market and international finance, a world currency, supranational currency, or global currency refers to a currency in which the vast majority of international transactions take place and which serves as the world’s primary reserve currency [3] .

Reserve Currency

A reserve currency, or anchor currency, is a currency which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. It also tends to be the international pricing currency for products traded on a global market, such as oil, gold, etc [4] . It is held by central banks and other major financial institutions of different countries enabling them to pay off international debt obligations and influence their domestic exchange rate. Adding to this is the fact that Reserve currency allows the issuing country to purchase the commodities at a marginally lower rate than other nations. For major currencies, this transaction cost embedded in currency change is negligible with respect to the price of the commodity. The government issuing the currency will be able to borrow money at a better rate, as there will always be more liquid market for that currency than others.

Evolution of Reserve Currency

Spanish dollar: 17th-19th centuries

The Spanish dollar (also known as the piece of eight, the real de a ocho or the eight-real coin) is a silver coin, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Because it was widely used in Europe, the Americas, and the Far East, it became the first world currency by the late 18th century. Many existing currencies, such as the Canadian dollar, United States dollar, and the Chinese yuan, as well as currencies in Latin America and the Philippine peso, were initially based on the Spanish dollar and other 8-reales coins [5] . Figure 2: Source: https://en.wikipedia.org/wiki/File:Philip_V_Coin.jpg In the 17th and 18th century, the use of silver Spanish dollars or “pieces of eight” spread from the Spanish territories in the Americas westwards to Asia and eastwards to Europe forming the first ever worldwide currency [6] . There were 3 major reason that helped Spanish dollars entroute to being the World currency [7] : Spain’s political supremacy on the world stage The importance of Spanish commercial routes across the Atlantic and the Pacific The coin’s quality and purity of silver.

19th – 20th centuries

Before 1800s and during the same, most domestic currencies were dimensioned against Gold weights and International trade was designated in terms of these currencies which in turn stood for the weights of gold. The economic unit of account is a fixed weight of Gold. Hence, we can say that world’s first global currency was gold [8] . Three distinct kind of Gold standard prevails: Gold specie standard: System in which monetary unit is associated with circulating gold coins Gold exchange standard: Involve the circulation of silver coins, or coins made of other metals, but the authorities have guaranteed a fixed exchange rate with another country on the gold standard, creating a de facto gold standard Gold bullion standard: System in which instead of circulation of gold coins the authorities have agreed to sell gold bullion on demand at a fixed price Governments, especially during the War times, faced with the need to fund high levels of expenditure especially the military expenditures, but with limited sources of tax revenue, suspended convertibility of currency into gold on a number of occasions. This lead to the collapse of International Gold standard and the emerging collapse around the time of World War I had substantial significances on global trade. After the Second World War, a system similar to a Gold Standard was established by the “Bretton Woods Agreements” [9] . Under this system, many countries fixed their exchange rates relative to the U.S. dollar. The U.S. promised to fix the price of gold at $35 per ounce and the exchange rates around the world were nailed against the United States dollar. United States Dollar became the dominant Global Currency and was characterized by the fact that it can be exchanged for a fixed amount of gold. But by 1970, with the repeal of Dollar reserves by French Government and by the tight Fiscal strain of federal expenditures for the Vietnam War, President Richard Nixon ended the direct convertibility of the dollar to gold in 1971, resulting in the system’s breakdown, commonly known as the “Nixon Shock” [10] . Espousing the collapse of the fixed exchange rate regime, repeal of the gold standard and the institution of floating exchange rates as per the Smithsonian Agreement in 1971, most currencies around the world no longer are benchmarked against the United States dollar. Even then United States dollar got increasingly used as the main currency medium for conducting Global Trade.

Factors influencing the decision of Central Bank of a country to hold a particular currency as Reserve Currency (Lim 2006 and Cohen 2000)

Amount of World Output and trade: The larger the more likely it is that other countries will use it Macroeconomic and political stability, leading to stability in currency’s value High degree of financial market development Network externalities emulating a self-generating demand for the currency

Economic Reasons for United States Dollar becoming the Reserve Currency

United Stated being the preeminent Economic superpower United States Dollar was stable in value and freely convertible. Convertible currency is any type of currency that can be quickly purchased or sold without the need to obtain permission from some sort of central bank. The convertible currency may be used to obtain other forms of currency, or utilized to purchase gold United States Dollar was less subject to exchange depreciation or exchange controls than other currencies New York offered a broad range of financial facilities for the short-term investment of reserve funds Because of the depth in the market, large purchases and sales of liquid financial assets in New York could be effected without sizable change in their prices No other financial market, except possibly that in London, offered comparable facilities. But Sterling appeared subject to the risks of both depreciation and of inconvertibility to a greater extent than the United States dollar Above all, the ability of United States financial facilities and capital market to meet the needs of other countries in a satisfactory way in which they can hold the reserve currency

Benefits associated with United States Reserve Currency role

A country, here in our case United States benefit immensely because United States dollar is the predominant reserve currency. The benefits associated are: United States benefits from the increased demand for the dollar that the reserve currency status creates. This increased demand in turn adds significantly to the value of United States Dollar Other countries give goods and services to United States in exchange for United States Dollars issued by the Federal Reserve Other Countries also lend the Dollars they have accumulated back to United States at low interest rates United States benefits from importing these goods and exporting its inflation to other countries in the form of depreciating dollars Improved efficiency of New York financial markets due to immense complexity arising of the opening up of financial markets across the word in tandem with globalization United States enjoy the luxury of having increased flexibility in financing United States payment deficits

Costs associated with United States Reserve Currency role

Restrain on Independent domestic monetary policies. Being the Reserve currency country United states have reduced ability to pursue an independent monetary policy, especially when the United States is in a recession Ineffectual intentional devaluation of United States Dollar. Even if United States wants to devalue their currency it is not possible as other countries also will devalue their domestic currency in the same proportion. United States is so important in Word trade that if there is a devaluation done by United States, other countries in order to preserve their international competition are succumbed to domestic currency devaluation Burden of supplying reserves to other countries and also the burden of maintaining a complex financial market system Last but not the least is the immense risk associated with a full flush out of United States Dollars by the countries having Dollars as currency reserve. This effects out as a sudden devaluation of the United States Dollar coupled with loosing the benefits and status associated with the Stature of International Reserve currency

Whether a Single Reserve Currency: An Economic Viability

Figure 3: Source: https://en.wikipedia.org/wiki/Reserve_currency In practice we can see that United States Dollar account for 64% of the Currency composition of official foreign exchange reserves. But on a theoretical front, economists have two opposing views on viability of a single reserve currency always dominate the global economy. YES View: Due to the presence of Network Externalities one currency will almost always dominate. Network externalities arise from the field of invoicing trade and denominating foreign debt securities. This means that there are strong incentives to conform to the choice that dominates the marketplace [11] NO View: Economists such as Barry Eichengreen [12] differs from the view of existence of Network externalities since they are not substantial. As far as the currency’s market is liquid, there is strong scope for reverse diversification and capital losses can be hedged against. The implication is that the world may soon move away from United States Dollar. Hartmann (1998) and Eichengreen (2005) point out that although some theoretical analyses based on network externalities in the use of money for transactions suggest that there will be only one international currency, this argument does not apply to the currency of denomination of reserves

Is the World moving away from United States Dollar?

More than 60% of the World’s reserve currency is held in United States Dollars. Then why would Mr. Greenspan think that the euro might replace the dollar as the world’s predominant reserve currency?

History Evidence

As the world moved on with Globalization as one of the main drives, United States Dollar started facing serious challengers as a world currency. During the latter half of 1980s, the Japanese yen started appreciating from 225 Yen per Dollar in 1985 to 128 Yen in 1988. Also Yen started became increasingly used as an international currency. This period coined as the “Japanese Asset Price Bubble” lasted for a decade and after which as expected the world saw the Japanese Recession in 1990s. Thus we can see that Japanese Yen never posed real threat to the stature of United States Dollar as World Currency. More recently, the Euro has been gaining ground as reserve currency since it was introduced in 2002. Now, only seven years later, approximately more than one-fourth of the world’s reserve currency is held in Euros.

Research Evidence

Recent developments in international financial markets add pressure on the dollar. First, the emergence of the euro offers a serious alternative placement for foreign assets. Moreover, after a brief initial period, transaction costs in the euro currency markets have fallen drastically. Second, several other industrial countries’ currencies have also enhanced their liquidity and thus also offer attractive alternative assets for further diversification (Optimal Currency shares in International Reserves: The impact of Euro and the prospects for the Dollars by Elias Papaioannou, Richard Por tes and Gregorios Siourounis; European Central Bank, Working Paper series, Nov 2009) For determining the determinants of reserve composition researchers have done regression on actual currency shares on Macroeconomic, monetary and financial factors. Chinn and Frankel (2005) used aggregate IMF data to investigate determinants of the global composition of international reserves. Their projections suggest that it will take at least 25 years for the euro to challenge the dominance of the dollar as a major reserve currency, unless there is a major deterioration in the stability of the dollar (depreciation, inflation) Dooley, Lizondo and Mathieson (1989) and more recently Eichengreen and Mathieson (2000) utilized confidential IMF data to investigate the high persistence. Both studies found that currency pegs, the direction of trade, and the currency of foreign debt can explain the high inertia in reserve composition The U.S. supply of liquidity to the world must be matched by comparable demand on the part of foreign investors (Stiglitz, 2006). United States need the cooperation of other nations. In effect other nations must realize trade surpluses and thus lend to the United States to finance its trade deficits. Because the United States is an important supplier of both reserve currency and assets for international reserves, it must issue monetary liabilities that are sufficiently attractive for acquisition by other nations. However United States Dollar does not fulfill all the prophesies for the stature of Reserve currency. The root cause for the same is the existence of huge debt burden. America’s $54 trillion financial obligation is almost 400% higher than estimates for 2008 U.S. GDP. In fact, the sum of these obligations is nearly the equivalent of estimates for 2008 world GDP. The sheer size of this financial responsibility is fair grounds to even question the solvency of the United States. Another important reason which can give immense pressure on the status is the fact that United States Dollar’s value is getting depreciated. Against major currencies, the dollar depreciated by about 33 percent during 2002-2009. The economic crisis of 2007-09 has created doubts about the stability of the structure of economy, capital market and United States Financial system. Aggravating this is the financial stimulus packages offered to overcome the crisis, which in turn pushed up the inflation further debasing the United States Dollar value. China, which holds about 60 percent of its $2.273 trillion [13] foreign-exchange reserves in dollars, is especially vulnerable. China would like to diversify out of dollars, as seen in its decreased purchases of U.S. Treasury securities in 2009. Same is the case with Russia who criticizes United States of digging a hole with an economy based on huge deficits and massive borrowing, creating a cloud on Dollar’s future. Critics claim that claim that a credit-based reserve currency such as the dollar is inherently risky, facilitates global imbalances, and promotes the spread of financial crises. As a result, they argue that the dollar should no longer serve as the world’s reserve currency (Robert J. Carbaugh and David W. Hedrick, 2009). If the United States Dollar needs to be dethroned, who can be the next contender? – EURO, YUAN or A new single Global Currency.

Can Euro Supplant Dollar?

IMF estimates suggest that since 2001 developing countries have reduced the share of dollar-denominated assets in their foreign-exchange reserves from 70 percent to 60 percent. Also at the same time they have increased the share of euro-denominated assets in their portfolio by nearly an equal amount. However, according to the IMF survey Developing countries are not dumping dollars. They continued to add dollars to their portfolios, but they have acquired Euros and British pounds at a faster rate. Figure 4: Source: International Monetary Fund, COFER data Money reduces the cost associated while economic exchange. The more widespread the currency is more valuable and more acceptable it will be for the country holding it. Thus the whole point of a currency capable of becoming a reserve currency stems from having a large domestic base. Euro has all the potential for this. United States has a population of 308 Million [14] and renders a GDP of around $14.4 trillion [15] . European Union encompasses of 27 nations, population of 501 million and renders a GDP of around $18 trillion [16] . Of the 27 nations, 14 have adopted Euro as the currency. Thus as more nations start adopting Euro the domestic base of Euro is going to increase. This makes Euro most attractive to peg against. Adding to this is the fact that the European financial market is deep and broad. Hence as seen in the trend and as we move ahead, foreign companies and governments will denominate more of their securities in Euros and foreign banks will give and make more loans in Euros. If European Union countries not currently using Euros (especially UK) accept Euros then by 2020 United States Dollar will loose dominance (Menzie Chinn & Jeffrey Frankel, 2008).

Arguments that goes against Euro taking dethroning United States Dollar as reserve currency

United States Dollar enjoys the network externalities. It has got the inertia from being the mostly used currency in the International market United States Dollar market enjoys the advantage of being larger in size, credit quality and liquidity over the Euro market As seen with the Ups and Downs in the value of United States Dollar, even Euro’s value has fluctuated from $1.6 per Euro in 2008 to $1.3 per Euro in mid 2009 If United States if able to unwind its current macro-economic imbalances then United States Dollar value will increase and it will be difficult to dethrone the same from its stature

Can the World accept “Supranational” currency (Single Global Currency)?

International Monetary Fund Managing Director Dominique Strauss-Kahn’s vision of “an IMF of 21st century” is envisaging on the call to provide a globally issued reserve asset, similar to-but in important respects different from-the SDR (Address at the Annual Meeting of the Bretton Woods Committee in Washington, DC, Friday February 2010) [17] . A single global currency refers to a hypothetical single global currency or supercurrency, as the proposed terra or the Dey (acronym for Dollar Euro Yen) [18] , produced and supported by a central bank which is used for all transactions around the world, regardless of the nationality of the entities (individuals, corporations, governments, or other organizations) involved in the transaction. No such official currency currently exist [19] .The major push for the Single Global Currency came from Russia and China in March 2009, when the Kremlin [20] called for a supranational currency as part of the reform of the Global Financial system. Later in the same month, Zhou Xiaochuan, President of the People’s Bank of China, called for “creative reform of the existing international monetary system towards an international reserve currency,” conceiving it would “significantly reduce the risks of a future crisis and enhance crisis management capability [21] . However there are both costs and benefits associated with the implementation of a Single Global Currency. The advantages of going for a single global economy are analyzed by Ratnam Alagiah in the paper “Writing the Future: A theoretical Justification for a uniform and universal system of currency in accounting for inflation”, Journal of Modern Accounting and Auditing, July 2009. He compares the benefits associated with signal world currency as with having a single domestic currency. The advantages gained are: Reduction of the inflation rate to one common rate (if required) among all states Possible reduced Interest rates Expansion in investment Increase in development and trade due to the removal of uncertainty Reduction in transaction cost Reduction in cost of capital (Moshirian, 2004, Page 306) Apart from the benefits, one positive factor which can drive the confidence in the emergence of the Single Global currency is the evolution of Euro. In the past, in the absence of the Euro, with the diverse currency regimes across Europe, financial institutions in Europe were more exposed to fluctuation from foreign exchange and foreign exchange risk than now. Thus, emergence of the Euro has been a step in the right direction. This step forward can be seen as a crusade of emergence of Single currency in the 21st century, creating right environment for all key stakeholders and players in an increasingly integrated global environment. While introduction of a Single Global Currency has lots of positive effects, the implementation of the same poses serious challenges and threats. The vast diversity in the existing national political and economic system will create a stop block in the introduction meeting all the ends up. Other reasons impeding the evolutions are the loss of National monetary policy and religious difficulties. For Single Global Currency adoption to take place, as pointed by the theory of Optimum Currency [22] is the existence of Capital and Currency mobility. But Fariborz Moshirian in his paper, ” Global Financial Services and a Global single currency”, Journal of Banking and Finance, August 2006, analyses that “that a number of assumptions made as part of an optimum currency theorem are no longer relevant to the financial and economic forces that are in operation in the 21st century. It appears that labor immobility may not inhibit the process of financial integration amongst various developed and emerging countries, as capital mobility is ensuring that nations that are the recipients of foreign capital could develop their economies and increase their level of integration with the global economy”. Denotations are that one hand while banks may loose some income due to less trading in foreign exchange, lower interest rates, lower inflation and more business predictability, banks will benefit from better investment opportunities, more dynamic growth, demanding more credit but at lesser credit risk.

Will YUAN be the next reserve currency?

TBD: To be completed in the Main Final Project report. Here I will be giving insights about whether Chinese Yuan has the potential of being the next world currency and if not what are the reasons. Also I will provide facts about whether it can fulfill the prophesies for the stature in the near future. TBD: If the World can accept a single Global Currency, How will be the International Market articulate the phasing out scheme of the current Reserve currency, United States Dollar. By taking inputs from the Research Paper, “Can SDRs and a Reserve Currency Coexist?” by Henry N. Goldstein, I will try to analyze the possibility of an exist phase where there is diminishing amounts of United States Dollars, Euro, YEN, YUAN and other currencies, while at the same time increasing amounts of “Single Global Currency”.

Theodore Levitt’s the Globalization of Markets Essay

In The Globalization of Markets, Theodore Levitt proposed that firms must adopt a homogenised approach to marketing in order to succeed in the international market. Discuss this view, drawing on relevant organisations/products in order to support your points. Theodore Levitt’s The Globalization of Markets, published in 1983, is considered in retrospect to be flawed. Yet it remains one of the most widely-read papers among business managers and students. A number of Harvard Business School seminars continue to make it required reading (Tedlow et al 2003: 20). The paper puts forward several theories: the most often cited is the suggestion that homogenisation of approach to global markets is required for success. However, a homogenous approach may suffer from insensitivity to local markets and fail to meet consumer requirements. However, Levitt’s theory is more complex than it first appears. It will be argued that certain levels of homogenisation can bring economies of scale, particularly if developed with a knowledge of cultural similarities as well as differences. Its other arguments continue to be persuasive: Levitt argues that the perceived requirements of consumers may change according to the features and pricing of other offers. Furthermore he acknowledges that the macroenvironment is not a constant, and that there will be times when homogeneity is not viable. The changes in the global market since 1983 are considerable and continue to develop, yet Levitt’s paper still has much to offer today’s business managers.

At the time Levitt was writing The Globalization of Markets, the global political situation was very different from today. The two most powerful nations were the US and the former USSR, which was still Communist, as was much of Eastern Europe. The Cold War tension between the West and Communist nations was still high. The Internet would not begin to become a commercial tool to any great degree until the mid-1990s. Penetration of computers for business and domestic use was still low. Business documents were typically produced on typewriters, some models of which had basic word-processing capabilities. Faxes were taking over from telex machines which had been around since the 1920s. Mobile phones were heavy, suffered from poor coverage and were not widely used. The resulting situation was a world where communications over long distances were often difficult, and where 32% of the population lived under Communism and was simply not a target market because of the very minimal levels of international trade with Communist nations (Tedlow et al 2003:10). When Levitt discusses globalisation, therefore, it is in the context of a far smaller market than today. Levitt’s paper was positioned to be provocative: “He does not offer a tenstep program…Instead he shouts: ‘Wake up!’” (Tedlow et al 2003: 14). He asserts that “Companies that do not adapt to the new global realities will become victims of those that do” (Levitt 1983: 102). Levitt begins by outlining the difference between the international and global approaches. International organisations adjust operations for each country in which they have a commercial presence. The global organisation, on the other hand, does not use differentiation: “It sells the same things in the same way everywhere” (ibid: 92). Levitt cites global brands – Coca-Cola and Pepsi, Revlon, McDonalds, Sony, Levi jeans – as examples of success without tailoring products to specific markets (ibid:93). He does not rule out digressing from the route of standardisation, but stresses that this must only occur when absolutely necessary, and a return to standardisation should be the objective (ibid: 94): standardisation has cost efficiencies enabling global companies to compete with local suppliers (ibid: 94) Levitt recognises barriers to trade such as taxes on imports but argues that the situation is constantly changing (ibid: 99).

Levitt argues that it is wrong to assume that the customer’s expressed needs must be met (ibid). While consumers may have a preference regarding their ideal product, many prefer to compromise on features in favour of a lower-priced item. Levitt demonstrates this through a case study of Hoover: market research showed that German consumers liked high specification washing machines, and so Hoover targeted the market with such machines, charging an appropriately high price. However, Italian washing machines, at a much lower specification, and a much lower price, gained favour with the German market to Hoover’s cost (ibid: 96-98). Hoover shows “the perverse practice of the marketing concept and the absence of any kind of marketing imagination let multinational attitudes survive when customers actually want the benefits of global standardisation…It asked people what feature they wanted in a washing machine rather than what they wanted out of life”(ibid: 98) To summarise, Levitt’s key ideas are (1) that homogenisation is more cost efficient, and (2) that consumers will often accept a lower-cost product with fewer features rather than a more expensive item tailored to a local market. He argues that established marketing practice must be approached in more imaginative ways for real business benefits. Levitt’s ideas can be considered in the context of various pertinent marketing concepts and theories. Levitt’s approach can be considered in terms of marketing mix using the 4 ‘P’s:

  • product is homogenised, designed to have wide general appeal without offering features that are only relevant to a specific market segment.
  • price is low
  • place is not considered
  • promotion is barely considered

Product

As will be seen in the following sections, the successful global brands cited by Levitt as taking a homogenised approach to the global market do not demonstrate strict adherence to and success with his recommendations. McDonalds’ homogenisation strategy has not been universally successful: as it opened up operations in South Africa in the 1990s, its focus on beef surprised local managers. The main market sector of local black consumers favoured chicken because it was cheaper than beef. Beef was the preference of white consumers. Local competitors acknowledged and used these market segment characteristics to their advantage (Kotler et al 1999: 183). Samsung’s successful approach to the global market has focused on high specification and high price to grow its market share. Its UK market share grew from 2.6% in 2000 to 155 in 2003, and climbed from 4th in the worldwide market in 2002 to 3rd in terms of unit sales and 2nd in terms of revenues the following year (Lee et al 2004: 12). Samsung has also decentralised its design departments, placing them in the US, UK and Japan to cater better for local tastes, but the design and other departments maintain the Samsung brand consistently in all markets. This demonstrates a combination of homogenisation and differentiation. The mobile phone market has characteristics that make it difficult to adopt a completely homogenised approach to achieve success globally.

The Japanese markets typically adopt new technology 2 to 3 years ahead of their European counterparts, and this has been one of the reasons that Vodafone has struggled to perform in Japan and has now exited the market. While the company was able to learn from the Japanese market and use this knowledge to perform well in other countries as they ‘caught up’, Japanese firms appear to have been better positioned and able to capitalise on the understanding of their domestic market. With many markets reaching saturation point for mobile phone ownership, the focus has moved to encouraging consumers to purchase new phones, which compete on functionality (most recently colour screens, cameras and digital music file capabilities) and/or creating a design trend (Motorola’s Razr has successfully achieved this, assisted by bringing out the phone in a range of different colours). Phone purchases are subsidised by network operators who prefer consumers to buy phones with high levels of functionality as this increases their use of them and hence the revenues generated. The iPod is another example of a product which is achieving global dominance through a design which is becoming iconic. It is not the cheapest digital music player, nor does it have as high a specification as some similarly-priced players, yet in the UK, 44% of MP3 players are iPods (XTN 2006: 3) The iPod is a global product, at least in those markets where individuals have the disposable income to purchase one and the technology to transfer audio files to it. Tailoring the product is not necessary, although the iTunes website, providing downloads for the device, is limited by national copyright legislation in the countries where it operates. French MPs recently voted that downloads from iTunes and other similar sites must be compatible with all MP3 players, presenting a further challenge to homogenisation for iTunes: it is anticipated it will pull out of the French market (Chrisafis et al 2006).

Price

The most notable departure from Levitt’s advocated approach by his global brand examples is on price. Coca-Cola, Pepsi, Levis and Sony are premium brands which have, for many years, competed with lower-priced local brands with similar features and functions. The importance of the global brand’s value, recognised by leading contemporary theorists (Lagace 2003), cannot be underestimated, yet its value is arguably diminishing (ibid). McDonalds’ pricing strategy varies from market to market. In the UK, for example, its products are cheaper than many of its competitors’. In the Czech Republic a Big Mac costs the equivalent of $2.60 at January 2006 exchange rates, much lower than the $3.15 US (domestic) price. (www.economist.com/markets/bigmac/displayStory.cfm?story_id=5389856). However, in respect of the local market, it is a premium-product: if the price is considered in relation to average salary, the Czech price is the equivalent of a US consumer paying $12, and other restaurant/fast food options are often cheaper (www.czechpoint101.com/costofliving.html).

Place

While Levitt does not consider place of sale, his theories can nevertheless be applied to sales channels. Homogenisation enables operations such as distribution to be standardised, potentially reducing costs. While it might be assumed that local retail practices should be adhered to in order to compete with local products, this may not be the case. Dell, for example, reduces costs through not having retail outlets in a market where many of its competitors do. While the internet may have given a competitive edge to some businesses because of reduction of overheads, traditional retailers are moving into multiple platform selling, with high street stores and websites reinforcing brand and providing a tangible element that some consumers find reassuring: Madslien (2005) cites research by Deloitte showing that for Christmas shopping in the UK, the websites of high street retailers were the most popular. However, this economy is dependent on the market having access to the Internet sales platform. Ryanair’s experience demonstrates the difficulties of regional internet sites, let alone global sites. Its website is identical for each European country in which it operates, but because many East Europeans do not use credit cards and Internet penetration is lower than in Western Europe (Economist 2004: 69), sales have been compromised. This shows how homogenising sales channels to cut costs can be an unsuccessful strategy.

Promotion

Promotion can be homogenised but may prove less effective in some countries as a result. For example, magazines are more popular in Italy than in Austria (Kotler et al 1999: 214), so can achieve much greater penetration. Homogenised approaches require localised research beforehand to be effective, particularly with product names, which can translate badly. For example, the Nova car had disappointing sales in Spain, where Nova translates as ‘doesn’t go’ (MarcousA© et al 2003: 38). For a domestic brand which subsequently looks to expand into a wider market, a change of name may be necessary to take advantage of economies of scale in production and marketing, but can weaken the brand’s identity in the market in which the change is made if it is already established there. Kotler et al suggest an approach which has echoes of Levitt’s theories but is less uncompromising, and can enable homogenised promotion. They define global marketing as “concerned with integrating or standardizing marketing actions across a number of geographic markets”, advocating a departure from the standard where a local market demands it, but maintaining consistency to as great a degree as possible. They suggest focusing on similarities: this requires a great deal of local knowledge of markets, but rather than using that to tailor a campaign for one area, it is used to produce a promotional strategy for a wider geographical area (Kotler et al 1999: 185). This approach enabled Gillette to promote the Sensor razor by finding three characteristics of concern to shavers in all global markets – closeness, safety and comfort – and using these as the basis for the message in a highly successful promotional campaign (ibid: 211). While it is frequently argued that cultural differences mean that promotion and the should be tailored to each country that an organisation operates in, Dahl argues that research into cultural differences and advertising shows a bias, with researchers comparing countries which are specifically selected because of their differences, rather than investigating similarities (2004: 22). Additionally, he notes that research covering advertising looks at advert content rather than consumer response to content (ibid: 21). However, there are advantages if homogenisation is viable: Silk et al identify a cost advantage of 1% to 2% through economies of scale serving both the domestic and overseas markets in marketing and advertising agencies (2003:2): this may seem little, but costs may run into billions for the larger agencies, and the aim is for a margin of 15% (ibid: 38)

Porter’s Five Forces Theory

Levitt’s model gives limited consideration to the various factors that may help or hinder organisations in any market, and these are no less applicable to organisations with the capacity to trade globally. Porter (1979) looks at five areas influencing a business: supplier power, buyer power, degree of rivalry, threat of substitutes and barriers to entry. To these can also be added barriers to exit, collusion (e.g. between competitors) and strategic alliances, and several of these aspects are of particular relevance here. Global operations require certain supply strategies. As the scale of operations is larger, there is increased likelihood that one supplier will not be able to service all demand from the organisation, yet having a number of suppliers is likely to reduce economies of scale and requires additional administration and negotiation, adding to costs. Minimising costs is core to Levitt’s model. Using one or two larger suppliers may reduce costs, but increases risk as if one supplier has difficulties, it impacts on a far larger proportion of production. The trend in recent decades has been for global businesses to source as well as supply globally. There has been a particular preference for developing manufacturing capacity in low wage areas in order to keep costs down. This also helps global organisations compete with local businesses. However, there have been growing concerns among consumers regarding ethics and corporate social responsibility. Gap and Nike have acknowledged issues with the labour conditions at some of their suppliers (ETI 2005: 3) and have sought to improve these. Although this may appear to increase costs, products tend to be of higher quality because workers are less tired (ibid: 4), and suppliers are more likely to be delivered on time (ibid). This helps improve efficiency in distribution and creates savings in other areas. Additionally, it helps reduce the risk of consumer backlash, which Nike in particular suffered from in the late 1990s (Klein 2000:377). Boycotts of brands perceived to be ethically unsound demonstrate the power of the buyer. When Levitt suggests that consumers will compromise on features in order to buy goods at a lower price, it might be assumed that the global business is in the position to dictate to the market what products it will buy.

The observations regarding Hoover actually reflect a more complex relationship between product and buyer, relating to a perception of whether the cost per benefit reflects value. The supermarket model raises several issues with regard to Levitt. The first is the establishment of global supply chains, not only to compete with local producers in foreign markets, but also to compete in domestic markets by undercutting local producers. Organisations such as Wal-Mart in the US and Tesco in the UK have sought to establish global supply chains to reduce costs while originally operating in the domestic market. Both have subsequently moved to operate globally, with Tesco’s overseas sales rising 13% in 2005 (Fletcher 2006). The second issue is the extent to which a homogenised supermarket model can be exported, and there is a strong argument for tailoring to a specific market in areas such as food, which is an integral element of cultures yet varies hugely from country to country. Tesco’s approach is strongly localised, particularly in East Asia. Its Chinese stores are the result of a joint venture and their success can be partly attributed to the input of local partners who have helped them create an atmosphere instore that mirrors outdoor markets (ibid). A lack of success by a number of supermarkets attempting to export their UK model (Marks and Spencer in Europe, Sainsbury in the US, Tesco in France) suggests that local practices need to be incorporated into any retailing strategy. However a third issue shows adherence to Levitt principles: the acceptance by the consumer of lower specification at a lower cost. In order to prolong shelf-life, supermarkets use “premature picking and over-refrigeration” (Blythman 2005: 82) leading to underripe products on supermarket shelves, but because consumers place value on the convenience of supermarket shopping and prices of many lines are cheaper than from shops who only operate locally, poorer quality produce is accepted. The consumer’s expectations are more complex than Levitt implies. In a summary of papers presented at Harvard Business School’s 2003 Globalization of Markets Colloquium, Legace cites a presentation by Holt, Quelch and Taylor identifying five ‘lenses’ through which the consumer views global brands. Expectations of higher quality among global brands are common, particularly of those with US, European and Japanese identities, and there is also a perception that purchase global brands confers a higher status onto the consumer.

These observations would seem to be at odds with the ‘basic product’ advocated by Levitt, and with the attempts to drive down costs by sourcing in countries where production costs are lower. Strategic alliances are not discussed by Levitt, and may be key to an operator moving into a global market. Samsung’s initial venture into the US demonstrates a tailored, internationalist approach. The company worked with Sprint to develop jointly-branded phones as part of a $600m, 3 year contract signed in 1996 (Lee et al 2004: 10). This leads onto the issue of entry into a market. Levitt’s paper appears to be more applicable to organisations that already have a presence in a number of markets. For those expanding from a domestic market into global supply, the creation of the necessary infrastructure will require significant levels of investment. Kotler identifies three main methods of approach to entering foreign markets: exporting, joint venturing and direct investment (1999: 204-208). Exporting is the simplest, as many of the functions remain in the organisation’s home country. However, this may involve higher production costs than competitors in the foreign market. Use of intermediaries may help smooth the initial move into a market, but adds a link to the distribution chain, and hence adds a cost. Joint venturing moves more of the operation into the foreign market enabling an organisation to utilise local knowledge more effectively, but reduces control. Direct investment involves setting up operations in a foreign country, but requires a large amount of investment. Direct investment could mean a more tailored approach in a particular market, which conflicts with Levitt’s suggestions, but could also be part of a global supply network built by an organisation that helps reduce costs. Levitt does appear to conflict with Porter on the issue of differentiation. By focusing on reduced specification products that compete on price, an organisation increases the ease with which a competitor can produce a similar item. A cost-based strategy assumes that competitors are inefficient (Hammonds 2001), and relying on competitor ineptitude is risk-laden – Porter is particularly critical of Internet-based companies who take this approach (2001: 72). He also emphasises differentiation and acceptance that the offer may not appeal to the whole market, but that there should not be compromise to appeal to a wider market base (Hammonds 2001). Levitt’s advocated approach appears to compromise on product to appeal to the widest possible market.

Further Areas to Consider

The Globalization of Markets functions primarily as a short article suggesting that businesses rethink accepted ways of operating, and does not try to speculate on future developments, other than to argue that those ignoring its advice will struggle to compete against those who take Levitt’s ideas on board (Levitt 1983: 102). It is inevitable that in a changing world, various factors have come into play which define new issues for the global operator. Levitt does not consider the possibility of reactions against globalisation (Tedlow et al 2003: 27). These can in turn lead to opportunities for businesses catering for specific markets. An example is Mecca Cola (Murphy 2003), a product developed in France targeted at Muslims not wishing to drink US brands, and which is now sold in the Middle East, Europe, Africa and some parts of the Americas. Research by Weber Shandwick in 2003, found that the US were boycotters as well as boycotted, with 43% of US consumers surveyed saying they were less likely to buy French products because of lack of support from France for the Iraq invasion (www.webershandwick.com/newsroom/newsrelease.cfm/contentid,9047.html). An important element of cost structure for globalisation is not covered by Levitt, but is evident in Sharma’s description of local Indian brands competing with global brands. Sharma (2004: 6) identifies Nirma as the leading detergent brand in India, due to its pricing strategy. A low-cost model operated in all the business’s areas providing “adequate quality at affordable prices”. Nirma holds companies producing ingredients for its products, helping keep its costs down. It has provided strong competition for Hindustan Lever, part of the global Lever operation, although Lever dominates due to its extensive product portfolio. The discussion above suggests that the application of Levitt’s theories is relevant to many businesses to some degree. Certain markets seem more suited to homogenisation than others, but there is a strong argument for a carefully considered approach. Kotler et al cite 1982 research identifying the main factors underlying a market’s potential: these are demographics, geography and economic factors (1999: 203). Yet the examples discussed suggest that equally important is consideration of cultural similarities between different markets. It may be more viable to open markets in a number of countries where economies of scale are possible because of similarities between them, rather than to focus on characteristics of a country in isolation from other markets. While the message of Levitt’s article at first seems an extreme call to operate in the same way in all markets, its core ideas, if adapted according to the needs of businesses, can deliver greater profitability and efficienty. There are two important lessons for business managers:

  1. Recognition of the flexibility of the consumer to consider alternatives

This may involve relatively detailed assessments of the importance of different characteristics to a market, and how much value is attached to each

  1. The possibility of homogenising at least some areas of global operation

Through analysis, identifying similarities rather than focusing on differences can provide a streamlined operation Where the article fails is in the lack of identification of a homogenised global brand using a low-cost strategy – but, it could be argued, successful global brands with premium prices enjoy increased margins and may be more profitable. Word count: 3929 Blythman J (2005) Shopped: The Shocking Power of British Supermarkets (Harper Perennial, London) Bordo M, Eichengreen B and Irwin D (1999) Is Globalization Today Really Different from Globalization a Hundred Years Ago? Paper for Brookings Trade Policy Forum, Washington DC, April 1999 at 66.249.93.104/search?q=cache:LOo9hm7hZHcJ:www.econ.berkeley.edu/~eichengr/research/brooking.pdf+is+globalization+today+really+different+from&hl=en&gl=uk&ct=clnk&cd=2 Chrisafis A and Marriner C (2006) French MPs say song downloads must work on any player in The Guardian 22/03/2006 Dahl S (2004) Cross-cultural advertising research: What do we know about the influence of culture on advertising? (Middlesex University) Day J (2003) ‘Protest’ drinks range targets Muslims in The Guardian 23/04/2003 De Cock C and Jeanes E (2005) Questioning Consensus, Cultivating Conflict in Journal of Management Enquiry 14 (4) Drach D (1999) Globalization: Is There Anything to Fear? Centre for the Study of Globalisation and Regionalisation, Warwick University Working Paper no. 23/99 Economist (2004) Spreading wings Unattributed article in The Economist 15/05/04 p69 Engel C (2002) European Telecommunications Law: Unaffected by Globalisation? in Basedow J, Baum H, Hopt K, Kanda H and Kono T Economic Regulation and Competition. Regulation of Services in the EU, Germany and Japan (European Business Law & Practice Series 18) The Hague 2002, 219-251 ETI (2005) Bridging the gap between commercial and ethical trade agendas Ethical Trading Initiative Briefing Paper No. 5 at www.ethicaltrade.org/conf2005 Fletcher R (2006) Turtles and toads boost Tesco in The Sunday Times 05/03/2006 Gereffi G (2002) Outsourcing and Changing Patterns of International Competition in the Apparel Commodity Chain Paper presented at conference on Responding to Globalization: Societies, Groups and Individuals, Colorado April 2002, initially prepared as a background paper for UNIDO’s World Industrial Development Report 2001 www.colorado.edu/IBS/PEC/gadconf/papers/gereffi.html Ghemawat P (2001) Distance Still Matters: The Hard Reality of Global Expansion in Harvard Business Review (September 2001) 137-147 Hammonds K (2001) Michael Porter’s Big Ideas Interview in Fast Company March 2001 p150 Hofstede G (1991) Cultures and Organizations HarperCollinsBusiness, London JovanoviA„”¡ M (2003) Spatial Location of Firms and industries: An Overview of Theory UN Economic Commission for Europe, Geneva Klein N (2000) No Logo (Flamingo, London) Kotler P, Armstrong G, Saunders J and Wong V (1999) Principles of Marketing 2nd European Edition (Prentice Hall Europe, London) Lagace M (2003) Peeling Back the Global Brand at Harvard Business School Working Knowledge hbswk.hbs.edu/pubitem.jhtml?id=3541&sid=-1&t=special_reports Lee B-Y and Lee S-J (2004) Case Study of Samsung Mobile Phone Business KDI School of Public Policy and Management Working Paper 04-11 Levitt T(1983) The Globalization of Markets in Harvard Business Review May/June 1983 pp92-102 Madslien J (2005) Online Christmas shopping soars 15/12/2005 at https://news.bbc.co.uk/1/hi/business/4532142.stm MarcousA© I, Gillespie a, Martin B, Surridge M and Wall, N (2003) Business Studies 2nd Edition (Hodder Arnold, Oxon) Mitchell A (2003) Why Ted Levitt wasn’t wrong about globalisation in Marketing Week, June 2003 Murphy V (2003) Mecca Cola challenges US rival BBC News Online 08/01/2003 news.bbc.co.uk/1/hi/world/middle_east/2640259.stm Porter M (1979) How Competitive Forces Shape Strategy in Harvard Business Review March/April 1979 Porter M (2001) Strategy and the Internet in Harvard Business Review March 2001 Sharma S (2004) Onslaught of Global Brands: Indian Brands Fight Back! (Rai Business School, New Delhi) Silk A and Berndt E (2003) Scale and Scope Economies in the Global Advertising and Marketing Services Business Harvard Business School Marketing Research Papers No. 03-10 Tedlow R and Abdelal R (2003) Theodore Levitt’s “The Globalization of Markets”: An Evaluation after two Decades Harvard Business School Working Paper XTN (2006) Music Purchasing Mini Report 2206H1 from www.xtndata.com

Internet References

www.ryanair.com www.webershandwick.com/newsroom/newsrelease.cfm/contentid,9047.html www.qibla-cola.com www.czechpoint101.com/costofliving.html www.economist.com/markets/bigmac/displayStory.cfm?story_id=5389856

The Many Firms Involved in Globalization Business Essay Essay

Globalization has made many firms to target India because it is one of the emerging market in the world. To enter Indian market is very challenging because of its diverse culture and political system. This dissertation is mainly concentrated on “Problems faced by western firms in Indian Economy”. Since there are many problems faced by western firms in Indian market the author`s research will mainly focus on problems like , Indian infrastructure, Indian culture, corruption, Indian legal system and political risk. India is a country with a population of 1.169 Billion according to May 2009 census .India is located in the southern part of India called South-Asia. It is the country with the largest democracy in the world and the highest diverse and complex culture in the whole world. The main metro cities in India are Mumbai, Kolkata, Delhi, Chennai, Bangalore and Hyderabad. The capital city of India is New Delhi and the financial centre of India is Mumbai. According to Desai,R(1999) India is the seventh largest country in the world. The climate of India is always changing. India receive rain from south west monsoon in the month of June- September. In India the national language is Hindi and there are also other 18 official languages. English is spoken mostly in commerce, administration and higher education (Desai,R.1999). The main religion in India is Hinduism followed by Islam, Christianity, Sikhism, Buddhism and Jainism and the main Ethnic group of India are Indo-Aryan 72%, Dravidian25%, Mangoloid 2% and others. The Fiscal year of India starts from April 1st to March 31st. There are 28 States and 7 Union Territories in India and it is the second largest population in the world. Indian Government provides free and compulsory education till the age of 14. The main industry is Agriculture which contribute to two-third of the population and most of people are living in rural areas than urban areas in India. According to (Desai,R.1999) the India is following parliamentary form of govt based on UK Model. The three wings of Indian government are the executive, legislative and the Judiciary. The Executive consist of the President, the vice president and the council of ministers which is controlled by Prime Ministers and the legislature consist of lok Sabha and Rajya Sabha (Desai,R.1999). The Judiciary of the country is Supreme court. The main political parties in India are Bahujan Samaj Party, Indian National Congress, Bharatiya Janata Party, Communist Party of india (Marxist), Janata Dal and Samata Party (Desai,R.1999). According to 2007-2008 estimate India’s growth in GDP is 6.7% and it is expected to rise 8-10% in the near future and Per capita income is $4139 according to 2007-2008 estimates. In India agriculture contribute to 17.1% of GDP and industry contribute to 19% of GDP .The major trade partners of India are Russia, USA, Japan, Iraq and European union. Since. india is a very big market, so there are number of problems faced by western firms in indian market. when foreign companies coming to india to do business the problem faced by their home country will be different from the host country. There are number of factors like business etiquette, corruption, infrastructure, culture, government policies and intellectual property rights etc.

Background

According to 2007-2008 estimate the GDP growth of 6.7% makes India, the fastest growing economies in the world and the second fastest in Asia. Indian economy has the second largest car industry in the world and in terms of Purchasing power it is the fourth largest economy in the world. After NYSE, the largest number of companies listed is Bombay Stock Exchange and that is 6,600 companies. It is one of the country in the world that has its own satellites. According to Tholons Research the main client classification in India are Government, Public, Private and Multi National Companies in India. Due to higher growth in GDP, industries like Insurance, Banking and Telecom are in a good growth but in order to remain competitive globally the clients should have proper skills, reduce time to market and also need to achieve the levels of process of standardisation. According to Central Statistics Organisation (CSO) the GDP for 2009-2010 estimates is considered to grow at 7.2% with the service and industrial sector growing at 8.2% and 8.7%. In India consumer markets are divided into urban and rural markets. According to study by (RMAI) Rural Marketing Association of India the rural market is not affected by the global recession so studies shows that there has been increase in rural market by 15% . But Urban area is affected by global recession by 25% according to paper of CII-Technopak. Since Rural market is not affected by global recession many companies like Godrej and Hindustan Unilever are targeting rural markets to increase sales and also increase their marketing efforts to take the advantage of potential rural consumers. It is also targeted by MNC drug companies in order to sell their products in rural markets. Consumer Behaviour is always changing and challenging as people in different states have different tastes and preferences. In India most of the people in urban areas are using luxury goods. The Major Development in Indian consumerism is the rise of rural market for different basic goods. The Middle class is given high boost to consumer culture and it is expected to grow in future. Due to increase in number of middle class most of the people are shifting from agriculture to service sector. Another Factor that lead to change in consumer behaviour is the credit culture. Now a days Indians are not worried about paying in card as in the past it was most negligible. The rise in credit culture is due to rise in purchasing power of customer. Today Indian’s are aware of product, price and quality whenever they purchase any products. In the past price plays an important part in purchasing but now Indian consumers consider value for money than price. The reason for increase in purchase power is the rise of number of middle class Indian consumers in Indian market. Factors Affecting consumer behaviour are geographic locations, occupation, purchasing place and environment of the consumer. Cultural factors affecting consumer Behaviour are product (colour, design, shape), social practices and decision making by male person in the family etc. In india to do business the etiquette of indian business should be followed and it is very important for doing business and there are number of business etiquette to be understood while doing business in india. In India due to diverse culture the factors like caste, regionalism, religion and language should be considered when doing business in India. In india we should understand the importance of culture when doing business because it is given more importance than business matters in india. The infrastructure should be considered when doing business and the main problem with indian infrastructure it will take long time to make decision in india and also it is time consuming in india , so it will a problem for foreign investors. The problem of corruption is another obstacle faced by western firms in indian market . since corruption is affected in all levels of business firm in india means we have to give bribe to each and every person of the government staff to get sanction for starting any business in india. The government policies are very long process so it will take months to get a bill passed from government and there are so many problems that needs to understand by western firms operating in india. The detailed explanation of all business difficulty faced by western firms in indian market are explained in the remaining pages of literature review.

Purpose of the Study

“The purpose of this dissertation is to study about Indian market environment and the problems faced by western firms during their operations in the Indian market”.

Objective of the Study

1: How the Indian government policies cause a problem to the western firms operating in indian market. 2: How western firm should deal with Different cultures of Indian states when doing business in the Indian market . 3: Obstacles faced by western firms in indian Infrastructure.

Chapter II

Literature Review

Literature Review

The literature review is the most important part of this project. In order to understand problems faced by western firms in Indian market it is essential to analyse and know about India in a basic manner.

India In General -Introduction

According to Kumar, R and Sethi, A. (2005) India has the biggest number of post offices, the largest railway network in the world, the second highest number of technically trained manpower and the highest number of students completing from universities every year. The famous diplomat and author Pavan Varma.(2004) describes India as a difficult country to define and characterize ,especially today when they are transition, emerging from shadows of history into the glare of a globalizing world. The task is dealt with obstacles and India is too large and too diverse to allow for convenient cover all labels. In India according to Hindu belief the significant events, functions, meetings and shopping’s should be avoided during specific time of each day called ” Rahukala”. Rahukala is connected with the mythical planet “Rahu” (the seizer) and it is believed that it occurs due to the course of eclipses. In India people who are born in rahukala are not expected to rest in peace, will earn only less money and will not engage much in social well being. According to a leaders global market research firm “synovate” is said the cricket is the most favourite game to watch on Television that is 93% and also the most watched live video on television that is 74% ,So most western firms who wish to do business in India are using cricket and bollywood actors to promote their products in Indian market. It is said that Indian’s are most passionate about three things like food, films and cricket(kumar,,R and Sethi,A.R.2005)

Causes of Difficulty In Doing Business In India For Western Firms

Business Etiquette

Business etiquette are the rules governing business in different countries and it is different in different countries. For example rules governing in UK is different from India. It refers to standards and values that is suitable to the people and which is socially acceptable.

Rules of Business Etiquette in India

The importance of business etiquette include trust, reliability and courtesy which increases the goodwill of firm, increases opportunities in business and helps in developing new business relationship. In india business etiquette depend on culture as different states have different culture so that what is good in one society will be bad for another society. So inorder to have a good business relationship the understanding of culture is very essential and for this the business etiquette will be different by company rules, regulations, region and business speciality. So understanding of business etiquette is very important while doing business in india. There are number of business etiquette when doing business in India. In business meeting always address the Indian businessmen with titles like Professor, Mr, Mrs or Doctor and if no title is given address them using Sir or Madam. In India when doing business do not offer to have alcohol or smoke as most of the Indians are vegetarians. Indian meeting usually starts with a handshake. Indian mostly use Namaste and by using Namaste in business meeting is a symbol of understanding Indian business etiquette. Business cards should be placed at first meeting when conducting business in India .It should be received and given with right hand and make sure it is given properly otherwise it is shown as disrespect in Indian meetings. It is better that one side of card should be translated in Hindi to show respect to Indian culture in business meetings. When doing business in India, the meetings should be arranged well in advance. The meeting should be well written and should be conformed by phone. Avoid meeting during the month from October to March as it is too hot climate and also during public holidays like Gandhi Jayanti, Deepavali, Idul-ul-fitr Independence Day, republic day etc. (https://www.kwintessential.co.uk/etiquette/doing-business-india.html) When doing business in India Hierarchy plays an important role in Indian business etiquette whereas in western firms hierarchy is given only less importance. For example in companies the manual work will be done by “peon” and no one in the office will do manual work to move a desk to other place as this shows that hierarchy plays a significant role in Indian business. In India when doing business Indian’s always like to keep long term relationship with business partners and Indians conduct business with only those who know them well and trust. So In order to gain trust of Indian business partners western firms needs to build a good relationship with good Indian business partners who know the Indian business conditions and market well in order to succeed in Indian market. (https://www.kwintessential.co.uk/etiquette/doing-business-india.html) When operating business in India, do not shake hands with female staff out of respect and in western firms it is just opposite. When entering business room in India we should greet the senior most person first and all important decision are taken by senior most person in India. Punctuality is considered even though 10 minutes late will not matter in India when conducting business meetings. Since Family matters take importance over business last minute cancellation is possible when conducting business meetings. (https://www.kwintessential.co.uk/etiquette/doing-business-india.html) When doing negotiation it usually take long time and also it is very slow and should not be angry and be patient to control it. Don’t be aggressive and arrogant when making business negotiation in India. Indian business take decision not only based on PowerPoint presentation, statistical data but also based on emotions, feelings and faith and should avoid high pressure tactics. If Indian business men say “I will try ” or ” we ‘ll see” means they are not interested in business terms. When Indian business successful end negotiation they will end with the offer of dinner and don’t neglect it as this may show disrespect to Indian business culture.( (https://www.kwintessential.co.uk/etiquette/doing-business-india.html) Corruption In India According to Lasserre,2003 corruption can be defined as `the abuse of public office for private gains’. It damages the public properties like infrastructure on which the business growth functions causing inaccurate and expensive services(Doh, et al, 2003).Mrs Indira Gandhi told that Corruption is not Unique to India ,it is a global phenomena in an attempt to reduce corruption in politics during her Government rule. According to Pavan Varma ” Corruption has grown endemically because it is not considered wrong, so long as it yields the desired result”. In order to run business smoothly in India many industrialists and businessmen are giving money to politicians to run business effectively. India was most corrupted during ” licence-permit” regime period and it is substantially reduce during the liberalization of Indian economy in 1991whereas in western firms the corruption is very less. The main reason for corruption is the politicians and business man and lack of fund by government are the factors for the corruption in india. According to UNDP 1998 corruption have most destructive effects in developing countries as it is main obstacles in economic growth and democracy. The studies shows that in spite of recent measures to reduce corruption and improve service delivery there has been wide difference between perception and actual experience about corruption in public services and states like Assam, Jammu and Kashmir, Bihar, Madhya Pradesh and Uttar Pradesh have high level of corruption while Himachal Pradesh, Uttaranchal, Delhi and Punjab have a medium level of corruption in case of using public service by BPL households( TII-CMS India Corruption Study 2007). The Table below the rank of 11 public services in BPL House hold in india.

Table 1: Services Ranked In India

Services

Rank

Police 1 Land Record/Registration 2 Housing 3 Water Supply 4 NREGS* 5 Forest 6 Electricity 7 Hospital 8 PDS* 9 Banking 10 School Education ( up to 12thclass) 11

PDS* Public Distribution System.

NREGS* National Rural employment Guarantee Scheme.

Source-TII-CMS India Corruption Study 2007.

(https://cmsindia.org/highlights.pdf)

From the above the table we see that school education is least corrupted and most corrupted is police . From this we can see that basic services are less corrupted than need based services. For starting a business in India need based are very important in India ,since need based are more corrupted it will be difficult for foreign investors to start a business in India. According to Doh et al some scholars said that corruption in india is both pervasive and arbitrary. The studies shows that one third of Below Poverty Line (BPL) household are giving bribes to avail of more than 11 public services in India (TII-CMS Study India Corruption Study 2007). According to The Council of Europe Criminal Law Convention(1999) proposed to harmonize the national law on corruption and also have the right to criminalize both national and domestic bribery and also various forms of corruption. The table below shows the estimates of bribes of 11 public services in BPL Household

Table 2 .Estimate of Bribe

Services

Total Bribe paid in the year (Rs. in millions)

Basic Services:

PDS* 450 Hospital 870 School Education (up to 12thclass) 120 Electricity 1,050 Water Supply 240

Need based

NREGS* 70 Land Record/Registration 1240 Forest 240 Housing 1570 Banking 830 Police 2,150 Total for 11 Pubic Service covered in the survey 8,830

PDS* Public Distribution System.

NREGS* National Rural employment Guarantee Scheme.

Source- TII-CMS India Corruption Study 2007.

(https://cmsindia.org/highlights.pdf)

From the above table the we can see that the most important factors for building up a business are police, electricity, land record/registration and Housing which are most corrupted in this table so from this table we can see that it is corruption that will be a major problem for western firms for setting up business in India.

Indian Infrastructure

Infrastructure assets are the network and physical structure that is used to provide significant services to a society. It is considered as a tangible assets to set up a business , can be regarded as the backbone of the economy. It is broadly accepted that india’s infrastructure is filled with weak transport networks, airports, ports that do not meet up with current demand. In this competitive global market it is important to understand that good infrastructure can increase competitiveness both internationally and nationally and also for achieving stable development objectives. In order to achieve good economic growth in the long run it is essential to have a good social infrastructure and education system. Without proper power and latest transport facilities it will not possible to develop economic growth in the long term. According to TII-CMS Study 2005 there is outdated infrastructure in India that means service have improved but infrastructure does not cope up with service growth. For example According to this survey water delivery is most outdated in most Indian states and most of the pipes are always damaged. The infrastructure such as road, telecommunication and electric power ,sanitation are the infrastructural problems faced by western firms when operating in Indian market. India’s commerce and industry minister said that without proper infrastructure we can’t continue to grow further that we had now. For example Daniel Vasella the chief exective of pharmaceutical giant Novartis (NVS) said that “if you want to build a road in china a small number of people is needed to make a decision but if you want to build a road in india it will take 10 years of discussion before the decision” (https://www.businessweek.com/magazine/content/07_12/b4026001.htm )

Reasons for Poor infrastructure

In India the reason for poor infrastructure is that modern concepts like just in time production will not work because of lack of modern infrastructure facilities like road, rail, water and supply and due to the problems like crossing the border between different states of India which result the western firms to fear in investing in Indian market(Heymann et al (2007). The slow growth in infrastructure gap is the main reason for the slow economic structure in India. In India both urban and rural infrastructure are worse than expected due to lack of infrastructure facilities . According to UN estimates three of ten largest cities are situated in India and all ten cities in the world are expected to grow by 20% by 2015. According to world bank 2007 no city in India has water 24 hours a day , seven day a week and the metro cities like Bangalore , madras and Hyderabad the quality of water is getting worse. India infrastructure rank on 67th position in the global competitiveness report 2007 in comparison with china 52th , Russia 65th and brazil 75th position. (https://www.eastwestcenter.org/fileadmin/stored/pdfs//econwp096.pdf) There are many obstacles for Indian infrastructure and some of them are politics, lack of fund, regulatory framework and so on. In politics the barrier means the political stability of the government that is government interference and breaches of contractual obligations neglect the foreign investors to invest in Indian infrastructure. Lack of fund means the politicians are not using public service and they are using for personal purpose which result the government in shortage of funds to invest in infrastructure facilities. The 12th finance commission recommended that India need an additional grant of INR 150 bn for the four year production from 2006/07 to 2009/2010 in order to build good roads and bridges(Global Insight 2007). In order to increase investment in infrastructure India need a co-operation of public -private partnership in order to improve the infrastructure facilities in India. The foreign investors are not willing to invest in Indian infrastructure due to regulatory framework in India. (https://www.scribd.com/doc/927005/450-Bn-Reason-to-Invest-in-Indias-Infrastructure) India have developed many infrastructure plans to improve infrastructure facilities like National Highway Development Programme(NHDP) and Pradhan Mantri Gram Sadak Yojana (PMGSY) but does not have an overall infrastructural plan which resulted in delays and so many problems. According to Government of india ( 2006) suggest that India will concentrate on three factors in order to improve infrastructure facilities in India. First one is to improve the broadband service via internet. Second one is to modernise telecom equipment production and third one is to develop network to expand telecommunication service in rural India. In order to increase investment in infrastructure the western investors should be motivated.( https://www.scribd.com/doc/927005/450-Bn-Reason-to-Invest-in-Indias-Infrastructure) In concluding remark it is now India understood the importance of foreign investment and the significance of infrastructural facilities in order to increase the FDI flow in India. While investing in India there are three significant risks that needs to be considered when doing business in India. First one is that the issues like rules of the government and distribution should be analysed when making provision of infrastructure . The second reason is that India is a homogeneous country rather than single sub continent. For example that states like Gujarat, Delhi and Maharashtra will a good place for the infrastructure growth in India. Third one is that in India different infrastructure classes have different characteristics so each class have different risk so it should be analysed properly. In order to have a good infrastructure Government needs to shake off it rule of bureaucracy , political system and should decrease corruption. (https://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000218232.pdf)

The Culture factors when doing business in India.

The scholar and business author describes culture as the ” The collective programming of mind” and explains that it lies between human nature on one side and individual personality on the other (Hofstede 1991). According to Harris P. R and Moran R.T (1987) defines culture as ” A distinctly human capacity for adapting to circumstances and transmitting this coping skill and knowledge to subsequent generations. Culture is a shared value and is derived from social environment and not from family genetic . Culture is a group development and culture is different in different countries. According to Trompenaars (1993) culture is a collective way in which a group of people interpret and understand the world. The indian culture is totally different from western culture and the importance of culture is very essential when doing business in india as india is have large number of diverse culture in different states , so it is must for western firms to analyse each state culture to do business in india. According to Zaidman (2001) he said that in order to succeed in India, is to understand the tradition and way of communicating with others which form the basis of Indian society. It is said that religion is the way of life and should be respected to maintain a good business relationship in India ( Gorill 2007). According to Hoecklin,L (1995) warns that cultural differences if not properly handled can lead to costly misunderstanding, business failure and management frustration. According to J.B.P.sinha et al (2002) Indian’s maintain collectivistic behaviour when they are talking to family members and they behave individualistic manner when are dealing with non family members. Indian’s use both individualistic and collectivistic according to different situations. Indian’s use individualistic behaviour to gain collectivistic aim and use collectivistic behaviour to gain individualistic aim.(Kumar and Sethi,2005) So it will be difficult for western manager to cope up with Indian manager behaviour in business. An example of KFC about how culture become a problem when doing business in india. The failure of KFC to cope up with Indian culture. Even though it opened its main stores in metropolitan cities like Delhi and Banglore it faced many obstacles from many competitors and also from small business. The main reason for that they did not direct control with local partners for help and support rather than direct control. Then they advertise using western ideas which is not used by Indian as Indian’s are mostly don’t accept foreign culture . So in order to succeed in Indian we should analyse the Indian market condition first and also understand the political climate of India market to remain competitive in India.(Marita Von Oldenborgh ,1996). In Indian Culture hierarchy plays an important role and also considered as the major part of the Indian civilization. According to J.B.P.Sinha ( 2005) ” hierarchical orders denote that whole cosmos and everything within it – animate as well as inanimate- are arranged in a hierarchical order of being superior to same and inferior to others.” Due to Hierarchical order decision are made by top manager and decision process is very slow . Communication style of Indian’s are indirect as most Indian’s are unwilling to say `no`.(Kumar,R.,2007). A Danish manager commented that Indian’s will tell one thing ,think other and do third thing, ,which is not what Dane would do” and this comments shows that Indians will behave differently in different situation(M.L.Hughes,2002). Indians behave in a context sensitive manner and there are three aspects for this like desh (place), kal(time ) and patra (person) (Sinha and kanungo,1997). Due to context behaviour there are number implications for this like it will result in unpredictability and it will loose the trust of the partners, it will create hindrance in communication and it will make a good idea less important( Kumar and Sethi 2005). Since Indians follow hierarchical order they always depend on superiors for help which is considered a negative for western managers. So Indians believe in nurturant leadership that means Indian employees are more personal than organizational. A good example of this leadership is the case of Tata steel. Russi Mody The former managing director and chairman of the company give the following advice” Given the choice between result oriented, rules oriented or people oriented, choose the last one and rest will fall in line automatically”( Sinha and Mohanty, 2004).The dependent relationship should be studied by the western managers when doing business in India. .Indians are relatively good in building strategy but they are weak in implementing strategy( Kumar and Sethi 2005). It is essential for the western managers to understand both behaviour and thinking pattern to become successful in doing business in Indian market.

Table showing Difference Between Eastern and Western Culture

Many scholars argue that there is difference between eastern culture and western .The basic difference between two cultures on societal basis are shown in the below table.

TABLE 3: Cultural Solution to Universal Problems

SOCIETAL ELEMENTS

EASTERN ORIENTATION

WESTERN ORIENTATION

Human Nature

Inherently good and evil Inherently good and evil

Activity

Being: passive-harmony Doing: aggressive-conflict

Nature of Time

Polychronic: diffused-phases Monochronic: linear-segmented

Time Orientation

Traditionalist: past-present Modernist: present-future

Law

Rule by man: deference to paternalism and reliance on trust Rule by law: deference to rationality and reliance on legal contracts

Truth

Indirect-Oblique: sometimes best to tell Direct-Honest: always best to tell

Human Relationships

Collectivistic: meet group needs and group obligations Individualistic: meet individual needs and rights of individual

Sources: Adler (1997); Smith(1995); Chen (1995); Xing(1995); Trompenaars(1993); Evans, Hau & Sculli(1989); Kelley,Whatley, Worthley& Lie(1986).

(https://wwwdocs.fce.unsw.edu.au/orgmanagement/WorkingPapers/wp130.pdf)

The table above clearly shows difference between western and eastern orientation on societable basis and this table helps to understand the eastern and western culture clearly. But In order to understand more detail about western and indian cultures hofstede theory should be applied. For that two different cultures should be taken. To do this United states is taken as western culture with help of hofstede theory to understand the difference between United states and indian culture. According to Hofstede G.H .(1980)” culture is the collective programming of the mind which distinguishes the members of one human group from another”. India have high power distance, low to medium uncertainty avoidance, low individualistic and medium masculinity and united states have low to medium power distance, low to medium uncertainty avoidance, high individualism and high masculinity. The Figure 1 shows the comparison of two cultures like united states and India to show the difference between western and Indian culture. The Figure 2 shows the world’s average for hofstede five dimensions of culture and the average score of all countries rated according to hofstede theory.

(https://www.geert-hofstede.com/hofstede_dimensions.php?culture1=95&culture2=42)

(https://www.geert-hofstede.com/hofstede_india.shtml)

Main Source: www.geert-hofstede.com

Power Distance:

United states have low power distance of 40 compared to world average 55. Low power distance is a good sign of equality between societal levels including organizations, government and families. Lower Power distance will result in less centralization and managers are more practical and systemic when doing business.(Hofstede.G.1984). In India the power distance is very high that is 77 compared to world average 56.5 that means there is high inequality of power distance . High power distance cause corruption in the society and also result in downfall of government. In business it will result in higher centralization and managers are not practical and systematic .(Hofstede.G.1984). According to Hofstede cultural dimension United states and Indian culture have very big difference in power distance it might a problem for western firms to do business in India . So western managers will face difficulties in managing organisation and Indian business people.

Individualism v/s collectivism:

United states have the highest individualist dimension of 91 that is above the average of 43. Due to this united states is more self reliant and individualist attitude. High individualistic managers are creative and always try to be innovate new ideas and importance is given to individual goals and achievement.(Hofstede.G,1984). In India the individualistic rank is 48 with the world average of 40. It means the most of the Indian people are collectivistic. Due to this managers are not creative and innovate in making ideas and they rely on group decision and importance is given to organisational goals. Since the greater distance between India and united states culture exists it will be difficult to manage human resource management in India for western firms operating in India.

Masculinity V/s Femininity

According to Hofstede masculine culture are more rigid in manner than feminine culture. The united states have masculinity rate of 62 which is above world average of 50 that means there is great difference between gender roles. It means male controls an important part of the society. India have masculinity rate of 56 with world average of 51. It means it is almost same as United states. Since both countries have high masculinity than world average it shows that there is no much gap between male and female role in both countries.

Uncertainty Avoidance

In this United states have uncertainty avoidance of 46 compared to world average of 64 that means USA have low Uncertainty avoidance with world average. According to Adler 1986 high job mobility are common in low uncertainty avoidance like USA. As India have uncertainty Avoidance of 40 compared to world average of 65. Due to this it is more open to unethical ideas and situations. Even though there is only little gap between two countries it might be problem for western firms.

Long term orientation v/s Short term orientation

The United States have the lowest Long Term Orientation dimension that is 29 with world average of 55. The low Long Term Orientation dimension will result in meeting its obligations and shows appreciation for culture traditions. India have a Long term Orientation dimension of 61 compared with world average that is 48. It means Indians believe in long term goals than short term goals. So this might be problem for western firms operating in India. The difference between the united states and Indian culture shows the difference between two cultures and also shows what are cultural problems faced by western firms when doing business in India. To conclude there are large number of cultural values to be considered when doing business in India. In order to achieve business objective in India western firms need to consider the factors like to have a good relations with Indian colleagues, should be able to communicate in a good manner and should reach the right person to complete the task effectively and should co-operate with Indian managers to plan and execute the strategy effectively in India (A.E.Fantini). The factors like leadership styles, decision making process and attitude towards words needs to be considered and also there are cultural norms for joint venture relationship, relationship with government authority and outsourcing partners. So western firms need to understand all these cultural challenges when doing business in India otherwise it will be difficult to western firms to do business in India.(Kumar, R.2007).

Effects of Changing government Policies on Foreign businesses

India is a country with a high degree of nationalism and unstable democracy which causes many problems for western firms in Indian market. The problems are nationalism, bureaucratic in fighting and corruption.(Kumar, R and Sethi,A.R, 1995). When operating business in india the rules governing indian government should be followed ,which is completely different from international law. One of the best example of nationalism is the case of Pepsi and coke. The non-government organisation claim that pesticide exceed the limit proposed by EU norms. Then the Indian government banned the product but when actual test is taken by central government due to pressure from Pepsi and coke company it shows that the pesticide didn’t exceed the level proposed by EU norms. This case shows that how easily nationalism affected in India so it should be analysed properly.(Kumar,R 2007). According to N. Assaine et al(2003), said that in terms of bureaucracy Canadian businesses told that the length of the time, paper work and uncertainty in business transaction were difficult and once signing the contract there is no guarantee for market access. Change in state Government also lead to cancellation of projects and it took years to know the status of the project .So according to Canadian businesses they considered the government rules as one of the greatest barrier in doing business in India. Another major hurdles for western firm to invest in India is corruption. Due to corruption it increase the cost of doing business in India and also have a negative impact on FDI (J.E . Campos, 1998).

Indian legal System

There are number of business laws and legislation to be followed when doing business in India. Indian legal system follow English common law that accepts international court of justice jurisdiction with reservations and with limited judicial review of legislative act(world fact bank 2003). The Indian constitution was formed in 1950. The constitution of India assures equal rights to all parties and prohibits discrimination on the basis of gender, caste, religion ,race and allows worldwide franchise which makes the India the largest electorate in the world. (https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1001&context=lps_lsapr) The main parts of Indian constitution law are constitution, statutes (legislation) , customary law and case law. Supreme court is the highest body in the whole judicial system. Each state have high courts and there are many subordinate courts under this .The judges of the supreme court are appointed by president of India. Since the govt policies are delayed due to backlogs and postponement of meetings and also due to the lengthy process of Indian legal system most of the companies are solving business disputes through arbitration process. In order to have world wide practice for arbitrary process Indian government have modified and had entered into arbitration service agreement with international organisation like USA and Europe. (Desai,R . 1995). The features of Indian independent judiciary are the power to punish for the contempt, the modus operandi adopted in appointments and the fixed tenure of the judges. It is said that independent judiciary is the backbone of Indian economy and it is independent and example of Indian economy are imitated by the world. (www.aislsnet.org/meetings/ enriching/singh.pdf)

Table Showing the barrier Of Government policies In India For western firms

Table 4: Indicators of barriers to entrepreneurship in selected regions:

Indicator: Administrative burden on: India Latin America OECD* Emerging markets Euro area USA Start up in general: 3.82 2.14 2.61 1.89 1.02 For corporation 4.25 1.85 2.82 2.06 2.06 For sole proprietor firms 4.75 3.17 2.73 2.10 2.10

Source: OECD 2007

OECD*- Organisation for Economic Co-operation and Development.

(https://www.eastwestcenter.org/fileadmin/stored/pdfs//econwp096.pdf)

According to this table we can see that India have high administrative burden than Latin America, OECD emerging markets, Euro area and USA. This table shows that India have a high burden on administration to start up a business and a corporation and sole proprietor firms for western firms when doing business in India. According OECD study India is twice restrictive as OECD emerging markets average due to high economic regulation and administrative burden. Due to bureaucratic regulation in India the German based industrialist says that it took six months to set up a liaison office in India. Almost all foreign companies complaint of procedural delays, higher taxes and less suitable labour law. Due to strict Indian labour law India rank at 96th position in case of Government rules according to Global Competitiveness report 2007-2008. Intellectual Property Rights: It refers to creation of mind that is invention, industrial design for articles, literacy and artistic work, incomes and symbols used in business. (https://www.uhy.com/media/PDFs/doing_business_guides/Doing%20Business%20in%20India.pdf) India has well established intellectual property rights in accordance with TRIPS agreement of the WTO. India’s intellectual property is established in statutory, administrative and judicial levels. Police officers can take action against infringement of Intellectual property rights. The intellectual property includes patent rights, copyrights, trademarks and design act. (https://www.indianembassy.org/intellectual-property-rights.php) Even though it has a good intellectual property rights but according to foreign investors intellectual property rights is weak . An example of this is the case of Novartis shows that the patent right in international pharmaceutical and chemical firms is weak. The Indian controller of patents and designs rejected the Novartis patent “Glivec” for three reasons like the product is a substitute of a known substance, priority and expectation of earlier use (Sukumar, 2006). But Novartis argued it is accepted in the countries like Russia, china and Taiwan and he told India have violated the of article 14 of Indian constitution.( https://www.eastwestcenter.org/fileadmin/stored/pdfs//econwp096.pdf ) The weak intellectual property in india destroys the livelihood of modern artists and welfare of consumers and workers. India have weak copyright and enforcement system and due to the piracy of copyrighted works like movies, books, software’s are easily widespread. In India since intellectual property are weak it will not encourage prosperity and creativity. In order to prevent the companies like BSA -business software alliance and NASSC- national association of software and service company are teaching customers about bad effects of piracy in India and also development in enforcement is need to prevent pirated goods. Since Intellectual property rights is weak it will difficult for western firms to do business in India. (https://asianforum.jp/topics/2006/pdf/Hudson_III.pdf).

International business risks

International risks are the risks that a foreign firm face difficulty in doing business in host country than home country and it is completely different from home country. There are number of factors needs to analysed when doing business in host country . Some of the factors when doing business are explained in the following paragraphs. The strategic risk is one factor that affect the ability of firm to make a strategic decision and also have strong consequences on the competitiveness of the firm so this should be analysed when doing business internationally. The political risk like political instability and nationalism factors should be taken when doing business internationally as different countries have different political system. For example the case of Pepsi in india like they were forced to withraw from india due to nationalism like indian government want to protect their own soft drink company.(Lee.K and Carter,S, 2005) The country risk like culture , government policies ,economic policies and political conditions should be analysed when doing business internationally as this will affect the business adversely. The legal environment is different in different countries and actually there are three types of law like common law , civil law and Islamic law and this law are developed based ion country’s culture, traditions and religion. The countries often restrict foreign companies to enter new country by imposing tax, trade barriers inorder to protect their own products and companies. (Deresky,H, 2008). The technological factors like outdated technology, lack of security in e- commerce and cost of creating new technology are the problems when doing business in international area and also environment risk like air, water and air pollution which the reputation of the company and economic risks change in exchange rates, foreign investment and monetary policies should be analysed when doing business internationally. In order to avoid risk in international business the firms who are willing to do business in foreign country should conduct risk assessment of each country and need to analyse the risks like corruption, intellectual property rights, ownership barriers etc before entering into a new country.( https://ezinearticles.com/?Risks-in-International-Business&id=1331702).

Conclusion

India is very huge market with a lot of opportunities in it for the foreign companies. Most of the foreign companies are targeting Indian Market because they have understood the potential in it. Entering a market would be easy but sustaining in the market is the toughest part. There a quiet a lot of companies entering Indian market some are successful some are not one of the main reason is because they do not understand the market well. Some of the main factors these companies should consider while entering market are factors like culture, corruption, government policy, infrastructure and intellectual property rights. Once these foreign companies accept the way India is and should be ready to do business by understanding the problems and the way India is they this business can make the most out of it. Foreign companies should understand Indian culture and the behaviour of the Indian consumers to be success full in India.

The Impact of Globalization on Global Development Essay

Globalization

Globalization is one of the broadest concepts with a high degree in diversity and different dimension. It is a process of interaction and integration among all people from all background and has been driven by information and technology. The past present and probably the future view globalization as the growth in the sizes of al he systems that is the social, political and economic systems together with the increase in the complexity of interconnectedness of the societal links. The totality of societal changes gives an overview of globalization processes in that it combines all aspects of life being crowned by technological advancement. Different researchers agree that the contemporary world is characterized by new and intensive processes of globalization with a high level of interconnectedness among the political, economic and social processes. Having been a concept that attracts a lot of analysists, globalization has different impacts that are either agreed upon or disagreed, arguing that globalization is bad while others see it as a positive aspect in life that has lifted countries and societies permanently. In particular, this essay discusses if globalization is good or bad.

To begin with, globalization has impacted a lot in the society through its historical transformation. Industrialization is one of the greatest’s tested transformation that globalization has brought. The core drive of globalization is technology which has given a normal, increasing amount of widening and deepening connection in the cultural, economic, political events that are driven by new technology worldwide. The developing counties, for example, have received high levels of growth through direct foreign investments which have seen a free market and industrial as well as growth I economic rate. Capitalism is also one of the aspects that globalization has expended its importance in different continents and states and here competition has been embraced increasing the growth rate and performance of various industries (Rodrik, Dani pg79). Historically this has the increasing technology has therefore as an aspect of globalization been one of the positive impacts that have been receiving together with the effects of advanced information and technology. Information and sharing of communication through the internet have also enhanced a global village primarily in the business environment and social, cultural interconnectedness. Individual and corporate societies can easily share information that improves the performance of their organizations and firms through social networking. Thus, I believe that all can buy the idea that globalization is inevitable and its impacts are positive.

Another good thing that globalization has brought in is the global demand and achievement of democracy and participation. Before the 19th century, there was global colonialization and high rate of slavery and civil war. This was followed by the global spread of social movements, citizen groups and Non-governmental organization that capacitated the citizens and the society of their democratic rights. As such, there was increased participation, and movements spread information where everyone participated leading to a global democratic society. Through media, writings and the internet, an individual can easily share their different opinions concerning the political and democratically happening of the current society (Brown pg2). Such organization like the UN among others have high influence in their member countries, and the integration has enhanced an increased political stability especially in countries that have been characterized by prolonged civil war.

Globalization has promoted diversity, understanding and tolerance. Here different cultures and people can appreciate the diversity of other cultures (Scherer pg3). Globalization has enhanced and encouraged sharing of ideas lifestyles and experiences. Today we can understand the practices of different cultures and borrow them as well. Globalization promotes diversity, in that technology, internet and holding of events, today is easy where different cultural practices are held, and this creates unity tolerance and communities can easily embrace each other. Also, globalization promotes awareness. Raising of awareness in all parts of the world is no longer expensive. There are national media stations, social media as well as the internet where people from all walks of life can easily access information.

Moreover, in value and volume, trade has sustainably grown over the past fifty years. The global growth rate has increased by 7.4 percent which has been indicated as a positive growth rate in trade. This has been received in the areas of trade based on political and economic areas. Foreign Direct Investment has rapidly been growing with the industrialized countries registering a higher rate. Such countries as Japan, European Union and the United States accounts for the highest global inward foreign globally investment. Bilateral and multilateral relationships geared by globalization have seen the reduction of tariffs on manufactured goods and expanding the production of the good in different counties different from the home countries (Rodrik, Dani pg195). Technological advancements also have lowered the communication costs and the shipping costs which is an advantage to nations and thus reporting improved global trade and economy.

Despite the positive impacts that globalization has brought in hand, it can also be termed as bad. This is because the world is increasingly becoming unequal as the distribution of opportunities has become unequal due to technological changes. The gap in income is earning n the society is increasingly widening in that the rich become richer while the poor continue becoming poor. This is associated with such factors as a foreign direct investment which increases profit and capital t those countries that own the means of production and have the capacity to invest and transfer their production and manufacturing industries to other countries without application of tariffs. Employment is also a challenge that has been experienced resulting from the high rate of globalization. Technology has reduced the amount of human labor that is needed to apply in the labor markets which therefore widen the gap of unemployment (Blommaert pg20).

Technology through the introduction of machines and computers laid off employees in industries where most individuals relied on for their livelihood. Machine and computers require only one individual to operate them and also analyze data in cases of companies, and this has highly affected the society negatively especially the youths. Globalization as such has been argued as a bad thing in the society.

On a finishing note, globalization is inevitable in the contemporary world, and many arguments are for and against globalization. Globalization has helped highlight the world’s most pressing needs and issues together with reinforcing the importance of global sustainable development. Its benefits as outlined in the essay outweigh its negative aspects and in my opinion globalization one of the aspects that nations should be proud of as it benefited all nations worldwide. Despite globalization, it has also caused challenges and nations, therefore, should work towards combating them.

Work cited

Brown, Garrett Wallace. “”Globalization is what we make of it: Contemporary globalization theory and the future construction of global interconnection.”” Political studies review 6.1 (2008): 42-53. Retrieved n 11/9/2017 from https://journals.sagepub.com/doi/abs/10.1111/j.1478-9299.2007.00144.

Blommaert, Jan. The sociolinguistics of globalization. Cambridge University Press, 2010.

Rodrik, Dani. One economics, many recipes: globalization, institutions, and economic growth. Princeton University Press, 2008.

Scherer, Andreas Georg, Guido Palazzo, and Dirk Matten. “”Introduction to the special issue: Globalization as a challenge for business responsibilities.”” Business Ethics Quarterly 19.3 (2009): 327-347. Retrieved on 11/19/2017 from https://www.cambridge.org/core/journals/business-ethics-quarterly/article/introduction-to-the-special-issue-globalization-as-a-challenge-for-business-responsibilities/AC817A40B9AE17D284708EAE624C9432

The Effects of Globalization on Human Trafficking Essay

Introduction

Globalization is described as the interconnectedness of people and places. While there are pros and cons to this ideology, it has been proven to create a sense of a global community. Globalization has been said to be both voluntarily and involuntarily responsible for the rapid growth of human trafficking. Human trafficking is described by the Protocol to Prevent, Suppress and Punish Trafficking in Persons as the recruitment, transportation, transfer, harboring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation (UNODC, 2018). The International Labor Organization (ILO) estimates that there are 2.4 billion people in the world at any given time involved in forced labor and subjected to exploitation as a result of trafficking (ILO 2008).

Globalization’s Connection to Human Trafficking

The more globalization progresses and integration flourishes throughout countries, the more successful human trafficking becomes. Human trafficking heightens with the help of globalization just like in the old days. Slave trade in the past was a main import and export for countries at that time. By analyzing slave trade in the past, it can be predicted that human trafficking will also heighten economic globalization today. The ILO estimates that human trafficking is responsible for a profit of around $32 million globally (ILO 2008). A new idea of a fourth world has been introduced by Erika Polakoff. Millions of homeless, incarcerated, impoverished, and otherwise socially excluded people come together to make up the fourth world (Polakoff, 2007).

Majority of human trafficking victims are derived from this group of the population. As the social gap between economic classes grows, it can be assumed that human trafficking will only heighten. The bigger the gap gets; the more exploitation occurs. The more exploitation occurs, the bigger the gap gets. The two go hand in hand and either grow or minimize together. Naturally, a growing gap will reduce opportunities to those of the fourth world. Multinational corporations are able to easily exploit and traffic people for this cheap labor. Often times, the exploited against are aware of their conditions, but stay anyways because it is better than the alternative.

Prevention and Protection

The idea of human trafficking is hard to prevent and avoid due to the fact that the traffickers themselves are always planning further ahead than those trying to prevent it. It is hard to find a way to prevent human trafficking because organization are normally centered around one country and cannot control what goes on in other countries. Many activists have tried to use a multi-tiered approach to fight against trafficking with a proactive stance instead of a reactive stance. This approach would stop the trafficking before it even develops.

There are education programs put into place by Vanessa Baird to keep men from soliciting women (Brewer, 2018). This program is supposed to help prevent trafficking from occurring as often as it would otherwise. Another action of this proactive approach is to watch and monitor raw materials from slave to marketplace to try to find which multinational corporations participate in trafficking.

Empowerment

As previously discussed, a large social gap contributes to human trafficking due to the decreasing opportunities in the lower class. A lack of work in less developed countries plays a major role in trafficking. Once the trafficked are exploited, it is extremely hard to leave that system. Trafficked victims are at a high risk of being trafficked again due to the fact that they are unable to find work in their less developed countries. Promoting education, training, and employment can help to fight against human trafficking.

Athens County: Vocational Programs

Empowerment is definitely a strategy that can be implemented throughout Athens county. Given that it is a predominantly liberal county, there are a lot of people that are for globalization. The next step is to promote a positive idea of globalization. As a population that encourages integration, we need to be aware of possible dangers to globalization and how to prevent them from happening. A good way to prevent this activity is to implement vocational programs. Athens County is one of the poorest counties in the state of Ohio. Having knowledge on basic jobs and having opportunities could work to close the gap between classes.

Conclusion

Human trafficking plays an important part in economic globalization. The bigger the social gap is, the more the human trafficking grows. There are many different forms of prevention and protection that can be implemented to better the situation. The most beneficial system to prevent human trafficking in Athens County is implementing vocational programs. By working together and helping to provide opportunities, human trafficking can eventually start to diminish, while globalization continues to flourish.

The Effects of Globalization on Companies Essay

Due to globalization the business people have to interact and manage different people from different cultures. “It is helpfulA¢â‚¬A¦.to think of culture as analogous to music:(a)If another person hasn’t heard a particular piece of music, it is impossible to describe.(b)Before the days of written scores, people had to learn informally by imitation.(c)People were able to exploit the potential of music only when they started writing music scores.” (Hall,1973). Culture is a collective phenomenon that is about shared values and meanings. For a successful company a strong connection between organizational structure and culture is very important. Organizing is the process of arranging people and other resources to work together to accomplish a goal. Organization structure is a system of tasks, reporting relationships, and communication linkages. Culture is a collective phenomenon that is about shared values and meanings. Strategic mergers are becoming critical components for today’s global business strategy. The common causes for the failure in mergers are structural and cultural differences. Before merger the firms need extensive preparation, a relationship of trust between negotiators and long period of post-merger consolidation. 1.1. Research questions What are the organizational designs and key dimensions of culture? What are the factors that influence organizational structure and culture? What are the impacts of organizational structure and culture on merger Process? 1.2. Research objectives To describe the organizational designs and key dimensions of culture. To identify the factors that influence organizational structure and culture. To describe the impacts of organizational structure and culture on merger Process. 2. Research methodology 2.1. Data collection and data analysis. 2.2. Case study method.

3. Literature review and application

4. Organizational structure:

‘The structure of an organization is the sum total of the ways in which it divides it’s labour into distinct tasks and then achieves co-ordination among them’ (Mintzberg, 1979) Managers design the organizational structure to influence employees to achieve wider goals.

4.1. The organizational designs:

Organizational design is the process of creating structure that will help to achieve the mission and objectives of an organization. The organizational design consists of 1.Organizational variables, 2.Control variables, and 3.Cultural variables.

Organizational variables:

The organizational variables are designed to achieve organizational effectiveness. They will help the organization to achieve its goals without any confusion in a precise way. The following are the important organizational variables. 1. Decision rights: This Indicating who is having the responsibility to approve an important decision regarding the business and implement necessary technology and control various types of decisions. It designs the proper allocation of decision rights. 2. Business processes: The set of ordered tasks needed to complete key objectives of the business and includes 1) A beginning and an end,2)Inputs and outputs,3)A set of sub processes that transform the inputs into out puts,4)A set of metrics for measuring effectiveness. 3. Formal reporting relationships: The formal reporting relationship reflects the flow of communication and coordination among the units throughout the organization. Effective communication, coordination and cooperation among units in an organization are basic necessities for growth of the organization. 4. Informal networks: Sharing and transferring knowledge within different project unites other than the formal reporting relationships are the key factors for effective function of the organization.

Control variables:

These are the tools which will help the organization to monitor, motivate and evaluate the performance of the organization. 1. Data: Collecting information regarding the progress of all units, evaluating and providing feedback. 2. Planning: It is the processes through which the desired strategic objectives are achieved. 3. Performance measurement and evaluation: To improve the quality of work a set of measures are used to get feedback about execution of plans and the processes. This feed back is used to improve the performance of the organization. 4. Incentives: Incentives are motivating factors within an organization which will help to improve the organizational performance.

Cultural variables:

Set of values and beliefs about what is desirable and undesirable in a community of people. 1. Values: The set of unspoken and clear beliefs that underlines decisions made and actions taken, reflects aspirations about the way things should be done.

4.2. Identifying structural characteristics:

Every firm should have a strategic plan which specifies the future direction of the business. The responsibilities of the managers should be organized to achieve the strategic plan, for this the firm should have their organizational structure that identifies responsibilities for each job position and relationships among those positions. The organizational structure also indicates how all the job responsibilities fit together. The organizational structure affects the effectiveness and efficiency with which the firm produces its product and therefore has an impact on the firm’s value. When choosing a structure that fits its business goals, it is important to understand different types of organizational structures and compare them with each other. Reduce the disadvantages or negative impacts that the chosen structure might have on the business goal. According to my analysis different firms use different organizational structures which are influenced by specific characteristics of its business and can affect the firm’s performance. Organizational structures vary among firms according to: Size of organization Strategic importance Budget and time constraints

4.3. Types of organizational structure:

Organizational structure defines the way work is divided, managed and synchronized. Organizational structure is formed according to the organizations size and strategy. Functional structures, Divisional structures and Matrix structures are the traditional structures. Team structures and Network structures are new directions in organizational structures. The following are the important types of organizational structures.

4.3.1. Functional organizational structure:

In a functional structure employees are grouped by managers according to their activities and profession or function for example like production, finance or marketing. Functional structure is not only used in business but also in banks and hospitals. Functional structure is effective in small organizations with less problems and limited demand for change and innovation.

4.3.2. Divisional organizational structure:

A divisional structure groups together people working on the same product, in the same area, with similar customers. It is suits more in complex organizations with diverse operations with many products, territories, customers, and work processes.

4.3.3. Matrix organizational structure:

The matrix structure combines functional and divisional structures. It is more precise to use matrix structure in permanent cross-functional teams to support specific products and projects or programs. It is more useful in manufacturing, service industries, professional fields and nonprofit sectors.

4.3.4. Network organizational Structure

Network structure is a modern structure which includes the linking of numerous, separate organization structure to optimize their interaction in order to accomplish a common, overall goal, because it consists of multiple organizations that works together to produce products and services. 4.4. Comparison of organizational Structures: In each type organizational structure there are variations. Each one is unique in its own way. The adaptability of a particular structure depends on the necessity of the organization.

Functional organization structure :

They work best in a stable environment like small organizations with less problems and change.

Advantages of functional structure:

Economies of scale. Task assignments with proper training and guidance. High-quality technical problem solving. Good skill development within functions. Clear career paths within functions.

Disadvantages of functional structure:

Difficulties in indicating tasks for things like cost control, product or service quality, timeliness, and innovation. Lack of communication, coordination and problem solving across functions.

Divisional Organization structure:

They work best in a complex organization with many products, territories, customers, and work processes.

Advantages of divisional structure:

More flexibility in responding to situational changes. Improved coordination across functional departments. Good responsibility for product or service delivery. Focused on specific customers, products and regions.

Disadvantages of divisional structure:

Reduces economies of scale. Increases costs through the duplication of resources and efforts across divisions. Creates unhealthy rivalries as divisions compete for resources and top management attention.

Matrix organizational structure:

The main influence of matrix structures to organizational performance lies with the cross- functional teams whose members work together to share knowledge and information in a timely manner to solve problems.

Advantages of matrix structure:

Good collaboration across functions. Problem solving takes place at team level which will improve decision making. Improved customer service because there is always respective manager informed and available to answer questions. Better strategic management, since top managers are free from un-necessary problem solving to focus on strategic issues.

Disadvantages of matrix structure:

The two-boss system is subject to power struggle. It creates task confusion and conflict in work priorities. Strong team loyalties will cause a loss of focus on larger organizational goals.

Network organizational structure:

A network organizational structure is seen as a more complicated and complex structure than any other structure. A network structure uses IT to link with networks of outside suppliers and service contractors.

Advantages of network structure:

Quality and cost are the best advantages of network structure. The creative use of information technology.

Disadvantages of network structure:

More demand for new management responsibilities. Network of contracts and alliances are more complicated to maintain.

4.5. Importance of organizational structure in merger process:

Effective organizational structure makes responsibility delegation easier and makes it easy to see the organizational change throughout the organizations. It is important to realize the advantage of organizational structure to benefit from a strong framework. Organizational Chart: is a tool that represents employees work responsibilities and reporting relationships. With its reporting structure it shows the structure and hierarchy of employees of their division of work and level of responsibilities in the organization. Distribution of Authority: Organizational structure shows the authority and responsibility distribution throughout an organization. Employees will get awareness of their superiors and subordinates. Communication: Organizational structure makes communication easy between employees in their duties and this enhances information sharing and problem solving. Chain of command: the structure helps employee to know who is engaged in the decision making process. Proper Balancing: Structure helps specific task and activities to be assigned in functional departments which provide a good coordination between departments.

Lorachester,2010

4.6. Impact of organizational structure on merge:

In the case of merger, two organizations are required to integrate their organizational structure appropriately. Inappropriate organizational structure can cause failure in integration between firms and reduce benefit of merger. Unclear reporting structure has a great tendency to cause merger failure. Reconstructing organizational structure may take some time after a merger and it may cause uncertainty and anxiety amongst employees. Therefore it is important to declare the new organizational structure with clear roles and reporting relationship of employees (SS Brahma). Good organizational structure facilitates communication between individuals or groups within the two organizations. Incompatible structure becomes obstacle for successful communication and achieving the corporation goal become impossible.

4.7. Factors that influence organizational structure:

The organizational structure can be influenced by different factors, such as the size of an organization, the environment, technology, efficiency of organizational design, etc. The structure of an organization should be developed in such a way that endorses the strategy and plan of management. It is very significant for managers to be aware of the factors which may have an influence on the structure of an organization. Environment Strategy People Technology Size

Figure: A framework for organizational design- aligning structure with situational contingences

Environment

Stable Environment- Composed of certain and predictable environment. Desires of customers are well known and may remain constant. Few changes take place in such kind of environment and organizations can perform well without frequent change. Bureaucratic organization and mechanistic design fits in such environment. Dynamic Environment- composed of uncertain environment with less predictable elements. The desires of customer are frequently changing. Organizations must be flexible. For such environment, adaptive organizations and organic design is adequate.

Strategy

Organizational structure should be designed in such a way to fit its strategies. Different strategies need different structure. Organizations may need to change their strategies or mission for better performance and this leads to a change in organizational structure. Stability oriented strategy – only few changes occur in the external environment, Bureaucratic organizations and mechanistic design is adequate for such certain strategy. Growth oriented Strategy – Strategies is likely to change frequently. Circumstances are complex and uncertain. The operation objectives focus on flexibility of frequent change and innovation. Plans changes regularly and there is a need for improvement.

Technology

Technology is the way task is done using knowledge, skill, equipment, techniques and human know-how. Advance in technology cause frequent change in an organization. A suitable technology results in high productivity and lower cost for the firm. Technology is a major influence on organizational structure. The right combination of structure and technology are critical to organizational success (Joan Woodward 1960s).

Organizational size

As the size of an organization become larger and older, the structure becomes more complicated. It is very difficult to manage large organizations without a formal organizational structure, whereas in very small organizations structure can be very simple. Employees can carry out their task based on their needs, skill and/or interest. Tasks can be performed without having a formal work assignment and delegation of authority. In large organizations, the structure is more liked mechanistic. Tasks are highly specialized and more level of management. Work procedure is dictated by rules and strategies. Communication flow is from superior to subordinate.

5. Organizational culture:

“Organizational culture consists of the behavior, actions, and values that people in an enterprise are expected to follow.”(Pettigrew, 1979) “Organizational culture is a set of values, often taken for granted, that help people in an organization understand which actions are considered acceptable and which are considered unacceptable.”(Moorhead & Griffin, 1992)

5.1. Key dimensions of an organizational Culture:

Measuring key dimensions of an organizational culture provides a composite picture of the organization’s culture. This will become the base for the feelings of shared understanding of the members about the organization, how things are done, and the way the members are supposed to behave. The following are the 10 key dimensions of an organizational culture. 1. Member identity: The interpersonal relationship of the employees with the organization to feel a vital part of it. It depends on loyalty of employees to the organization. 2. Team emphasis: Organized group work rather than individual work. 3. Management focus: Identifying the effective outcomes of people within the organization and taking them into account to make important decisions. 4. Unit integration: cooperation and coordination among the units. 5. Control: The extent to which rules and policies used on employees to control their behavior. 6. Risk tolerance: The level up to which the employees are encouraged to be innovative and risk seeking. 7. Reward criteria: A precise system which rewards promotion and salary increase according to employee performance rather than seniority, favoritism or other nonperformance factors. 8. Conflict tolerance: The degree to which the employees are encouraged to talk about the conflicts openly. 9. Means versus end orientation: The extent to which the management focuses on outcomes rather than on techniques and processes used to achieve those results. 10. Open-system focus: Monitoring the changes in external environment.

5.2. Identifying cultural characteristics:

“Denison Organizational Culture Model”, indicates the external adaptation, internal integration, flexibility, stability as cultural characteristics of the enterprise which influences the prospective of organization. These four ideal characteristics would be reflected by four features (1) involvement, (2) consistency, (3) adaptability and (4) mission. Involvement: referred to the capacity of workers, ownership and responsibility. In the culture characteristic reflects the company’s training for staff, the communication between workers, the participation of staff and the responsibility of workers. Consistency : to measure whether the company has strong and cohesive internal culture. Whether company has a set of fundamental value, so that employees have immense identity and have clear expectation of future. Adaptability : mainly refer to capability of adapting the change from external environment or whether they have ability to aware the sign of market and response quickly. Mission : is used to determine the company is focusing on immediate interest or has long-term strategy and accurate tactics to approach even bigger goal.

5.3. The stages of cultural formation:

As people become more civilized they develop and share some common beliefs and values according to their geographical location which will guide their behaviour.The positive outcome of the beliefs and values makes them strong and will influence on how people should work and relate to each other. The following figure will explain about the stages of cultural formation. Shared values Reinforcing Shared beliefs Outcomes Norms Individual and Group behaviour

5.4. Types of culture:

Charles Handy (1993) generalized 4 culture types. Power culture: is one in which people’s activities are strongly influenced by dominant central figure. Role culture: is one in which people’s activities are strongly influenced by clear and detailed job descriptions and other formal signals as to what is expected of them. Task culture: is one in which the focus of activity is toward completing a task or project using whatever means are appropriate. Person culture: is one in which activity is strongly influenced by the wishes of the individuals who are part of the organization.

5.5. Multiple cultures:

A key concern in the culture of any organization is diversity. The term multiculturalism refers to pluralism and respect for diversity in the workplace. They value the talents, ideas, and creative potential of all members. Good characteristics of multicultural organizations are, 1) Pluralism: Members of both alternative cultures and majority cultures are important in setting key values and policies. The talents, ideas and creative thinking from different cultures are important for an organization to achieve its goals. 2) Structural integration: Members from multiple cultures are given equal opportunity in all levels and in all functional responsibilities. The integration of all levels of employees, management and all functional unites are important for a successful coordinated progress. 3) Absence of prejudice and discrimination: A proper guidance and task force actions deal with the need to eliminate culture-group conflicts. Prejudice and discrimination will cause difference among work force which will affect the work. So it is important to eliminate the prejudice and discrimination.

5.6. Culture and performance:

We can review the effect of organizational culture on employee behaviour and performance with some key ideas. The culture of an organization allows employee to understand both the history of the firm and present methods of operation. This knowledge provides guidance about expected future behaviours. The commitment of Organizational culture to corporate philosophy and values. This commitment generates shared feelings of working towards common goals. The organizational culture, through its norms, serves as control mechanism to channel behaviours towards desired behaviours and away from undesired behaviours. Finally, certain types of organizational cultures may be related directly to greater effectiveness and productivity than others.

5.7. Importance of culture in merger process:

The market world today is facing increase competition, in such situation organisations will like merge to have popular strategic tools entering new markets and acquiring new technologies. On the other hand, 80% of mergers do not reach their financial goals and 50% of the mergers fail. (Nahavandi and Malekzadeh 1993) It’s true that most mergers fail because of financial reasons or economic crisis, and management as well, but we must critically look at the importance of culture in the merger process. When two companies merged with different cultures, it will have greater consequences on the organisation. An example for this is merger between US air and America West. The two airlines had extremely different organisation cultures. US Airways had an older workforce with highly structured bureaucracy, whereas America West had much younger workforce with entrepreneurial culture. For a successful merger they must adopt to a common culture that will suit the company. Cultural differences: When employees do not agree with the cultural adaptation it will create problem for the organisation. This will affect their performance in the organisation. Culture play an important role in the way employees will react when they face new business environment, in some situation where merger take place. It’s difficult for some to work with new members within a team. To overcome this problem the organizations need to prepare employees to adapt to the new culture.

5.8. Impact of organization culture on merge:

Organization culture is one of the most important factors of success or failure of a company in merger process. Culture will have an enormous impact on the way a company operates today. The culture does not become established until shared understanding achieves dominance in the collective thinking of the members of the organization. The following points below illustrate some important interrelationships that deeply affect the organization culture in merger process.

Purpose and Goals:

The purpose and goals of the organization initially trigger the kind of culture that founders want to follow their successors to see their vision. The extent to which they achieve this culture depends as much on the others factors as on their own leadership

Organization policies:

The different rules and policies followed by the organizations will create problem after merge.

Organization structure:

The difference in organizational structures also causes serious problem in the merger process.

Employee skills and attitudes:

The different skill sets and attitudes of employees from both the merging organizations also cause some disturbance in merger process.

Use of technology:

The development of technology and the way it’s implemented will create an impact on the organization culture.

5.9. Factors that influence organizational culture:

The following are the some of the important factors that influence organizational culture in a broad way.

Change in management

For an organization, change management means defining and implementing actions and technologies to deal with changes in the business environment and to profit from changing opportunities. Change management is one of the main factors that influence organization culture. Change might come in various forms within an organization, such as technological change, change in management staff as well as change in leadership.

Employee

Employees are part of an organization, they will be unhappy if things are not going well in the organization. In today competitive world, it’s important for organization to do all they can to keep their employee happy and motivated. Organizational culture plays a vital role amongst employees. An organization that has a good culture ensures that its employees are satisfied with the facilities it provides them. This means that taking adequate care of employees ensures organizational effectiveness. This culture also enables employees to work in a comfortable environment that is reflected in the overall efficiency of their work performance.

Geographical location

Geographical locations influence organization culture, in sense that when companies are located in a particular region, they mostly adopt to the culture of that area to succeed. Geographical location might vary in turns of language; language is a factor that greatly affects cultural stability. When people from the same geographical location speak the same language, culture spreads easily. Since countries see language as an integrate part of their cultures. Religion is a strong shaper of value; different geographical location has different religions, at such this affects organization culture in that particular region.

6. Case study (US Air and America West

Merger Case)

6.1 Brief summary of the case

6.2. What are the influences of organizational structure and culture in merger

Process

6.3. Recommendations for the successful merger of organizational structure and

culture in US Air and America west merger case.

7. Findings and Conclusions

8. Recommendations

Graphs and tables

The Effects of Globalization on Business Processes – SWOT Essay

1.0: Introduction Globalization has a drastic effect on the approach to business process within an organization that is competing in the domestic as well as global market stage as argued by Philip Kotler and Kevin Lane Keller (2005)[1]. This is naturally because of the fact that the microeconomic factors influencing the overall business process in an organization has a macro impact due to the impact of globalization as argued by Gerry Johnson and Kevan Scholes (2003)[2]. This makes it clear that the management decision-making at the strategic level as well as operational level play a critical role in the overall effectiveness of the organization’s performance in the global arena of the chosen business sector. This is further justified in the arguments of Richard Lynch (2003)[3] who argues that the efficiency of managers and the management decision-making is the key for an effective performance and sustainable competitive advantage achieved by an organization. In this essay a critical analysis on the need for proactive approach by managers to address global competition is presented to the reader. The essay commences with the SWOT analysis of the global business environment for a given organization capturing the key elements that are common industry wide. This is followed by the analysis on the role played by the managers in addressing the highlights of the SWOT analysis (proactive or reactive) with examples from different business sectors is presented by the author. 2: Globalization – SWOT Analysis SWOT analysis presents the strengths, weaknesses, opportunities and threats faced by an organization in the given industry as argued by Gerry Johnson and Kevan Scholes (2003). Since this essay is focused upon the globalisation and its impact on an organization, the SWOT analysis presents the key factors that are common to global business market that are critical to decision-making for a manager in an organization. Strengths

  • Supply chain integration
  • Cost Savings through outsourcing
  • Increasing profit margin through importing finished products for retail from Far East

Weaknesses

  • Communication gap and cultural differences between parties involved that are geographically separated
  • Business Continuity Requirements
  • Human resource related issues

Opportunities

  • New markets to compete
  • Potential for combined deployment of development strategies in the global arena
  • Efficient market segmentation and product innovation

Threats

  • New entrants from Far East
  • Lower profit margin with price-based competition
  • CRM and outsourcing

The aforementioned key points are analysed in the light of managers’ proactive or reactive approach to decision-making and the net result on organizational benefits in the next section. 3: Managers’ decision-making: Proactive or Reactive? Gerry Johnson and Kevan Scholes (2003) argue that managers play a vital role in the strategic decision-making for the efficient business process within an organization both at the strategic level as well as at the operational level on a day-to-day basis. At the operational level, the manager plays the key role on deciding the resource allocation requirements against the demand whilst the strategic decision-making is more towards proactively driving the organization’s core business process to delivery excellence. This is further justified by Richard Lynch (2003). The key advantage of proactive management and decision-making by mangers in case of the supply chain integration is the ability to deploy the pull strategy thus enabling the demand-based production in the organization as argued by Jacqueline McLean (2006)[4]. The ability of the manager to decide the level of production and enable proactive operational decision-making will thus enable the organization to effectively manage its fixed costs overhead by reducing the expenditure on raw materials procurement and storage as argued by Malcolm J. Saunders (1997)[5]. Alongside, the effective supply chain integration will not only enable reduction in fixed cost overhead but also provide the management to ensure that the overall business process adheres to a lean management strategy where its can effectively respond to a sudden fluctuation in the market demand. Outsourcing is argued as a key advantage in the cost savings strategy of an organization as argued by Jacqueline McLean (2006). This is because of fact that the costs associated with the production and management at Far East as well as the operation costs are lower compared to those in the west. The increase in the outsourcing of the call centres to India since the dawn of the twenty-first century is a classical example for the aforementioned (Jane Griffiths (Ed), 2006[6]). Another example for outsourcing is the production of the fashion goods for retail in the West outsourced by leading brands including NEXT, Marks and Spencer, etc., to China which is predominantly focused upon the reduction of the production costs whilst ensuring quality and delivery assurance (Philippa Drewer (Ed), 2006[7]). In the aforementioned scenarios, the role of the manager and proactive decision-making is to identify the potential for outsourcing a specific business process or manufacturing segment within the organization to another country not only as an early starter but also ensuring the quality and service level agreements are met as argued by Jacqueline Mc Lean (2006). This approach is also treated as the best practise for the efficient management of the manufacturing outsourcing to the Far East whilst the reactive approach to outsourcing where the manager’s decision to outsource will be in response to costs and pricing demands, the performance is deemed to be poor as the supplier bargaining power eventually increasing the costs as argued by Jacqueline McLean (2006). Another interesting element with the importing of the finished products from the Far East rather than outsourcing the production is the fact that the organization does not have the operating overhead at all thus making it clear it can increase its profit margin considerably as argued by Roger J. Calantone et al (2004)[8]. In this case also, the proactive decision-making to address the market demands ensuring that the overall business process is not affected with the re-engineering strategy is the key for a successful implementation within an organization to address the competition in the global arena. Gerry Johnson and Kevan Scholes (2003) further argue that the proactive decision-making is not only to envisage the future trends in a market but to ensure that the organization is resilient to changes thus ensuring the ability to address fluctuations demand and change in customer interests. Addressing the weakness, it is clear that the proactive decision-making and management by the managers play a vital role in the mitigation of communication gap between the organization’s production/operations centres located in different geographical locations as argued by Roger J. Calantone et al (2004). Derek Torrington and Laura Hall (2003)[9] further argue that the efficiency of the organization to perform effectively in a given target market depends upon the ability of the manager to bridge the communication gap between geographically separated entities of the same organization or collaborating outsourced organization in the manufacturing process. Besides the communication effectiveness is the key element for the efficient production management and supply chain integration in the global arena. Thus the role of the manger to proactively identify the key areas of communications gap will help ensure the performance effectiveness of the organization. The business continuity requirements especially in case of geographically dispersed organization form a critical element for business process with minimal outage as argued by James C. Barnes (2004)[10]. From a strategic perspective, the business continuity management strive of an organization must ensure that its resilience backup is installed and tested at regular intervals of time as argued by G.A. Zsidisin et al (2005)[11]. From the aforementioned it is clear that the role of the manager is to ensure that the business continuity infrastructure installed at the geographical locations are tested for resilience using pseudo business continuity tests individually and in a combined fashion. This approach will encourage the key staff members involved to get accustomed to the business continuity strategies of the organization thus eliminating surprises and weak response in case of a real business continuity requirement. Besides, it is interesting to note that the flexibility of an organization in the global market is the key for an organization’s ability to enter new markets and deploy its development strategies. This is further justified by G.A. Zsidisin et al (2005) who argue that the supply chain integration and the efficient management of the production to meet the demands in the international market is a critical success factor for an organization. New markets for an organization competing in the global business market are infinite in nature as argued by Frances Brassington and Stephen Pettit (2003)[12]. This makes it clear that the strategic decision-making on the market choice and the strategy to enter the market requires vital contribution from the managers both at the strategic and operational levels. This is evident from the fact that the efficiency of an organization in establishing itself as a strong entity in new market segments depends upon the time, competition and demand factors associated with the market as argued by Philip Kotler and Kevin Lane Keller (2005). The failure of coca cola in promoting 3G in the UK drinks market as a Sprite-branded Energy drink (Mark Choueke, 2006) is a classical example where the proactive decision-making on the demands off the market and the brand image held by the customers to increase the sales in the target market. Alongside, the success of the Hilton Garden Hill Range of Hotels in the economy range of hotels in the global leisure market compared to that of Marriott group’s Courtyard Marriott (Caroline Kimber, 2001[13]) further justifies the proactive response required from the managers to gain sustainable competitive advantage. The development strategies in the global market is the main opportunity for an organization to increase its market share through combined deployment or individually deploying product and market development strategies as argued by Gerry Johnson and Kevan Scholes (2003). This is because of the fact that through identifying whether the market segment lies within the existing target market group or the product promoted is an item on demand in the new market is the key for choosing a development strategy. Besides, in a global market, the ability of an organization utilize more than on strategy simultaneously requires the proactive approach from the managers to gain sustainable competitive advantage. This is further justified in the arguments of Roger J. Calantone et al (2004) where it is clear that the service relationship and the identification of the development strategy for an organization in a given target market requires the proactive approach to managerial decision-making. Product innovation is argued as a critical element in the business development within an organization as argued by Frances Brassington and Stephen Pettit (2003). The fact that the product innovation is driven by market demand and the ability of an organization to give form to a specific demand in the identified target market makes it clear the effectiveness of managerial decision-making is critical. The key point of interest in this case is the ability of an organization to identify demands where the management involving marketing, product design and production managers act as a team to derive on a new product range as argued by Roger J. Calantone et al (2004). It is thus evident that the proactive approach by the managers is the key for successful implementation of the product innovation. This is because product innovation as a reaction in a given target market is actually the response to a product introduced by another competitor thus second-lining the product in the target market loosing the early starter advantage as argued by Frances Brassington and Stephen Pettit (2003). The key threats identified in section 2 justify that management effectiveness is necessary to not only address the organizational elements but also the key external elements that affect organizational performance in the global market as argued by Gerry Johnson and Kevan Scholes (2003). The case of new entrants from the Far East is treated as a threat mainly because of the increasing entry of sellers from Far East into the clothing market through online retailing and whole sale marketing to retail stockists in the western markets as argued by Jane Griffiths (2006). The key requirement for the manager in the aforementioned situation is to ensure that the organization does not loose its profit margin through efficient pricing and to ensure the company positions itself as competitive brand both in quality and price within a given target market. Alongside, the new entrant threat from the Far East poses the threat of loosing market share in the global market because of the increasing dependence on the import of goods from the Far East by western conglomerates that are sold with an added profit to its target markets in the west. This profit margin is narrowed drastically because of the relatively lower pricing from the new entrant from Far East. Therefore, a proactive approach from the managers is essential to ensure that the competition posed by new entrants from the Far East is mitigated effectively. The price-based competition in the global market is one of the key areas where proactive decision-making from the manger is critical for achieving competitive advantage in the target market. This is justified by Gerry Johnson and Kevan Scholes (2003) because pricing is an area where the quality and corporate identity along with the brand image is communicated to the customers in the target market. Hence through strategically positioning the company’s brand in the given target market, the price-based competition can be mitigated to a greater extent since the customer loyalty to a given brand can be utilised for sustaining the market share. The major threat with outsourcing the service related activities of the business to Far East is the poor service quality that has a direct impact on the customer relationship strategies of an organization in the global arena. The role of a manger is to constantly track the service performance and identify key areas of improvement which can be used for strengthening the customer relationship with the customers. It is evident that the management decision-making in proactively tracking the performance of an outsourced call centre and its impact on the customer loyalty can increase the service efficiency of the company. This will eventually forge strong customer relationship with the customers thus ensuring sustainable competitive advantage in the target market. Hence, to conclude the essay it is clear that the proactive approach to management and management decision-making by managers is the key for an organization’s success in the global market. This is applicable across all levels of management within an organization. References Caroline Kimber (2001), Strategic integration of customers and channels, Journal of Financial Services Marketing, Jun2001, Vol. 5 Issue 4 Derek Torrington and Laura Hall (2003), Personnel Management – HRM in Action, FT Prentice Hall G.A. Zsidisin et al (2005), An institutional theory perspective of business continuity planning for purchasing and supply management, International Journal of Production Research, 8/15/2005, Vol. 43 Issue 16 Gerry Johnson and Kevan Scholes (2003), Exploring Corporate Strategy – Texts and Cases, Prentice Hall Jacqueline McLean (2006), Big Opportunities Begin with Small Steps, British Journal of Administrative Management, Feb/Mar2006 Issue 51 James C. Barnes (2004), AA guide to Business Continuity Planning, John Wiley and Sons Jane Griffiths (Ed), (2006), Call Centres – Market Assessment 2006, Key Note Ltd Malcolm J. Saunders (1997), Strategic Purchasing and Supply Chain Management, FT – Prentice Hall Mark Choueke (2006), Coke plans 3G cuts to boost Relentless, Marketing Week, Vol. 29 Issue 47 Philip Kotler and Kevin Lane Keller (2005), Marketing Management – 12th Edition, Prentice Hall Philippa Drewer (Ed), (2006), Clothing Manufacturing- Market Report 2006, Keynote Ltd Richard Lynch (2003), Corporate Strategy, FT: Prentice Hall Roger J. Calantone et al (2004), Internationalization and the Dynamics of Product Adaptation—An Empirical Investigation, Journal of Product Innovation Management, May2004, Vol. 21 Issue 3


Footnotes

[1] Philip Kotler and Kevin Lane Keller (2005), Marketing Management – 12th Edition, Prentice Hall [2] Gerry Johnson and Kevan Scholes (2003), Exploring Corporate Strategy – Texts and Cases, Prentice Hall [3] Richard Lynch (2003), Corporate Strategy, FT: Prentice Hall [4] Jacqueline McLean (2006), Big Opportunities Begin with Small Steps, British Journal of Administrative Management, Feb/Mar2006 Issue 51 [5] Malcolm J. Saunders (1997), Strategic Purchasing and Supply Chain Management, FT – Prentice Hall [6] Jane Griffiths (Ed), (2006), Call Centres – Market Assessment 2006, Key Note Ltd [7] Philippa Drewer (Ed), (2006), Clothing Manufacturing- Market Report 2006, Keynote Ltd [8] Roger J. Calantone et al (2004), Internationalization and the Dynamics of Product Adaptation—An Empirical Investigation, Journal of Product Innovation Management, May2004, Vol. 21 Issue 3 [9] Derek Torrington and Laura Hall (2003), Personnel Management – HRM in Action, FT Prentice Hall [10] James C. Barnes (2004), AA guide to Business Continuity Planning, John Wiley and Sons [11] G.A. Zsidisin et al (2005), An institutional theory perspective of business continuity planning for purchasing and supply management, International Journal of Production Research, 8/15/2005, Vol. 43 Issue 16 [12] Mark Choueke (2006), Coke plans 3G cuts to boost Relentless, Marketing Week, Vol. 29 Issue 47 [13] Caroline Kimber (2001), Strategic integration of customers and channels, Journal of Financial Services Marketing, Jun2001, Vol. 5 Issue 4

Opportunities and Challenges Presented by Globalization Essay

Opportunities and challenges presented by Globalization :IT Service providers in Continental Europe

EXECUTIVE SUMMARY

Enterprises within Europe are increasingly trying to seek the advantages of global sourcing. Unlike enterprises in U.S. or U.K., continental European countries have historically been reluctant to engage with offshore providers. The reasons were far stretched, ranging from political sensitivity, labor laws, cultural compatibility and language requirements. Globalization, however, is creating new avenues that European companies can not ignore. A recent report by Gartner shows the potential IT Offshoring market to be in the range of about $ 200 to 240 Billion. The market is expected to register double digit growth for years to come. The current offshore spending by firms amounts to just $17 Billion worldwide. This clearly shows a big gap, a huge market potential which is yet to be exploited. The huge demand has also led to emergence and growth of several new players in the field of IT Outsourcing/ Offshoring services, this is leading to ever increasing competition in the marketplace. In order to cope up with this increased competition and to provide better services, these service providers are increasingly adopting Global delivery models. By selecting an advantageous and cost effective proportion of resources worldwide, Global Delivery Model boosts business performance while also lowering costs. It also helps the supplier deliver requirements that are met on-time, within budget, and with high quality; greater efficiency and responsiveness to their clients. In Europe, nearshore models still dominate the market. But these models are continuously being updated, with more and more providers setting up Offshore Development Centers in locations like India. A framework for building an optimal combination of onsite, nearshore, and offshore delivery capabilities is provided by Capgemini’s Rightshore® model. A recent Gartner report has suggested that, the current US economic slowdown is expected to lead buyers of IT services to consider increasing the percentage of their labor in offshore locations. India will remain the dominant location for IT offshore services for North American and European buyers as a result of its scale, quality of resources and strong presence of local and traditional service providers.

INTRODUCTION: EUROPEAN IT MARKET

* The European market remains a highly complex and competitive market with a large number of providers. Mergers and acquisitions will continue but will be balanced by new market entrants * Outsourcing adoption in Europe is increasing for both infrastructure and applications; the widespread lack of well defined sourcing strategies among buyers and the realities of ever-changing business requirements will generate frequent deal negotiations and renegotiations * Global delivery and utility services are irreversible trends evolving at different speeds among various European countries. The European multi country, multi language/culture composition increases the evolutionary complexity of these trends * Selective outsourcing with multiple providers will remain the preferred model of engagement for European buyers. Governance and end-to-end integration/management of different providers/solutions are the most challenging aspects of it * ITO market maturity varies: UK is the most matured IT market in Europe. The other European markets are maturing at different speeds. An acceleration in ITO adoption is now apparent in countries such as France and Germany A focus on achieving service delivery excellence and the best value/quality balance is increasingly driving European organizations (especially those beyond the first generation deal) to consider selecting multiple providers for an outsourcing contract. For example, in the IT Telecom sector, the most common division is by service tower, with customers opting to choose different providers for their network, desktop, data center and application competencies. At the moment, however, providers tend to join forces in an opportunistic manner, as a response to customer demands. This is the cause behind the ever-changing composition of the “providers teams”; as a consequence, consolidating best practices to manage IT service spin offs between different providers in an effort to guarantee end-to-end service delivery excellence remains challenging. As the number of providers engaged is set to increase, this challenge is likely to intensify. It will also be driven by other market characteristics, which include a persistent tactical use of outsourcing by European customers, insufficient process maturity, and lack of clarity in the definition of roles and responsibilities. As we look at global delivery, it is fair to say that there are two major misconceptions that still exist among the European market: 1) Global delivery is often considered as a synonym of “offshore,” and 2) IT services delivered through global delivery capabilities are application services. In reality, in the past few years, the European market has witnessed a considerable expansion in terms of both geographical location options (in areas such as Eastern Europe or North Africa, for example) and portfolio of services offered (now including, for example, help desk and remote infrastructure management services). Global delivery and offshore, however, remain the key deal characteristics that need to be treated with extra care in many European geographies, and as a consequence, many deals remain confidential. Traditional providers’ investment will be directed toward enhancing existing capabilities (especially “near shore” in Eastern Europe) and ensuring process solidity. Offshore providers’ investment on the other side will be centered on creating front-end capabilities with a focus on specific country and vertical-oriented competencies. While these global delivery models mature and are refined/ optimized, customers’ satisfaction will remain a challenge.

KEY TRENDS SHAPING IT OUTSOURCING MARKET IN EUROPE

TRENDS

CHARACTERISTICS

Selective Outsourcing With Multiple Providers * Embraced by majority of European companies * Objectives: IT excellence and cost optimization * Integration and governance challenges Global Sourcing and Global Delivery Models * Near shore proximity key for European market * Expanding portfolio of outsourcing services * Key area of investment for providers and buyers IT Utility * Industrialization is accelerating * Convergence of IT utility and global delivery * Key drivers: flexibility, efficiency, optimized cost, speed Aggressive ESP Competitive Landscape * National, “global” and offshore ESPs converging * Mergers, acquisitions and divestitures to continue * Providers are implementing new business models * New offshore market entrants Application Outsourcing to Grow * Drivers: portfolio rationalization, legacy modernization * Global delivery will gain acceptance * Multitude of providers competing

Source:

Gartner The U.K., Netherlands, Sweden and Finland are examples of countries more attracted by the global delivery model. However, in the meantime, the impact of global competition has started to drive countries such as Germany and France to consider global delivery as a viable option to be considered strategically, rather than when all other options have been exhausted. Despite a slower gestation and the fact that a complete infrastructure utility (IU) offering has not yet been developed, the IU model is continuing to attract new offerings and/or new providers. In the meantime, European customers, attracted by the idea of being able to access IT services in a flexible way, remain cautious as they expect further clarity on issues such as unit definition, pricing mechanisms, integration to existing systems, and security portability In the near future, we expect that the IU for ERP platforms will remain the most common battleground for providers; other providers are expected to instead mask their IU offering behind a package that includes “product and support services.” The concept of software as a service (SaaS) or ready-to-use applications will continue to generate lot of interest. Expectations for a solid delivery and specific functionalities will drive providers to specialize their offerings. Finally, gains in terms of process efficiency will be seen as crucial to deliver enhanced competitiveness, flexibility, agility and cost optimization.

GLOBAL TRENDS: IT OUTSOURCING and OFFSHORING MARKET

IT Outsourcing market is showing an average growth of 9% p.a.

IT Outsourcing Worldwide forecast (Million $)

Source :

Gartner Dataquest In terms of volume, North America continues to be the leader in IT outsourcing. Ÿ Latin America and APAC have shown good growth Ÿ Europe has fast emerged as a big IT outsourcer Global offshore spending is continuing to register double digit growth. Worldwide Offshore IT Services Spending by Importing Region (million $) Source: Gartner Dataquest, 2004 and Worldwide and U.S. Offshore IT Services 2006-2010 Forecast n In terms of volume, the North America continues to be the leader in IT offshoring. n Once averse to the idea of outsourcing, Europe is now steadily adopting an IT offshore model to boost the economy n Global offshore spending is projected to increase to 29400 $ Million in 2010 The graph on the next page shows the potential market for various types of sourcing options. This clearly depicts that he IT and Business Process offshoring market has grown at a tremendous rate over the past 7 year and the market provides a huge potential which is yet to be exploited.

IT and BPO market

Source Gartner, Dataquest, Aberdeen Group, McKinsey, Evalueserve, Infosys, IDC and Nasscom strategic review 2008 q Currently we are not even exploiting 10% of the potential market size ( IT services off shoring just at $17 Billion, whereas market potential is about $200-240 Billion *) q According to a new research by Gartner, the market is likely to grow further after the financial slowdown, as firms will try aggressively to reduce costs and improve efficiency

Different Sourcing Models

In-sourcing / Shared Services: Sourcing from internal sources or from an affiliated firm in the home economy Onshore Outsourcing: Sourcing from a non-affiliated firm in the home economy Captive Offshoring: Sourcing from an affiliated firm located abroad Offshore Outsourcing: Sourcing from a non-affiliated firm located abroad

REGIONAL DYNAMICS ACROSS EUROPE

The following section will describe the regional ITO trends and local dynamics across different European locations.

UK and IRELAND

2005: €17.2B 2010: €25.7B 2005-2010 CAGR: 8.3% ITO drivers: Improve IT quality for end users, speed/flexibility, access to technical skills, cost reduction Inhibitors: Loss of control, lack of trust, security/privacy, IP

Key trends:

• Most mature market in Europe with wider number of mega deals (public sector) • Deal sophistication, including government. Increasing interest in new pricing schemes, business enhancement and shared services • More selective sourcing and global delivery • Areas such as Scotland and Ireland feeling pressure of Indian and Eastern European operations • Wide potential for application engagements to mature from project engagements into outsourcing based engagements Despite being the largest and most mature market in Europe, the U.K. remains also one of the fast-growing ones. Here organizations seem to have moved away from the equation of “outsourcing = cost reduction.” While cost remains a key component, other objectives seem more important, such as improving IT service delivery, gaining specific skills, especially for application outsourcing deals, and becoming a more flexible organization. (See Appendix F) Inhibitions remain related to a general lack of trust in the ability to join forces with the providers to manage security, control over IT operations and IP. The U.K. market is characterized by a large number of mega deals, especially in the public sector. These outsourcing deals often include initiatives that have classically been carried out through project engagements and now are increasingly being performed in the initial phases of an IT outsourcing or BPO deal. This change reflects the growing desire of customers for a tighter link between investment and results (for which the outsourcer is responsible during the duration of the contract) and the important shift in role for the internal IT department. Rather than focusing on assembling and managing all of the necessary skills and capabilities to meet a certain objective, IT organizations, in this scenario, are responsible for coordinating the objectives of the Business Unit and the internal and external providers engaged to support them. Often infrastructure outsourcing is at the core of these complex relationships. At the same time, the U.K. is also the largest market in terms of adoption of IT services delivered through a network of global delivery capabilities (which include nearshore and offshore locations). From this point of view, areas that used to be considered as low cost for outsourcing operations (Scotland and Ireland) continue to feel the pressure of Indian and Eastern European capabilities. Finally, organizations that have engaged for a long period of time in project-based application deals are planning to elevate them into more-strategic, long-term application management engagements. This will allow them to gain a longer-term commitment from the service provider and the relevant support to re-evaluate their application portfolio.

NORDIC COUNTRIES

2005: €5.2B 2010: €7.6B 2005-2010 CAGR: 8.2% Drivers: Cost reduction, access to technical skills (especially in application outsourcing engagements), support in global operations, focus on core business Inhibitors: Loss of control, security/privacy, lack of trust

Key trends:

• Nordic market generally mature. Many large deals are in second or third generation. Some likely to evolve toward multi sourcing • Large corporations see global delivery as a viable option. SMBs see nearshore option more favorably • Consolidation drives specialization by geography, vertical market or horizontal service • Increased competition between regional and global ESPs • Cultural affinity seen as crucial to guarantee deal success/longevity Each of the four country markets that compose the Nordic region has its own distinct characteristics and buying behaviors in IT services. However, if we look at the forecast growth between 2005 and 2010, we expect the region to grow at a similar speed (despite size differences) of about 8%. Denmark: Sometimes seen as the “entry point” for the global service providers to the Nordics. Expected growth is from €856 million in 2005 to €1.2 billion in 2010 (CAGR of 7.8%). Finland: Unique in the Nordic region as buyers focus much more on business value of an outsourcing deal rather than just cost. Expected growth is from €1 billion in 2005 to €1.45 billion in 2010 (CAGR of 7.5%) Norway: Remains the smallest outsourcing market in the region. Expected growth is from €1.2 billion in 2005 to €1.8 billion in 2010 (CAGR of 8.1%) Sweden: Largest market and very cost-competitive. Probably the Nordic country targeted most by offshore providers currently. Expected growth is from €2 billion in 2005 to €3.1 billion in 2010 (CGR of 8.7%) From a client perspective, the Nordic region market is generally mature, with many large corporations in second- or third-generation outsourcing deals. Global delivery is widely accepted as an option. Competition between regional providers and global providers is increasing; this was initiated by the inability of local providers to support the operations of key Nordic organizations around the globe. However, recent acquisitions and divestitures by both local and international providers prove that the market has still got room for further maturation and consolidation.

NETHERLANDS

2005: €3.4B 2010:€5B 2005-2010 CAGR: 8% Drivers: Cost reduction above all, agility/flexibility, improving service to end users Inhibitors: Loss of IP and control, security/privacy, high cost

Key trends:

• Market shows mixed signs of maturity (organizations accept global delivery) and immaturity (sourcing strategy is often neglected) • Market split between large global corporations and wide portion of SMBs • Increased competition for local/national champions • Application under scrutiny for externalization The market in the Netherlands is one of the more modern IT outsourcing environments in Europe, closely following the U.K. in many trends. A focus on global delivery and the expansion of many deals into the application or business process layer points to more market maturity. This maturity is driven primarily by the relatively high proportion of large (and often multinational) enterprises headquartered in the Netherlands and competing in major markets such as financial services. But there are some contradictory characteristics that point to an immature market (cost cutting is by far the major driver, and sourcing strategy is often neglected); this, as a consequence, often inhibits the potential success of outsourcing initiatives. The market remains very challenging and competitive. This is due to the high presence of small and midsize businesses (SMBs), which traditionally tend to consider outsourcing as a threat more than an opportunity and require a higher level of customization, which tests the profitability model of service providers. Competition remains strong for national champions as global and offshore providers continue to target opportunities in the country. Increasingly, application outsourcing opportunities are emerging as organizations look at portfolio rationalization, legacy system transformation, and custom application software development initiatives and accessing application utility solutions.

FRANCE

2005: €6.6B 2010: €10B CAGR: 8.4 % Drivers: Cost reduction, refocus internal IT, speed/flexibility Inhibitors: Loss of control, lack of trust, security/privacy

Key trends:

• Beyond its reliance on staff augmentation, France’s outsourcing market shows opportunities in all facets of outsourcing: infrastructure, applications and BPO • Selective outsourcing has gained acceptance, and organizations show cautious interest in global service delivery • National champions remain under competitive pressure from the global and multinational providers France has long been considered behind in the outsourcing trend. Now, however, the French outsourcing market is consolidating and growing, while the long-standing reliance on staff augmentation is losing strength. The major driver that will support a CAGR of over 8% between 2005 and 2010 is the need for French organizations to reduce cost and enhance their level of competitiveness in the market by refocusing their internal IT skills on more-strategic tasks while gaining flexibility. On the other side, it is interesting to see that challenges related to HR management have lost strength, compared with the traditional fears related to loss of control and security and lack of trust. Large organizations have recently moved toward the adoption of selective outsourcing with multiple providers. This model has gained acceptance as organizations look at maximizing the balance between cost and service delivery excellence. There is also a new focus on application outsourcing. This trend is important not only because it signals an acceleration in the growth of outsourcing in France overall, but because it signals a major change in the way French organizations use different kinds of IT services. Increase in application outsourcing deals also touches on one of the major taboos of IT services in France: offshore outsourcing. As such, although offshore remains a word to be used with extra care in the French market, many organizations would consider that access to global delivery models is an appealing part of outsourcing, especially when delivered by traditional players. In this case, North Africa (Morocco, for example) is emerging as a viable near shore location. National champions, the providers that focus on a specific region or country, remain under competitive pressure from the global and multinational providers.

GERMANY

2005: €10.6B 2010: €16B 2005-2010 CAGR: 8.6% Drivers: Cost reduction above all, focus on core business, refocus internal IT Inhibitors: Security/privacy, lack of trust, loss of control

Key trends:

• Global economic pressures have forced many organizations to look at outsourcing as a viable option • In the short term, objectives such as flexibility and agility are secondary • Pressure to divest internal IT departments or internal shared service organizations remains strong • Global delivery gaining ground especially toward Eastern Europe • Intensifying competition between strong German players and global ones • Legacy system modernization will remain a key objective The German market is “federated” in several ways: government responsibilities, industrial centers, buying centers within enterprises, and management structures in place. All of this makes doing business in Germany (and negotiating significant IT service deals) unique. Decision processes tend to be longer, require more consensus building and often entail more travel than in other parts of Europe. For a long time, the majority of German organizations have considered IT operations as a key component to maintain or enhance their level of competitiveness in the market. This has, as a consequence, slowed the outsourcing growth. In the past two years, however, economic pressures have forced many organizations to look at outsourcing tactically to cut cost. While in the short term, achieving flexibility is a secondary objective, organizations look at outsourcing as a way to refocus their internal capabilities while focusing on their core business. The traditional inhibitors around security, trust and loss of control apply. While non-German external service providers (ESPs) still find it difficult to position themselves in Germany (exceptions are IBM Germany, which established itself early on as a “German” ESP, and HP, based on its early SAP hosting business and penetration as a technology provider), German providers maintain strong domestic positions and are starting to focus on expanding their international presence (through T-Systems). In the short term, German organizations will still consider selling their own IT capabilities, while global providers will see these as viable targets to build capabilities as long as they provide financial support through a long-term outsourcing deal. Finally, beyond potential healthy growth for ERP application outsourcing initiatives (especially SAP), as many organizations look at legacy system modernization, it is likely that many projects will evolve and deploy model to include the long-term management of applications.

EASTERN EUROPE

2005: €1.1B 2010: €1.6B 2005-2010 CAGR: 7.9% Drivers: Acquisitions made by large Western European organizations, increased competition, need to revamp obsolete IT environments (leap-frog) Inhibitors: Low expertise to manage OS deals, high cost of OS, loss of control

Key trends:

• Slow internal consumption of outsourcing • Key nearshore delivery hub for providers supporting operations of European organizations • Local Eastern European service providers will remain target for acquisitions • Long-term growth will be supported by increasing competition, acquisitions made by Western companies and the penetration of Western ESPs in the region • The region has become a strong global delivery hub Recent admission to the European Union has transformed countries such as Poland, Romania and the Czech Republic into attractive locations to establish global delivery capabilities designed to deliver IT services to European or global customers. Eastern Europe has been identified as an ideal region to establish a service delivery hub by U.S.-based providers (IBM, Accenture and EDS), European ones (Atos Origin, Capgemini, T-Systems, SIS and S&T) and offshore ones (Ness, TCS, Satyam, Infosys and Wipro). When necessary, providers are openly seeking acquisitions to gain scale; it is the case for SIS, which acquired ELAS, HT Computers in Slovakia, and Ibis-Sys in Serbia (February 2005). Others, like Austrian-based S&T, are pursuing a strategy of becoming the provider of choice in Eastern Europe through a combination of organic development and local acquisitions. S&T acquired Computacenter Austria to strengthen its product resale capabilities. Although internal consumption of outsourcing has been slow, it is expected to grow rapidly, thanks to increasing competition driven by the fact that private-sector companies and public-sector organizations are now focusing on bringing their systems into line with market standards. This is leading to some “leapfrogging” effects — the IT utility approach, for example, holds significant appeal without posing the same transition challenges as elsewhere — but because these markets are fairly immature, there is still a strong focus on products and product support services rather than more-sophisticated IT service engagements. Italy and Spain are two other major countries with an expected ITO market size of about 5 Billion $ each by the year 2010.

GLOBAL DELIVERY MODEL

GDM is a unique approach to outsourcing and off shoring, which offers the best of both worlds by blending onsite, onshore and offshore resources and locations. By using a far-reaching network of onsite, onshore, and offshore resources, GDM aims to cuts across geographies to access the right resources, in the right place, at the right cost. By selecting the most advantageous and cost effective proportion of resources worldwide, Global Delivery Model boosts business performance while also lowering costs. It also helps the supplier deliver requirements that are met on-time, within budget, and with high quality; greater efficiency and responsiveness to their clients. In this section we would discuss in detail, the key drivers to a successful GDM. Source: Capgemini, 2008

KEY DRIVERS OF A SUCCESSFUL GDM

STRONG PROCESSES

Strong processes are the backbone of a successful Global Delivery Model. There is a strong need for detailed, documented and time-tested processes for all the activities and interfaces. * Strong quality and project management processes ensure delivery excellence. * World class processes for knowledge management and sharing resources encourage improved learning among teams. * Processes for managing talent ensure that the projects get the best and most motivated people. * Strong processes for interaction and communication within team make it possible for globally distributed groups to interface and collaborate in an effective manner while delivering excellence on a continuous basis. On the other hand, processes, while strong, should leave ample space for creativity and flexibility. It is only then that the Global Delivery Model (GDM) can create far more value than the traditional sourcing models. Here is what it will translate into: * Quicker, seamless transitions, and early project ownership * Optimum onsite/ offshore mixes through intelligent allocation of the available resources * High degree of predictability through processes, sharing and reuse * A strong relationship approach to ensure continuity and business focus * Sharing of best practices and tools across the enterprise * Depth and quality of resources, continuously trained and retrained to suit project needs * Adherence to SLA based pricing models to ensure good Return on Investment (ROI) and drive customer satisfaction

PROCESS ARCHITECTURE

Companies rely on processes to consistently deliver high quality solutions while executing a number of engagements from multiple locations. According to the policies adopted by a leading IT services provider: values, vision and policies should form the first level of the three-tiered process architecture. These are then implemented through process execution at the next level. These processes are defined with clear ownership and clearly defined roles and responsibilities.

Quality System Documentation

Quality System Documentation defines clearly all the processes that should be put into place. These documents provide the engineers and consultations with a vast repository of detailed procedures, templates, standards, guidelines and checklists. The comprehensiveness of these documents supports all tasks from higher-level information abstraction and definition to tasks such as coding and documentation. This is crucial to assure clients with the delivery of high quality and predictable IT solutions that meet their business needs. These documents should also be monitored and updated regularly.

Knowledge Sharing

Employees are given a forum like a website portal, to share knowledge gained from their experience at the organization. It is meant to be a central repository of the knowledge that can be tapped by peers and as sometimes external clients as well. The collection of documents on this portal is reviewed and classified into different areas: * Software development life-cycle activities such as requirements specification, design, build and testing documentation. * Software-related topics such as tools and quality documentation. * Topics of general or operational interest such as travel or HR policies, etc.

Process Assets

This is a repository to facilitate sharing and giving out of “engagement learning” across the organization. The user has the facility to submit to the repository, retrieve from the repository and obtain information on the status of the repository. A process asset can be any information ranging from an engagement, which can be re-used by future engagements. Typically these include project plans, configuration management plans, requirements documents, standards, checklists, design documents, test plans, causal analysis reports and utilities used in the engagement, etc.

Process Database

The Process Database is a software engineering database to study the processes at the organization with respect to productivity and quality. More specifically, its purpose areas are as follows: * To aid estimation of effort and project defects * To get the productivity and quality data on different types of projects * To aid in creating of a process capability baseline

Process Capability Baseline (PCB)

Process Capability baseline is used to specify, what the performance of the process is, i.e. what a project can expect when following the process. This estimation is done based on the past data. The performance factors of the process are mainly those that relate to quality and productivity. Process baseline defines the productivity, quality, effort distribution, defect distributions, defect injection rate, cost of quality etc. Using the PCB, a project can predict, the effort that will be needed for various stages of the project, the defect densities likely to be observed during various defect detection cycles and quality and productivity for the complete project.

Tools Repository

The list of tools that have been evaluated and judged “probably useful” for future use are stored in a centralized repository called Tools Repository. There is a coordination group which maintains the versioning f these tools and is the point of contact for information on these tools. The group’s objectives are as follows: * Standardization of tools usage * Ensure evaluated technologies are transferred into normal practice across the whole organization * Identify and evaluate new technologies on a continuous basis to determine their benefits.

PROJECT MANAGEMENT

The project management processes are aided by practices in line with the CMMI Level 5. These processes address every key aspect of a project across the project life cycle, including: * Project planning * Project monitoring, reporting procedure and review mechanisms * Project risk management * Configuration management * Change management * Issue escalation and resolution * Communication with client managers These processes form the basis that binds the Global Delivery Model (GDM) together. At the outset of every project engagement, management should ensure robust project planning and estimation processes delineating all aspects of the project, including: * Project profile * Project processes related to project life-cycle, change management, requirements traceability, process tailoring, etc. * Deliverables and effort estimation * Goals and milestones for the project * Project tracking: client feedback, reviews, reporting, escalation, tasks, issues, quality * Defect estimates and prevention * Project team roles, skills, key personnel, training * Risks foresight and risk mitigation plan Project management and project quality processes should be strengthened by the use of a variety of custom-built as well as third party tools, which can help a provider manage the complexities of the GDM.

Capability Maturity Model (CMMI)

CMMI is an internationally recognized standard for measuring the maturity of an organization’s software development processes and has become the primary benchmark multinational corporations use to judge offshore service providers’ abilities to deliver high quality software. CMMI was developed under the guidance of the Software Engineering Institute (SEI) of Carnegie Mellon University in the U.S. (www.sei.cmu.org). It is organized into five maturity levels with CMMI Level 5 being the highest. By operating CMMI level 5, customers’ benefit from the providers ability to consistently deliver high quality software on schedule, which ultimately results in a lower total cost of software ownership due to less rework and easier maintenance. Most of the big IT providers and the Indian providers are CMMI Level 5.

GLOBAL DELIVERY MODEL & SERVICE DELIVERY MODEL: GDM TOOLS

The practice of GDM is bolstered by the use of robust tools. These tools helps providers keep some of the largest and most complex projects well on track. At the heart of the Project Management toolset are the Project Management (PM) tool and the Process database. A range of general purpose and specialized tools are integrated into these systems, this helps to automate number of tasks. These tools help in controlling a project, avoiding defects and slippages and help the provider in becoming more proactive. * Tools that monitor projects to track defects and benchmark them against earlier estimates * Tools for scoping, requirements gathering and impact analysis * Tools to monitor efforts, schedule adherence and task slippages * Process assets systems and tools to efficiently store and manage project documents and data * Specialized tools to track individual service projects like application maintenance * Tools to monitor automatic scheduling of audits based on detailed project guidelines, followed by tracking of audit results, non-conformance reports, and corrective actions * Tools to automate the workflow for senior management reviews, in line with engagement schedules and decided plans Delivering Quality to the client is of utmost importance in every aspect of the engagement. The next section describes what Quality means within the Global Delivery Model (GDM).

QUALITY PROCESS & METHODOLIGIES – with a focus on CMM Level 5

A commitment to quality underpins all IT projects and services. A lot of emphasis is given by providers to ensure that the IT services they deliver should not only meet but surpass client’s expectations. Quality should be a way of life, and it should cover all processes, interfaces and outputs, in management, core and support process. It is this way organizations can deliver long term excellence, with predictability of returns, through the use of Global Delivery Model (GDM). Organizations benchmark themselves against international quality standards, like ISO 9000, CMM and recently, the Malcolm Baldrige framework. In addition, they use techniques like the Six Sigma Cross Functional Process Mapping (CFPM) methodologies (from Motorola University) to facilitate their process improvement. A number of quality tracking methodologies, tools, and processes are being put in place to ensure superior quality products and service to clients in each engagement and also across engagements, at each relationship level. These quality tracking methodologies are discussed below, and are classified based on the client objectives addressed using specific quality programs, tools, and systems: * Relationship Management and Governance * Software and Service Quality * Operations * Solution and End-User Focus * Resourcing Effectiveness

KNOWLEDGE MANAGEMENT FRAMEWORK AND SERVICES

It is interesting to note that, beyond all the technology-driven hype lays the greatest untapped resource of the last two decades – Knowledge. With the increasing growth of interest in knowledge management services, many different knowledge management frameworks have been put into place. These frameworks grow on the reputation of the organizations that initially created them, and the depths of experience they offer. Knowledge Management is a means of creating, storing, accessing and reusing knowledge to accomplish the organization goals. Providers work with their clients to build the appropriate knowledge management frameworks and processes, as well as identify technology solutions for establishing sound Knowledge Management processes and systems. Providers provides end-to-end workforce collaboration and knowledge management services including Knowledge Management Process Consulting, Collaboration and Knowledge Management Applications, Portals, Content Management, Document Management Services, Enterprise Application Integration, Security and Process Workflow. Knowledge Management Services can help clients assess their needs, evaluate technologies and recommend best-fit solutions in the context of the prevailing business problem. Within a relationship, knowledge management processes operate at three levels:

Project Level:

Teams have a project coordinator for each project, and specific knowledge management related goals within these projects. Periodic project reviews cover project management as well.

Account Level:

Every client account has a knowledge management roadmap drawn out for the client deepening on the client’s specific needs. Knowledge sharing is improved by a range of methods such as orientation training programs, online discussion boards and collaborative environments and sharing within projects. Also, a number of client-provider presentations and seminars foster knowledge sharing within client and provider teams in an account.

Organization Level:

The organization should also hold a good knowledge sharing platform, an organization-wide Knowledge Repository portal, on an intranet. An organization-wide knowledge sharing ensures that the teams have constant access to best practices and the collected learning by working with the world’s best organizations.

OFFSHORE DEVELOPMENT CENTRE

An Offshore Development Centre (ODC) is essentially a dedicated intermix of specialized programming and engineering resources. Global Offshore Development Centres are instrumental in delivering faster, higher-quality services with less risk and more predictability. Irrespective of the operating location of the Business, Global Delivery Model provides an enterprise with access to proven methods, leading-edge tools and platform specific architectures, all managed by highly skilled and flexible professionals. Offshore Development Centres acts as a virtual extension of the clients development teams present on another geographical location. With sustained infrastructure investments over the years, several organizations have created knowledge and networked work environment from where their employees can provide high quality solutions to clients. These investments enhance employee productivity and reduce engagement risk for the clients. Global Offshore Development Centre, with the collaboration of well designed infrastructure, highly skilled and trained resources, proven and time tested processes is a doubly beneficial outsourcing delivery model with a powerful value proposition for businesses looking at IT Outsourcing. This network is a remarkable mixture of strategy and delivery, a proactive partner, and a unified team of highly skilled and experienced professionals, continuously working to provide high performance solutions in every part of the world. The fact that multi-disciplinary teams in each centre all work the same way across locations following a standard blueprint enables fast, seamless collaboration and continuous innovation no matter where the client is. This approach opens up new options for organizations needing to fuel organization growth while reducing costs. Clients can: * Draw upon resources from around the globe for better time-to-market and lower costs. * Benefit from economies of scale and distributed workloads when they outsource critical business or IT functions. * Reduce business risk and enhance business value by leveraging industry best practices embedded in the provider’s standardized methods, tools and architectures. Offshore Development Centres are strategically located wherever organizations can tap an expansive pool of talented workers, and wherever the clients need specific language skills and geographic proximity to key global or regional markets. The choice of ODC sourcing locations are discussed in further detail in forthcoming sections of the report. Global Delivery Model helps ensure that clients can harness the power of globalization to achieve the competitive advantage needed to win in today’s flat world.

RISK MITIGATION

In wake of increased business complexity and increased industry competition, every business is wary of the risks associated with their Business. Global Delivery Model (GDM) has mature business continuity planning built into it. A detailed plan for risk identification, monitoring and mitigation is put together as part of detailed project planning. This plan covers risk identification, prioritization and mitigation of risks. Risk mitigation tasks are executed during the project and risks are monitored and re-evaluated at regular intervals. The status of risks is continuously tracked, and reviewed using the monthly milestone Reporting mechanism. Business continuity plans have a comprehensive focus on infrastructure and security redundancies:

Infrastructure Focus

* Well-defined Business Continuity and Disaster Recovery Plans at organization and client level are looked into * Global de-risked development centers, by setting up GDCs in geographically spread out locations * State-of-the-art fail safe network connectivity with multiple fall-back options * Interoperability to ensure seamless relocation of project * Locations far away from potentially conflict-ridden zones

Security Focus

* Stringent physical security and network security * Secure Human Resources practices * Regular external audits to ensure compliance of standards

Confidentiality and Privacy Focus

* Access restrictions and controls of all Information Assets, strict adherence to client confidentiality agreements * Project dependent security measures including physical isolation of projects, if needed * Legal agreements with employees to ensure compliance * Agreements under relevant jurisdiction for the client * Regular monitoring and updating, if necessary of the compliance measures put in place

People Focus

* Keep redundancies for key project personnel * Back-up of project artefacts and experiential repositories

CULTURAL SENSITIVITIES

Organizations should have an effective process to help you cope with the cultural issues in a transition to the Global Delivery Model. Processes should be set into place, which should facilitate smooth functioning of cross-partner teams. It’s important to promote better understanding of work culture differences, awareness and appreciation of different cultural backgrounds. The organizational impact of offshore and near shore development centres leaves a mark on process orientation, collaborative working styles and project management. Organizations should conduct extensive cross-cultural training of its staff: * cultural acclimatization * client business and organization overview * technical environment and processes specific to the client * creating non-intrusive interactions for the client Providers should adopt a Communicative Approach for strategic partners, by which they should help their partners and the client staff to: * Understand the offshoring process * Understand their offshore partner * Collaboratively improve project management skills * Make strategy for continuous process improvement.

INDIA AS AN OFFSHORE LOCATION

The below shows a Global landscape of off shoring capabilities of various destinations. One axis shows “Cost of Labor” and the other depicts “Access to Qualified Talent”. The graph clearly shows that India provides a very low cost of labor while providing a very high quality access to Talent. This gives India an advantageous position vis-à-vis the competition.

GLOBAL LANDSCAPE OF OFFSHORE DESTINATION CAPABILITIES

Note: Shading of circles indicates degree to which high skilled work is currently off shored to the specific country Cost of labor does not include all the operational costs involved in off shoring Source: Duke University / Booz Allen Offshoring Research Network 2006 Survey India as an offshore location is way ahead of competition. But at the same time India is facing an increased competition from some other alternate offshore locations (As displayed in the table below) Offshore IT services market size for low-cost locations Source: Merill Lynch, 2005 Both U.S. and European firms prefer India as an offshore location 70% of the imports for United States in offshore IT services are sourced from India 93% of the UK firms, already working with offshore providers, use Indian vendors 66% of European companies already using offshore have their offshore providers in India However, India will face increased competition from other emerging offshore locations: Canada and Eastern Europe are emerging as a near shore option and showing strong growth China is showing a substantial growth with the availability of large labor pool at low costs but rates poorly with respect to the quality of delivery Other emerging markets such as the Philippines and Mexico offer an alternate low cost offshore option and have made some headway during the past year. India has an IT workforce of more than 1 Million strong people

India Market: Availability of employees (‘000)

2006 2007e 2008e 2009e Strength in IT 455.0 591.5 769.0 999.6 Strength in ITES 452.4 588.1 764.6 993.9 Strength in Captives 384.0 460.8 553.0 663.6 Total Strength 1,291.4 1,640.4 2,086.6 2,657.1 Additional required in IT 105.0 136.5 177.5 230.7 Additional required in ITES 104.4 135.7 176.4 229.4 Additional required in Captives 64.0 76.8 92.2 110.6 Total additions required 273.4 349.0 446.1 570.7 Supply of IT graduates 350.0 385.0 423.5 465.9 Non-IT graduates 100.0 105.0 110.3 115.8 Total Supply 450.0 490.0 533.8 581.7 Supply excess 176.6 141.0 87.7 11.0 Source: Merill Lynch, 2007 Source: Merill Lynch, 2007 The graph above depicts that in spite of the ever increasing demand of Indian IT professionals, there will be still be an excess in Supply of IT resources. India will continue to provide the lowest cost IT Labor. (Depicted in Appendix A)

SOURCING OPTIONS FOR EUROPE

Source: IDC, 2004 The basis for the picture presented in can be summarized as follows: * U.K. organizations (large enterprises and the mid market) are predominantly sourcing from India) * The Nordic countries show a preference for Russian and Baltic State resources, largely based on historical/cultural reasons * The Netherlands is using both Indian and Eastern European near shore/offshore resources * Germany turns to Russia and Eastern Europe, again for historical/cultural reasons plus the fact that German is widely spoken * France turns to Northern Africa (Morocco, Algeria, Tunisia) and Romania (language skills) India has the highest OSP activity. The country accounts for 88% of all services, while Eastern Europe and Russia (including Baltic countries) represent less than 11%. Other countries account for less than 1%. These splits are shown below. China as an offshore location for Western European organizations remains a question mark. So far, no OSPs have emerged to make a significant impact in the Western European market. Source: IDC 2004 The below shows breaks down offshore specialist IT services spending by service type and changes in these splits between 2003 and 2008. Source: IDC 2004

SELECTING THE RIGHT ONSHORE/ OFFSHORE MIX

Onshoring / offshoring ratio is a function of project size, duration, and volume as well as project complexity. Source : Capgemini, 2007 From the above table we can very well understand, what kind of projects can be best off shored and in what percentages are such projects usually offshore successfully. Discussed below are the Offshore/Onshore ratios for different activities in a typical Application Development Project. Source: Bitkom (2005)

CAPGEMINI’S DISTRIBUTED DELIVERY FRAMEWORK

Capgemini follows a distributed delivery framework, which helps it to deliver successfully complex IT project across geographies. Source: Capgemini, 2007 Front and Back office work together to meet client’s requirement

Distributed Delivery

Distributed Delivery refers to engagements delivered using multiple widely distributed teams for various parts of the delivery lifecycle. Specifically this distribution is assumed to incorporate a Front Office, (normally the prime contractor in the delivery), and a Back Office such as a near-shore or offshore facility. Rightshore® relies on a network of industrialized near-shore and offshore centers. This is a unique option for clients who want to balance on-site work with near-shore and offshore capabilities. Rightshore® means having the right resource, at the right place, at the right time for a reduced Total Cost of Ownership (TCO). Source: Capgemini, 2007 Capgemini: A Tier 1 player regarding Offshore Capabilities Source: Capgemini, 2007 Capgemini is strong in both Application Management and IT Infrastructure Management Services Capgemini boosts of successful delivery of several large IT projects based on its Rightshore® model Source: Capgemini, 2007

ELEMENTS NEEDED FOR A SUCCESSFUL DELIVERY

§ Combined project teams § Open communication § Knowledge transfer § Trust and mutual respect § Responsiveness § Explicit risk sharing Capgemini draws its global resources, cost-efficient processes and extensive experience in diverse geographies, disciplines and industries to deliver: * Reduce costs: Save up to 40% on IT costs and improve your bottom line by leveraging the right balance of locations * Streamlined processes: Improve productivity and reduce operating costs by implementing agile, efficient processes. * Innovation: Free your energies from IT and focus on innovating and transforming your business. * Competitive advantage: Stay ahead of the curve with solutions that employ the latest technology to improve quality in delivery. * Growth: Implement solutions that increase productivity and help you expand your business. “It’s the combination of flexibility, the right competencies, the blend of onshore and offshore resources and cost savings that make Rightshore® such an attractive proposition.” – Stefan Fransson, CIO

FUTURE OF THE EUROPEAN OUTSOURCING INDUSTRY

Current Competitive Landscape – Europe

Source: Gartner IT Outsourcing, Europe 2007 The European outsourcing market remains overcrowded and highly competitive. While “national champions” and Europe-based service providers continue to face a tough competition from leading global providers, they also face a growing threat from leading offshore providers focusing on expanding their European coverage. As a consequence, consolidation among the European IT outsourcing market is set to continue, and customers must be aware that the impact of this consolidation process on their well-known providers and their established contracts could be significant. In this competitive market, where the predominance of achieving profitability rather than market share has consolidated, providers will be expected to maintain a high level of scrutiny on their geographical and portfolio reach. A prompt divestiture of unprofitable or no strategic operations will be a key requirement to survive in the market. In the meantime, as many providers continue to pursue necessary restructuring programs, financial investors will discover that this presents an opportunity to make money.

CONCLUSION

This section presents a brief discussion on the current situation and the opportunities and challenges faced by Indian and European IT Service providers. Approximately 61 percent of the Indian IT sector’s revenue comes from U.S. clients. For the top five India players who account for 46 percent of the IT industry’s revenues, the revenue contribution from U.S. clients is approximately 58 percent. The current slowdown in the U.S. economy has made IT suppliers shift their focus from US to Europe. An Everest Research Institute’s recent study says that the present crisis along with the coming to age of market models for infrastructure outsourcing, and Indian supplier’s moving up the ADM value chain (like package implementations and consulting services) will have a deep impact on M&A activity in the Indo-European ITO sector. These M&A will also help the Indian suppliers in building up a Global brand while strengthening their Global Delivery capabilities. These providers have recently opened up new subsidiaries in Eastern Europe, thus hoping to quash any fears that potential west European customers might have of the outsourcing of IT services. IT companies like Atos Origin, Capgemini, Logicia CMG, Sopra Group have traditionally been the major players in the Continental European ITO market. These companies have stayed competitive on that promise that they offer better services because they understand their customer better than any other non-European firm. But things are changing fast; these firms are now facing a big challenge due to the increasing acceptance of Low cost Indian/ Global IT suppliers in Europe. Global players like IBM, Accenture, HP, etc have already established a strong base in offshore locations like India and are offering a much better value propositions as compared to their European counterparts. Some of the European companies are evolving rapidly to meet up to this new challenge. To sight an example, Capgemini has recently announced its plans to double its India headcount to 40,000 by 2010. Capgemini wants to position itself as the first European ITO firm which is truly global and which is capable offering end-to-end solutions to its clients while offering the best quality for a competitive price. An advertising campaign at Capgemini, rightly says; “Righshore is not an option, it’s a necessity”

References

DOCUMENTS “Gartner on Outsourcing, 2006-2007,” By Lorrie Scardino, Kurt Potter, Allie Young, Lisa Stone, Claudio Da Rold, Helen Huntley, Cassio Dreyfuss, Jim Longwood, Gianluca Tramacere and William Maurer “Predicts 2007: IT Outsourcing Starts to Break From Tradition,” By Richard T. Matlus, Kurt Potter, Laura McLellan, Thomas J. Bittman and Claudio Da Rold “Outsourcing Europe: Forecast Database,” 2006. By Gianluca Tramacere, Robert De Souza and Cathy Tornbohm “Sourcing in Europe in 2010: Challenge Your Assumptions,” 2006. By Claudio Da Rold, Gianluca Tramacere, Lorrie Scardino, Cathy Tornbohm, Roger A. Cox and Ian Marriott Duke University / Booz Allen Offshoring Research Network 2006 Survey IDC and Nasscom strategic review 2008 SHRM Research “Workplace Visions”, 2006 PAC. Le March© Français de l’infog©rance, 2006 Gartner IT Outsourcing, Europe 2007 Duke University / Booz Allen Offshoring Research Network 2006 Survey Capgemini Internal Documents and Presentations Annual reports: Capgemini, IBM, Accenture, Infosys, TCS and Wipro.

WEBSITES

https://www.capgemini.com/ https://www.tpi.net/ https://www.globalbda.com/ https://dealarchitect.typepad.com/ https://searchcio.techtarget.com/ https://www.domain-b.com/

APPENDIX

Appendix A

GLOBAL LANDSCAPE OF OFFSHORE DESTINATION CAPABILITIES

The below shows a comparison between the average salary of an IT resource in the year 2005 and 2010. Source: Neo IT, 2006

APPENDIX B

IT SPENDING AND OFFSHOIRNG IN FRANCE

Source: PAC. Le March© Français de l’infog©rance, 2006 • The market is growing rapidly in size • New Services offerings are constantly being created • Innovative delivery models with global perspectives are crucial for success

APPENDIX C

COMPOSITE OFFSHORING “ATTRACTIVENESS” SCORES BY COUNTRIES

India is 80 % and will remain the bulk of the offshore market Composite Offshoring “Attractiveness” Scores by Country – ITO Source: SHRM Research “Workplace Visions”, 2006 India with a strong currency, a sustained economic growth rate of 9%, controlled inflation and stable political system has established itself as an IT delivery centre with stable cost base. India with a sound education system provides an unparalleled source of IT talent. India with its highly quality conscious culture and sound communication infrastructure provides a strong case for long-term attractiveness from an IT delivery perspective.

APPENDIX D

CAPGEMINI GROUP: A SNAPSHOT

Shown below is the revenue breakup by discipline across the Capgemini Group. Source: Capgemini, 2008

APPENDIX E

QUALITY PROCESSES AT CAPGEMINI Source: Capgemini, 2008

APPENDIX F

PERCEIVED VALUE OF OFFSHORE

A survey done by Forrester in the year 2006 shows that the perceived value of offshore goes well beyond cost “How would you compare offshore providers with large US services firms on each of the following attributes?” Base: 44 firms using offshore providers Source: Forrester, 2006

APPENDIX G

OFFSHORE PERCEPTION IN EUROPEAN COUNTRIES

Another survey done by Forrester in 2006 shows that, continental European companies have some reservations due to geopolitical, regulative and cultural challenges of off shoring. Source: AT Kearney

APPENDIX H

GARTNER FORECAST ON THE FUTURE OF THE OFFSHORING INDUSTRY

Gartner forecasts that as labour arbitrage fades away, it will be replaced by productivity gains and synergies Source: Gartner

APPENDIX I

GLOSSARY

Term Definition ASP Application Service Provider BPO Business process outsourcing BPU Business process utilities CFPM Cross Functional Process Mapping CMMI Capability Maturity Model ERP Enterprise resource planning EMEA Europe, the Middle East and Africa GDM Global Delivery Model ICT Information Communication Technology IT Information Technology IU Infrastructure Utility M&A Merger and Acquisitions ODC Offshore Development Center PCB Process Capability Baseline PM Project Management SaaS Software as a service SMBs Small and Midsize Businesses SEI Software Engineering Institute SWOT Strength, Weakness, Opportunity, Threats TCO Total Cost of Ownership TCS Tata Consultancy Services

Intensification of Globalization and Advancements in Economies Essay

The intensification of globalization and the enhancements in the earth of science have not only offered birth to new technologies but have also amplified the consumers’ require for speed. Today, shoppers seek out fast, fewer roomy and simply moveable products. This need together with the escalating innovation in engineering has resulted in the union of the mobile, web and the Computer system. The entire world market place of client electronics follows the free market tradition which signifies tricky levels of competition and buyer sovereignty. In the light of the large level of competition faced by cell mobile phone producers, the strategic system of these kinds of an corporation will have to revolve close to innovation, products differentiation and person-friendly technology. “Strategic arranging is a follow which allows customers of an corporation to envisage its foreseeable future and establish up the needed measures and operations to accomplish that which is wished-for.” (Pfeiffer et al.1986) .Strategic arranging is also “a apply of defining the standards, rationale, picture, procedure, plans and goal of an firm. (Rothwell, 1989) Via the progress method, a authority or company identifies the product it would like to attain by its agenda and the exact way by which it designs to attain these outcomes.” In this procedure an organization not only identifies with its lengthy expression plans but also tries and decides the most effective and most efficient approach that could fulfill its aspirations. Strategic scheduling will help us in answering vital questions these kinds of as the place do we stand at the minute? How did we arrive to this place? In which would we like to be? How will we get there? Are we on the appropriate observe? And in answering these issues we occur to go over the crucial aspects of strategic organizing.

SWOT Evaluation

When discussing exactly where we stand, we are accessing the present-day circumstance of our firm. This includes an audit which analysis interior and exterior elements that impact the efficiency of any organization. This investigation is known as the SWOT analysis which identifies the achievable strengths, weaknesses, opportunities and threats present for the business (the former two staying internal where by as the latter getting exterior). When chatting about strengths, a cell mobile phone manufacturer and retailer has lots of in conditions of marketing and advertising, services method, trustworthiness, top quality, finance, site and an in general good manufacturer impression. As an organization working in a industry which is at the verge of achieving the level of saturation, the provision of fantastic quality consumer care is crucial. An outstanding promoting strategy which assists build a brand image, dependability and manufacturer loyalty are a several strengths which our business enjoys. In the weaknesses just one are unable to enable but include things like the fiscal complications our firm faces in keeping up to day with the most up-to-date equipment and education of the workforce. Good alternatives lie in the department of investigate and growth which will direct to diversification in the solution portfolio. The international field of our merchandise can be placed on the growth aspect of the business cycle. This will permit us to function in more than the couple of international locations we at this time operate in and dig out new utilizes from the cell cell phone. A single of the key threats encompassing our firm is because of to the recent earth economic downturn, which has led to the tumble in the common normal of residing for many and the rise in production costs. An additional danger is that caused by the variations in demographic tendencies and swift changes in preferences and fashion which benefits in solutions and systems starting to be obsolete. The SWOT assessment assists offer a crystal clear reduce picture of in which the firm stands and in which it could be. It is transient nonetheless just one can not neglect the actuality that if it is currently being designed by an worker of the group it might be subject matter to bias.

Situational Investigation

Though analyzing the recent problem of the group, the professionals and strategic planners are in reality listing down and determining the tactics and targets for the organization’s foreseeable future. The business is impacted, not only by inner components but when producing any sort of selection it also will take into account the exterior elements. Situational analysis involves the examine of external variables these as the markets, level of competition, engineering, provider markets, labor markets, they financial system and so forth. Researching the setting on an inner as perfectly as an external level offers the business a fantastic opening to establish with the threats and the opportunities surrounding it. In which we stand now is a result of our planning and commitment in the previous. With the hopes and optimistic aura produced by our achievements, there is also the dread of getting victimized by the paralysis by analyzing. Paralysis by evaluation is that the failure of managers to have out vital selections owing to fixation with meetings, producing stories, and amassing figures for investigation. Paralysis of helpful selection generating in corporations can manifest when there is degree disagreement, disparity amongst distinctive hierarchical ranges, or vague goals. (qfinance.com) This can also consequence from the issue designed by the circumstance at hand or the lack of ability to just take dangers owing to about contemplating and extreme preparing rather than performing. Having said that frequent pressure checks, schooling applications and conferences aid preserve our companies work force intact. Conferences about latest technological tendencies and consumer preferences will also assistance freshen and broaden the look at of our workforce enabling them to innovate and stylize technology.

Eyesight and Mission

When discussing the issue of where our organization wants to be, we come experience to confront with a person of our most big goals, which is to grow to be the primary providers of mobile answers. Less than this component of the approach of strategic setting up we acquire selected objectives for the organization. These are basically aims and targets that the business needs and strives to reach. For us these ambitions can revolve about technologies (greater touch screens, availability of business office software program in our mobile program, simpler and consumer welcoming graphical interface), much better competent workforce, improved trained managers, economical distribution of methods, far better promoting techniques (far more captivation advertisement marketing campaign) and so on and so forth. (enterprise dictionary.com) In this element an group also develops a vision and a mission. A mission statement is “a sentence describing a company’s perform, marketplaces and competitive benefits a limited composed statement of your company plans and philosophies.” (entrepreneurship.com). A mission assertion generally states what the firm stands for, what is the reason of its existence, who are the targeted consumers, the whole merchandise assortment and also the area (geographical) on which the group operates. A eyesight assertion on the other hand is an “inspiring portrayal of what an business would like to achieve or complete in the mid or long run. It is proposed to serve as an clear point for picking existing and potential routes of motion.” (qfinance.com) On the other hand when organizing out the plans, missions and visions a person has to make absolutely sure that they are realistic, time certain, measurable and unique. If they are vague and far from truth, that is they are monetarily or in conditions of managing abilities, unachievable to accomplish then the result is wastage of resources.

Approach and Methods

Future the organization should established its strategy which is the medium it will adopt in the extensive run for the success of the goals that the company has set out for itself. These are generally very carefully assumed of and nicely integrated. A thriving system is 1 that permits the organization to accomplish all of its aspired targets without having going around spending budget. Also a approach is thriving if the effects it creates are of high quality and are valuable in the long run. Several businesses in the hope of improved success, follows a individual tactic of breaking down its objectives into smaller sized targets for different divisions of the get the job done force. Nonetheless there are those (supervisors and supervisors) who apply and preserve a check out on the overall software of the strategies. (tutor2u.internet) Productive conversation varieties portion of the foundation which qualified prospects to the accomplishment of the aims. Thankfully our business has a quite impressive conversation program. Holding standard meetings and conferences can boast up the morale of the workforce as these discussion boards remind them of the particular role that they are playing (clarification of task targets) and how it can help in the era of the bigger picture, which is the over-all managing of the complete firm. This part of the planning approach essentially solutions limited phrase queries like what is to be accomplished? What is the strategy currently being made use of? Who is liable? When is it to be finished? These are typically shorter operate tasks like assortment of figures or development of a database and are normally headed by the head of that individual division. The hierarchal program followed by the business also has a excellent impression on the in general overall performance of the business. The most excellent variety of hierarchy (that our organization ought to also abide by) is the line personnel managed by the lime supervisor who is headed by the head of the department. In this the hole between the upper and the decreased course employees is not that broad. Therefore the morale of the workers is higher and the operate atmosphere is pleasant ensuing in a far more effective and eager get the job done drive.

Keep track of and management

The final part of the treatment phone calls for checking and controlling which revolves all over the act of retaining a examine if the corporation is heading on the suitable observe. It is to make guaranteed that the approaches are doing the job, the spending budget is thoroughly managed, the work power is successful, the assets are getting utilized productively and the professionals have no misplaced monitor of the company’s targets. Acquiring opinions is a excellent way to inquire about the former issues and given that our firm has a really extraordinary interaction procedure gathering feed-back will not be an difficulty. Responses not only assists us inquire about what we want but also assists track down if there is any hindrance in any other part of the organization. Comments can be gathered in the kind of team conversations or just one to 1 talks or even by merely retaining a remark box. An additional extremely critical component that falls in this article is that of shopper feed-back. Conducting a market evaluation will allow for us to ensure that the shoppers have achieved what they wanted and expected from the product. We’ll also learn of the characteristics that they would want a cell cellphone to have and also the difficulties they face in running them. Shopper responses will allow us to go above the make a difference externally. When each interior and external feedbacks have been gathered, the effects of these will be in contrast to the initial objective that was set. Now the firm can measure its general performance and track down the glitches and mismanagement which will then be subject matter to correction. Other means of measuring the efficiency of your organization is via the monetary circumstances and also by means of personnel pleasure ranges. In this component of the technique the supervisors typically appear across with a amount of problems, major and small. When essential by modifying the approach, strategies and methods and by taking corrective motion we will make certain that the firm stays determined on its program in get to fulfill its targets and goals. The success from this year’s plan will be fed in the next and will allow getting a competitive edge. This will make it possible for a excellent flow of information and practical experience. It will lower charges far too, boost effectiveness and allow us to resolve faults as soon as they are detected instead of ready for the end of the business enterprise year. Other styles of analysis that can sort component of your strategic system are the PEST analysis which is the Political, Inexpensive, Sociological and Technological evaluation, STEER assessment which is the Socio-cultural, Technological, Inexpensive, Ecological and Regulatory elements, EPISTEL which is the Ecosystem, Political, Informatics, Social, Technological, Financial and Authorized assessment. Around the a long time there has been substantially improvement in technological know-how. The pace at which science has progressed in the previous 10 years is remarkable and by no means just before had it been so fast and ground breaking in its innovations and discoveries. Today technologies these types of as MMS, GPRS, WAP, GSM, significant resolution cameras are common in pretty much all the mobile phones becoming introduced. This technological breakthrough has impacted most of the strategies and administration practices of most of the organizations primarily those people functioning in the subject of consumer electronics. Engineering modifications the way we do company. Technological know-how has intensified all the things that surrounds the organization from the attractiveness of the marketplace to the electricity of the prospective buyers, strength of the new entrants, concern of improved substitutes, energy of the suppliers and the magnitude of levels of competition. This technological revolution has also magnified the will need for proficient labor. Therefore schooling and conducting workshops has develop into an essential part of every organization’s system. Every single firm attempts to sieve out the finest of the ideal and then dedicates alone to coach the function drive for promising success. A different extremely vital principle that in relevance surpasses all the other folks is that of expense slicing. The buyers want the most current little bit of technologies at a realistic price tag. The world recession has drowned the normal of dwelling for quite a few about the world and consequently to retain up to date with the elevated level of competition in each and every field of lifestyle, the require for reasonably priced engineering has magnified. The best that our organization can hold on the suitable keep track of and at a great pace is by developing consumer welcoming, thorough, affordable and stylish cell phones. Also the branding and internet marketing should be planned out according to the specific marketplaces (in our scenario this is the phase of the small business operating specialists). One more very critical tactic is that of diversifying into the sector. Our corporation can department out into the production of private pcs and laptops to fortify its roots in this enterprise. The only way that the former statements and solutions can be introduced out into follow is as a result of productive administration. Efficient and prepared out management of the methods at hand can lead any businesses to the optimum peaks of good results. A good supervisor guides and supervises for the sake of accomplishment not for the boasting of authority and management, he or she refrains from intervention other than at occasions when deviation is clearly obvious, he or she by no means loses their concentrate from the strategic goals of the company, they allow a cost-free flow of suggestions and make their subordinates feel cozy in the get the job done position, they never observe on a macro degree fairly on a micro just one so they know just what is heading on, also they emphasis and function really hard to prevent currently being victimized by the paralysis by investigation. These days the entire field of purchaser electronics is in a limited struggle to win above the competition. Daily new cellular cellphone firms are rising and therefore we have to have a wonderful volume of resistance to survive the rough moments. No issue how well founded and productive a corporation is, with out a good strategic plan, efficient management, qualified workforce, up to date technologies, versatile operation models, monetary strength, creativity and creativeness and a excellent sector comprehension, it can arrive crashing down on its knees. Thus to make a mark a organization should really have the excellent feeling to prevent its threats, prevail over its weaknesses, make superior use of its strengths and grab its chances.

Impact of the Globalization of Baseball Essay

The explanation why I chose this topic is for the reason that when it comes to worldwide trade, baseball has an critical affect on how some countries export talent to carry in much more cash. Baseball is identified as America’s national previous time, having said that all through about the past generation, specially from the 1980’s to the present, the earth has professional essential alterations, and globalization has emerged as one particular of the foremost discourses. The world improvement of activity has also accelerated from the 1980’s for illustration, one particular can obtain the flows from region to region of sporting merchandise, products and landscapes that have grown this kind of as the advancement of the media-activity creation intricate and job images to worldwide audiences. The migration dimension will involve the international motion of persons these as travelers, exiles and visitor workers in the sports activities arena, the global migration of sports personnel, this kind of as coaches, players, etcetera. has been a pronounced and proven characteristic of the sporting ‘global village’ in recent a long time.

For instance, the movement of player migration occurs in some sports activities, these as experienced baseball, amongst North The united states, Latin America, and East Asia. The financial dimension has been definitely concerned on the quick stream of revenue and its equivalents close to the entire world. It is obvious that the movement of finance in the world-wide athletics arena has appear to target on the global trade in staff, prize revenue and endorsements, and the marketing and advertising of sport together unique traces. A different variable that need to be thought of is the media dimension, it involves the circulation involving countries of information and illustrations or photos that are developed and distributed by newspapers, journals, radio, television, and the Entire world Large World wide web.

The sport-related media continuously ‘broadcasts’ pictures of sporting activities to massive world wide audiences. For example, contemplate globally audiences for the Planet Baseball Common in 2006. One more instance of all over the world publicity would be younger baseball gamers who are in their early stage of baseball in the course of in the summer they also televise the Little League Globe Sequence. This is in which the expertise from distinct nations around the world get their first possibility to present the environment how very good they are. The U.S. is a central section of the global method, the most striking illustration of transnational electricity of sporting activities group is Key League Baseball. Players from outdoors the United States are defined as guest workers in this technique In the MLB, numerous gamers are recruited from Latin American nations around the world, such as the Dominican Republic, Puerto Rico, and Venezuela. Given that the change of the century there has been a lot more of an influx of Asian gamers that have been a part of the North American skilled baseball market and as a final result of that baseball company is booming in Asia as a swiftly-swelling band of fans adhere to the exploits of household-developed players on the other aspect of the Pacific.

The growing prominence of international born baseball players in MLB seems not only in the performances of international superstars these types of as Sammy Sosa, but also in in general number of international gamers on MLB rosters. By 2005, 242 overseas gamers, which occupied 29.2% of 829 Main League gamers, were being characteristic from 15 international locations with each other with Puerto Rico and the Virgin Island. The Dominican Republic prospects all international locations with 91 players Venezuela is 2nd with 46, Puerto Rico is the 3rd with 34. As for the Asian countries Japan qualified prospects with 21 players, South Korea has 9, and Taiwan has 3. The small business of Important League Baseball carries on to expand at an extraordinary speed by means of the expansion of their electronic of their digital streaming infrastructure efforts. MLB Innovative Media spin-off BAMTech and Discovery Communications, have attained a very long phrase-expression partnership that provides them obtain to find European athletics rights from globally athletics properties.

Though the two MLBAM and Discovery Communications would not reveal the financial particulars, it does not change the current ownership stake for BAMTech at present MLB Innovative Media has a 58% stake. A single point is specified MLB’s house owners will be reaping the extended expression positive aspects as the media landscape is on the verge of a considerable shift. In accordance to MLBAM, in the 14 a long time of its existence, they and the spin-offs currently are serving 7.5 million full world-wide subscribers with its U.S. based clients’ OTT products. So transferring into the European marketplace would seem like the following reasonable phase. Their key target certainly is to provide in much more earnings, but I also sense like they want to endorse the video game of baseball to a larger worldwide industry. The new-found revenues will give baseball’s proprietors continued charge certainty outside the house of how perfectly their respective groups carry out in the standings, which generate revenues at the gate, via regional media contracts, and sponsorships. They have develop into a developing centralized earnings source that no other sports activities league has as an edge. Major League Baseball noticed gross income raise by $500 million very last year, and was speedily approaching $9.5 billion.

In late December they should be at, exceed $10 billion. In 2017, the Earth Baseball Common took centre stage, Main League Baseball required to attract in a massive quantity of audience to enjoy the match, so they invited unique countries from all around the entire world to take part in the event. These teams bundled groups from Europe, the Middle East, Asia and South The usa, some nations that might not thoroughly grasp the notion and comprehension of how the sport is played. The principal reasoning guiding this is that they want far more nations to be uncovered to the recreation of baseball and attract far more talent for the game to be a lot more diversified. America’s pastime has long had a footprint in nations around the world like Japan, Cuba and Mexico with the WBC they required to showcase the abilities from other areas of the globe. Ordinarily, the WBC was usually played in the United States with just the American participant, and Caribbean players and the Latin American players however that years they experienced some online games played in Seoul, South Korea, and Tokyo, Japan below in the U.S. they move all over also from Los Angeles, and San Diego to Miami.

Major League Baseball’s in general aim internationally is to be the most constructive and significant aspect of cultural lifetime that we can close to the environment. But that begins with being familiar with what localized cultural life actually is, and the WBC has served as a kind of reality-discovering mission for MLB, allowing the league to study far more about supporters and sports lifestyle overseas. The World Baseball Classic was designed up of groups from Canada, China, Cuba, the Dominican Republic, Italy, Japan, the Netherlands, Puerto Rico, South Korea, Taiwan, Australia, Mexico, Venezuela, and the United States in the fourth WBC in tournament background. A couple of very first timers Columbia and Israel manufactured it into the match as very well. When you have these types of numerous groups of people all doing the job for a person frequent objective it can be a excellent working experience from individuals countries that truly really don’t get the full exposure to showcase their expertise, and it is also nice to know that people back in each groups household nations view and aid the very own countrymen to do great things and show teamwork and unity in between the nations. Personally, in my perspective, just one of the many factors why I fell in appreciate with this match is that it confirmed me that no subject what qualifications you have or the place you came from none of that issues simply because there is only just one frequent target that is shared by everybody on that crew and it is to go as far as probable to have a opportunity to acquire the championship.

The game of baseball reveals that there is not one particular specific that can get the activity by them selves there are nine persons the field that has to get the job done jointly as a person unit to achieve their intention of profitable. The recreation can only create everyday living extended bond and friendship that can be without end. Baseball is shifting from the days when the activity was hardly becoming performed, with extra migration and the influx of global talent coming into the highlight, baseball is slowly fading absent from currently being America’s pastime, the reputation and want for the domestic gamers is faded absent, the motivation to convey in new clean talent is at a demand from customers appropriate now. With significant requires for international born players, the Dominican Republic from the Caribbean, and Japan from East Asia are the country’s top the push for extra overseas gamers. For illustration in the Dominican Republic, baseball is this sort of a predominant activity that the government alongside with some assistance from some main leaguers from that country see how the challenging operate can make a change in their financial system they have collaborated together to build academic amenities for young men and women to try out-out and get the job done on sharping their skills. On average the youngest Dominican youngster that is seemed at on the streets is about 8 decades previous that suggests that from the time that he is scouted at 8 years aged except if the age of 15 or 16 they are in these amenities training and bettering their craft. Due to the actuality that they are pressure to give up college and focus only on baseball suggests that they only have one particular shot to make it large time in the Key Leagues.

In the Dominican Republic 4 out of 10 kids at dwelling at or down below poverty, so these kids have to obtain a little something to do to generate some money, some go to university, other individuals are out in the streets, and yet another handful are occupied instruction for their shot at the major time. Numerous of the young ones that go to faculty, only end going to middle school, and then they enter the workforce, individuals who when into the observe facilities, the percentage of these persons coming out and creating it large time is only 2% of all the youngsters that entered the software. So with them dedicating their entire youth to the developmental procedure the young children by no means went to university and they never have any right education, so they return to poverty. On the other hand, individuals that do stop up earning the slash they go on and do massive things in baseball, most of them occur again dwelling to the island immediately after the time is above on normal from all the Dominican born gamers significant league and insignificant league salaries blended the island racks up about $400 million each year. Some men and women when they return property from enjoying baseball for 5 or six months, they help fund a basis or an business to support out there country, some even assistance construct educational institutions, hospitals, etc.

The impact is baseball is so high in the Dominican Republic that each individual of the 30 Major League teams has a instruction facility in distinct pieces of the island. At the of the regular year some of the players locate a location of various groups from the Caribbean, Mexico or Latin The united states and enjoy some choose up wintertime league baseball some do this to assistance boost their competencies for the begin of subsequent year, other folks do it to not get rid of the come to feel the sport. In the DR, it is a small business that puts thousands of Dominicans to get the job done as they educate area potential customers as effectively as Venezuelans, Panamanians, Nicaraguans, Mexican, and Cuban who have escaped the communist regime. All of these nations around the world have observed some gain from baseball as stars ship property back again residence, but only Dominicans have taken benefit of this opportunity and produced a baseball infrastructure. Yet another nation that utilised to be capable to assist create their very own property grown participant was Venezuela, but political unrest beneath the country’s socialist government and a growing crime wave have despatched big league groups fleeing. This 12 months, a summer season league comprising U.S- sponsored groups collapsed, canceling the whole schedule.

MLB by itself estimates that teams shell out about $125 million a calendar year on baseball academies just in the DR It’s easy to get to a 50 percent-million dollars that baseball is bringing to the island, an MLB formal Ruck said. The expending has not come with no controversy, as is often the situation with U.S. investments in building countries, allegations of exploitation doping and other abuses have dogged the U.S.-operate academies. Nonetheless enduring, on the other hand, are charges the teams have exploited desperately bad youngster from the Dominican Republic and somewhere else by encouraging thousand to quit and chase baseball, Ruck claims. Situations at academies have enhanced markedly in new a long time, suggests Ruck. Most are extra or much less condition-of-the-art amenities that now emphasizes suitable diet and supplies good residing quarters, he states. A further country with strong ties to the advancement of the sport of baseball is Japan despite the fact that staying outnumbered by the baseball crazy corners of the Caribbean and Latin The usa the Japanese participant have stood their ground in MLB. This was apparent through the 2017 Earth Baseball Basic when they completed with a bronze medal, in a competition exactly where they were intended to finish in the center of the middle of pack in that tournament there were being sixteen groups, and out of people sixteen to end in third at the rear of infamous powerhouse nations like the D.R. and the U.S. that was really remarkable.

The Japanese level of perform is so higher that some of the gamers who want to operate on their mechanics of pitching or hitting go to Japan to their careers back again on monitor. American gamers were being desired in the years subsequent WWII to increase the amount of baseball in Japan from the stage of zero that it sunk to. Baseball was launched into Japan in 1873 by an American teacher in Tokyo, Horace Wilson, and the game caught on incredibly rapidly via a lot of the island nation. At initial, the Japanese had issues in being familiar with the regulations of the sport-and-in that regard Baron Hiroshi Hiraoka in 1877 traveled to the United States and brought again to Japan a translation of the conventional baseball principles. In the course of the past century, the Japanese have usually been truly receptive to suggestion from American in performing on the game’s finer factors but on event they’ll revert to their have tactics. When the American gamers would go on tours to unfold consciousness and encourage the recreation of baseball in Japan, that give some Japanese businessmen and sports activities persons an thoughts to start off to build they own professional league, they had been considering that if they ever had to American groups in a competitive video game of baseball they would be very good enough at the very least set up a fantastic combat versus good quality groups.

The Japanese started the league with an 8 group once-a-year match that started again in December 26, 1934 at the commencing of the 1950’s qualified baseball in Japan definitely took off and receiving key recognition. This was caused thanks to American players staying invited to indicator with groups from the two the Pacific and Central leagues, the groups were being permitted to have two foreigners on its roster, and most of the teams in the league besides for one group ordinarily fill their quota. In just the previous 25 a long time there have at minimum been 100 Us citizens have both played or coached in Japan and their existence has been significant, due to the fact they were being crucial to the improvement and structure of the excellent of baseball in Japan. Just one rationale why there is not as numerous Asian- born players in the Significant League Baseball is simply because they like to preserve their players domestic just to help make baseball well-known inside of the continent by itself in excess of the many years there has been a booming range of enthusiasts and persons viewing the activity on tv, or listening to it on the radio. All Asian countries are gradually attaining recognition of the talent that has been untapped to its fullest potential. There are some players that are having permission to occur to United States, but these are players who have excelled previous their opportunity and want to be uncovered to the rest of the world to showcase their competencies and abilities.

In current many years, some of the key Japanese imports to the United States have been Yu Darvish and Shohei Ohtani, they were being both equally in their early twenties and the older imports from Japan are players like Hideki Matsui, Ichiro Suzuki, and Daisuke Matsuzaka. Most of the Japanese players who occur into the United Said are pitchers, in Japan’s society the ideal participant on the staff the is pitcher, most of the youth in Japan nowadays who engage in baseball want to be pitchers. The publicity to the activity of baseball in the Asian nations is massive now in today’s modern day baseball, with much more little ones acquiring the chance to start off getting a sense for the baseball at a youthful age they are in a position to understand about the recreation and improve their expertise and methods at a youthful age to turn out to be the very best player achievable for the long term. Major League Baseball has attained world desire from various areas of the planet, and they are commencing to become a lot more globalization in sections of the earth that were as soon as dominated by other athletics, this sort of as, soccer (soccer), in Brazil, Germany, and other European international locations, ideal now it is a slow procedure but they sense that with time baseball will develop into a lot more of a around the world activity.

How is the Corporate Governance Affected by Globalization Finance Essay Essay

Corporate governance appears to be a particularly important topic nowadays, when ownership rights and control over assets in corporations are separated, and the top management of corporations might not act in the interests of stakeholders. There are numerous corporations all over the world, and their effect on the world economy is quite substantial. Corporations as one of the most complicated structures of a firm appear to be also the most powerful regarding its influence on economic development and political decision-making process. Considering the importance of corporations to the national economies and shareholders’ concern over level of protection of their investments, it is particularly relevant to be well aware of the governance systems inside corporations, their policy of shareholders’ treatment and their level of subordination to the state.

These paper aims to explore, how entering the international market affects the corporate governance of corporations. Our research question is “How is the corporate governance affected by globalization?”

The research that we conducted will be useful for exploration of globalization effect on the world economies, and it is as well relevant for those, who have interest in topics related to corporate governance and its dependence on exogenous conditions.

To answer our research question we will rely on the following institutional economics approaches: agency theory, transaction costs theory, business ethics theory. We opted these four institutional theories, as they are the most relevant to explain the current changes in corporate governance of German companies as they enter Ukrainian market. In our research, we focus on the effect of Ukrainian market conditions on the governance system of foreign corporations that enter the national market, in our case we analyze German corporations. Both of these countries are in the continental Europe, thus Germany adopted the European type of capitalism. However, it is rather hard to determine what kind of capitalism Ukraine adopted after the break- down of the Soviet Union. We will use real examples of corporations operating in these countries to evaluate the changes in the corporate governance brought by the differences of the background, and to show the consequences the globalization in these cases led to.

The paper contains six main chapters. Chapter 2 provides reasoning for the choice of the countries that are analyzed in the paper. Chapter 3 is a review of four institutional economics theories that we use to analyze the corporate governance in Ukraine and Germany in further chapters. In chapters 4 and 5 we describe and explain main changes in corporations and corporate governance in Ukraine and Germany correspondingly. In these chapters we also focus on the particularities of corporations operating in these countries from the perspective of state of economy, level of political stability, state intervention in private sector and social factors. Chapter 6 is a study case of few German corporations (METRO AG, Henkel etc.) operating in Ukrainian economy. This chapter is an empirical proof of the differences in corporate governance, corporate legislations and their effects in two chosen countries with our comments and advises on possible changes, relying on material provided in previous chapters.

2. Germany and Ukraine. Reasoning for the choice of the countries.

Germany and Ukraine are for the time period one of the most unique economies in the world. Both based on heavy industry those two countries are one of the wealthiest countries in Europe. The time during the Germany’s division and the occupation of Ukraine is a “black-spot” in economic history, regarding both those countries. However, in late 1980s and early 1990s, after the break of Soviet Union, many countries regained their independence thus allowing them to choose their own economic path.

Germany, was separated in year 1961, when the soviets built a wall, which divided Berlin into Eastern and Western parts, thus part of Germany as well, into two economic blocks; one of which was “Western” or capitalistic, and the other one “Eastern” or communistic.

On the other hand, Ukraine shared rather similar destiny in historical perspective. In 1922 Ukraine became a part of USSR (The Union of Soviet Socialist Republics), thus determining their fate for socialistic regime, under control of Soviet Russia.

Both, Ukraine and Eastern Germany, managed to escape the Soviet control in late 1980s (1989 for Germany and 1990- Ukraine), thus allowing them to be independent and choose their own paths and make their own decisions.

“The term corporate governance is used in two distinct ways. In Anglo-Saxon countries like the US and UK good corporate governance involves firms pursuing the interests of shareholders. In other countries like Japan, Germany and France it involves pursuing the interests of all stakeholders including employees and customers as well as shareholders” (Allen, F., & Gale, D. (2002). A comparative theory of corporate governance. Social Science Research Network, Http://papers.Ssrn.com/sol3/papers.Cfm).

The economic paths that Ukraine and Eastern Germany chose were rather different. The main differences were the corporate governance control. The united Germany adopted the continental European corporate governance model, whereas for Ukraine, a rather young and inexperienced country, they chose to adopt Anglo- Saxon corporate governance.

The main differences about those two corporate governance systems were noticed by WladimirAndreff :”In Continental Europe corporate governance, there is no domestic external market for executive talent and, thus, when a German (or any other continental European) CEO is appointed there is no negotiation (about salary, stock options, performance bonus, retirement provision and the like). The second difference is in wage negotiations between the enterprise union and managers. Anglo- Saxon firms behave in both cases as properly capitalist; continental Europe firms, by contrast, are more seen like communities. The latter employee- favoring firm opposes the former shareholder-favoring firm”(Andreff, W. (2002), Journal of international business studies, Vol. 33, No 1, pp.195- 197, accessed on 23/10/2010).

The industries both countries chose were similar. Germany and Ukraine are both famous for their heavy industries, such as machinery industry, and the IT business. However, the main exporting areas of the countries differ greatly. Ukraine still bases most of its economy on Russia. Not only it exports most of its goods there, but also imports the most of country’s energy (gas, oil, electricity) from Russia. Whereas, Germany, is internationally well known for its car industry and home technic. Therefore, the German corporate governance is in relationships with many other different countries, which have different institutional systems, thus making German governance system to adopt in its own way.

On the other hand, Ukraine, basing its main relationship with Russia, had to adopt other meanings of doing transactions. Corruption and government incompetence made the cooperation between western countries and Ukraine rather difficult. According to MSI (Management Systems International):”Ukraine can be categorized as a closed insider economy A¢”â‚¬ a country strongly influenced by elite cartels” (MSI, (February 10, 2006), Corruption Assessment: Ukraine).

In conclusion, both countries have their own similarities and differences. Ukraine and Germany share rather similar historic background until the 80-90s of XX century, however, after both countries escaped the influence of USSR, affected by globalization, they took different paths following different choices, as an example governance structure. Neither of their choices were wrong. Out of these reasons this paper will be analyzing the corporate governance particularly in these countries.

Institutional economics theories used in the analysis of the corporate governance (Agency, Transaction, Business Ethics).

There are many different approaches, which are possible analyzing countries. The theories this paper will be focusing on are: Transaction cost, Agency and business ethics. Those theories were chosen due to several reasons.

Firstly, transaction cost theory would be particularly interesting to apply to German corporate governance, as German corporations have transactions with different firms in different countries, as for Ukraine corporations, it mainly deals with Russia and other post Soviet countries, such as: Belorussia, Lithuania, Latvia, Kazakhstan.

Secondly, agency theory would show how different agents and principles manage the transactions. In Germany’s perspective, they have many branches of their companies around the world, thus making it rather hard to rule. More over, the difference in chosen corporate governance in Ukraine and Germany makes it interesting to analyze how are firm’s agents treated and rewarded in both these countries

Lastly, the business ethics part will mostly concern Ukraine, as the level of corruption in the country is rather high, thus making it rather difficult for international corporations to take part in Ukraine’s economic development. As for Germany, it will interesting to see how do the branches of corporations situated in different countries, where corruption level is higher/high, avoid the corrupt structures.

3.1. Transaction cost theory

The transaction cost is a cost incurred in making an economic exchange/ or participating in a market (Wikipedia.org, accessed on 23/10/2010). There are many different ways to calculate transaction costs. Also, the transaction cost mostly wants firms to cooperate, as lower the transaction costs lead to higher profit, thus making long-term contracts applicable and wanted. As Hanna Kuittinen argues, “The inter-A¬Arm cooperation is more efA¬Acient than the use of open markets or hierarchies when it minimizes the difference between the A¬Arm’s transaction and management costs (i.e. the governance costs) at the same time as the value of its dynamic governance beneA¬Ats is maximized”(Kuittinen, H., Jantunen, A., Kylahenko, K., Sandstrom, J. (13 September 2008) Cooperation governance mode: an extended transaction

cost approach , pp. 307). However, making contracts with other party, needs trust, therefore, the reputation and uncertainty part starts to play an important role in reducing the transaction costs. Especially when long term relationships are being on stake, the reputation determines, whether the contract will be made or not. Moreover, even if the contract is made, uncertainty still might determine the relationships between the firm, as Hanna Kuittinen reasons: “Uncertainty about future outcomes makes it difA¬Acult to specify contracts ex ante, and behavioural uncertainty complicates the coordination during the transaction and evaluation of the performance ex post “(Kuittinen, H., Jantunen, A., Kylahenko, K., Sandstrom, J. (13 September 2008) Cooperation governance mode: an extended transaction

cost approach , pp. 310)

3.2. Agency theory

Agency theory “treats the difficulties that arise under conditions of incomplete and asymmetric information” (Wikipedia.org, accessed on 23/10/2010). The most important part is the asymmetric and incomplete information in these days economy. Principle hiring a new agent for its company is never certain about the validity of his documents or experience. So how should principles determine the agency costs? If they would over evaluate the agent it might come out that the new employee does not sufficiently do his job as expected, however if the agent is under paid, he might start shirking and not try do his best. As Claudia Keser and Mark Willinger argue “low incentives can affect participants in a contradictory way because of a possible conA¬”šict between intrinsic motivation and A¬Anancial reward. Furthermore, it can be concluded from a vast survey of experiments that in some cases incentives improve performance, and in other cases they have no effect, or even worse, hurt performance. “(Keser, C., Willinger, M., (2 October 2006), Theories of behavior in principal-agent relationships with hidden action, pp. 1527).

3.3. Business Ethics

“Business ethics I can either be institutional or personal in scope. Institutional business ethics deals with broad, somewhat impersonal and abstract issues of the ethics of corporations as institutions. An example of this is corporate social responsibility”(Pattan, E., J. (1984), The Business of Ethics and the Ethics of Business, pp. 1). As stated by John E. Pattan, personal or institutional, in this paper we will try to concentrate on the institutional point of view. “We make ethical judgments every time we feel that our interests or opinions are promoted or attacked, our rights respected or violated, or ourselves catered to or threatened” (Pattan, E., J. (1984), The Business of Ethics and the Ethics of Business, pp. 3) The main purpose of business if not a secret, every businessman wants to maximize his profits. But what moral costs does it involve? In some cases it might involve corruption, stealing sometimes even taking lives of others. Therefore, it will be studied, how do institutions deal with each other and how are ethics implied to their decisions.

Corporate governance Ukraine

Introduction to the corporate governance in Ukraine.

In the given paper we regarded the period of the economic development of Ukraine, starting from 1990 year. That time was remarkable for the fall of the Berlin Wall and the collapse of the central planning and command structures that had been in forces for 70 years. The country started implementation of reform programs aimed at market economy and globalization (Holmstrom, & Smith, 2000).

The leading enterprises and companies in Ukraine realized the importance of effective corporate governance. The reason is that it is the key factor determining the microeconomic efficiency of the enterprise sector and the quality of investment climate of the country.

According to A. Kostyuk ‘ the German model is getting spread in the Ukraine from year to year (Board Practices; An International Review’2003). The main evidences are small quantity of independent directors on the board, rare meetings of the board, not big number of committees on the board, the management board affects the supervisory board. There are nearly 35 thousand joint stock companies in Ukraine that is comparatively more than in many developed countries. Every year the state commission on securities and stock exchanges states about over 12 thousand of cases of breaking the principles of corporate governance in the country. In this case, it is significantly to regard the role of ownership structure in corporate governance. It is important to know why owners purchase shares and what corporate mechanisms they use. (A Kostyuk 2002).

The cause of closing of board practices in Ukraine is the rise in concentration of ownership, which results in rise in corporate control, violation of minority shareholders’ rights, rise in number of disputes, conflicts of interests and decrease in transparency of the Ukrainian joint stock companies. A  A A 

‘Database provides annual financial statements in total for 14356 companies, in particular 2215A corporations in 1998, 8325 corporations in 2000 (out of 11850 registered), 7735 corporations in 2001A (out of 12039 registered) and 10213 corporations in 2002 (out of 12010 registered). For the empirical testing we use the dataset of 10313 observations on manufacturing open joint-A stock companies in total, in particular 4337 firms in 2000, 3385 in 2001 and 2591 in 2002. Thus theA sample covers around 37%, 28% and 21% of all open joint-stock companies in Ukraine in 2000, 2001A and 2002 respectively. The data is collected from publicly available information, in particular, fromA annual financial statements of Ukrainian joint-stock companies (Source: PFTS ñ First Trading StockA System, Istock database:A www.istock.com.ua), (Corporate governance in Ukraine ‘ Vitaliy Zeka ).

Nowadays corporations in Ukraine are divided into joint stock companies founded pursuant to Law of Ukraine ‘On business association’:

Open Joint Stock company

Close Joint Stock Company

Ukrainian Joint Stock Company

Ukrainian Private Joint Stock CompanyA 

The biggest companies in Ukraine are:

Company Profit Sector – Naftogaz Ukraine Ukraine 6.126.451(Energy/Commodities), Mariupolskij Metkombinat Ukraine 2.382.034(Industry), Azowstal Ukraine 2.059.265(Industry) , Linos Ukraine 1.923.149(Energy / Commodities), Mittal Steel Kriwoj Rog Ukraine 1.836.833 (Industry), Industrialnyj Sojuz Donbasa Ukraine 1.750.239(Industry), Ukrtatnafta Ukraine 1.460.350(Energy/ Commodities), Zaporozstal Ukraine 1.325.41(Industry).

Directors can be nominated by the supervisory and the management boards independently.

At least 25 % of Companies with where controlling block of shares (50 percent +1 share) belongs to one owner, have boards with 5-6 members. They represent interests of the controlling shareholder. (A Kostyuk 2002)

In accordance with Article 118 of the Commercial Code of Ukraine, basic shareholder rights are established by law. The width of shareholders rights in Ukrainian firms may vary and depends on whether the joint stock company has free circulation of shares (an open type) or its shares are distributed among the founders and cannot be traded on stock exchange( a close type) . Companies controlled by the foreign institutional investors or Ukrainian investment companies have 7 or 9 members on the board (see the Commercial code of Ukraine).

Supervisory board members at Ukrainian joint stock companies meet every quarter. Boards at the companies, where the ownership is strongly concentrated, hold meetings less frequently than at those companies, where the corporate ownership is spread. This is because of controllers have a chance to have both the supervisory and the management boards under their control.

The procedure of nominating new directors in Ukraine is plain and chaotic. Shareholder may nominate committees by themselves. In order to do this, they must possess enough stake in enterprise. Each shareholder who possesses shares of the enterprise above 2 % of shareholders equity can offer his own candidate on the supervisory board. As we see from the chart, 44% of elected directors were nominated by shareholders. 31 % of elected directors were nominated by the management board. Only 25% of directors were nominated by the supervisory board.

(A. Kostyuk 2002).

In other words, shareholders wish to be controllers through electing directors and executive who would represent their interests.A 

Groups of the director nominators and their efficiency in nomination

Supervisory boards at Ukrainian joint stock companies are not independent. Some of them possessA largeA share of equity of the companies. The researches show that only about 8 % of board directors are independent.A There is evidence that 42 % of Ukrainian joint stock companies have no independent directors on supervisory board. About 31 %of researched companies in Ukraine have not more than 1 independent director .Companies have policy committee, which are under control of foreign institutional investors.A Directors can be nominated by the supervisory and the management boards indecently. The companies with dispersed ownership structure have a practice of nominating directors by governing corporate bodies. All candidates must be shareholders . A 

Definition of Corporate Governance.

The term ‘corporate governance’ can be interpreted as ‘the system of legal and economic institutions that create formal and informal regulatory system, which determines behavior of enterprise. (Piotr Kozarevswski 2009).

Mechanism of concentration of corporate ownership structure in Ukrain during 1998-2001 is illustrated by next figure.

(Kostyuk, 2007)

The researches ofA Saul Estrin, Adam Rosevear, AlexA Krakovsky, Alex PivovarskyA helped usA  greatly A to understanding theA issue of corporate governance mechanisms in Ukraine. All these expertsA considered that many corporate governance mechanisms, such as the boardA of directors, financial reporting etc, hardly work in Ukraine.A According to Alexander N. Kostyuk (“Corporate Governance in aA transition economy” 2007) “One of the well-known reasons is the absenceA of an Act of Joint Stock Companies.” The draft of this Act had beenA presented in 2001. However, the Act has not been approved by theA Ukrainian parliament, where a strong political lobby protects theA rights of large owners, named “oligarchs”. Therefore, joint stock companies in UkraineA have to work with reference to “The Act of Enterprises”, which does notA explain the nature of many corporate governance mechanisms, such as boardA committees,A executive directors,A executiveA monitoring, etc. As the result, corporate governance in Ukraine allows violation of minority shareholders rights, weak transparency and inadequateA corporate social responsibility. Under such circumstances, one of theA ways out is through developing a set of internal statements to makeA all these corporate governance mechanisms work.

Evidences of corporate governance in Ukraine.

There is evidence on corporate governance, which we observed while studied the statistical data on corporate governance in the country. “Our survey reveals that performance at the enterprise level has also not been improving, average output, employment, and productivity in Ukrainian firms have fallen every year since 1990 and profitability has been uniformly low, if not negative. Moreover restructuring has been very modest, although rather more differentiated across enterprises. For example there has been little increased trade with the West on average only 2%of enterprise sales in 1996 went to OECD countries, up from 0.5 % in 1999. Investment has also been low, so capital stock is largely obsolete.” (Saul Estrin & Adam Rosevesr, 1999)

This is another example we may apply for. In the average firm in Ukraine , the number of managers holding shares is around 15 , while the number of employees is 599 and former employees is 302. Holdings by Ukrainian citizens and companies are also highly dispersed at 1065 and 616 shareholders on average respectively. However, the typical number of shareholders, which are banks, foreign individuals and foreign firms, is one and investment fund is two.

The basic conditions for fundamental structure change in company corporate governance in Ukraine are still weak and need for radical policy changes and capital market development to make company corporative governance more effective (Saul Estrin & Adam Rosevesr, 1999).

After we studied the supervisory board practices in Ukraine, we may conclude the following: they are small in size, lack of legal employee participation in the corporate governance, rare meeting of board, small number of committees on board, management board influences, supervisory board, small number of independent directors.

Analysis of corporate governance in Ukraine from the approach of agency theory.

The Principal- Agent relations exist when one person called the agent acts on behalf of another, called principal. The welfare of the principal is affected by the choice of the agent.A In companies it is the shareholder who acts as the ‘ principal ‘ and company directors act as the ‘agent.’ A 

This interaction works well when the agent is a professional at making the necessary decisions, but contrary doesn’t work well when the interests of the principal and agent differ. A ‘There is possibility of opportunistic behavior on the part of the agent that works against the welfare of the principal’ (Baza Oba, 2004 ).

Most of agent’s actions in the companies are unknown to the principal or expensive to obtain.A A As applied to corporate governance in companies in Ukraine the second practice is common. The absence of accounting and audit norms in Ukraine as we mentioned above, leadsA to corruption and bureaucracy. All these prevent the Ukrainian companies from ‘ bringing simultaneous capital, access to Western ‘, technology, markets and managerial expertise’ ( Estrin & Rosevear, 2003 ).

Analysis of corporate governance in Ukraine from the approach of transaction costs theory.

In order to be able to transact at all and to transact safely, actors have to incur costs to find out how and where transaction opportunities occur, and about the possibilities the possible risks and uncertainties involved. These expenses are called transaction costs. Market transactions consist of several aspects:

1. Search and information costs (who offers the product? Is the seller the owner? What are the conditions?)

2. Costs to draft, to negotiate and to conclude the contract.

3. Monitoring costs and enforcement costs. These are the costs that are incurred to make sure that the other party commits to an agreement, whether this is of a private nature or a public nature (John Groenewegen, 2010).

According to Vladimir Andreff ( 2006), along with ‘ contract’ corporations (enterprises, established on the basis of the contract) there are a large number of corporations formed to address public authorities – ‘public’ corporations typically, in business practices of Ukraine. These corporations are successors of the reorganized ministries, state committees, departments and state enterprises to unite industry, or other principles.

(Inna Pidluska, 1998)

Analysis of corporate governance in Ukraine from the approach of business ethics theory.

It’s of common knowledgeA that no universal model ofA corporate governance exists. However,A there are generally accepted standards of good corporate governance. They may be applied in the frames of legal, economic and political aspects. InternationalA principles of corporate governance appeared as a result of increased public interest in corporate governance, which was generated by the globalization of financial markets and the capitalization of capital flows.A 

Ukraine is notoriously famous for engagingA inA corruption openly and freely. Ukraine’s President Leonid Kuchma has identified the main obstacle to business development as bureaucratic abuse of power, bribery and extortion. He also admitted that the government has failed to create conditions for conducting business honestly. (Inna Pidluska, 1998)

After the Orange Revolution the government of Ukraine has seen itA fit to sell business off to rich elite. It leads to the rise of the business oligarchs who have taken over the exercising state power into their own hands. So calledA ”shadow economy” was flourishing (Egger and Winner (2005).

In modern Ukraine giving a bribe is a regular everyday routine. To give a bribe to an inspector who checks the required norms in the company, or win a tender using special privileges, became a norm in Ukraine.

Average Ukrainian manager spends two days per week on inspection issues.A (Inna Pidluska, 1998)

The facts of double accounting and money laundering is a widely spread practice in a ‘shadow ‘economy of the country.

The size of Ukraine’s informal sector, or “shadow economy”, reflects the high degree of corruption. It is currently estimated that seven out of ten enterprises work in the shadow economy. These companies have no protection from corruption and are open targets for bribery and other forms of graft. (Inna Pidluska, 1998)

Nowadays, UkraineA is making a concerted effort to improve corporate governance at the national level. This goal can be achieved through the implementation of national Code of corporate governance. Problems of corporate governance in Ukraine must be addressed through introduction of standards of ethics and a code of practice for corporate governance. Business ethics is mainly aimed at promoting good reputation of the company at the market. TheA most important principles areA responsibility andA freedom. Employees and partners are individuals. They should beA honest, reliable and trustworthy. All the employees of the company with good will aim at high results, which improve quality of business itself and stuff’s lifeA (World Bank Group, 2009).

Nowadays corruption and bureaucracy widespread among the business community and judiciary itself is subject to political interference and corruption (Adam Mycyk & Elizabeth Cook, 2007 ).

Conclusion to the chapter.

An absence of progress in corporate governance in Ukraine can be explained by insufficiently deep character and consistency of institutional reforms realization.A The functioning of the new global economy is based on an effective management mechanism, implementation of the international accounting and audit standards and professional culture formation in corporate governance.

In general, the corporate governance practices, which were adopted by Ukrainian companies, fail to reflect the high levels set byA more developed European market economies and the United States.

5. Corporate governance in Germany

5.1 Introduction to the corporate governance system in Germany.

History of corporate governance in Germany:

In the 19th century, Germany’s typical form of business organisation was the “Kommanditgesellschaft” (“limited commercial partnership”). A “Kommanditgesellschaft” always had at least one member with unlimited liability whereas the other investor’s liability was limited to their contribution. In 1861, the General Commercial Code was enacted which devoted a section to joint stock companies and allowed incorporations with limited liability. Companies could choose between a single board of directors and a two tiered board system, involving shareholders appointing a supervisory board, which in turn elected the management board. This changed in 1884 when a reform was introduced which mandated that companies have a two-tier board that allowed free registration without a system of state concession. Thus a supervisory board was needed to take over the state’s monitoring role. For members of the supervisory board it was not possible to be a member of the management board but it was possible for a shareholder to directly elect member for the management board.

In the early 20th century, formal acts of corporate law led to the abandonment of mercantilism and the rise of classical liberalism. Corporations increasingly became public and private entities free from government control. Under the Nazi government of Adolf Hitler then, companies became less democratic in a reform of 1937. From then on, shareholders could not elect managers directly, and managers could only be removed “for an important reason”, directors were elected for terms of five years and were under the duty to serve the “Gemeinwohl” or “general good” which was manifested by the state officials to be of higher priority than maximizing the company’s revenues. After the war, new laws and changes all over the world led to more participation for workers within the corporations.

Corporate Governance from 1980-2010 in general

In the 1980’s, many countries privatized large state-owned corporations. Deregulation – reducing the regulation of corporate activity – has often been accompanied by privatization and is part of the laissez-faire policy. Another major post-war shift caused the development of conglomerates, meaning that large corporations purchased smaller corporations to expand their industrial base. Especially more concentrated and owner-controlled firms had high returns during the 1970s and early 1980s but this turned in the late 1980s and1990s. Increasing international competition could be the cause. In the mid-1990s, Germany adopted a series of legal and regulatory reforms related to corporate governance.

In 2002, the German Corporate Governance Code was created. The aim of the German Corporate Governance Code is to make Germany’s corporate governance rules transparent for both national and international investors, thus strengthening confidence in the management of German corporations. The Code addresses all major criticisms – especially from the international community – levelled against German corporate governance, namely

* inadequate focus on shareholder interests;

* the two-tier system of executive board and supervisory board;

* inadequate transparency of German corporate governance;

* inadequate independence of German supervisory boards;

* limited independence of financial statement auditors.

Each of these five points is addressed in the provisions and stipulations of the Code, also taking into consideration the legal framework. Of course the Code cannot cover every detail of every single issue; instead it provides a framework which the individual companies will have to fill in.

5.2 Analysis of corporate governance in Germany from the approach of agency theory

Corporate governance is about the way suppliers – who finance corporations – get a return from the managers on their investment. How can be ensured that managers do a good job and do not free-ride? How do suppliers of finance control the managers? These are principal-agent problems which have the essence that ownership and control – or separation of management and finance – are separated. Suppliers of finance give money to firms; the managers run the firm by using this supply of money and return some of the profit to the investors. Although this mechanism works out most of the time, the corporate governance problem is not yet solved.

In Germany, a top manager even with poor performance is usually only removed after extreme circumstances as the boards are quite passive.

There are large differences in legal protection of investors around the world. In Germany, at least some suppliers of finance have their rights protected and have them enforced by law through the courts, in contrast to many other countries. But still in Germany, managers are in most of the cases not liable.

In Germany, over a quarter of all votes in major companies are controlled by large commercial banks. The banks also have smaller but still significant influence as direct shareholders or creditors. As studies estimate, do about 80% of the large German companies have a non-bank shareholder who owns a share of over 25%. Family control through majority ownership or pyramids is the norm in smaller German companies. A pyramid means that the owner controls 51% of the company which controls 51% of its subsidiaries. The function of pyramids is to enable the ultimate owners to control the assets with the least amount of capital.

In Germany, large shareholders are associated with a higher turnover of directors.

The effectiveness of large creditors and large shareholders depends on the legal rights they have. In Germany, banks have much power because they vote significant blocks of shares, sit on boards of directors, play a dominant role in lending and work in a legal environment favorable to creditors. In Germany, banking governance is very effective.

German banks are relative to their lending power and control over equity votes not as active in corporate governance as one could expect. Large investors such as banks often fail to terminate unprofitable projects they have invested in when continuation is preferred to liquidation. A large investor often maximizes private benefits of control rather than wealth because he is rich enough. He will not internalize the costs of these control benefits to the other investors, large investors fail to force managers to maximize profits and pay them out.

Germany has a successful corporate governance system relying on a combination of concentrated ownership and legal protection of investors.

Compared to the United States, German creditors have stronger rights but shareholder rights are weaker. Germany has a system of

governance by both permanent large shareholders, for whom the existing legal

rules suffice to exercise their power, and by banks, but it does not have participation of small investors in the market. As Germany has a system of permanent large investors, hostile takeovers are rare. The advantage is that firms with long-term investors go through crises with less economic distress and better access to financing. Takeovers limit the planning for future for the managers and reduce the efficiency of investment. Permanent large shareholders and banks that dominate corporate governance in Germany are able to influence corporate management through informed investors who are better able to help firms.

A large investor-oriented governance system discourages small investors from participating in financial markets.

Germany has a successful corporate governance system that combines significant legal protection of at least investors with an important role for large investors. This combination is very different from the governance systems in most other countries which provide limited legal protection of investors and are stuck with family- and insider-dominated firms receiving little external financing.

5.3 Analysis of corporate governance in Germany from the approach of transaction costs theory

The degree to which a firm can switch or differentiate its governance mechanisms depends on the legal jurisdiction in which it operates. German law accords greater bargaining power to labour unions than other countries do. This tends to create a stronger degree of governance inseparability. Governance inseparability means that a firm’s choice of governance mode for a transaction is constrained by the governance choices it made for prior transactions. Governance inseparability can also be created by contractual commitments. Most German firms are efficiently engaged in long-term exchange relationships which require long-term contractual commitments. These contractual commitments cause governance inseparability because they are costly and sometimes even impossible to reverse. The flexibility of a firm is restricted for the future through contractual commitments.

Changes in bargaining power of other parties -e.g. employees, suppliers or customers – to a firm’s contractual commitments can also lead to governance inseparability. Changes in bargaining power can for example emerge from changes in law and regulations. Parties that gained bargaining power unforeseen, try to use this circumstance to improve their own positions but forcing the firm to adopt locally suboptimal governance mechanisms in the future. The German government does not change its regulations constantly giving security to firms and private actors, but there are still other factors that could affect bargaining power and thus make changes in bargaining power to a constant risk in Germany.

As German firms engage in long-term transactions, no firm can entirely avoid making contractual commitments and are thus always aware of the risk of governance inseparability. Governance inseparability constrains most firms over time because of their existing arrangements which limit their scope and flexibility.

5.4 Analysis of corporate governance in Germany from the approach of business ethics theory.

Germans in general are pessimistic about the introduction of an ethical code. Businessmen in Germany think that ethical codes are not effective. In their view, ethical codes do not provide aid for executives in refusing unethical requests and do not give a clear definition of acceptable limits of conduct. But over the years, there is a growing acceptance of business ethics among German executives. Managers like former Nestlé chairman Helmut Maucher, who are fed up with such “moral poppycock” have given way to an increasing number of corporate members of the German branch of the European Business Ethics Network, including well-known German companies, such as Daimler Benz, Bayerische Hypo Bank, Siemens, together with German subsidiaries of transnationals like Procter & Gamble and IBM.

5.5 Conclusion to the chapter.

The German corporate governance system is one of the best in the world. Of course it has some disadvantages and it still can be improved but it already works more efficient than most other corporate governance system and is one of the most advanced ones.

Case study.

Corporate governance in Ukraine and Germany differs in many ways. Ukrainian corporate governance system is younger and less developed, it has many weaknesses yet, comparing to the OECD standards of corporate governance and German Code of Corporate Governance (GCCG). This gap between the corporate governance systems in the two countries becomes especially obvious when globalization enters the picture. Due to the internationalization of the markets, foreign (German in our case) corporations with their own systems of corporate governance involve in the economy (Ukrainian in our case) with completely new to them conditions. Such changes have a double effect on both foreign corporations and domestic market. To show this, we will focus on how different are German corporations’ headquarters from their branches in Ukraine.

1). Metro AG was formed in Germany in 1996 through a merger of retail companies Asko Deutsche Kaufhaus AG, Kaufhof Holding AG and Deutsche SB-Kauf AG. The same year the company entered the list of 20 largest publicly listed companies in Germany and since then it started expanding to foreign markets as well. (Official website of METRO Group, https://www.metrogroup.de) METRO AG has established its branch in Ukraine in 2002. One of the main changes the company implemented was decentralization of its structure in order to improve performance of each separated sales division, this way METRO Cash & Carry was formed in Ukraine. Further on METRO Cash & Carry launched a new strategic performance improvement program “MCC 2012 – Committed to Excellence” in Ukraine. The program is built upon two cornerstones: the re-positioning of METRO Cash & Carry’s business focus and the optimization of the company’s structure with the introduction of a regional organization. METRO Cash&Carry Ukraine established an “Inter-corporation university” to provide practical managerial education to potential employees. (Official website of METRO Cash&Carry Ukraine, https://www.metro.ua)

The company had to adjust to a number of particularities with regard to Ukrainian economy, political state and geographical specialties; weather conditions, different consumer preferences and available labour market supply were taken into consideration, and few alterations in the company’s strategy, structure and logistics were made. A substantial problem was the process of negotiation in the beginning of business in Ukraine, the reason for that was lack of unity between the state national level authorities and city level authorities and inconsistency of their activity. Another substantial problem was caused by the difference in business ethics, written contracts are of the highest value in Ukraine, whereas METRO relies on the agreements with suppliers that regularly has contract proof, and therefore a number of trials on that account took place in Ukraine.

As a matter of fact, METRO Cash&Carry was performing successfully in Ukrainian market, since they cooperate with mostly domestic suppliers, with national authorities and launch special projects for Ukrainian market, they employ national specialists as company managers, the company also focuses on the exchange of experience between the international branches and attempts to adjust the most to the country they operate in.

2). Henkel corporation has its headquarters in Dusseldorf, Germany. Henkel has business lines: Laundry & Home Care, Cosmetics/Toiletries and Adhesive Technologies. The company management is committed to such principles: value creation as the foundation of our managerial approach; sustainability as a criterion for responsible management; transparency underpinned by an active and open information policy.

Henkel corporation was established in Ukraine in 1998. The company is centrally managed, a range of products is not presented in Ukraine due to a lower level of demand for these products in Ukraine. The company succeed in Ukrainian market by employing Ukrainian specialists as top managers, although they would dedicate German specialists marketing and financial reporting functions, as the corporation required accounting to be done by its standards. Strong system of detailed planning for 5-years periods and experience of Ukrainian specialists in the domestic economy helped the company to get itself a strong position on the market. (Official website of Henkel corporation, https://www.henkel.ua/SID-AE091F88-63C2EB69/about-henkel-85.htm).

Conclusion.

The most essential factors in formation of a national model of corporate governance in Ukraine are:

The structure of ownership of shares in corporations;

Specificity of financial system as a mechanism of transformation of savings into investments;

Ratio of sources of corporate investments;

Macroeconomic and economic policy in Ukraine;

Political system;

History of development and modern features of legal system and culture;

Traditional Ukrainian ideology;

Business relations practice;

Traditions and level of government intervention in economy and its role in regulating of legal system.

References

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Haxhi, I., & Van Ees, H. (2009). Explaining diversity in the worldwide diffusion of codes of good governance. Journal of International Business Studies, 41(4), 710-726.

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Kerr, R., & Robinson, S. (2009). The hysteresis effect as creative adaptation of the habitus: Dissent and transition to the ‘Corporate’in post-soviet ukraine. Organization, 16(6), 829.

Lehmann, E., & Weigand, J. (2000). Does the governed corporation perform better? governance structures and corporate performance in germany. European Finance Review, 4(2), 157.

Muravyev, A., Talavera, O., Bilyk, O., & Grechaniuk, B. (2010). Is corporate governance effective in ukraine? Eastern European Economics, 48(2), 5-24.

Rogach, A., & Balyuk, T. (2009). Transfer pricing in transition economies: Evidence from ukraine. Transition Studies Review, 16(1), 20-33.

Schubert, S., & Miller, T. C. (2008). At siemens, bribery was just a line item. New York Times, Sunday Business, , 1.

Sidhu, K. (2009). Anti-corruption compliance standards in the aftermath of the siemens scandal. German Law Journal, 10(8), 1343-1354.

Wójcik, D. Change in the german model of corporate governance: Evidence from blockholdings 1997-2001.

Official website of Henkel corporation, https://www.henkel.ua/SID-AE091F88-63C2EB69/about-henkel-85.htm

Official website of METRO Cash&Carry Ukraine, https://www.metro.ua

Official website of METRO Group, https://www.metrogroup.de

Globalization and Social Work Essay

Globalization affects nations all in excess of the globe and is now just one of the most talked about concepts pertaining to the foreseeable future of the financial state. Globalization is a blanketed expression that encompasses the integration of economies in quite a few unique ways. One particular such way is the incorporation of like ideologies throughout a large span of individuals. To get these messages throughout to the meant populace, as properly as make the usually means to successfully grow to be a global idea, a lot of societies must drastically change their preceding way of living to accommodate the modifications globalization provides. These modifications influence the indigenous populations of these regions in each good and negative methods. When disparity occurs, it is the cost-effective flaws globalization has on the indigenous populace that is highlighted most. This is in which social personnel find their expert services necessary in international advocacy, plan transform, and the advancement of social welfare. This paper will seem at how globalization interferes with indigenous procedures, and what roles social employees enjoy in fixing global crises arisen for the reason that of transnational interference.

What is Globalization? (#1)

Globalization is the plan that the many workings of a society such as small business concepts, governments, developments, and so forth. should really be integrated into other cultures and populations on a global scale (DiNitto & Johnson, 2016). The causes for transcending these principles internationally fluctuate involving economical attain and the marketing of human development. The idea of globalization takes on a number of meanings as its definition depends on the standpoint. From an economic standpoint, globalization is the transference of creation processes from a single industrialized nation to a further. It is also observed as the liberation of global finance units and is attributed to expense reductions of transportation and communications (Lyons, 2006). Other views have centered on the definition of globalization as remaining a broader term, encompassing a myriad of overseas influences that alter tactics and extend relationships to other states and nations.

Globalization has extended an interconnectedness of merchandise to nations all more than the planet. Areas like McDonalds were being when little corporations that have been only discovered in a handful of towns across the United States. Now there are thousands of McDonalds unfold across hundreds of international locations (Powell & Geoghegan, 2005). Where by as soon as it took providers a long time to grow their small business to other nations, the evolution of marketplace and technological know-how has now allowed startup firms to extend organizations oversees inside a short interval of time. The exact same can be seen for the automotive sector and the distribute of vehicle ownership. Detroit employed to be the cash of the automotive field, but at the time car or truck manufacturing was moved oversees, autos turned frequent commodities. Globalization is specifically correlated with the enlargement of properly-acknowledged empires and continues to be an integral element of corporate growth.

The most involved establishments of globalization are the Earth Financial institution, the Globe Trade Business (WTO), and the Intercontinental Monetary Fund (IMF). The Planet Lender cash cash initiatives on an worldwide degree (Polack, 2004). This institution’s most important goal is to market improvement in underdeveloped nations around the world. The Planet Lender usually money assignments by lending revenue to the political elites of these nations around the world, as it strongly favors robust dictatorships (Jordan, 2008). The WTO differs from the Entire world Financial institution in that this institution specially focuses on international trade policies involving nations, which allows foster trade (Polack, 2004). Business interests supersede any foreseen boundaries to world-wide expansion, which usually means the legal rights of the persons are not often acknowledged, if acknowledged at all (Jordan, 2008). This unfortunate check out of world wide improvement shines an unwell-fated light-weight on the values of the monetarily elite. The IMF maximizes money security by taking part in a central position balancing the payments and financial crises of international trade (Polack, 2004). All a few of these establishments participate in an integral portion of globalization financing.

The Myth of Globalization (#6)

There is a consensus by lots of that globalization is a myth that it is simply a neo-liberal fa?§ade of recycled capitalist ideations (Powell & Geoghegan, 2005). To have an understanding of the fantasy, it is essential to to start with figure out what neoliberalism suggests. Neoliberalism favors cost-free-current market capitalism by performing as a philosophical foundation for how a capitalist planet ought to function. The neo-liberalist seeks own gain in each and every transaction of their daily life and does not see a welfare state as contributing to the accomplishment or total wellbeing of the economic system (Polack, 2004). Globalization promises that it addresses the will need of quite a few by bringing transportation methods and communications know-how to countries that would in any other case hardly ever have had the entry (Lyons, 2006). What is not stated is the deficiency of a bare minimum wage and barbaric perform schedules that add to the conception of these projects (Powell & Geoghegan, 2005).

There a few other reasons why globalization is regarded a fantasy by critics. The to start with is that the elites involved with the world financial state boast that there has been a reduction in money inequality when in reality, fairly the reverse is real (Polack, 2004). Investigate reveals that the gap among the lousy and the elite have grown thoroughly in the very last 25 several years. A further myth that has been verified bogus is that the earnings produced through globalization trickles down to the poorest portion of the populace. When this has been verified to be accurate in a handful of nations, it is not true for all of them (the US integrated). Just one of the greatest debated myths concerning globalization is that trade is what is dependable for inequality. In truth of the matter, it is not so much trade that is to blame for earning inequality, rather it is a blend of principles together with deficiency of education and learning, the improve of technological know-how, and the decrease of labor unions that produce financial hardship (Polack, 2004).

Globalization Success (#3)

There are some crucial features of globalization that can be considered as prosperous, getting brought about valuable advancements in what have been previously penurious locations. It is crucial to note that the accomplishments of globalization are relative and have been the lead to of scrutiny amongst numerous in the supporting industry (Jordan, 2008). 1 of the first significant developments of globalization was the conception of transport methods (Lyons, 2006). Airplanes, ships, and trains are just a number of of the mass transport devices that have related close friends, people, and new encounters to all those who would have usually remained motionless in their life time. This form of transportation gave the world an accessible signifies of touring never ever ahead of noticed. Mass transport has assisted in exposing tradition and unfamiliar procedures to others all more than the globe, contributing to the blossoming of cultural enlightenment. As for organization relations, mass transport has produced shipping and delivery merchandise and products and services a lot quicker and far more economical for both equally the producer and customer.

Another major improvement that has brought on similar achievements through globalization is data know-how (Lyons, 2006). This engineering grew from telegraphs and Morse code to telephones, fax, e-mail, and wise telephones. The interconnectedness that this engineering has on the globe is phenomenal. No extended does it consider a three-working day ride on a horse to provide a concept to a human being in one more city. Men and women from all around the planet can basically select up a phone and make get in touch with to another man or woman on the other side of the globe. This technology has presented a indicates for unexpected emergency response, and methods to competently rely critical information to meant recipients in an immediate. As with the transportation systems, this technological innovation has globally supplied people today the liberty to travel without concern of shedding call with the significant programs in their existence. Also like transport systems, information and facts know-how strengthens enterprise relations by supplying an less difficult way for communication to be built for several corporate handlings.

Industrial, clinical, and technological advancements proved to be another globalization results that has assisted indigenous folks about time (Lyons, 2006). Farming turned easier and productivity amplified with the motion industrial inventions have had across the world. Much better farm machines, agricultural scientific breakthroughs, and the unfold of these breakthroughs via mass transport and communications are serving to to feed men and women all above the planet. Professional medical advancements are combating the moment debilitating diseases/afflictions this kind of as polio, cancer, and HIV, which at just one time were being a loss of life sentence (Jordan, 2008). The progress in engineering has also been a staple in assisting with lifesaving health care machinery and other integral innovations concerning the social welfare of worldwide inhabitants. A lot of of these breakthroughs have stretched throughout the entire world and have in some ways made a much better nation. Having said that, it however leaves a individual to surprise at what value these breakthroughs are getting built.

Globalization Failings (#4)

Having looked at the successes of globalization, it is critical to reference the damaging impact and failings of globalization as very well. Three flaws that stand out far more than others are the worldwide credit card debt disaster, the labor exploitation of the Global South, and the standard pleasure in relation to both sides of the company spectrum (Polack, 2004). The world personal debt crisis has been regarded as liable for most of the shortcomings relevant to globalization. The reasoning for this is attributed to the financial loans supplied by the Planet Bank and other northern fiscal institutions to the nations around the world of the World South (Jordan, 2008). The Worldwide South were being a selection of nations around the world that have been not as affluent as Europe, Spain, or France throughout the 1400’s. Nations around the world in the Global South gained these loans to implement big-scale infrastructure assignments just immediately after World War II (Polack, 2004). Sad to say, these tasks either unsuccessful or only sophisticated the elite and/or interests of organizations located in the north. This left the folks of the Worldwide South nonetheless responsible for all accrued debt.

The credit card debt accrued from the loans delivered by the northern investors directly contributed to the globalization defect concerning the labor exploitation of the World-wide South (Polack, 2004). Quite a few of the inhabitants of the International South have been displaced, pushed into further poverty, and compelled to scapegoat the accountability of repaying the financial debt. The people of these populations have resorted to creating absolutely free trade zones (FTZs) to compete with other international locations for outdoors money and labor profits. This is a huge win for outdoors companies for the reason that they don’t have obstacles these as youngster labor legislation or least wage to deal with. These firms also get absent with not owning to pay out as significantly for taxes and tariffs on commodities inside of FTZs. This not only exploits the laborers of these international locations by not spending them in close proximity to what they really should (some accrue what is equivalent to significantly less than a US $1 for each working day), but also by performing youngsters and older people excruciatingly extended hours (Jordan, 2008).

Dealing with severe poverty and financial debt (in particular when it is accrued by the hand of other folks) and slave-like labor is a burden that numerous in the International South are even now suffering from to this working day (Polack, 2004). What is appealing is that studies exhibit that countries whose concentration is not on increased person incomes have bigger averages of subjective nicely-being (SWB) than what would commonly be predicted for international locations residing in turmoil (Jordan, 2008). The cause this is a weak spot in globalization is due to the fact of the meant intent for increasing processes of generation to weak international locations. Supporters of globalization gloat that this expansion creates economic advancement and although that may possibly be real for some elements of the entire world, lots of have not knowledgeable that section of the offer. It seems that the values of the globalization supporters lean more to individual get, and in no way toward all those who are not in the very same standing as the economically elite.

Civil Modern society (#10)

Endorsing human welfare and advocating for social justice are two essential principals in the composition of social get the job done. There are values to globalization that stand out as good and are contributing to the advancements for a far better culture, but as previously reviewed, there are also several failings that are producing good will need for the observe of social operate on a world scale. Social staff have partnered with a lot of of these communities by means of civil societies. A civil modern society acts as a middle ground among the state and the current market (Powell & Geoghegan, 2005). These societies can assortment from users of a bowling league to significant congregations of disenfranchised populations. Civil societies are also referred to as a third sector, with their operate currently being to collaborate and hear to their men and women and communicate the wants of the modern society to advocators that can advertise positive change in the neighborhood. Social staff are increasingly turning into international advocators. Social workers and civil societies lover to dismantle the structural inequality brought about by globalization and improve opportunities for the disadvantaged populations of individuals areas.

A civil culture can only boost optimistic improve if there is some kind of social funds present. Social capital is the reciprocity in between two or more people by indicates of cooperation (Jordan, 2008). Without the need of some sort of agreements amongst civil societies and the Condition, there is no democracy and will for that reason not lead to change. When social money is present and flourishing between troupes included in a civil modern society, transformations such as increased healthcare and much better get the job done ailments will commence to seem (Powell & Geoghegan, 2005). Unions are a wonderful illustration of how this complete system operates. The employees of the business are a society and the owners of the organization are the elite. Equally want one thing out of the marriage employees want to be compensated and the elite want to operate a prosperous business. If there is social capital current, the union functions as the mediator involving the two entities to guard the personnel and to also function with the owners (Jordan, 2008). This process fosters a working romantic relationship and allows both equally events get what they want.

The globe would be a far better position if civil societies and social capital have been the norm of affordable operations (Powell & Geoghegan, 2005). Sad to say, it is not that way and globalization does not assist. What happens when there is no social capital and the personnel are not secured by principles and rules like all those in FTZs? Well, exactly what is presently going on in international locations all in excess of the environment. Sites acknowledged as sweatshops use laborer’s that are compensated tiny to no cash to get the job done atrocious hours in free trade zones (Polack, 2004). Most billion-greenback companies in the US, like Disneyland and Walmart, utilize sweatshops in the FTZ locations to this working day. People and other elitist nations alike have historically placed a blind eye about wherever their outfits and electronics are made. There are no social staff or authorities to act as mediators and advocators in many of these spots to stand up for the employees and assist them get the assets or the compensation they need to have and ought to have. In places like America where by there are labor rules that shield minimum amount wage, several hours labored, and boy or girl labor polices, the citizens are na??ve about what is happening in areas that do not share those resources.

The point out of affairs triggered by globalization weaknesses across the globe area a larger emphasis on the want of social personnel than ever before. The industry of social perform is composed of caring, intellectual people that have a passion to market social welfare in a modern society. With the myriad of adversities the entire world is at this time experiencing, social personnel have much to add (Jordan, 2008). A social employee wears many hats to complete countless jobs, but none are extra critical than their capability to entry the value in other folks. This is noticeably needed in places wherever folks are not equipped or authorized to see their probable or worth (Powell & Geoghegan, 2005). A social worker will stand beside these who are not able to stand for themselves and carry the considerably-wanted interest and methods required to assistance guideline those people in want towards a way of prosperity.

Think Globally, Act Domestically (#11)

There are lots of ways in which globalization could increase methods all more than the globe. The phrase assume globally, act domestically retains two enlightening connotations that deliver answers to some of the most outstanding difficulties linked with globalization. , and what social workers and Concentrating globalization back again to the neighborhood workings of the San Joaquin Central Valley is is highlighting the agricultural relevance of exportation. The ethics of the social work follow have advanced with globalization to now include marketing of basic welfare to societies each at the neighborhood and worldwide level (Polack, 2004).

Imagine globally, act regionally as it pertains to social staff is composed of the education and expertise received by international experiments and cultural variety teaching. Imagining domestically in this context has two meanings. The initial refers to the neighborhood populace of immigrants and how social personnel can teach them selves on the cultural values and tactics of these specific shoppers. The clients will greater realize success if they are understood and partake in interventions that much better fit their cultural identification. The other connotation of imagine globally, act locally pertains to the initiatives of social employees internationally. It is important that social personnel comprehend the techniques of cultures they are performing with on a world scale and be cognizant of not pushing American beliefs into their culture. know-how transfer, the labor sector, and cultural awareness

Social function on a world wide scale is an crucial principle to think about as the populace grows more substantial, organizations unfold their enterprises farther, and cultural competency of social staff extend deeper. Although globalization has served drive a number of kinds of breakthroughs all through out the world, there are numerous drawbacks in the techniques globalization affects indegenious populations. Globalization is not always bad a detail if regulations and regulations were considered and fulfilled by partnering with reps of each area. As organizations seem to globalize their businesses, they really should also feel domestically about the cultures of the people who dwell there and what ramifications are built with their company intervening in spot wherever they had been their 1st. Social personnel are wonderful advocators for enlightening these organization about the worth of social welfare when capital acquire is what is shading their eyes. The extra social funds developed within these areas and with the gamers in the match Globalization a single working day be a favourable concept shared by all.

References

DiNitto & Johnson (2016). Social welfare politics and public coverage (8th Ed.). Boston, MA: Pearson.

Jordan, B. (2008). Social perform and planet poverty. Worldwide Social Perform. 51 440-452.

Lyons, K (2006). Globalization and social work: Intercontinental and neighborhood implications. British Journal of Social Function, 36, 365-380

Polack, R. (2004). Social justice and the international economy: New issues for social get the job done in the 21st Century. Social Function, 49, 281-290.

Powell, F., & Geoghegan, M. (2005). Reclaiming civil society: The long term of worldwide social work. European Journal of Social Operate, 8, 129-144.

Economic Phenomenon as Globalization Essay

CHAPTER 1 INTRODUCTION

1.1 BRIEF

Globalisation is an economic phenomenon that has marked itself on a worldwide scale. Among the different definitions that defines globalisation a simple one would be the movement of goods, services and capital due to an increase in trade and investment in many countries around the world. Movement of goods, services and capital has always taken place but advance in technology and reduction of barriers has made trade and investment more flexible. One major advantage of globalisation is that the increase in liquidity of capital allows investors in developed countries to invest in emerging countries. There is no doubt that during the past years, globalisation has contributed to the IT boom in many countries such as India, UK and Australia amongst others. This rapid growth in this sector has contributed to the economy of their respective countries and is now viewed as an important pillar for economic growth. Every country depends on its industrial strength for economic stability. On the other side, the industries depend on investors either local or foreign for organisational stability. Investors from developed countries mainly invest in Business Process Outsourcing activities which have contributed to the expansion of the Information and Communication Technology sectors. Call centres are a growing part of the customer-related services industry in many countries and it is expected to expand as many organisations outsource their services. In his article, Malcom Higgs (2004) defined the call centre as “offices established by organisations to deliver services remotely over the phone and thus replacing the need for face-to-face interactions with customers and significantly shifting the economics of service delivery”. This concept has been adopted by many organisations to fulfil strategic roles such as telemarketing, financial service transaction and customer service and support. Managers whose organisation is involved in the customer-relation services through call centres face many challenges since their operations are capital intensive, there should be continuous investment with the rapid change in technology and above all they are responsible for the large number of employees that usually work in different shifts. Research made on the call centre industry has proved that this sector attracts a large working force mainly composed of unskilled young workers who have just left college. The strategies adopted by managers to recruit a mass of potential candidates is motivating these workers by using the right word such as “ there are exciting opportunities being call centre operators”, “interesting salary” or “ previous job experience in this field is not mandatory”. The aim of many organisations that have adopted the call centre concept is to improve customer service which will in turn increase customer satisfaction. However, if managers do not invest in customer training the aim of the organisation will not be achieved. Moreover, even if the call centre industry brings an important contribution to the economy, many researches have revealed the “dark side” of this sector. It has been given the status of “electronic sweet shops” (David Holman 2002) where agents’ work is very demanding both physically and mentally with a routine work, low wages and little opportunity for career development. These factors have proved to have an impact on the well-being of the agents such as on their health and on their performance at work. However, other factors either internal or external to the job which will be discussed in Chapter 2 also have shown to have an effect on the health and the work of the agents. Hence tackling the problem at the source is the best way to improve employee well-being, satisfaction, motivation and reduce the high turnover rate that the sector has experienced over the past years.

1.2 Aims and objectives

Ø The challenge of attracting and retaining call centre employee is significant to ensure the stability and growth of the organisation. The aim of this study is to examine different factors internal and external to the job that impacts on both the well-being and work performance of agents involved in outbound and inbound call centres which in turn contribute to the high turnover rate, absenteeism within that sector. The main objectives of this study are firstly to determine to what extent factors internal and external to the job impacts on the well-being and performance of agents. Proper correlations and test will be carried to determine the relationship between what was found in literature review and the information gathered through my investigation in the two call centres. Moreover, emphasis will be laid on personality traits and test will be performed to check if there is a significant relationship between level of control and personality traits. Finally, adequate recommendations with respect to the findings taking into consideration different provisions made under different laws namely labour laws and Occupational Safety and Health Act 2005.

1.3 Plan of the research

This exploratory research is divided into 5 chapters. This chapter includes of a brief introduction of the research and the research aims. It also elaborates the contribution of globalisation in the rapid growth of BPO industry. Chapter 2 comprises of the literature review which is one of the most important chapter of this dissertation for findings should be supplemented with academic support. Various factors such as nature of work, physical environment, personality traits, quality of work life, work-family conflict, and social life amongst others are discussed. Chapter 3 consists of the methodology and the steps taken in carrying this quantitative study. It explains the various methods that can be used to conduct the research and why a questionnaire survey was used to collect data. Chapter 4 consists of the analysis of the data collected. Chapter 5 consists of the discussion based on the different test that have been conducted Chapter 6 consists of the recommendation and the conclusion

CHAPTER 2 REVIEW OF LITERATURE

The call centre industry is among the most important economic activities that has experienced a rapid growth over the last few years both with the increase of new information and communication technologies (David Holman et al 2002). Lynn Holdsworth (2002) argued that this rapid growth is due to the altering need of both the business and the consumer. Furthermore she added that to be able to meet the demands and the expectations for a ‘24-hr electronic society’, the need for ‘service-based’ call centres is essential. However, other researchers have found that call centres have become a vital element of the majority companies’ marketing and customer service strategies for bigger, better, faster and even more effective communication (Olukemi et al 2009). There are various benefits that a call centre can offer to an organisation and these were listed by David Holman (2002) as follows: it reduces the price of active functions, upgrade the service facilities offered and opportunity of income generation. On the other side, the rapid increase of call centre has been accompanied by a major challenge in attracting and retaining employees and Olukemi (2009) estimated that for the ‘56,000 call centres in the USA, there is roughly 3.07 million agents’ which represent quite a significant amount of employees in this sector. However, Mathew Crome (1998) claimed that for a call centre to survive on the market and to prevent high turnover within the organisation, different strategies should be adopted such as get better customer service, hire experienced and motivated person to work and above all provide an adequate working environment. Within this literature review, different factors both internal and external to work will be discussed concerning an employee’s well-being and performance in call centres. Internal Factors

2.3 Nature of work

According to A.Dawson (2002), the nature of any particular work should be describe by its ‘objectives’ character. This consist of its physical environment, where most of the work would take place, rewards and compensation system, number of working hours amongst others. She further added that putting this system in place will not only give appropriate information to any person who is not familiar to that field but also help him/her design a mental framework of the nature of that kind of work and readily compare it with other types of job. The ‘objectives’ character within the call centre industry will be describe below however giving full description of both the nature of the work, the working and physical environment will probably not provide sufficient understanding of the experience of working in it. The Business Process Outsourcing Industry has for long been indulged in different activities such as: payroll administration, processing of receivables and payables, document and data management, financial analysis, web design, multimedia, software development, outbound and inbound call amongst others. However, this research will be based mostly on call centres involved in ‘outbound’ and ‘inbound’ call. Inbound agents take calls from customers while outbound agents phone up customers themselves. The main duty of the call centre agent is to communicate with customers via the telephone to serve various purposes for example, providing detailed information of commodities, marketing, taking orders etc (J.Wegge et al 2006). The call centre work has been judged to be neither difficult nor challenging but easy as everything is script. However Holman (2002) rejected that argument since earlier studies have proved that the work of a call centre agent is very challenging and J.kennedy (2008) further added that due to the nature of the work, it has been given a status of high-stress environment with high turnover rates. The job is challenging as agent’s should be able to carry out their task perfectly, performing synchronized subtasks such as using the communication skills to take a call, manoeuvring a keyboard to enter the necessary information and speaking to the customer. Performing these synchronized subtasks take additional time causing customers to wait for long which subsequently affect their satisfaction. Hence the agents have to perform the task quickly under high time pressure and sometimes attending approximately 25 calls during an 8 hour shift. However, the number of call varies according to the objectives set by the management. Furthermore, the agents are trained to be courteous, helpful, and pleasant even if they are verbally abuse or harassed by the customers. This require them to learn how to control their emotion and not express what they really feel, which is referred to as ‘emotional dissonance’ (J.kennedy et al 2008).

2.3.1 Working environment

Various aspects based on customer service work in call centres has caused the call centre industry to be considered as an ‘‘electronic sweetshops” (David Holman 2002) due to the tiresome, repetitive, high demand and stressful nature of the job. Mc Guire( 2009) claimed that other factors such as meagre wage, routine work, little or no autonomy in the work and poor social support also contribute to that poor status given to that industry. J.Wegge (2006), argued that these tasks restrict an agent to be inventive, practical and share their views and opinions but rather act like a program machine resulting in low work motivation, health problems and high turnover rate The introduction of new and advance technologies has contributed to the rapid growth of the call centre industry bringing along the use of more sophisticated telephone, computer systems or softwares and tailored monotonous, repetitive work practices. The implementations of these new technologies restrict the agents to participate in the work in terms of the application of their skills, knowledge and abilities gain for the particular task or job. They only have to follow the procedures that have been provided to them. Even if scripting reduces the need for an agent to think and helped them to make their work quickly, studies have proved that too much scripting is positively related to emotional exhaustion. To this, S.kumara (2010) argued that since many organisation have a high level of ‘‘structural labour division” this allows them to pay their employee a meagre salary as the tasks being simple and basic do not need qualified agents since any unskilled agent can do the job after going through a short period of on-the-job training. On the other side, the level of management control and performance screening has increased with the introduction of telephone and computers limiting an agent’s control over his work. Feedback gained through performance monitoring, can have an effect on the salary of an employee which in turn can affect the latter’s well-being at the workplace. Being under close supervision during a whole day shift can cause frustration, tension, anxiety and even increase the level of stress. According to a review by McGuire (2009), each employee has its own opinion on the working environment; some will find a high demand working environment challenging for them to put extra effort by increasing performance and level of motivation while others will find it stressful. This is of vital importance as it will have a positive impact on the way an employee will organise his work and manage the level of stress. Moreover, with the increase of stress related illness such as anxiety and cardiovascular problems amongst others and its effect on performance and low job satisfaction, the well-being of an employee has been given much consideration. Study showed a positive relationship between the provision of a secure and compassionate working environment and improvement of employee’s psychological and physical well-being.

2.3.2 Physical Environment

Through different literature reviews based on call centres it has been seen that much emphasis has been laid on different factors within the work environment that are causes of stress, low job performance ,job satisfaction and its impact on well-being of the employee. However, less researches has been made on the physical working environment which is considered as a contributing factor. The physical environment forms part of the working environment which Dawson (2002) describes as follows; the ‘environment’ being where most of the job will take place and the ‘physical environment’ being everything that is tangible that is the workspace, the visual display units, chairs, tables amongst others. In their research on well-being of employees within the call centre, the Shepell.fgi Group (2008) found that most of workstations which were ergonomically poor have a negative impact on the agent’s health. Hence if the agent is not fit to perform its duty this will adversely affect his/her job performance of meeting his/her respective targets. That’s where Mc Guire (2009) came forward with an argument that it is of vital importance to analyse the relationship between physical environment’s perceptions and employees’ well-being and performance. Holman (2002) studied the different causes of stress for call centre agents and among the causes illustrated in his study; physical environment was taken into consideration. These include the use of the computer system and the ergonomic design of the system itself but also appropriate design of seats. Ergonomic can be defined as “the application of knowledge of human’s characteristics to the design of systems”, (A.Chandra et al 2009). It has been found that the work station should be well design, correctly fitted and have the appropriate equipments since the agents spend most of their working hours at their work station. Non- conforming ergonomic design of the computer based system and the seats will definitely have an impact on employee health such as visual problems, musculoskeletal disorders and even hearing problems. Visual problems is mainly due to the poor position of the visual display terminal, provision of inadequate lighting, excessive glare, leading to problems like visual fatigue, eye strain, burning eyes and ophthalmic migraines at the end of the working day. Seats which are not ergonomically fit for the agent and repetitive awkward working postures increase the risk to develop musculoskeletal problems usually in the back, shoulders, arms and neck. According to the review of A.Chandra (2009) the risk for an agent to develop muscular fatigue will inevitably increase with the frequency of computer work due to provision of improper computer stations and furniture. Research has proved that agents who work on a full-time basis are more prone to experience higher levels of job, physical environment stressors and musculoskeletal strain than those working on a part-time contract. Poor work station design together with environmental factors can distract the employee and affect “manual dexterity and cognitive ability”. Furthermore, providing inappropriate equipment together with improper working conditions, have an impact on the psychological well-being of the agent which, disrupt comfort and security at the work station. This situation eventually causes an increase in the intention of an employee to leave the organisation. From the health and safety perspective, Mc Guire ( 2009) states that the physical conditions provided to an employee to perform his/her work will affect the employee safety and health perceptions and hence his/her performance and well-being. Hence, when an employee is satisfied with the physical environment provided to work, this will in turn enhance job satisfaction, motivation, performance and the well-being of the worker. However, J.Visher (2007) in her review goes beyond the ergonomic layout of workstations as there are other environmental factors that readily obstruct with the achievement of work objectives.

2.4 Employment in call centres

Nowadays, being employed and having a descent living is crucial for each individual to be able to satisfy our needs which may be material or intuitive. Douglas et al (2006) categorised these needs into four major groups that is, leisure time, earnings, need for prestige and innate drive for work. There has been much debate about employment within the outsourcing industry and Halliden et al 2005, suggested that the employment strategies and procedures vary greatly within call centres since they are not directed using the same approach. It is well-known that this industry is reputed to attract mostly the young working force usually coming straight out of college with no other job experience and lacking the technical skills to work in that field. Halliden (2005) argued that many call centres do not follow all the employment procedures of agents as it should be done. He further added that most of the agents are employed either on a part-time or informal basis usually provided with little training and a meagre wage. These employees are under close supervision and managerial control which finally result in an increase in the number of absentees, high turnover rate, impact on health, performance and job satisfaction. There has been quite a large amount of literature that focused on many factors within the call centre sectors that impacts on the well-being and the performance of the employees. However, Townsend et al 2005, has found that less researches have been made on the recruitment process and the types of employment contracts. It should also be noted that with the variation of the work organisation, managerial styles and the maturation of the outsourcing industry itself, both the recruitment process and the types of contract would have to be reviewed.

2.4.1 Types of contracts

The review of M.Parzefall et al 2010 focused on the different types of existing contracts also known as psychological contracts. It has been found that the perception of psychological contract is related to ‘‘an individual’s belief regarding the terms and conditions of a reciprocal exchange agreement between that person and his employer”. J.Wegge (2006) explained that the difference in the type of employment contract has a positive effect on the level of motivation of an employee. For example, an employee with a full-time contract will tend to have a positive connection with the organisation compared to an employee with a part-time contract. Moreover, having a full-time contract is a sign of job security which can enhance work motivation and well-being especially in an organisation where the level of turnover is relatively high. However, job security does not depend totally on the type of employment contract an employee has but to what extent the employer is fulfilling its responsibility towards the employee ( M.Parzefall et al 2010). Hence the employer should ensure that there exist a reciprocal relation between him and his employee. Furthermore, the breach of a contract from an employer proved to have an negative effect on the trust, satisfaction, commitment, role-performance and willingness to stay within the organisation.

2.5 Personality traits among call centre agents

It has been seen earlier that the call centre has been given a status of high stress working environment with a relatively high turnover rate (J.Kennedy et al 2008). To withstand a work which is very demanding both physically and mentally, finding and choosing the proper candidate is not always an easy task. In her review, M.Nicholls stated that in the outsourcing industry, personality traits of candidates are assessed to match with the selection criteria. To determine if an individual can fit him/her in the present environment and performance within the organisation. In order to be able to assess the personality traits of the candidates, the “Big Five Personality traits” should be taken into consideration (A.Furnham et al 2008). The “Big five personality traits” or the “Five Factor Model” is mainly used in the field of personality research and it aims at proving that every individual has its own personality (A.Aluoja et al 2009). In her study on the Five Factor Model, Martina (2010) stated that there is a connection between the different personality traits and the well-being of an individual such as ‘life satisfaction’. This model was developed with respect to various individual characteristics and is used in different countries and organisation to be able to illustrate the structure of the personality of each individual. However, it should be noted that the way personality is assessed with respect to the “Five Factor Model” differs from each organisation and the business they are involved into (Martina 2010). According to O. Sawyerr (2009), this Five Factor Model has been used within the call centre to demonstrate that people with different personality adapt and adhere themselves to different factors such as the nature of the work, the working environment and the physical environment and even to the stress related to that kind of work. The model consists mainly of five dimensions of personality such as:

  • Conscientiousness which refers to an agent being a hard worker, responsible and careful.
  • Agreeableness means to be trust worthy, flexible and cooperative.
  • Emotional stability means to be stable, tolerant with respect to stress.
  • Extraversion refers to sociable, enthusiastic, outgoing.
  • Openness means creative, intellectual and liberal.

2.5.1 Personality traits with turnover and absenteeism

Many studies made on call centre sector came forward with the same statement of an industry with a high rate of turnover and absenteeism and according to Sawyer (2009), identifying the different personality traits of agents who proved to be successful in the outsourcing working environment might be an important contributor of giving the call centre a better image and status in other literatures. The main objective of most call centres is to offer a high quality customer service and much emphasis is laid to attain this objective. Hence, there is no doubt that conscientiousness will be a desirable personality trait that managers will expect a candidate to have. Research has proved that an agent who is conscientious will inevitably give a better service and adapt himself/herself to that kind of working environment rather than a candidate who lack all these traits. An individual, who is conscientious, set clear goals, put extra effort to perform well and to do things right no matter whether the work is characterised as extremely demanding both physically and mentally. Therefore, it can be said that conscientiousness is directly correlated to job performance and job satisfaction among call centre agents with that personality trait. Furthermore, with respect to absenteeism and intention to quit the organisation, researches have proved that conscientious individuals are more bound to rules and have a feeling of “appartenance” to the organisation hence they are less likely to show any behaviour of quitting their job. Literature has shown that agents during an 8 hour shift work have to deal with different kind of customers and usually those who are extremely demanding. To be able to cope with such a demanding working environment, call centre agents who are most suitable for this work should be agreeable and have characteristics like being tolerant, flexible and cooperative. Agents having these particular characteristics will inevitably give better quality service delivery. On the contrary those who are not agreeable will be doubtful. In his review, Sawyer (2009) clearly pointed out that with respect to absenteeism and turnover; agents who are agreeable are more willing to make the best of every situation and to move on with their work even in bad times. However lack of research on this personality trait makes it difficult to draw a concise relationship between these two. Call centre agents have been trained to control their emotion by being polite, helpful and courteous even if they are verbally abused and harassed by customers. It has been mentioned earlier that when agents do not express what they really feel, it is usually known as ‘emotional dissonance’ and with time it ends up to be ‘ emotional exhaustion’. Emotional exhaustion will inevitably cause the agent to be stressed, and have the intention to quit the organisation. However, some agents can adapt themselves to that kind of working environment especially those who have high emotional stability status. Being able to manage their stress will have almost no impact on their performance and well-being. Thus it can be assumed that emotional stability has a negative relationship with absenteeism and intention to quit work. However, those who are unable to manage their stress, who are anxious will be absent from work on a regular basis and will prefer to leave the organisation. Young Sung and colleagues (2009) suggest that extraversion and enthusiasm can be linked. Being extrovert means being talkative sociable, enthusiastic and ambitious. However Sawyer (2009), in his study find out that those who are extrovert cannot usually fit themselves within the call centre environment. As seen earlier, the work of a call centre agent is to communicate with customers via the telephone following tailored and script procedures. The nature of the work involve no face-to-face interaction hence this kind of work will suit mostly an introvert person. Extrovert call centre agent will definitely have a strong intention to move out of the outsourcing industry in order to seek other job opportunities. The nature of work within call centres has been mentioned in many reviews to have an impact on the performance and well-being of agents. Agent who is opened to new experience will be discouraged by script monotonous work which is most of the time under close supervision. Research has proved that these individuals look for new work experience and are willing to grow within the organisation. Furthermore, literature has proved that agents in call centres have no autonomy over their work and hardly have any chance to involve themselves in the work. Hence it can be predicted that there is a positive relationship with an agent of high status of openness to new experience with turnover. These individuals find that their need to grow within the organisation, to be creative cannot be met in the call centre working environment hence they are more prone to leave the organisation and seek for other job opportunities. Different factors within the call centre have an impact on the health of the agents. This will be discussed in the paragraph below.

2.5.2 Burnout

The term burnout has been used in many literatures on call centres with respect to emotional exhaustion and lack of interest towards one’s work. O.Sawyer (2009) defined emotional exhaustion as ‘mental and emotional fatigue and a feeling of being drained of energy’. The stressful nature of call centre, that involves repetitive work and low autonomy usually leads to burnout among employees. However, it has been found that not all employees experience burnout as this vary according to the different personality traits that each individual possess and that personality plays an important role in the development of burnout. It has been mentioned earlier that agents who are conscientious and agreeable have a tendency to experience less emotional exhaustion as they can cope and deal with difficult situations ( A.Bakker et al). However above these big five personality variables, locus of control was taken into consideration. Locus of control is defined as ‘the degree to which people believe that they have control over a wide range of factors in their lives’ (O.Sawyer et al 2009). Locus of control has been found to play a key role in the development of burnout. Studies done on locus of control have shown that there is two different LOC namely internal and external. Agents with an external LOC will have a tendency to believe that everything that happens is a matter of luck or fate and they are usually the one who tend to experience higher level of stress and burnout. They experience a feeling of emotional exhaustion since they feel that they are unable to control their working environment. However, those with an internal LOC believe that there is a strong link between their actions and consequences and they have sufficient control over their working environment. Since they are confident and have their working environment under control, they do not seem to experience any stress or burnout.

2.6 Training

Together with recruitment, training process within call centre has been given little attention. With expansion and maturation of each call centres the need for training has become an important aspect since most call centres focus on quantity and quality of services delivered to customers. However, regardless the type of business the call centres are involved, there is still the need for high performance emotional labour as mentioned earlier due to the stressful nature of call centres themselves. Even if the nature of the work does not involve any face-to-face interaction with the customers, agents should be able to manage the tone of their voice and control their emotions while dealing with difficult customers. Hence appropriate training should be given to the agents to limit any experience of stress or burnout. It has been found through literatures that managers of call centres have a recruitment goal of attracting large amount of candidates. However according to K.Townsend (2007), managers are looking for candidates with appropriate attitude which will match the organisation rather than taking into consideration the technical skills required for the job. He further added that it is good to find candidates with attitude which will match the culture of the organisation. Finding candidates with the appropriate skills that are communication skills, keyboard and computer skills, and the capacity to deal with pressure and perform the task of an emotional labour. Much emphasis is laid on a candidate’s personality than technical skills with respect to emotional labour. Once the recruitment process is over and the appropriate candidate that will fit the organisation is employed, training takes place. The training methods that are used in call centres have some similarities as every freshly employed candidate will undergo a two week on-the job training. The aim of the two weeks training is mainly based on the knowledge of the products or service that the company offers, the different software that the agents should use to perform their task, the policy of the organisation and different communication skills. When the two weeks training is over, the agents are on probation for another one week where a system of ‘budding’ which means that an experienced agent is placed with a new comer. The new agent is under constant supervision and regular feedback is given to the management. Moreover, it has been found that within the call centre industry training given to agents is centred mainly for job proficiency and meeting demands of customer in terms of quality and quantity rather than for career development. As it has been found earlier, the big five personality factors vary from individuals. Therefore, those with personality characteristics as conscientious, agreeableness will adhere themselves to these methods of training. However, those who are extroverts and who are open to new experience would prefer training that will made them grow within the organisation. Hence it can be predicted that training methods is correlated to job performance of the agents.

2.7 Quality of work life

So far in this study, discussion was based on the different aspects of call centres with respect to the nature of the work, working environment, physical environment which can be considered during the selection process. It has been seen that each and every factor mentioned above does have an impact either directly or indirectly on performance and well-being of the agents. Within this section, different factors that affect quality of work life of the agents will be discussed. Connel et al (2009), in their review on Quality of Work Life, stated that it is common to put all call centres in the same basket with respect to the work which has been described as routine, with low skilled workforce and stressful working environment. However, they argued that the main interest is to analyse the job quality which differs greatly from organisation since during the past years there has been a rapid growth and development of call centres all over the world. The quality of work life has been given much attention as it is the key for an employee to be able to improve his personal life through their work and its environment. Therefore in this research, emphasis will be laid on three major factors that may influence quality of work life that it, the content of the job, reward system and the number of working hours.

2.7.1 Job Content

Evidence gained from literature, has shown that even if there has been an increase in “material wealth”, the quality of work life of employees have not changed that much. Instead there has been an increase in the level of stress, rather no job security and no more satisfaction from work (J.Burgess et al 2010). They further added that the quality of work life has deteriorated with change in technology, leading to ‘deskilling’ and ‘alienation’. The concept of ‘deskilling’ and ‘alienation’ is explained by sociologist Karl Marx and is applied to the call centre working environment. Karl Marx defined alienation as a ‘condition whereby workers have no job-satisfaction or fulfilment from their work’. In their study, Burgess and his colleagues found that there is an increase in ‘material wealth’ while quality of work life is still the same. Karl Marx explained that within the actual society, people work for the satisfaction of other needs. It has been seen that call centre agents have no control as they only have to meet the number of calls the organisation has targeted (O.Sawyer et al 2009). He further added that since the agents are alienated from their work increases the rate of absenteeism and turnover. Furthermore, literature has shown that there has been a rapid degradation of work within call centres as the level of skill required has progressively reduced as managers, use ‘ deskilling’ as a method to control the workforce. Braverman another sociologist defined deskilling as ‘the breaking down of the job into its constituents parts to reduce labour cost’. It has been shown that so far within the outsourcing industry; they are still in the Fordism era that is workers perform repetitive tasks that requires little training. Hence they no longer have to employ skilled workers at high rates as unskilled workers can do the job following the procedures which has already been script for them.

2.7.2 Reward System

Compensation in terms of salary, increments accompanied with promotions, and medical benefits amongst others can be considered as motivating factors to make employee perform better and be get job satisfaction since they are rewarded for their effort (M.Azril et al 2010). The call centre industry in literature has been given a reputation of paying the agents with a meagre salary. However, not all employees within the call centre are given the same treatment as not everyone performs the task of an agent. In their review, J.Burgess ( 2010) and colleagues made reference to ‘core’ and ‘peripheral’ workers. ‘Core’ workers are workers who are employed on full-time basis and who have considerable job security, for example managers. ‘Peripheral’ workers on other side are workers who are employed either on a full-time basis or part-time under government training schemes, who enjoy less job security and who are easier to recruit since their skills are common to employment. However, within this study, emphasis will be laid mostly on ‘peripheral’ workers. Since these workers are dispensable and easily replaced, they receive low pay in spite of being unskilled; they are putting extra effort to perform well within the organisation. Many agents have reported that they suffer from high stress that affects their well-being and performance at work with respect to the absence of payment of overtime, inflexible leave arrangements and lack of incentive in terms of rewards to help them to meet their objectives. Furthermore, workplace politics plays an important role in the reward system among employees in the call centre industry. Internal Politics of the organisation has proved to be bad and unnecessary to have a negative impact on the work of the agent which in turn increases the intention to quit their job. Studies have proved that within many organisations, workers have the tendency to stay in groups and protect those within the group while ignoring others. Promotion will be given only to those belonging to that particular group preventing others that deserve to have a promotion for their good performance. Those people usually forget the aims and objectives of the organisation; there is a lack of corporation, poor governance since they don’t abide to the policy and ethical codes of the organisation thus resulting in low performance among the agents.

2.7.3 Working hours

With regard to working hours in call centres, many researches have been done focusing on the effects it might have on work-life balance and health of the employees. The quest for a 24 hour business system and organisational flexibility has lead to a shift from the habitual 8 hour shift work, five working days to an extension of working hours and number of employment days. It has been found that in most call centres vacancy it is clearly mentioned that they are looking for agents who are willing to work weekends and public holidays and who are flexible in their working hours since they may be require to work at night. In her study, J.Connell (2009) argued that with this new system, the need for rosters are important and that ‘unsociable’ working hours have become part of an organisation employment system. Rosters are designed in such a way that there is a system of shift work. The agents are required to start early, finish late and during weekends since the organisation usually work in the time zones of other countries. Hence this lead to an increase in the unsociable hours which are among job requirement in call centres. Researches have found that this system of shift work has an influence on the work-life balance of the agents since they have to spend most of their time at work they are deprived of their social life. Many studies have shown that shift work has an impact on the health of the agents. Most health complaints can be related to the quality of the day sleep after night shift and to a lesser extent to the sleep before morning shift. Health problems that night work can cause are gastro intestinal disturbances as this leads to a change in the sequence in the timing of meals, cardiovascular or neurological disorders.

2.7.4 Circadian Rhythm

A Circadian Rhythm is a major rhythm with regular ups and downs in the 24 hour day. Many systems in the body are very active at certain times of the day and not acting at all on other time of day. Usually most activities happen in late afternoon or early evening for example body ability to produce energy from food is highest in the afternoon and evening. The least activity usually happens in the middle of the night. There are personal differences in circadian rhythm among each individual. Hence this variation in circadian rhythm, may in turn lead to shift work sleep disorder, lack of sleep being a major issue. Lack of sleep will inevitably lead to a decrease in performance, concentration and low motivation of the agent. Moreover, to be able to concentrate and work properly, B.Charbotel (2008) argued that many agents use drugs such as sleeping pills, medication for anxiety or depression or other stimulants and over time become addict to these drugs.

Bullying and Harassment at work

Through the last decade, bullying and harassment have become an increasing phenomenon at work. According to M.Rafferty (2007), even if there has been an increase in awareness and measures taken to prevent bullying and harassment at work, the number of cases reported is still at its highest peak. In her report M.Rafferty defined bullying as follows “repeated inappropriate behaviour, direct or indirect, verbal or nonverbal, physical or otherwise by one or more person against one or others, at the place of work”. Harassment on other side was defined as “any conduct related to sex, race, colour, disability, sexual orientation or any personal characteristic which is unwanted by the recipient” (L.McMahon 2000). B.McCulloch (2010) clearly mentioned in her article that bullying is a form of harassment where there is excessive abuse of power and authority on an individual. Other research has shown that bullies are most of the time those who have been linked to anti-social personality disorder and to childhood abuse. M.Vickers (2009), mentioned that bullies used namely exclusion, breaking promises, constant changes in work procedures, restriction to training and career development opportunities and pressure to complete targets in limited time. Bullying and harassment at work have an impact on both the employee and the organisation. The impact of bullying and harassment on the well-being and health of a worker will depend on its frequency and duration. Employees affected by this hostility, are often vulnerable, upset, humiliated, threatened. These victims over time lose their self-esteem, self-confidence and experience an increase in the level of stress. Long-term repeated hostility effects on the victims can worsen and cause nervous breakdown, depression, anxiety, psychological trauma and even lead to suicide. Bullying has a severe consequence on the organisation as victims tend to absent from work on a regular basis or even leave the organisation since they are unable to work. However, M.Vickers (2009) argued that some characteristics of the organisation contribute to bullying such as “job design, job related stress, internal politics, conflicts, workplace culture and misuse of the organisational procedures”.

External Factors

So far, within this review, emphasis has been laid on the internal factors that have an impact on the well-being and performance of call centre agents. However, other external factors can also contribute to stress; affecting job satisfaction, performance and well-being of the employees. These factors can be classified as follows:

  • Financial stress,
  • Political Instability
  • Family conflict
  • Law

Financial Stress

Many employers depend on the performance of their employees to be able to achieve the aims and objectives of the organisation. However, there are many factors that have an impact on the performance of these employees which in turn have a negative effect on productivity and quality of service delivered. Douglas (2006) argued that any individual work to be able to satisfy one’s needs. M.Masemola (2003) argued that as every individual try hard to achieve their needs and gain ‘financial independence’, the process become more and more difficult due to different factors such as change in economy, political conditions, inflation amongst others. In their review J.Burgess (2010) and colleagues have found that even if the economy has increased in terms of wealth, the quality of work life, the wage of employees has not improved. Other research has proved that many people are facing financial problems that in turn disturb their performance but also creates other personal problems such as family or marital conflicts and even drug abuse. It has been found that people going through financial problem prefer not to talk to anyone about it as they feel that they are losing score in this materialistic world we are living. Moreover, people who are living beyond their means found themselves with additional financial difficulties. This situation will inevitably affect the employee leading to a state of financial stress which is a common phenomenon in the lives of people at every stage of society. M.Ross (2007) stated that external factors have a tendency to add more stress than the internal working environment and it does make employees to be ‘irritable’ and ‘distractive’ during their work. Agents who are not concentrated have poor performance and find that they are unable to meet the targets of the organisation. He further added that those experiencing financial stress will be unsatisfied with the wage that they received. Earlier within this literature, it has been found that within the call centre industry, agents are under close supervision and managerial control. Therefore if an agent is unable to manage the stress from personal problem and from work which is reflected by his/her performance at work, the latter might lose his/her job. Hence, fear of losing once job is another factor that can contribute to the existing stress which in turn has a negative impact on the health of the agent.

Political instability

The call centre industry has been given the status of the most important activity that has a large contribution to a country’s economy. The investors of these call centres both local and foreign while investing in any country take into consideration many factors and political stability is one of them. However, situation of political instability can bring many changes and affect various organisations. M.Aslam et al argued that political instability will affect the organisation in terms of the quality of the products or service delivered as this situation will affect employee behaviour. They further added that these employees usually suffer from mental disturbance and feel anxious and this in turn affect the organisation returns and expansion and hence the financial system of the country. Hence when political instability arises, organisation especially those dealing with foreign clients such as the call centre industry should pay much attention to that situation. In many cases, the organisations find that they should bring changes to their policy and procedures which in turn may lead to an increase in unemployment and a decrease in the salary of the workers. Research has proved that the call centre industry require agents to concentrate on their work and put their full “mental capabilities” therefore political instability can have an impact on the employees such as lack of motivation and concentration, frustration even intention to leave the organisation. Political instability affects the organisation as there is a decrease on returns and with time this situation can lead to downsizing. Moreover, some sociologist, have found that organisations are not the only victims of political instability as society also suffers. Political instability will bring about a change to the norms that govern society and this will have an impact on the employees who form part of the society. Emile Durkheim a sociologist argued that with the rapid economic growth, there has been an absence of norms in society. The absence of norms within a society is called ‘anomie’. He explained that anomie is present when social controls are weak, when moral obligations that constrain individual and regulate their behaviour are strong enough to function effectively. Durkheim argued that the absence of norms allows people to do what they want and they are unable to control themselves. In a situation of anomie, people become greedier, the drive for money can no longer be controlled and they tend to spend more than they have. This finally results in employees having debts, facing financial problems; they are mentally stressed and are unable to respect deadlines which are due to a decrease in performance. Industrial conflicts, marital break-up and high rate of suicides are several indicators of anomie.

Work-Family Conflict

In the present century we are living, research carried out among students who are leaving college or those who are in their final year at the university, have certain expectation when they think about their career. These individual are seeking for jobs that will allow them to balance work and personal life with respect to family (R.Weisman). However, with respect to the call centre industry as it has been discussed earlier it is difficult to have a certain balance between work and personal life due to the number of working hours and numbers of working days ( J.Connell et al 2008). S.Guerts et al (2008) complement the statement made by J.Connell et al (2008) and argued that for most employees balancing work and family is very challenging and failing to do so regularly result in conflicts. Work-family conflict or family-work conflict, are mainly due to job stress and role stress of the employees. These conflicts usually result in health problems, impacts on the well-being of the employee but also increase emotional exhaustion that the latter already has due to the nature of the work and the working environment. It should be noted that these conflicts are not restricted to those who are married with or without children but also single parents and single individuals and do not involve only men since with time there has been an increase in the number of women entering the working force ( O.Karatepe et al 2006). J.Connell et al (2008) defined work-family conflict as “a form of interrole conflict in which the general demands of, time devoted to and strain created by the job interfere with performing family-related responsibilities”. Therefore, S.Guerts et al (2008) have found that it exist two forms of conflicts namely ‘work-family conflict’ and ‘family-work conflict’ which they explained as follows; work-family conflict results mainly from not accomplishing home responsibilities and spending that time to complete work that has been brought home and family-work conflict mean not being able to fulfil responsibilities at work due to family constrains. Both types of conflicts have an impact on the well-being and the health of an employee in the form of anxiety, depression, lack of sleep, lost of trust and frustration. However, it has been found that stress related to work is one of the major causes of work-family conflicts. M.Chu Yu et al (2010) came forward with an argument that women are more prone to face work-family conflicts than men. The role of women within the family has been given much importance. Work-family conflicts result mainly from role demands stemming from one domain which are incompatible with the role demands stemming from another domain due to the ‘triple burden of women’ which consist of work, taking care of children and care of household work. So far within this section, the cause of work-family conflict has been restricted to tension that aroused by conflicting role pressures. However, family-work conflict that is family life interfering with work can result from different situations for example some individual may live in a family where there are regular fights or even if some members of the family are indulged in different curses of society such as drug abuse, alcohol, domestic violence amongst others. These employees suffer from emotional exhaustion, fear, anxiety, depression and psychological strain which in turn have adverse effect on competence and performance. Being unable to perform their tasks, and concentrate on their work and respecting deadlines, these agents with time develop a fear of being dismissed.

Labour law

Labour law has been implemented in almost all countries over the world in order to enable every employee to know what are their legal rights and restrictions under the Employment Rights Act. Law makes provision for the different relationship that an employee has from the time he/she get employed. Relationships between employer and employee, government, trade union and banks which are under the Employment Relation Act. The Employment Rights Act makes reference to different conditions such as the type of contracts, hours of work, remuneration, other conditions of employment for example sick leave, medical facilities and compensation. Most of employees who are employed in local organisation are eligible to benefit from most of the provision made under the Employment Rights Act and the Employment Relation Act under certain conditions. However, many investors especially those involved in the Business Process Outsourcing work with foreign clients sometimes apply the conditions of employment under the labour law of other countries such as the hours of work, remuneration. Hence many employees finding themselves in great difficulties when they are dismissed decide to leave the organisation or in case of accident since they are rarely aware of the benefits they are eligible for. On the other side, amendments made to the labour laws by the government sometimes benefits those who are in the public sector rather than those who are in private one. Hence those employed within the call centre industry which forms part of the private sector find that they are left aside, deprived of their rights and this situation bring along frustration, insecurity among the employees.

Case Study

Mauritius has been viewed as the most successful economies in Africa due to the four pillars of the economy that is sugar, textile, tourism and finance services. However, with globalisation and the fact that both the sugar and textile industry were facing high level of competition on the global market from China and India, these four pillars had to be reviewed as they were not strong enough to ensure the future improvement and expansion of the economy. Hence the Mauritian government, invested in the information technology sector in view to attract foreign companies with a resourceful, low-cost and business-friendly environment and lay the establishment of a fresh pillar for the economy. The name has been amended with time and is now entitle as the information and communication technology sector which comprises different activities such as manufacturing, telecommunication, wholesale and retail trade and business services such as call centres. The Business Process Outsourcing (BPO) activities are the head of the expansion of the ICT sector and represent about 45 % according to the Central Bureau of Statistics. Through the years more and more companies have began to crop up resulting to approximately three hundred according to the Outsourcing and Telecommunication Association of Mauritius. It is estimated that the growth of the BPO industry is 70 % a year and employing a working force of around 100,000 people. From statistics provided by the National Computer Board, at March 2007 the number of employee was 6,960 occupying different job positions half of whom are employed in call centres as teleagents. This proves that there has been rapid growth rate within the sector itself. As every employee in Mauritius, these workers are covered by the Employment Rights Act which has been amended and came into force in 2008. The Act makes provision regarding the agreements between employer and employee, conditions of employment, benefits and among these is the Workfare Programme. The aim of this programme is to help employee who have lost their job for economic reasons for a certain period of time through the provision of job placement. On the other side, the Employment Relation Act which also came into force in 2008 made provision for the formation, registration and recognition of trade union. However, within the call centre industry, there are no trade union organisations. According to the information gathered at the Ministry of Labour, Industrial Relations and Employment Office at Vacoas, cases reported to them by call centre agents are rare. Recently agents from Infinity BPO, Prestige Call Centre and MMS Outsourcing reported that they have not received their monthly salary for three months including their end of year bonus. With respect to special regulations that govern call centres, the officer argued that so far there are no such regulations but with the present situation within the call centre industry, the government will definitely come forward with one. The aim of this study is to analyse how external and internal factors mentioned within the literature review affect the well-being and the performance at work of call centre agent. However, the problem of non payment of salary by employer will not be considered within this study so as not to interfere with the present situation within call centres in Mauritius. For collection of data which will be done through a questionnaire survey, two call centres with a relatively large number of employees involved in outbound and inbound call will be considered. The names of the organisation will be kept anonymous as requested by the Human Resource Managers.

CHAPTER 3 METHODOLOGY

This chapter introduce various methods that can be used to carry out a research. The methods part of any research paper is an important milestone which helps to be able to provide concrete results for decision making process. Furthermore, the results that have been collected can be studied and verified.

3.1 Target population

The Call centre Industry was carefully selected for the dissertation as it was judge that it is a high risk with respect to the impact that ergonomic and psychological hazards have on a call centre well-being and performance.

3.2 Sample design

The sampling design is one of the methods that can be used to collect the data. The advantage of using sampling design is that it serves as an aid to obtain a representative sample of the population for analysis. That is a sample whose characteristics are similar to the population of concern. Taking a sample from a population has various advantages such as: Ø Less time consuming than a census Ø Less costly to administer than a census Ø Less cumbersome and more practical to administer than a census of the targeted population.

3.3 Types of sampling methods

  1. Simple random sampling – Every individual or item has equal from the frame has an equal chance of being selected and selection can be done either with or without replacement.
  2. Systematic sampling – It involves choosing every nth number respondent from a directory.
  3. Stratified sampling – The population is divided into strata like first into male and female and from there the ethnic category.
  4. Cluster sampling – The random selection of group rather than individual for example religious group.

However for this study, two other methods of sampling were used namely judgmental and convenience sampling. Judgment sampling is a non-statistical method of sampling where the units to be sample is selected based on knowledge and/or experience. This method of sampling was used as aim of the study was to lay more emphasis on call centre agents involved in outbound and inbound calls to be able to identify the impact of various factors on their well-being and performance and obtain information from a specific group of people. Hence a more representative sample should be selected to get accurate results rather than using other statistical methods. This method involves handpicking agents from the population within the call centre based on knowledge and judgment. On the other side, convenience sampling another non-statistical method of sampling was used as the target population was selected according to their convenient accessibility and proximity. This method of sampling has been useful during the pilot testing as it has help to obtain basic data and trends with respect to this study rather than using simple random sampling.

3.4 Sample Size

A sample size of 200 agents was selected from a total of 3,615 employees within the call centres industry. This sample consists of agents involved mainly in call handling in order to get accurate results to meet the objective of this study.

3.5 Survey Method

There are two different methods of collecting data namely primary and secondary data collection and for the purpose of this study both method has been used. Primary data include the collection of information through various methods like interviews, surveys and questionnaires amongst others but for this study, only questionnaires were used. Secondary data collection involves data from relevant literature from journals, books and from the internet.

3.6 Data collection design

As mention above, data was collected from agents using a formally designed schedule of questions which was respondent-completed from the sample of the population. The questionnaire was design according to the objectives of the study, people perceptions and attitudes. Among the various types of questionnaire survey, captive group survey was used. This method was used as the survey has targeted only a group of employees within the call centre industry. It should be noted that within the call centre industry apart from call handling, there are other department such as management, IT department etc. The major advantage of using a respondent-completion questionnaire survey is that it is cheaper, quick and relatively anonymous. However as any other method of collecting data do have some disadvantages as it often results in low response rate. When designing a questionnaire for a respondent completion greater care must be taken with the layout and presentation especially if it would be read by untrained people. ‘Closed’ questions, that is questions that can be answered by ticking boxes is ideal for respondent completion survey rather than using ‘open-ended’ questions that was avoided. The questionnaire was divided into different sections in order to meet the objective of this study.

  1. Demographic Profile
  2. About the job
  3. Physical environment
  4. Personality traits
  5. Shift work
  6. Social life
  7. Health concern

3.7 Questionnaire pilot testing

For adequate questionnaire coverage and clarity of the questions, 10 questionnaires were subjected to a pilot test. The questionnaire was then revisited taking into consideration the recommendations made by the pilot-test groups, the objectives of the study and information based on the literature review

3.8 Analysis and interpretation of data

After collecting the data, it must be analysed to make adequate recommendations and conclusions. Before the analysis stage, the data must first be checked for errors, inaccuracy, incompleteness and hence bring the necessary correction through a process called editing. The results of the survey will be used as support evidence to illustrate some of the main findings for the writing up of the research report.

3.9 Limitations

This study is carried out as efficiently as possible to achieve its objectives. However, there are some limitations such as:

3.9.1 Lack of information

Not much research has been done regarding call centres and the lack of information acted as a constraint during the collection of materials for the literature review.

3.9.2 Reluctant to co-operate

Questionnaires distributed within the two call centres were either returned blank or responded partly. Many have argued that they do not want to disseminate information about their working environment as they fear to encounter problem with the management. They have been informed that management was aware about the ongoing survey within the organisation.

3.9.3 Time consuming

Time was a limiting factor. It was only possible to meet some of the agents when they were about to start their shift and administration of the questionnaires was difficult due to the lack of time. Questionnaire was judge to be too long and time consuming

Degree of truthfulness

The analysis of the data was based on the truthfulness of the respondents. The accuracy of the results will only depend on the extent to which the agents give correct and true answers.

3.9.4 Lack of experience

Lack of experience can act as a constraint to be able to conduct the study in the best possible way. Some issues may not be considered or ignored in this study that experience researcher will be aware of.

CHAPTER 4 DATA ANALYSIS

An analysis is a systematic approach to problem solving. The analysis of the data was made using SPSS to be able to draw bar charts, pie charts and tables. The analysis was based upon data collected and SPSS was used to be able to draw bar charts, pie charts, tables and to perform different test that have been judged to be necessary within this study.

4.1: Demographic Profile

Valid

Frequency

Percentage

Gender

Male 45 36 %
Female 80 64%

Age group

18-25 94 75.2%
26-35 29 23.2%
36-45 2 1.6%

Marital

Status

Married 20 16%
Single 105 84%

Education Level

CPE 1 .8%
SC 20 16%
HSC 104 83.2%

Income

5,000-15,000 125 100%

Job Position

Outbound 48 38.4%
Inbound 77 61.6%

Table I

1. Gender of respondent

The above table shows the percentage of Male and Female. From the 125 respondents, 64% were Female and 36% Male. The results clearly shows that Female are present in large number in the call centre industry compared to Male.

2. Age group of respondent

From the results illustrated in the above table, it is clear that the working force within the call centre is relatively young with a percentage of 75.2% for 18-25, 23.2% for 26-35 years and only a small percentage of 1.6% representing those within 36-45.

3. Marital status of respondent

The results show that a relationship can be derived between the young working force and the marital status of the respondents. Most of them, i.e. 84% of the sample taken are single while only 16% are married.

4. Post Occupied by respondent

Earlier within the literature review, it has been mentioned that emphasis will be laid on call centres mainly involved in outbound and inbound calls. From the data collected during the survey in two call centres, it has been noted that the majority are involved in inbound calls, i.e. 77% and only 38% are involved in outbound calls.

5. Month/Years of service

With respect to the months/years of service within the call centre, 51.2% of the agents indicated that they have been working between 3 months and 1year. 40% respondents were there between 1 and 3 years and the rest representing 8.8% have been working for a longer period (4-6 years).

6. Highest level of education achieved

Qualification of the respondents was determined by the highest education level they achieved before entering the world of work precisely the call centre industry. The distribution of education level is clearly represented in the frequency table. The majority of the respondents entered the working force after the HSC (Higher School Certificate) while the rest with their SC (School certificate) and CPE. The above results prove that the call centre industry attract mostly a young working force usually coming from college with no job experience.

4.2: Nature of work

4.2.1: About the job

Figure 4.1 A variety of questions were asked to the agents during the survey. Among the different sections within the questionnaires, nature of work was analysed. Respondents had to choose from Agree to Neutral. To facilitate data entry, each was given a rating: 1 for Agree and 5 for Neutral. The above bar chart illustrates the answers of the respondent pertaining to different categories. With respect to their skills, most of them agreed (60%) that their present job allows them to make good use of their skill and abilities to perform their respective task. 30.4% strongly agreed with that statement while 7.20% and 2.40% disagreed. Another factor that was analysed was the amount of work. According to the results obtained, there were diverging opinions. While 37.6% agreed that the amount of work they were expected to do was reasonable, 28.8% disagreed as they judge that the amount of work allocated to the agents during their respective shifts was above expectation and at the end of their shift they were unable to complete all the work. This in turn results in an accumulation of work the next day. Different researches made on call centres have proved that it is referred as tiresome, monotonous, high demanding and stressful. To confirm this statement the question was asked to the agents. From the results illustrated in the above bar chart, 49.6% of the respondent strongly agreed that their work satisfied all the criteria mentioned within literature reviews based on call centres. Compensation with respect to the salary they received was also analysed. The relationship between the amount of work allocated during a shift and the amount of money paid was taken into consideration before answering this question. 52.8% of the respondent strongly disagree that they were paid fairly for their work. Some of them argued that they work more than expected, they give all their best to complete their work but in return received a meagre salary. Training was viewed as an important aspect within the call centre industry. After having been selected and since most of the employees are new in this field, proper training should be given to them. Most of the agents agreed that they receive the training they need to be able to do their job well. According to them, training was given during the first two weeks to explain the aims and objectives of the organisation, the type of activity they are indulged in and to get familiar to the process. Further to these two weeks, the agents are given one additional week known as “on-the-job training” where they are given the opportunity to apply the knowledge gained. The agents were asked whether they were given adequate opportunities for professional growth in the organisation. 34.4% disagreed with this statement while 28% agreed. Those who disagree were in the organisation not more than 3month-1year. However, among the 28% who agreed, they were mostly those who had been working for more than 1 year. Some of the agents argued that the organisation’s policies for promotion and advancement are not always fair since favouritism is a common issue. Others further added that this system contribute to the high turnover level in the call centre industry and explains the fact that most call centres are constantly recruiting.

4.2.2: Opinion of respondent about the job and working environment

Figure 4.2 To conclude this section, the agents were asked to give their personal opinion regarding their job and the work environment as being secured and compassionate. The majority gave a neutral answer for this question. A chi-square test was performed in order to determine the possible relationship between gender and opinion about the working condition and environment. Ho: Gender is not associated with opinion about working environment H1: Gender is associated with opinion about working environment

Table II Chi-Square Tests

  • alue
df Asymp. Sig. (2-sided)
Pearson Chi-Square 9.199a 4 .056
Likelihood Ratio 8.901 4 .064
Linear-by-Linear Association 1.387 1 .239
N of Valid Cases 125
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 5.04.

Table III Job and work environment * Gender of Respondent Crosstabulation

Gender of Respondent Total
Male Female
Job and work environment agree Count 5 9 14
% within Gender of Respondent 11.1% 11.3% 11.2%
strongly agree Count 10 4 14
% within Gender of Respondent 22.2% 5.0% 11.2%
disagree Count 6 18 24
% within Gender of Respondent 13.3% 22.5% 19.2%
strongly disagree Count 5 10 15
% within Gender of Respondent 11.1% 12.5% 12.0%
neutral Count 19 39 58
% within Gender of Respondent 42.2% 48.8% 46.4%
Total Count 45 80 125
% within Gender of Respondent 100.0% 100.0% 100.0%

From the above chi-square test table, it can be noted that the chi-square statistics is 9.20 with an associated p-value of 0.56. Given that p> 0.05, H0 is not rejected. Hence a conclusion can be made that the association between gender and opinion on working environment is statistically significant. From the cross-tabulation table, it can be seen that opinion of respondents varies with respect to gender. While 22% of Male respondent agree that the working environment can be defined as secured and compassionate, only 5% of the Female respondent agree. On the other side, while 23% of the Female respondents disagree with the statement only 13% Male also disagree. The majority of the respondents whether they are male or female preferred to give a neutral response to that question.

4.3: Physical environment

Figure 4.3 Physical environment plays an important role in the well-being and performance of the agents as previously mentioned within the literature review. Different questions were asked to the agents such as:

  1. Work surface was analysed and 62.4% of the respondent agreed that the amount of space allocated to them to perform their task was sufficient. On the other side, approximately 13.6% of them disagreed with this statement.
  2. Condition of the chair taking into consideration the ergonomic factors and standards there was analysed. 40% disagreed as their chair was neither in good state nor were they ergonomically fit for them to perform their work. However, not all respondent shared the same opinion as 36% agreed that the chair provided to them was in good repair and was in accordance to standards.
  3. Position of Visual Display Unit terminal, keyboard and mouse was also analysed since it is among the different factors within the physical environment that can impact on the well-being of the agent. Similar to opinion on the condition of the chair, opinion with respect to the VDU also varied. 33.6% agreed with its position as they judge that it is in norm with the ergonomic regulation while 47.20% disagreed and complain that due to the inappropriate position of the VDU they suffer from occupational stress.
  4. General lighting system was also assessed and here also opinion varies. 38.4% agreed that the lighting system was appropriate while 44% of the respondent argued that the lighting system was poor, the balance between natural and artificial light was not maintained and this created glare that prevented them to perform their work correctly.
  5. With respect to the ventilation system, the majority agreed (85.6 %) that it was well maintained.

4.4 Personality traits, level of control and burnout

4.4.1: Personality trait

Figure 4.4 Personality trait of the agents was taken into consideration and analysed with respect to their level of control over their work and working environment. Hence agents were asked to mention the personality trait that bestdescribe them individually. The above bar chart shows the results for the 125 respondents irrespective to their gender. However, further analysis will be done to test whether the above statement can be accepted or rejected.

4.4.2: Level of control

Figure 4.5 The above bar-chart gives an indication of the level of control with respect to different personality traits. Openness to new experience personality trait showed to have a high percentage with respect to level of control. 44% of the respondents replied that they have an average level of control and 36% argued that their level of control was low. Opinion of respondents varies according to the different personality traits. Hence, to test whether there is a correlation between personality traits and level of control over one’s work among agents a chi-square test was performed. The result is illustrated in Table I below:

Table IV: Personality traits * Level of control Cross tabulation

Level of control Total
Strong average Low
Personality traits conscientious Count 9 5 11 25
Expected Count 6.0 8.2 10.8 25.0
agreeable Count 6 7 10 23
Expected Count 5.5 7.5 9.9 23.0
emotionally stable Count 7 5 7 19
Expected Count 4.6 6.2 8.2 19.0
Extrovert Count 6 6 7 19
Expected Count 4.6 6.2 8.2 19.0
openness to new experience Count 2 18 19 39
Expected Count 9.4 12.8 16.8 39.0
Total Count 30 41 54 125
Expected Count 30.0 41.0 54.0 125.0

Table V Chi-Square Tests

  • alue
df Asymp. Sig. (2-sided)
Pearson Chi-Square 13.385a 8 .099
Likelihood Ratio 15.705 8 .047
Linear-by-Linear Association 2.669 1 .102
N of Valid Cases 125
a. 2 cells (13.3%) have expected count less than 5. The minimum expected count is 4.56.

H0: Level of control is not associated with personality traits H1: Level of control is associated with personality traits From the above table, it can be noted that the chi-square statistics is 13.4 with an associated p-value of 0.99. Given that p> 0.05, H0 is not rejected and a conclusion can be made that the association between level of control over one’s work and personality traits is not statistically significant.

4.4.3 Burnout

Figure 4.6 Figure 4.3 shows that the opinion of the respondents with respect to feeling of burnout from work varies greatly with 37% who disagree and 32% agree. A Pearson Correlation was made to determine whether there was a relationship with personality traits and feeling of burnout. The table below shows the result:

Table VI Correlations

Feeling of burnout Personality traits
Feeling of burnout Pearson Correlation 1 -.031
Sig. (2-tailed) .728
N 125 125
Personality traits Pearson Correlation -.031 1
Sig. (2-tailed) .728
N 125 125

Since the Pearson’s r value is -0.31 it can be concluded that there is little or even no association between feeling of burnout and personality traits. The p-value also confirm the above statement since the Sig (2-tailed) value is greater than 0.05.

Table VII Level of control * Feeling of burnout Crosstabulation

Feeling of burnout Total
agree strongly agree disagree strongly disagree
Level of control Strong Count 9 9 11 1 30
% within Feeling of burnout 22.5% 25.0% 23.9% 33.3% 24.0%
average Count 10 11 19 1 41
% within Feeling of burnout 25.0% 30.6% 41.3% 33.3% 32.8%
low Count 21 16 16 1 54
% within Feeling of burnout 52.5% 44.4% 34.8% 33.3% 43.2%
Total Count 40 36 46 3 125
% within Feeling of burnout 100.0% 100.0% 100.0% 100.0% 100.0%

4.5: Shift work system

4.5.1: Circadian Rhythm

Figure 4.7 It was observed that within the call centre industry there is a need for a 24hr running business. Hence to be able to deal with this system, shift work should be implemented. However it has been noted that the shift work system is designed according to other countries working hours. Therefore, the agents work on a non-standard shift system which usually varies such as 10am-7pm/ 11am-8pm/ 5pm-2am. Through the literature review it has been discussed that shift work has an effect on the CR of an individual. So it was important to know whether the agents have ever heard about it. The above pie chart illustrates the results. 74% of the respondents did not know about the CR whereas 26% of the respondents have either read or heard about it briefly. None of them had a concise knowledge of the subject

4.5.2: Circadian Rhythm Sleep Disorder

Figure 4.8 CR Sleep Disorder results in one of the factors illustrated in the above bar chart such as insomnia sleep loss and sleep deprivation. Insomnia was not a major problem among the agents as 84.8% answered ‘No’ while 14.4 % ‘Yes’. Sleep loss was considered to be a major issue as 75.2% of the respondents complained of sleep loss due to shift work. Sleep deprivation was a result of rotary shift which means that some agents complained that they do not have a fixed shift. Sometimes if they have been doing for instance a shift 5pm-2am, next day they might be starting a shift at 10am-7pm. However, results for sleep deprivation shows that opinion differs as 50.4% said Yes and 49.6% said No, because this rotary shift system is rare and applied only when there are backups and when deadline are not respected. The Pearson Correlation below was made with respect to the knowledge of agents about CR and the different CRSD.

Table VIII Correlations

Circadian Rhythm Sleep deprivation ( CRSD) Insomnia (CRSD) Sleep loss
Circadian Rhythm Pearson Correlation 1 .050 -.039 .176*
Sig. (2-tailed) .582 .667 .050
N 125 125 125 125
Sleep deprivation ( CRSD) Pearson Correlation .050 1 .088 .171
Sig. (2-tailed) .582 .330 .056
N 125 125 125 125
Insomnia (CRSD) Pearson Correlation -.039 .088 1 -.028
Sig. (2-tailed) .667 .330 .754
N 125 125 125 125
Sleep loss Pearson Correlation .176* .171 -.028 1
Sig. (2-tailed) .050 .056 .754
N 125 125 125 125
Correlation is significant at the 0.05 level (2-tailed).

The different CRSD was analysed and it was observed that there is a positive relationship between knowledge about CR and sleep loss (r= 0.176). Since the Pearson’s r value is closer to 0, this means that there is a weak relationship between these two variables. A change in knowledge about CR is not correlated with changes in sleep loss variable. Furthermore, the p> 0.05 (0.50) confirms that there is no statistical significant correlation between these two. The same applies to the relationship between knowledge about CR and Sleep deprivation.

4.5.3 Intake of stimulants

Figure 4.9 To be able to concentrate and work properly, B.Charbotel (2008) argued that many agents use drugs to relieve sleeping problems after/ during a shift. The result above shows that intake of caffeine is more popular among agents representing 58% of the respondents, followed by 32% agents who take sleeping pills and about 10% used stimulants.

4.5.4: Frequency of intake

Figure 4.10 With respect to what they intake to relieve sleeping problems the frequency of intake was also analysed. A simple count was made and the frequency of intake was divided into occasionally, frequently and rarely. Ø 29 agents take caffeine occasionally and 44 take it frequently. This represents the high level of consumption of caffeine to be able to cope with their shift. Ø 19 agents take sleeping pills occasionally, 5 frequently and about 16 agents take them rarely. They argued that if sleeping pills are taken frequently, over time they will become addict to those drugs. Ø The frequency of intake of stimulants was less compared to sleeping pills and caffeine. Only 2 agents take them occasionally, 3 frequently and 7 rarely.

4.6: Social life

4.6.1: Work-life balance

Figure 4.11 The present section asked different questions with respect to social life of the agents. The result from the survey is illustrated in the pie chart. 28% of the agents agreed with the statement that the number of working hours helped them to maintain a balance between work and personal life as they argued that their shift ends up earlier than others and they had enough time to balance both. However, 42% of the respondents strongly disagreed with the statement as firstly the number of working hours only allowed them to go back home to have some sleep and wake up to come to work. These agents are mainly those starting their shift at 11am or 5pm.

4.6.2: Family responsibilities

Figure 4.12 Shift work causes a major problem for the family of the agents as 50% of the respondent agreed with this statement. As mention above, agents said that they were at home to get some sleep and wake up to go back to work. Most of them are unable to dedicate some time to their family, to go out with them or are even absent on special events because of their work. 31 % disagreed since they are relatively young and family responsibilities are not a major issue for them. The number of working hours was not a burden as the most important was that they were able to get some money by themselves. Literature has shown that women are more prone to face work-family conflict. Hence to test whether this statement is true or false for this study, a direct relationship was analysed whether female were facing family problems due to work shift as compared to male. The result is illustrated in the table below:

Table IX Work-family Conflict * Gender of Respondent Crosstabulation

Gender of Respondent Total
Male Female
Work-family Conflict agree Count 5 15 20
% within Gender of Respondent 11.1% 18.8% 16.0%
strongly agree Count 20 42 62
% within Gender of Respondent 44.4% 52.5% 49.6%
disagree Count 18 21 39
% within Gender of Respondent 40.0% 26.3% 31.2%
strongly disagree Count 2 2 4
% within Gender of Respondent 4.4% 2.5% 3.2%
Total Count 45 80 125
% within Gender of Respondent 100.0% 100.0% 100.0%

Out of the 125 respondents, 42 Female i.e. 53% strongly agree that they face family conflict due to shift work while 20 Male (45%) strongly agree that they have family conflict. Thus it can be concluded that Female respondents, were more likely to have work-family conflicts than Male respondents. It can also be noted that 40% of Male respondents disagree with the statement that shift work cause work-family conflict and only 27% of the Female respondent also disagree. However, going through the cross-tabulation table, it can be observed that there is a direct relationship between work-family conflict and gender especially among female respondents.

4.6.3: Social Commitment and Leisure

Figure 4.13 The shift schedule most of the time make it difficult to organise social commitments and have some leisure time. The above chart shows the opinion of the respondents: 61.6% of the agents agreed with this statement as they argued that working in call centres is not an easy task especially the numerous working hours, days or even the fact of working on public holidays. Hence it is difficult for them to indulge themselves in any social activities and have some leisure time. They further argued that even when they are given a day off, they use that time to have some rest and be with their family. They are deprived of external social life and rely mainly on the social life they have at work among colleagues. Once again those who disagreed (20.8% of the respondent) are mainly those involved in the morning shift or those who are on ‘campaign’ which allowed them to work only 5 days a week.

4.6.4: Work-family conflict

Figure 4.14 Work-family conflict has been considered as an external factor that can have an impact on the well-being of an agent and also of the performance. However this statement was taken from researches made on call centres. Hence a question was asked to the agents and 46.4% disagreed with that statement as they do not face family conflict due to their work and this in turn does not impact on their concentration and performance.

Table X Correlations

Work-family Conflict WFC-Impact on performance/ concentration
Work-family Conflict Pearson Correlation 1 .021
Sig. (2-tailed) .820
N 125 125
WFC-Impact on performance/ concentration Pearson Correlation .021 1
Sig. (2-tailed) .820
N 125 125

4.7: Health problems

4.7.1: Causes of stress and stress level

Figure 4.15 The call centre environment is often referred as a stressful one. It was important to analyse the level of stress and their causes. The respondents were asked to rate their level of job stress and from the results above, 29 agents rated their stress level as severe. They linked that with the volume of work they were expected to do during their shift. Concerning the stress caused by the volume of work, 11 agents suffered from moderate level of stress, 5 suffered from extreme stress and only 1 suffered from mild stress. The nature of responsibilities was also among the major causes of stress among call centre agents. However compared to volume of work, only 7 agents suffered from severe stress level while 20 agents complained of moderate stress level. Physical environment can also be a contributing factor to job stress. The above results show that only a few agents complained of stress due to physical environment. 8 agents rated their stress level as moderate and 6 agents rated as severe. Apart from the three factors mentioned, some agents related their stress level to other factors. They were asked to specify but none of them did. The bar chart shows that most of them complained of moderate stress level because of other factors either internal or external to the work.

4.7.2: Occupational health problems

Sleep loss

Symptoms

Sometimes

(%)

Frequently (%)

Never

(%)

Angry or irritable 65.6% 5.6% 28.8%
Tired upon awakening 73.4% 22.4% 4%
Low motivation 57.6% 21.6% 20.8%
Loss of concentration 54.4% 20.8% 24.8%
Impaired performance 51.2% 7.2% 41.6%

Occupational Stress

Digestive disorder 37.6% 3.2% 59.2%
Depressed 28% 8% 64%
Back pain 61.6% 31.2% 7.2%
Ophthalmic Migraine 55.2% 37.6% 7.2%
Musculoskeletal disorders 51.2% 40% 8.8%
Visual Fatigue 52.8% 39.2% 8%

Table XI The above table gives the percentage of the number of agents suffering from different health problems due to poor ergonomic conditions, lighting systems and sleep loss related to shift work system. The different symptoms related to sleep loss have been illustrated in the table and it can be observed that 74% of the respondents said that they sometimes feel tired upon awakening. 66% reply that they feel angry and irritable while 58%, 55% and 52% argued they experience low motivation, loss of concentration and impaired performance. With respect to occupational stress, the majority of the respondents (62%) said that they suffered from back pain and 52% from musculoskeletal disorders. 56% suffered from ophthalmic migraine and 53% from visual fatigue. The different percentages have been obtained according to the data collected in connection with the number of respondents suffering from these symptoms either ‘sometimes’, ‘frequently’ or never. Below are a set of correlations made to determine the relationship between the symptoms illustrated in the above table and their different causes as per the questions asked in the questionnaire.

Table XII Correlations

Condition of chair Back pain Musculoskeletal Disorder
Condition of chair Pearson Correlation 1 .355** .296**
Sig. (2-tailed) .000 .001
N 125 125 125
Back pain Pearson Correlation .355** 1 .619**
Sig. (2-tailed) .000 .000
N 125 125 125
Musculoskeletal Disorder Pearson Correlation .296** .619** 1
Sig. (2-tailed) .001 .000
N 125 125 125
*. Correlation is significant at the 0.01 level (2-tailed).

The analysis of the correlation matrix indicates that there is a strong relationship between the condition of the chair provided to the agents and whether or not they suffered from back pain (r=.35), since the p-value is less than 0.01 ( p=0.001). Hence the correlation is significant.

Table XII Correlations

Lighting system Position of VDU ,keyboard and mouse Ophthalmic migraine
  • isual Fatigue
Lighting system Pearson Correlation 1 .352** .353** .370**
Sig. (2-tailed) .000 .000 .000
N 125 125 125 125
Position of VDU ,keyboard and mouse Pearson Correlation .352** 1 .300** .218*
Sig. (2-tailed) .000 .001 .015
N 125 125 125 125
Ophthalmic migraine Pearson Correlation .353** .300** 1 .726**
Sig. (2-tailed) .000 .001 .000
N 125 125 125 125
Visual Fatigue Pearson Correlation .370** .218* .726** 1
Sig. (2-tailed) .000 .015 .000
N 125 125 125 125
*. Correlation is significant at the 0.01 level (2-tailed).
. Correlation is significant at the 0.05 level (2-tailed).

The above correlation matrix shows different relationship between conditions of the lighting system, the position of the VDU with respect to occupational ill-health. It can be observed that the few relationships are very strong. The strongest relationship is between the general condition of the lighting system, luminance of the screen, glare and whether or not agent were suffering from visual fatigue (r=.37). The p is less than 0.01 (p=0.001) hence correlation is significant. There was also a strong relationship between position of VDU and whether or not agents suffered from ophthalmic migraine (r=.30). With a p-value which is less than 0.01, the correlation is significant.

CHAPTER 5 DISCUSSION

5.1 Demographic Profile

During the whole survey and in the analysis of the data collection within the call centre industry, it was observed that internal factors were dominant compared to external factors when identifying their impact on well-being and performance of agents. While analysing the demographic profile section within the questionnaire, it was concluded that there were more female agents than male. Most of the respondents were between 18 and 25 years showing a relatively young working force within this sector. 83% of the agents had Higher School Certificate as highest education level and were working for less than one year. The results confirms the findings of previous researches that call centres employs mainly a young working force coming out of college just after the Higher School Certificate and have been working as agents not more than 1 Year (Bhiwajee et al 2009).

5.2 Gender and opinion on work environment

The first hypothesis issued by the chi-square test (r= 9.20 and p > 0.05) implies that the agents attitudes and opinion towards working environment are not significantly associated with gender. However, the cross tabulation demonstrates that there is a small variation by gender when taking into consideration whether respondents ‘agree’ or ‘disagree’ with the statement that their working environment can be defined as secured and compassionate. The variation shows that male respondents had a more positive opinion compared to female respondents. The results can be supported by the fact that within the target population, the majority of the respondents were female. The findings from the cross tabulation can be taken into consideration and somehow confirm the hypothesis put forward by Kumara et al (2010) that male respondents have a more positive work-related attitude compared to female but the hypothesis is not supported in the study. Holman (2002) has defined the call centre as an ‘electronic sweet shop’ due to the nature of the work which is tiresome, monotonous, high demanding and agents have no autonomy over one’s work. The opinion of the respondents about the working environment as seen in Table 3 indicated that the majority gave a neutral answer to that question. They prefer not to give their opinion on the overall but when it comes to the statement whether they agree with the statement put forward by Holman (2002), it was observed that opinion varies with gender. A cross tabulation was made and it was clear that Female respondents (57%) strongly agree with this statement while the majority of the Male respondents (38%) disagree with this statement. No association was made between other factors such as amount of compensation, training and the use of one’s skills and abilities when respondent replied to the question on their description of work with respect to literature. The respondents had more or less the same opinion with respect to salary and training and there were no significant variation with gender.

5.3 Physical Environment and Occupational Health

Physical environment was analysed and relationship was made with respect to different health problems such as back pain, musculoskeletal disorder, ophthalmic migraine and visual fatigue. It was concluded that most agents complained of back pain and there was a strong relationship with the condition of the chair provided to the agent (r=0.35 and p< 0.01). It was also observed that provision of inappropriate lighting system, poor luminance of screen and presence of glare is a major cause of visual fatigue and ophthalmic migraine (r= 0.37 and r= 0.30). The relationship between physical environment and well-being, confirms research by Mc Guire (2009) that provision of poor physical conditions might lead to health problems. Charbotel (2008) also confirms in her research that musculoskeletal disorder and visual fatigue were often reported among call centre agents but did not make any relationship with the physical environment. However, even if the agents were provided with proper physical conditions to work, they still complain that they suffered from musculoskeletal disorder or back pain. This is because through different lectures such as Industrial Ergonomics, it was observed that many workers did not adopt proper working postures. Moreover, working posture is not the only problem but sitting for prolonged periods and extended work in the same posture are major causes of MSD’S and back pain.

5.4 Personality traits and level of Control

One of the objectives of the study was to check whether there was a relationship between personality traits and level of control. The results obtained proved that there were no significant association between the two variables (r= 13.4 and p> 0.05). However, data that has been collected represented in the cross tabulation (Table I) shows that many agents with the personality trait “openness to new experience” have relatively low control over their work. This relationship might be linked to the fact that many agents argued that they were not given adequate opportunities for professional growth within the organisation. Many agents have written shorts notes at the end of the questionnaire provided to them and favouritism was clearly pointed out. One of the respondents clearly pointed out that the organisation politics was unfair with respect to promotion and professional growth due to the system of favouritism and non recognition of the level of effort. The results can support the findings of Sawyer et al 2009 with respect to personality trait and performance. They argued that there were no significant association between performance and personality traits. However, those who were open to new experience showed poor performance. In their research, they further analysed different relationships between personality traits and absenteeism and turnover. In the present research these two variables were not taken into consideration. More emphasis was laid on power of agents with different personality traits to have control over their working environment. Sung et al 2009 also analysed the relationship between the Big Five Factor of personality and performance. In their study, they came to the conclusion that there is a strong relationship between personality trait openness to new experience and performance. They argued that workers with high openness to new experience will be more motivated and will inevitably increase their performance at work.

5.5 Burnout and personality traits

The study did not support the hypothesis that there might be an association between feeling of burnout and personality traits. It was seen that there were no significant association between personality traits and feeling of burnout among agents. As mentioned through the literature review, not all employees experience burnout as this vary according to the different personality traits that each individual possess and that personality plays an important role in the development of burnout. Moreover, it was found that level of control over one’s work can develop burnout among agents. The result from the cross tabulation (Table x) shows that agents who have low control over their work (53%) feel burnout from their work. The results confirm the findings of Sawyer et al 2009 when analysing the relationship between burnout and locus of control.

5.6 CR and CRSD

It was observed through the hypothesis that there were no significant correlation between knowledge of CR and its related CRSD. It was concluded that even if agents had no knowledge of what CR is all about, they experience at least one of the CRSD. It was observed that most of them suffered from sleep loss which is associated with shift work. The shift systems that most call centre adopts are non standard shifts for example 10 am – 7pm or 5pm – 2 am. Agents argued that it is difficult for them to have a normal sleep after a shift and they often turn to stimulants or sleeping pills. Table 7.2 illustrates the different problems that agents encounter due to lack of sleep. The study confirm what literature has said as most of the agents have replied that they suffer from impaired performance, loss of concentration and they feel irritable and angry due to sleep loss.

5.7 Work-family conflict and gender

Number of working hours was a major issue when taking WLB into consideration. Most of the agents said that they were not able to have a normal family and social life. Shift work unable them to spend time with their family especially during important events or get involve in social activities such as ‘clubbing’ or having fun with friends. Guerts et al (2008) argued that for most employees balancing work and family is very challenging and failures in this filed often can lead to conflicts. A cross tabulation was made between work-family conflict and gender. The results showed that Female respondents were more likely to face work-family conflict mainly due to the shift system of work. A relationship between work-family conflict and marital status demonstrate that the majority of the agents who are single are likely to face family problems. This confirms the findings of Karatepe et al 2006 that work-family conflicts are not restricted to those who are married with or without children but also single parents and single individuals. It does not involve only men since with time there has been an increase in the number of women entering the working force. However, work-family conflict has no significant relationship with loss in concentration or impaired performance (r=0.20 and p> 0.05). The findings of this study proved that even if the Female respondents have shown to face work-family conflict compared to Male respondents, there were no significant difference in gender with respect to the impact of the conflicts on concentration and performance. The majority of the respondents irrespective to their gender disagree with the statement.

5.8 External Factors

After the pilot testing, the questionnaire has been amended as it was observed from the beginning that external factors such as financial problems and government laws were completely ignored by the respondents. They do not face severe financial problem that will have an impact on their well-being and performance and they are not even aware of the laws that protect their Safety and Health (OSHA 2005) or their rights as employees (Employee Rights Act 2008). Hence due to lack of information and time, external factors have been less treated.

CHAPTER 6 Recommendation and conclusion

The new Occupational Safety and Health Act 2005 make provision for how to cater and promote health, safety and welfare in working environments. The law makes health, safety and welfare provision not only for workers in the private and public sectors but also for expatriates, self-employed and guest employees. Indeed, one of the main objectives of this act is to reinforce, consolidate and update the legislation on safety and health at work to match the changes in the working conditions of employees brought by new technologies, plants and equipments as well as new hazards. As per section 5 of OSHA05 the employer has general duties as follows:

5. General Duties

  1. Every employer shall, so far as is reasonably practicable, ensure the safety, health and welfare at work of all his employees.
  2. The employer shall, so far as is reasonably practicable, in particular
    1. provide and maintain a working environment;
    2. provide and maintain any plant or system of work;
    3. maintain any place of work under his control, including the means of access to, or egress from it, that is safe and without risks to health;
      1. ensure that use, handling, storage or transport of articles or substances is safe and withoutrisks to health;
      2. provide and maintain adequate facilities and arrangements for the welfare at work of his employees;
      3. provide information, instruction, training and supervision as is necessary to ensure the safety and health at work of his employees;
      4. ensure that any person not in his employment is not exposed to any risk to his safety or health.
  3. Every employer shall consult representatives of his employees who sit on the Safety and Health Committee with a view to the making and maintenance of arrangements, which will enable him and his employees to cooperate effectively in promoting and developing measures to ensure the safety and health at work of the employees, and in checking the effectiveness of such measures.

After a thorough investigation of the problem has been made and results obtained and analysed, the following recommendations have been made concerning the factors affecting agent’s well-being and performance taking into account the different provision made under the OSHA05

6.1 Solutions to nature of the work

In Chapter 4, figure 4.1 clearly shows that with respect to nature of work in call centres, opinion of respondents varied. The majority agree that call centre work was monotonous, tiresome, high demanding, stressful and they were usually referred as emotional labour. It is known that the Human Resource Department has a crucial role to provide support to employees’ well-being within the organisation. Hence the following corrective actions should be taken at management level:

  • Management need to implement job enlargement and enrichment strategies by maximising job control by restricting excessive call scripting that limit what employees should say to customers. Reducing the level of scripting, getting agents involvement and participation in job design and setting of organisations’ targets and objectives will tighten employee relationship with the organisation and reduce employee stress.
  • Work load with respect to the number of call can be alleviated by the introduction of more sophisticated call handling requirements such as decreasing the number of call per day, increasing the duration of the call and high skill customer interactions. This will lead to higher work motivation and better performance.
  • Making employees more autonomous will allow them to have better control over their emotions. This situation will help the agents to reduce emotional dissonance between what they really feel and what they expressed and lead to better employee well-being.
  • Fostering a positive work environment will encourage agents to be more productive and effective but also to achieve organisational success. Hence, management should adopt a more participative management style that is getting agents involve as much as possible.
  • Reviewing remuneration schemes by the implementation of the cafeteria-style benefits plan where the agents are given the chance to select a benefit package according to their needs. However, before the implementation of this benefit package, employer should first respond to employees wants. In addition to their basic salary, bonuses, increment, medical benefits, insurance and allowances will influence employee’s motivation to perform more in their tasks and enhance well-being.
  • Finally, psychology training and emotional management programs can be provided to enhance employee well-being by reducing employees’ job stress.

6.2 SOLUTIONS TO PHYSICAL ENVIRONMENT

It has been prove that a pleasant and agreeable physical environment can be a useful instrument to reduce stress and enhance employee well-being and occupational health. Hence appropriate control measure should be implemented with respect to the findings illustrated in figure 4.2 and in Table XIII First of all, it has been noted that despite adopting good working postures, workers may suffer from musculoskeletal disorders from extended work in the same posture or from sitting still for prolonged periods. Hence the agents should be informed how to change their working position frequently throughout the day:

  • Adjusting the chair and backrest so that the worker is more at ease to avoid slouching and adopting poor postures in the chair.
  • Adopting frequent stretching of fingers, hands, arms, and torso to allow blood circulation.
  • Encouraging the agents to take regular short breaks to stand up and walk around for a few minutes every 20 minutes or so.

However, management should see whether the chair provided to the agents are in good condition and repair. The basic parts of the chair such as back rest, seat and armrest are important elements to be considered for a safe and creative workstation:

  • Provision of a chair with adjustable backrest so that there is no pressure on the backs of the legs and feet are flat on the floor or on the foot rest provided.
  • The backrest should be in line with the S-Shape of the spine and provide adequate lumbar support. The backrest height should range from 48 to 63 cm high, while the backrestwidth should range from 35 to 48 cm wide. The backrest angle should be range from 103 to 112 degrees from the horizontal and the armrest height should range from 20 to 24 cm.
  • The chair height should be appropriate for the agent and the work surface height. However if agents are tall, and feet do no rest flat on the floor, foot rest should be provided to them
  • When purchasing chairs, management should see that they have wheels or castors which are suitable for the floor surface.
  • Chair is adjustable from sitting position and that the upholstery is a breathable fabric.

Armrests, if provided, should be soft, allow relaxation of the shoulders and elbows to be close to the body. If the armrests cannot be properly adjusted, or if the worker feels that they interfere with the workstation and the amount of space, he/she may remove them or stop using them. Adjustable armrests may be positioned such that they support the lower arm and allow the upper arm to be close to the torso within a 90 to 120 degrees range. It has been found that there is a strong relationship between the position of the VDU and employees suffering from ophthalmic migraine and a relationship between lighting system and visual fatigue. Therefore appropriate control measure should be implemented such as:

  • The VDU should be position in such a way that it is at eye level and equipped with and adjustable screen position, adjustable brightness and contrast. To prevent reflections from screen and anti-glare device should be provided. Employers should ensure that VDU are located at right angle to windows.
  • The luminaires or other forms of lighting may be arranged in rows and strategically located so as to follow a parallel path to the user’s line of sight when facing the VDU.
  • Filters may be used on lights and the use of indirect or shielded lighting must be adopted where possible to avoid intense or excessive levels of brightness or uneven lighting in the field of vision. Lamps must have glare shields to direct light away from the line of sight.
  • Non-reflective surfaces for desktops, mouse, and other items in the immediate vision must be ensured. Equipment and furniture may also be relocated so as to provide sufficient level of attenuation and reflection of light based on their location in the office.
  • Screen/monitor must be regularly dusted and cleaned to avoid dust accumulation forming layers of dust on the screen that can contribute to glare.
  • Glare filters fixed onto the surface of the screen/monitor may help to reduce glare; however, the level of lighting in the office must be sufficient to ensure adequate screen visibility. As such, overhead lights equipped with louvers/”egg-crates” may be used to re-direct lighting.
  • Ensure that wall colour is neutral and not too bright.
  • The inclination of the monitor may be adjusted to control the level of reflection and lighting on the screen. This is especially useful in reducing the level of reflection from overhead lights.
  • In terms of contrast for screen visibility and characters, the computer monitor may be set for dark characters against a light background; these are less affected by reflections than light characters on a dark background.
  • Ceiling fluorescent lights are oriented lengthwise to the sides of the VDU and that the general room lighting is uniform and slightly dimmer than usual office lighting

6.3 Solutions to health and social effects of shift work

From the results in figure 4.7 and 4.8 respectively it was found that shift work was a major issue in call centre. The effect of shift work on the Circadian Rhythm of agents and this variation in turn was the major cause of Circadian Rhythm Sleeping Disorder. CRSD especially lack of sleep has proved to have an impact both the well-being and performance of the agents. Moreover, sleep loss was not the only issue as shift work also causes family conflicts, difficulties to maintain a normal social life and hobbies and leisure activities. Below is a set of recommendation that management can adopt to minimise both the health and social effects of shift work.

1. Safe procedure

Change in shift rosters/ schedule has proved to have an adverse effect on working and social lives of agents can. Management and employees should work in close collaboration to find solutions to control the health and social effect of shift work. Shift schedules should be developed and agreed by both the management and employees. Before any shift schedules is introduced it is important to identify the need for change to the existing shift system, the benefits and problems encountered by employees from the current shift. Moreover, if there has been mutual agreement between management and employees, appropriate information about the health and safety effects of shift work must be provided.

2. Length of shifts and working hours

The recommended number of working hours as per section 14 of the Employment Rights Act 2008 shall consist of 8 hours and may begin on any day of the week. However, a worker working on a shift work system may be required to work in excess but there should be a mutual agreement between the employer and employee on the number of hours of work to be performed.

Night Shift

Night shift is more frequent in call centres. Since it is difficult to remove the night shift system and because they work in collaboration with foreign companies, proper control measures should be adopted. As mentioned above in section 14 of the ERA08 night shifts also should not exceed the prescribed 8 hours. Taking into account the circadian rhythm, it has been proved that the least activities happen at night, hence it is important to review the amount of work allocated to night shift agents and ensure that it is kept to the minimum. When scheduling night shift, management should make arrangements that there are enough agents working to prevent that any employee is not overloaded with work which will increase the stress.

Breaks during shifts

Planning of adequate and regular breaks usually two consecutive pauses of 15 minutes and meal break of 30 minutes are essential. Employers should encourage agents to take meal breaks time appropriately and not shorten to be able to complete their work and finish early. Moreover, it is vital to inform the agents the importance of the meal break rather than only smoking and going back to work. Appropriate meal will help to reduce digestive problem resulting from shift work. Canteen facilities should be provided with hot and nutritious meals and proper facilities for those who want to reheat their own food.

Rest days

During shift scheduling, rest days should be well planned. The ERA08 make provision for rest day. Section14 (5) clearly mention that workers should be entitles to two nights full sleep in every period of 7 consecutive days. The rosters should be design in such a way that the agents have at least twice a month a full or a half weekend free. However, shift schedule should be designed in such a way that work on weekends is to the minimum.

Health assessment

Health assessments of employees should be carried out to evaluate the effects of shift work on their health. It can be design is such a way that that there is either individual medical examination or general health assessment of the whole working force involve in shift work. However, any health assessment or medical examination should be done only when employees have been given proper information why it is done and whether they agree to participate. The health assessment of employees will take into account the effects on health, the nature of the work and compliance with relevant laws and regulations. The organisation can appoint an occupational physician to perform the health assessment or medical examination of it can be to the expense of the agent to choose their own physician and issue a certificate of fitness to undertake shift work. For workers who are not fit to undertake shift work, management should find appropriate alternate duty for the employee. Moreover, appropriate training program can be design to inform and educate agents about what can be done to reduce some effects of shift work.

Welfare Facilities

Apart from the safety and health of workers at work, employer has the duty ensure welfare. Shift work does not allow agents to maintain hobbies or leisure activities and difficulties to meet family commitments. Different groups can be organised at work taking into account different interest such as support teams or organise fun day where different sports teams can be formed. Management can also sponsor employee sports leagues such as football league or volleyball league which will be accessible for both male and female. Since work cause difficulties to meet family commitments, management can organise event bringing employee family members together to have fun for one day. Workshops can be organised on communication and conflict resolution to help employees to deal with work-family conflict but also on time management on how they can plan family activities around their time off.

Dealing with stress

Stress was also found to be a major problem among call centre agents. Figure 4.15 shows that the majority has either moderate or severe stress level. Hence it is important that management take the appropriate measures to deal with stress at the workplace. Once the existence of stress has been recognized and the stressors identified, action to deal with stress should be undertaken. If the main cause is a misfit between the demands of the environment and the individual’s ability, corrective measures may be taken, either by adjusting external demands to fits the individual or by reinforcing the individual’s ability to cope, or both. The ideal solution to combat stress is to prevent its occurrence. This may be achieved by tackling the core or the problem-the cause. However, very often there are many causes and the elimination of all stressors is not possible. That is why priority should be given to the elimination of the maximum number of causes. As this cannot always be achieved in the short term, it is generally agreed that the improvement of the worker’s ability to cope with stress is a valuable strategy in the process of combating stress.

Action on the worker

Ø The preventive approach: better recruitment of workers, counselling of workers on ways of coping with stress and workers education Ø The curative approach, this is medical treatment of the sick worker, treatment for diseases like depression can be started. Ø Training programmes on relaxation techniques to help the worker cope with stress: Benson’s method (Yoga, Tai Chi, Transcendental Meditation etc). Ø General support programmes: recreational activities, exercises amongst others

Introducing a stress policy

A stress policy will help employers demonstrate that the enterprise recognizes that stress is a serious issue and that it is committed to combating the problem. It will help both managers and employees to assess their responsibilities and the sources of help and information available. The stress policy should include the description of the symptoms of stress and stress-related illness, the responsibilities of both the organisation and employees for managing stress, relevant information regarding stress – related issues such as Employee Assistance Programme on Stress and finally a guidance for carrying out a risk assessment. It is important to note that risk assessment is an important tool for the management of health and safety at the workplace.

Management review

All the recommendation made above pertaining to the different problems identified within this study should be reviewed on a regular basis either once or twice a year. Risk assessment of the working environment done by the employer should be recorded and will be an essential document for the review process.

Conclusion

The evidence from this research gave a clear indication that there were no major differences between working in a call centre in Mauritius or in another country. As in other researches, the most common factors that were analysed are: the nature of work, the physical environment, shift work and stress and their respective effects on well-being and performance. What I have been able to conclude during this study, was that the stressful nature of the work and shift work was the main concern for call centres agents in Mauritius. The stressful nature of work was linked to the volume of work they were given and their salary. The work is already challenging and agents are self-motivated and ready to put the maximum effort to achieve objectives given to them as they know that at the end of the month they will be rewarded for the effort. In fact things are otherwise, the agents should attain all the objectives but are never fairly rewarded. There are frequent delays in payment of salaries, many mistakes in pay slips almost every month or they are simply paid less than what was proposed during recruitment. I personally think that management should not only take proper measures to address and improve working conditions and working environment relation to well-being and performance but they should abide their statutory duties under the law. For example, section 21 (1) of the ERA08 clearly stipulates that employer should pay remuneration to a worker at monthly intervals. So far most of the call centres in Mauritius was given high status as they were reputed to pay high remuneration to the agents until recently with the case of Infinity which proved the contrary. I firmly believe that this problem was present for quite a long time but the fact that trade unionism is absent in call centre industry, there was a fear to voice out their opinion and fight for their rights. Hence agents either remained silent and continue to work or simply moved out of the organisation a contributory factor for the high turnover rate in this sector. But I think that Infinity employees are considered as role models and that many other agents will follow their steps to fight for their rights. The effect of remuneration system on call centres agent’s well-being and as a contributory factor to the high turnover rate can be an interesting topic for further research.

Commercialization Sports Globalization Essay

“ Critically evaluate how globalizing and commercial forces have influenced sports generally and football especially. You should also include in your analysis the influence of globilization and commercialization on the management and governance of organizations in light of Stewart and Smith’s (1999) unique features of sport. You should discuss the implications of these changes on the management of sporting organizations. You must be critical rather than descriptive in your analysis and refer to theory wherever possible” This paper seeks to present how commercialization and globalization have affected sports industry in our days and how sport managers have to respond to these two factors. Sports always were concerning human communities, and were at the centre of human activities. At the early 590 BC the Greek athletes were financially rewarded for an Olympic victory-winning (Harris, 1964). “Sports has not always had such an international flavour. Sports first spread across international borders through imperialistic efforts. As countries such as Great Britain colonised various areas throughout the world, sport was used to impose the conquerors culture on the colonised land” ( Masteralexis, Barr and Hums,1998, p.210). Nowdays sports attract the public interest and “Modern sports and modern mass media are both multibillion-dollar businesses. Elite sports cannot function as they do without the mass media to publicize and underwrite them. The huge market for sports equipment and team-related merchandise is to a large extent sustained by the media’s 24-hour-a-day sports coverage, and the economic infrastructure of the mass media depends to a considerable extent on the capacity of sports to create large, loyal cohorts of readers, listeners, viewers, and interactive consumers” (https://www.britannica.com/eb/article-253580). Sport is a main interest in modern societies as more and more people participate like ever before. This massive growth of sport interest and activities has drove to main changes the major characteristics of sport. These changes that characterize sport are related to social changes as “among these changes some trends may be identified. First, sporting activities in western countries are characterized by a trend toward pluralisation i.e. by the increase in the number of sports that are practiced. At the same time sport activities know a process of diversification and differentiation: recreational, competitive and professional sports are becoming more and more separated. Second, sport activities are subject to a growing individualism. Sport is more and more seen as an option for an individual. The general ideology concerning sport has moved “from sport as a collective right to sport as an individual option” leading to the adoption of the principle of “let the user pay”. Individualism and pluralization may be seen as the cause of a trend toward the “marketization” (or commercialization ) of sport. In effect, sport is among the fastest growing leisure markets. All sorts of sport, and not only top sport are characterized by a growing involvement of money.” ( Enjolas, 2001). “Today, sport is big business and big businesses are heavily involved in sport. Athletes in the major spectator sports are marketable commodities, sports teams are traded on the stock market, sponsorship rights at major events can cost millions of dollars, network television stations pay large fees to broadcast games, and the merchandising and licensing of sporting goods is a major multi- national business. These trends are not just restricted to professional athletes and events, many of them are equally applicable to the so-called amateur sports” (Slack, 1998). Here is a selection of some examples that certificate the above : “a report published by Deloitte & Touche and Sport-Business Group has revealed that Manchester United heads football’s rich list with a turn over of 117m pounds. It is based upon turnover season 1999-2000. In the 2nd is Real Madrid with turnover of 103.7m. pounds.”, “Kellogg has signed its biggest ever UK sports sponsorship deal. It is linking its Nutri-Grain brand with Rugby League’s Challenge Cup. Kellogg will invest more than 1 million pounds into the sponsorship.” , “Musicians, sports stars and actors are rapidly overhauling established business tycoons as some America’s wealthiest young people.”, “Hays and Robertson is planning a two-way floating International Brands Licensing, the Admiral and Mountain Equipment brand business on Aim in June 2002, in an attempt to raise its market value to 11.5 m. pounds. Hays and Robertson will then join with Sky in a deal to sell England kits and other football kits later on in the year and focus on purchasing licenses for other brands for UK distribution.”(as cited in Beech and Chadwick, 2004, p. 8-9). Also as cited in McGaughey and Liesch (2002) ague that, “… sport has gradually commercialized through the growth of spectatorship, with revenues being generated via gate-takings and activities such as on-course betting (Rowe, 1996). While the advent of ‘live’ broadcasting and the commentary of sports through radio and television initially resulted in declining revenue for sporting bodies, popular sports have increasingly entered more economically rewarding contracts with television interests, with ‘the negotiation of television contracts rapidly becoming the biggest issue in the game’…” (p.384). According to Beech and Chadwick (2004), the development of a sport as a business is characterized by a sequence of phases. These phases are: the foundation of the sport, its codification, stratification, professionalisation, , post-professionalisation, commercialization and post-commercialization. The commercialization of a sport involves the development of an “overtly business context, external organizations see the opportunity of using the sport for their own purposes, typically marketing in the forms of sponsorship – involving governing bodies, leagues and clubs – and endorsement – involving players. If the sport organizations, leagues and clubs are inept in their management of the greatly increased financial revenues which become available, they will become available, they will come under pressure to the extent that some professional clubs in particular may be forced out of existence” (p.6). The commercialization in the English soccer began at the end of 1960, when Texaco (an oil company) and Watneys (a brewery) offered sponsorship to cups (Beech and Chadwick, 2004). “ …by the end of the 1990s commercialization had become firmly embedded across the whole of the top leagues as well as the FA, with sponsorship of a range of events and facilities, including individual stadia, common practice. Clubs websites had become integrated with betting companies, mobile phone companies and other external organisations, typically offering directly soccer-related services. Weaker (in terms of financial success) clubs have faced major pressures such as being forced into administration.” (p.7). Some examples that present the commercialization in the 1990s are “… between January 1993 and January 1997, shares in football sector rose 774per cent, outperforming stock market by a factor of 10.”( Marrow, 1999), “…18 month period between 1995 and 1996, shares in Manchester United and Tottenham rose 336 per cent and 368 per cent respectively.” (Marrow, 1999), “many individuals made slot of money from stock market floatation as Hall Family (Newcastle): 3m 1989-1992- sold a 41.6 per cent stake for 55m. pounds.” (Walters G, 2008, Lecture 1, Birkbeck notes). The commercialization of the sports has led to the commercial consumer income e.g. shirt sales, the commercial sponsorship income e.g. shirt sponsorship, the stadia development, the increasing of supporters-fans, matches are scheduled for tv audience, the merchandising have become more aggressive, expensive and targeted, the tickets price is higher (Walters G, 2008, Lecture 1, Birkbeck notes). Here are some comments about the commercialization in football: “ One of the reasons the fanzines are not encouraged is because the clubs fear any threat, small or large, to their complete control of merchandising income. Clearly fans want to identify with their clubs and if control also means ensuring that certain basic standards of product and service are met then that’s not necessarily a bad thing…the trouble lies with the way that merchandising has taken over at the expense of developing almost any other form of identification with the club” (Perryman, 1997, p.6), “this should have been a golden age, a perfect time to be a football supporter. Heysel and Hillsborough were in the past. We had seen off the hooligans and nearly all the fences. Where we were once the enemy within, we were now the height of fashion… tv programmes, plays and even opera took an interest… football shirts were everywhere. There was a boom… this should have been everything we ever wanted. Instead, just when it was, at last, all right to be a football fan, everything went sour…”( Horton, 1997, exploitation 13-14). “Globalization can be described as a process by which the people of the world are unified into a single society. This process is a combination of economic, technological, sociocultural and political forces” (Wikipedia, 2008). “In sports, globalization does not mean promoting international games and joining test matches or international competitions. It is a temporary event with minimal lasting effects and therefore is just called internationalization. The globalization of sports intimidates sports organizations that hold the right of franchise in these countries. So, it is a big problem for the professional associations, like those in baseball and soccer in Japan and in Korea and basketball in the Philippines. Sports management is something that is not directly related to globalization.  But, today, due to the wide coverage of media and the popularity of sports, globalization is an inevitable issue, even for the local sports organizations. The international sports enterprises are always looking for a chance to invade a new market, and in this sense, sports is very similar to agricultural and industrial products” (https://ccs.cla.kobe-u.ac.jp/staff/amano/WWW/amano.html, 2008). Also “the global development of sport has also accelerated from the 1980s. For example, one can find the flows from country to country of sports goods, equipment, and landscapes have grown such as the development of the media-sport production complex and projects images to global audiences.”(Lee and Lin, 2007, “the Sport Journal”). According to Masteralexis, Barr and Hums (1998), “Sport is subject to many of the same forces that are increasing the global distribution of consumer and entertainment products today” (p.209) as sports are affected by international influences as athletes play professionally in foreign countries, people watch sport events from other countries and they consume products of foreign teams. The sports industry like the general business, have realized that they have to expand their boundaries in order to sell their products in the global marketplace, by creating “products that they have the same appeal and generate the same demand in all corners of the world” (p.212) considering the different cultures, laws, languages, customs, traditions. “Efforts in globalizing the sport product can be seen on two fronts: 1. corporations are attempting to utilize the sport theme and sport products to enter the international marketplace and 2. professional sport leagues are attempting to spread the popularity of their leagues and associated products (televised games, licensed sport products, etc. ) overseas” (p.213). As an example “…many sport leagues, particularly those in North America, have sought out global markets through expanding television broadcasting and licensing, and by developing new leagues to introduce their specific sports to new geographic areas (Rushin, 1993). The most obvious example of this is the World League of American Football (NFL Europe) which despite financial losses, is seen as a means to introduce the professional football product to Europe, and expand television interests (King, 1996). In this way, professional sport leagues seeks out new revenue opportunities in many different markets…” ( Mason, 1999, p.406). Trenberh and Collins, 1994, suggested five “manifest market conditions” that affects the sports industry and the sports managers work: “1.a trend toward a increased professionalism in leisure and sports organizations 2. continued development of commercial forms of sport 3. maturation and normalization of career structures in leisure and sport 4. a mounting awareness of the need for fiscal accountability in the public and non-profit sectors and 5. the targeting of management skills by government as a way of enhancing sport systems ‘effectiveness’” (p.276). According to Boucher(1998), “…there is n question that the field of Sports Management has grown and developed at a rapid race, particularly over the past decade. Concurrent with this growth have been advancements made by professional and academic associations, formed to further needs of a variety of individuals who are affiliated with Sports Management”. Sport managers have to be aware of the changes that impact their work environment and have to be capable of knowing the new technology, which affects the sports industry and have to understand that sport and sport management as a whole, is growing as a popularity worldwide and sport managers themselves should learn, understand and respect the “differences when dealing in the international sport marketplace” (Masteralexis, Barr and Hums, 1998, p. 36), “ … it is imperative that sport managers understand the issues surrounding the governance and management of international sport…” (Masteralexis, Barr and Hums, 1998, p. 213). In order to manage the sport product, sport managers should always consider that: “1. the sport product is intangible and subjective making it difficult to ensure costumer satisfaction 2. the sport product is inconsistent and unpredictable 3. the sport product is a perishable commodity, developed in anticipation of demand and produced and consumed simultaneously 4. aspects of financing and budgeting for sports organizations differ from those of a typical business 5. for a manager there is a highly complex network of stakeholders ranging from government agencies to sponsors, volunteers and members 6. sport enterprises earn significant income from sources extraneous to the sale of the service(e.g. sponsorship and television rights) 7. managers of sport leagues must heighten competition to be successful, not eliminate it” (Trenberth, Collins, 1999, p.20). In addition the role of marketing is very important for a sport manager, in order to attract consumers, as marketing helps : 1. to guide a sporting organization in its selection of the “sport product” and its target costumers 2. to identify and monitor the activities of business competitors 3. to develop and implement promotional strategies 3. to develop and implement distribution strategies 4. to coordinate the research and information needed to carry out the marketing functions(above), audit their performance and help ensure their repeated success. (Trenberth, Collins, 1999, p.218). Sports managers need to understand also the strong need of : 1. financial management 2. share and stock market 3. mergers and acquisitions 4. sports law, commercial and international law 5. TV rights and EU law in European cases( Trenberth, Collins, 1999, p.279).

Conclusion

This paper has sought to highlight how commercialization and globalization has changed the worldwide picture of sports. As we can conclude a sport manager, in order to be competitive in the global marketplace and in order to be able to react to the changes of the international rules of commercialization have to be aware of the needs of the market and “consumers”-fans that address. According to Markle(1997), (as cited in Trenberth, Collins, 1999, p.281), “…sports managers need to understand the nature of the business and the disposition of the consumer through demographics, psychographics, socioeconomics, etc…sports managers need to built their business, the product and the perception of the product to be attractive and appealing … to built relationships with sponsors, to learn their business needs and become an agency rather than a salesperson. They should under-promise and over-deliver…” Also we should always have in mind what Robert L. Boucher (1998, p.79) suggests : “ call me naïve, but it is possible that today’s promoters of commercialism in sport have become intoxicated by sponsorship revenues? …is it right for a sport manager only to be conduit by which a sponsor can achieve greater market penetration? My contention is simply that in our quest for legitimation, we may have sold our souls to the interests of big business. It can be argued that much of what comprises the Sport Management domain is not related to business and producing entertainment for profit. In fact, a large percentage of sport enterprises in the global community are of an amateur nature where the motives of participants, spectators and administrators are of a more altruistic nature. Perhaps Chelladurai’s (1992) observation that there are really, in fact, two fields, that management of human services in sport and management of entertainment services through out sport, is entirely accurate. In any event, the need to return in a balance in orientation and to refocus has never been more pressing”.

References

Beech J. & Chadwick S. (2004), “The Business of Sport Management”, Ashford Colour Press, Gosport Boucher R. (Journal of Sports Management,1998, 12,76-85), “Towards Achieving a Focal Point for Sport Management : A Binocular Perspecive”, Human Kinetics Publishers, Inc Encyclopedia of Britannica, on line, 2008. from https://www.britannica.com/eb/article-253580/sports Enjolras B, “Commercialization and the voluntary organization of sport:the Norwegian model under pressure?”, Paper prepared for the Seminar “idrett, samfunn og frivillig organisering”, NFR, 9-10/01/20011, from https://web.bi.no/forskning/isforg.nsf/62af2dc31b641632c12566f30039282c/6dd187f9b8d0a3c3c125696f003d6d3a/$FILE/Enjolras.PDF Harris, H.A. (1964). Greek athletes and athletics. London: Hutchinson. Lee and Lin, (2007). “The Global Flows of International Professional Baseball System”, from https://www.thesportjournal.org/2007Journal/Vol10-No4/07ping-chao.asp Mason D.(1999). “What is the sports product and who buys it? The marketing of professional sport leagues”. European Journal of Marketing, Vol.33, No. ¾, 1999, pp. 402-418 Masteralexis L., Barr C., Hums M., (1998), “Principles And Practice of Sports Management”, United State of America :Aspen Publishers McGaughey S. and Liesch P. (2002). “The global sports-media nexus: reflexctions on the ‘super league saga’ in Australia”, Journal of Management Studies 39:3, may 2002. USA: Blackwell Publishers “Professional Sports in Globalization: A Comparative Study of the Japanese Baseball and the Philippine Basketball”, from https://ccs.cla.kobe-u.ac.jp/staff/amano/WWW/amano.html Slack T., (1998). Studying the commercialization of sport: The need for critical analysis. From https://physed.otago.ac.nz/sosol/v1i1/v1i1a6.htm Trenberth L., Collins C. ( 1999), “Sport Business Management in New Zealand”, New Zealand: The Dunmore Press Walters G., (2008), from the lesson “The economics and governance of professional football”, Lecture 1 “the business of football: an historical perspective”, Birkbeck notes Wikipedia, 2008, from www.wikipedia.com

Aspects of Human Resource Management Globalization Essay

Executive Summary:

The report aims to discuss aspects of Human Resource Management in light of the ever changing business world given the globalization of businesses today. Globalization has seen changes in the way businesses work and are expected to deliver investor value. Companies started competing not just with local competitors but with organizations across continents which forced companies to relook at continuously innovating and providing a unique value to its customers to retain them. Talent Sourcing and Talent Development within an organization have become a science that identify and accept that diverse employee base form the backbone of a business and are responsible for contributing towards achievement of organization’s global goals and directly impacting competitiveness and delivering that Investor value. This report will discuss: The concept of Globalization The increasing diversity of the workforce The changing nature of the workplace The impact of Human Resource Management functions in work organizations.

Table of Contents:-

1. Introduction

2. Main Body with examples

3. Critical Success Factors with examples & Recommendations

4. Conclusion

5. References

Human Resource Management in a Globalized Economy

Introduction

Early in the 1800s during the times of Industrialization, the approach to managing workforce was primitive task drive approach. Historically, Henry Ford’s assembly lines and Studies of Frederick Taylor such as the time and motion studies thought of improving productivity by putting employees in line with mechanics. They tried to boost productivity by designing the way work is carried out. They focussed purely on productivity since productivity was what gave profits and therefore competitive edge. Workforce was put them in the same league as machines inviting organization conflict and distraction from the goal. As globalized environment changed the rules of the game, Organizations realized that employees and their talents is the single most important supply of sustainable competitive advantage. Employees are the ones that deploy scarce resources optimally. To survive and to succeed, organization need to leverage its human resource capital’s talents to develop new products and services and creating value for customers. This marked change in attitude of managements saw the emergence of concept of Global Human Resource Management which characterizes implementation of personnel policies to maximize objectives of organizational integrity, employee commitment, flexibility and quality at a global level. Global Human Resource Management hence becomes very important since globalization and international operations bring with them challenges beyond a simple Human Resource Management program at a local level. Global Human Resource Management not only covers International recruitment Appropriate training and development Deployment of these resources But also goes beyond simple HRM in maintaining affable international industrial relations.

With international operations, managing the employee base worldwide has its own challenges.

P Morgan: There are 2 sets of variables when it comes to HRM in for an International Organization

First -employee types

Second – Political, labour laws, culture, legal environment, economic, and practices prevailing in different countries

A successful HRM model for an international organization is the successful interplay between these 2 sets.

Clearly there is a need to go beyond basic HRM practices to include:

More functions and activities In depth wisdom of employment law of the host country Close involvement with employees personal variables Provide for external influences Exposure to newer hurdles and risks Managing differential pay packages Managing ethnic, gender differences More liasoning activities More travel and coordination Higher management of unknown risk variables beyond the country where the headquarters are based It is imperative that Human Resources Management models are deployed in a global context to ensure success.

Main Body

The Concept of Globalization:

While Global trade itself is not a new concept, Globalization is. Globalization can be defined as “a process of trade and investment transcending political boundaries undertaken by an interaction of people, processes, entities and spurred on by advances in political systems, technology, business ethics and affecting culture, environment & societies leading to cross border prosperity.” International trades have been undertaken historically. Traders have traded goods and services over large distances travelling by land and sea. Eg, The silk route that connected the Western World with Central Asia & China during the Middle Ages. As time progressed further, we see that cross-border trade, investment & immigration boomed. Eg. Since the middle of the 20th Century to today world trade has exponentially grown by 20 times. Only in the last 5 years of the 20th Century, foreign investment currency flow went to US$ 827 billion from a meagre US$ 468 billion. This has had an impact on fiscal policies of governments that have opened up its economies in a controlled manner, both domestically as well as beyond their borders. Eg. The 1991 Financial Budget given by then Finance Minister of India, Dr. Manmohan Singh was figuratively the door to globalization for India. India hasn’t looked back since in terms of its growth and prosperity. India adopted a free-market economic system. This greatly increased its own production potential and created a bouquet of opportunities for its own companies and organizations across the world for international trade and investment. Companies started growing by virtue of the geography of their businesses and operations:

HRM in the face of such Globalized businesses:

In such a dynamic environment today Human Resource Management in a global paradigm involves the manpower planning of staffing requirements the world over, selection of the right candidates, training & development of employees for global operations. Since it is established that human resources form the backbone of any strategy, implementation of any strategy to succeed globally with Human Resource Management at its core can provide a strategic competitive edge. Human Resource function in this environment has to provide a support function to line manager by providing guidelines, searching, training, and evaluating employees. With an effective HRM function deployed, the organization would be able to leverage the knowledge, experiences and the skills of its distinctive employee bases the world over.

The Increasing Diversity of the Workforce:

As Globalization gains steam and becomes the norm, the employee base of multinationals has become varied and rich with nationals from all over the globe. Human Resources across companies have become homogenized, enriching the organizations with depth of knowledge about variables affective markets both within the countries as well as between them. The most successful organizations are ones which utilize this resource to the maximum. Having an experienced employee from a remote market on the team is a natural consequence towards better understanding new market dynamics and new consumer behaviour. Culture in different countries or the mode of doing business in different countries is also different

Deal Focus & Relationship Focus

Country wise distribution:

Formal Culture & Informal Culture

Country wise distribution:

Therefore HRM today for an international organization, has to consider Differences in HR practices in the local organizations Perception of HR as a function. Attitude and actions of headquarters towards HR Resistance to change in a myriad of different situations Cultural differences in teaching and assimilating styles

The Changing Nature of the Workplace:

“A diverse organisation will out-think and out-perform a homogeneous organisation every single time”. A. Lafley, CEO – Procter & Gamble Global competition presents a case for Global co-operation. Today, more than ever before, employees find themselves rubbing shoulders with someone from a different culture, race and society on an everyday basis. HR departments in these multinationals have to recruit, develop and retain people who have vastly different backgrounds. This has resulted in new skills to succeed such as sensitivity and other relational aspects. This is termed as “cultural intelligence”. Cultural intelligence is defined as the capability to adapt effectively across different national, organizational and professional cultures (Earley, Ang and Tan, 2005). Today employees across industries are given job roles globally, taking them around the world. In this new environment employees from home country as well as the expatriate have to learn how to work with each other given that they not only think and communicate differently but also execute differently. The Human Resource Departments need to develop their cultural intelligence to manage this diversity in their companies. The departments have to allow for newer challenges in the face of international employee deployment such as Managing international assignments Employee and family adjustment Selecting the right person for a foreign assignment Culture, communication and gauge Language and communication

Staffing Function in an International Organization:

Staffing in an international organization goes beyond simply forecasting requirements and selection of the right candidates to fit a job description. It is also a tool to develop and promote the organization’s own value system and culture. In an international scenario the following models could be deployed: An Ethnocentric staffing policy A Polycentric staffing policy or a Geocentric staffing policy ETHNOCENTRIC STAFFING POLICY: In this policy, top management positions filled by parent-country nationals. It is actually the best suited to international organizations.

Advantages:

If the host nation does not have qualified managers, the vacancies can easily be filled The culture of the HQ is easy to spread. Easy transfer of key skills and operating procedures

Disadvantages:

May result in bitterness in host country Deterrent to cultural diversity POLYCENTRIC STAFFING POLICY When this policy is deployed Host-country nationals manage subsidiaries and parent company nationals hold key headquarter positions. Multi-domestic organizations can benefit from this

Advantages:

Help rich cultural diversity Implementation is cost effective Easy transfer of key skills and operating procedures

Disadvantages:

Limits chances of host country employees getting exposure outside their own nation Possibility of gap in mission, values and work culture between HQ and host country operations GEOCENTRIC STAFFING POLICY This policy seeks best people, regardless of nationality. Transnational organizations and Global entities can benefit from this

Advantages:

Optimum deployment of optimum resources Employees get exposure to different cultures Creates a centralized value system

Disadvantages:

Local immigration policies may inhibit 100% deployment Higher costs associated with training and relocation May require complex Compensation structures to succeed.

The Expatriate Dichotomy:

Further when a citizen of one country works in another country, HRM needs to take care of a myriad of issues without which there is a strong chance of failure and a premature return of the employee to his home country The costs associated with failure are not low and are generally estimated at three times the expat’s annual salary in addition to the costs associated with relocation The issues that can crop up when expats are deployed: Immediate family may not adjust to a new environment The employee may not adjust Other personal issues Culture shock May not be able to cope up with bigger responsibilities Based on how complex the business is and strength of the HR function, it is important to deploy the ideal staffing policy.

Recruitment and Selection:

International Labour Market Sources Parent Country Nations (PCNs) PCNs are managers who are citizens of the Country where the MNC is headquartered. The reasons for using PCNs include The desire to provide the company’s more promising managers with international experience The need to maintain and facilitate organisational coordination and control The unavailability of managerial talent in the host country The company’s view of the foreign operation as short lived The host country’s multi-racial population The belief that a parent country manager is the best person for the job. Host Country Nationals (HCNs) HCNs are local managers hired by MNCS The reasons for using HCNs Familiar with the culture, language Less expensive, know the way things done, rules of local market Hiring them is good public relation Third Country Nationals (TCNs) TCNs are managers who are citizens of countries other than the one in which the MNC is headquartered or the one in which it is assigned to work by the MNC. The reason for using TCNs These people have the necessary expertise They were judged to be the best ones for the job. Selection procedure of Expatriates Use of selection test Technical Ability Cross cultural requirements Following traits are identified s predictors of expatriate success Cultural empathy Adaptability Diplomacy Language ability Positive attitude Emotional stability and maturity Family requirements Multinational requirements Management philosophy or approach The mode of operation involved The duration of assignment The amount of knowledge transfer inherent in the expatriate’s job in foreign operation Language skills Expatriate Success factors Willing and motivated to go overseas Technically able to do the job Adaptable Good interpersonal skills and be able to form relationship Good communication ability Supportive families Adaptability to cultural change Work experience with cultures other than one’s own Previous overseas travel Knowledge of foreign language Ability to integrate with different people, cultures, and type of business organisation The ability to sense developments in the host country and accurately evaluate them The ability to solve problems within different frameworks an from different perspectives Sensitivity to subtle differences of culture, politics, religion and ethics in addition to individual differences Flexibility in managing operations on a continuous basis, despite of lack of assistance and gaps in information

Globalized HRM role

Two major types of adjustments that an expatriate must make when going on an overseas assignment. Anticipatory adjustment Carried on before he leaves for the assignment It is influenced by following factors predeparture training pervious experience In-country adjustment Takes place on site It is influenced by following factors Ability to maintain a positive outlook in high pressure Jobs as reflected by the role he plays in managing, authority he has to make decisions, newness of work-related challenges and the amount of role conflicts Organisation culture Non work factors – toughness with he faces new cultural experience, family adjustment with new country Socialisation factor – to know what is what and who is who

Expatriate Training and Development

Need for Training to Expatriate Cost of expatriate failure is very high To build a team of internationally oriented, committed and competent personnel Minimize personal problems such as politeness, punctuality, tactfulness, orderliness, sensitivity, reliability, tolerance and empathy Improve overall management style Pre-departure Training- Emphasises on cultural awareness and business customs of the country of posting to cope with unexpected events in a new country. Post-departure Training – helps in minimising culture shock and depression that usually sets in a new country and culture. Cultural Integrator An individual who is responsible for ensuring that the operations and systems are in accordance with the local culture. He advises guides and recommends action needed to ensure this synchronisation. Even though expatriate are trained before being sent abroad, they are still not totally prepared to deal with the day-to-day cultural challenges because they lack field experience. He is responsible for handling problems between the subsidiary and host cultures. He may be from parent country or host country who has intimate knowledge of the company’s culture and can view operations from both sides. He can only advice ore recommend a course of action. Management philosophy and training Ethnocentric companies will provide all training at the HQ. Polycentric companies will rely on local managers to assume responsibilities for seeing that the training function is carried our wherever appropriate. Geocentric companies organise training courses in different parts of the world, where a particular function is best carried out. Regiocentric companies organise training courses in different countries of the region. Cultural Awareness Training There are five types of pre-departure training Area studies that include environmental briefing and cultural orientation Cultural assimilators Language training Sensitivity training and Field experience To decide the rigour and level of training, following factors are important degree of interaction required in the host culture similarities between home and host cultures If interaction is low and similarities are high, then training should be on task and job related issues rather than culture related issues. If interaction is high and similarities are low, then training should be on cross cultural skill development as well as task. Preliminary visits average duration will be about one week A well planned overseas trip for candidate and spouse provides a preview to access their suitability for job, introduction to host country management, accommodation required, and schooling facilities available. Language training Types of cross cultural training Environment briefing about geography, climate, housing and schools Cultural orientation to familiarise with cultural institutions and value system of host country Cultural assimilators to provide intercultural encounters Language training Sensitivity training to develop attitudinal flexibility Field experience to make expatriate familiarise with the challenges of assignment Cultural Assimilators It is a programmed learning technique that is designed to expose members of one culture to some of the basic concepts, attitudes, role perceptions, customs and values of another culture. These assimilators are developed for one culture where the candidate is currently working and the other culture is where he is proposed to be posted. Type of assimilators The trainee read a short episode of cultural encounter and choose an interpretation of has happened and why. Critical incidents: to be identified as a critical incident, a situation must meet at least of the following conditions: An expatriate and a host interact in the situation The situation is puzzling or likely to be misinterpreted by the expatriate The situation can be accurately interpreted if sufficient knowledge about the culture is available The situation is relevant to the expatriate’s task or mission requirements

Compensation Management

Factors Influencing Compensation Programmes Compensation decisions are strategic decisions and play a key role It should be consistent with overall strategy, structure and business needs of MNC It must attract and retain the best staff It must facilitate the transfer of international employees in a cost effective manner. It should give due consideration to equity and ease at administration. It requires the knowledge of employment and taxation laws, customs, cost of living index, environment and employment practices, the knowledge of labour markets and industry norms, foreign currency fluctuations. Paying Expatriates: unique problems Discrepancies in pay between PCN, HCN and TCN The need to vary expatriate compensation depending on the life cycle of the expatriate’s family Compensation issues related to re-entry into the parent country organisation Approaches to Expatriate’s Compensation Going Rate Approach Base salary remains linked to the salary structure of the host country. Required information is obtained through compensation surveys and published information. This approach is favoured by polycentric organisation Advantage Equality with local nationals and expatriates of different nationals Simple approach Attract the nationals of PCN and TCN if location is a high-pay country Disadvantage Transfer from a developed country to a developing country Fighting for getting favourable posting and resisting low pay country postings Problems when the expatriate’s repatriated to the home country An export or import or franchising arrangement Company appoints an export manager who reports to chief of marketing and all operations concerning export and imports are controlled by the home office Balance Sheet Approach It links the salary of expatriates and TCNs to home country salary structure. Assumption – Foreign assignees should not suffer financially due to transfer Salary package is divided into goods and services, housing, income taxes and reserve. Cultural Impact and Compensation Policy National cultural difference High power-distance – the compensation system should reflect hierarchical divisions in the firm. Low power-distance – the salary system should be more egalitarian and performance based. Individual cultures – rewards should be given on an individual basis. Collectivist cultures – they should be team based. Culture with high masculinity – compensation policy focus on social benefits, quality of work life and equity. Culture with high uncertainty avoidance – structured and consistent pay plans are preferred with no variable plans and discretionary allocation. Culture with low uncertainty avoidance – pay should be linked to performance.

Performance Management in International Organisations

Performance Management and its link with other HR Processes Reward Management Human Resource Planning Training and Development Process Relationship with strategy Multinational Performance Management Whole vs part Non-comparable data Volatility of the international environment Separation by time and distance HQ-subsidiary interdependence Ethical and legal issues Market Maturity Performance Management of expatriates decisions and play a key role Setting clear goals for each unit, each department and each employee Goals must be mutually supportive and balanced for long and short term needs. Setting standard and measurement criteria for evaluating each type of goal Formal monitoring and review of progress towards these objectives Using the outcomes of the review process to reinforce desired employee behaviour through differential rewards and identifying training and development needs. Variables that Influence Performance of Expatriate Compensation Package Nature of Assignment Role Clarity Psychological Contract – HQ’s support Environment of the Host Country Cultural Adjustment

Critical Success Factors & Recommendations:

The Impact of Diversity and the Changing Nature of the Workplace on Human Resource Functions in Work Organizations:

Given the era of Globalization, managing diversity at the workplace has become a business issue for the HR Department and no longer simply a moral, social, or legal concern. The challenge is no more creating a diverse employee demographic, but empowering one that already exists due the natural global nature of the business. Despite all the hype around Diversity and the pros of having a multicultural workplace, organizations still tend to reflect: Soft implementation of highly expensive Diversity Management Programs A poor gender ratio when it comes to higher managerial positions Poor integration of disabled people into the employee base. Senior management teams not reflecting ethnic diversity. Some critical success factors to ensuring that diversity is leveraged well by organizations include:

A) Clear organization wide understanding of the business case for Diversity.

The HR department along with the senior management and the line managers need to be clear about the need to be diverse and embrace new cultures and ethnic backgrounds into their folds. Going beyond corporate trainings and having blurred notions of how multi-cultural employee base would help the organization to gain competitive edge over local competition in remote markets, all levels of the organization need to clearly articulate how a diverse human resource base would help reach the organization goal and hence their own individual goals. Further they understand that a multi-cultural workforce can improve their organization’s adaptiveness and change readiness. This would clearly improve the culture within the organization to recruit, develop and retain the best staff.

B) Assessment of Current Situation.

HR departments that are particularly successful at managing diversity routinely spend time, money and effort in gauging the ever changing composition of the workforce given geographical expansions, attrition and new recruits. They routinely assess not just numbers associated with the above dynamics but also behaviours, and culture associated with these changes. Eg. Eastman Kodak created a specialist external diversity panel to conduct an outsider review of the current situation. The Management of Eastman Kodak assessed recruitment policies to address cultural imbalances and even cultural blocks to retaining and developing a multi-demographic employee base.

Without the above HR Departments would only end up paying lip service to managing diversity or spending huge amounts on expensive specialist corporate trainings on managing diversity without actually creating a basic inclusive work culture. Ergo, wasting time and effort on initiatives that are unsustainable in an environment where self assessment itself is not done.

C) Managing Diversity is a top-down approach.

Successful diversity management initiatives are ones that have high visibility of the senior management team. Eg. Back in mid 90ies, Lou Gerstner identified diversity as a key strategic initiative for IBM globally. He was a strong proponent of leveraging differences to address new markets. He established eight task forces representing various ethnic groups, allocating executive sponsors from his direct reporting team and insisting on specific measurable results within specified timelines personally reviewing progress on the results.

Many HR departments have gone beyond simply including diversity management in their employee handbook and actually championed setting up panels and councils that include senior executives. Diversity management may require fundamental changes to the very culture of the organization and hence require stewardship by the senior executives.

D) HR initiatives need to promote cultural harmony rather than address cultural imbalances.

Initiatives from HR need to promote creating a multi-cultural environment. Simply having reservation seats and quotas and fancy cultural training and diversity training is not enough. HR Departments need to ensure that minorities have the same opportunities and such initiatives are an integral part of their day to day working rather than simply an extra curricular task!

Ensuring objective appraisal systems, rewards and recognition and universal training and development opportunities is key to promoting an all encompassing holistic HR approach.

E) Objective assessment of the Diversity management initiative and scientific assessment of programs are key.

Many HR Departments have succeeded in developing measurable diversity management programs. E.g. the Hyatt Hotel Group the world over ties approximately 15% of the bonus potential to diversity goals.

HR Departments that have been successful in managing diversity have translated it into a core competency used to assess the performance of management.

F) Diversity Management principles are all encompassing and wholesome enough for everyone to participate.

If the Diversity Management programs are only a bastion of the senior management, the entire exercise would be superficial and unsustainable. In order to result in successful recruitment, retention and development of employees in a globalized world, it is important that it is an inclusive program cascading throughout the organization. E.g. IBM created specific task forces but more importantly invited participation in the form of inputs to help these task forces in creating an inclusive culture.

Managing diversity and the every changing workplace in the face of globalization is not the prerogative of the senior management alone but is to be implemented at the grass root level where managing diversity to retain and recruit top talent is a challenge in itself.

These critical to success factors for managing diversity are not complicated models however they are tough to actually execute and require a motivated effort on the part of the Human Resources team and buy-in from the entire organization.

Conclusion:

Clearly Globalization has brought about a paradigm shift to International Trade providing it with a great boost. I feel, employees form perhaps the most critical resource base since they are the ones to deploy other resources and hence, in today’s Globalized world, competitive advantage can be gained only by effective Human Resource management. A natural caveat to be issued in such a varied workplace is greater requirement from organizations to focus on differences between ethnic and cultural groups in attitude and performance at the workplace. Diversity requires Human Resources Department to find similarities and recognize differences as workplaces get more and more diversified. The test for Human Resource Departments therefore is to manage and appreciate the diverse workforce. With a multinational approach to Staffing Recruitment and Selection Compensation Management Performance review and management An organization can leverage the human potential to succeed regardless of the geography and the ethnic composition in its employee base.

For truly the organization of today, the difference between success and failure can depend on the recruitment and retention of the most skilled, qualified and talented staff from the world over, creating a unique and strong multi-cultural backbone to get the valuable competitive edge.

Literature Review: Globalization and Competition Essay

LITERATURE Critique Typically, advertising focuses on your wishes of the operator, promotion and marketing and advertising inside of the requirements of the purchaser (buyer). The intention of business enterprise is commonly to acquire as nicely as maintain a buyer. Or possibly, to make use of Andrew Drucker`s considerably a lot more refined making to crank out as effectively as keep a buyer. (Via item differentiation as perfectly as value competitors) Intercontinental advertising and marketing and advertising entails your advertising and marketing of items as nicely as companies past the organization`s residence land. International advertising and marketing and internet marketing is a sophisticated style of abroad promotion and promoting which engages a lending broker inside of promotion and promoting functions in numerous nations. Worldwide promoting and marketing and advertising signifies advertising and marketing and marketing pursuits synchronized as well as incorporated across a amount of areas. Technological innovation as effectively as globalization designs the earth. The 1st makes it possible for ascertain guy preferences your second, fiscal realities. Standardized customer merchandise, decreased rate as perfectly as technological innovation commonly are guidelines regarding prosperous globalization. Your globalization of areas is at palms. With this, your worldwide skilled world nears its quit, and so could your global business. Your world`s wants and wants are now irrevocably homogenized (sector wants). This distinct will make your intercontinental enterprise outdated and the entire world extensive small business overall. No a single can be chance-absolutely free by means of throughout the world get to and the irresistible providers of level (reduction of rates as nicely as selling prices) as well as placing. Your global as effectively as around the world company will not be the same thing. Your worldwide business operates in a large amount of countries as effectively as tunes it is merchandise as nicely as techniques inside of every single on substantial comparable rates. Worldwide advertising and marketing and internet marketing could be the approach of placing attention a great organization`s suggests within just the collection as perfectly as exploitation of throughout the world field possibilities constant with as effectively as faithful of its speedy as perfectly as very long-expression perfect targets as nicely as targets. With this paper, my lover and I experimented with to examine your tactics a company competes inside around the world surroundings by implementing assorted tactics. Individual’s procedures modify in numerous approaches a company’s features as very well as enthusiasm allow. A corporation ought to be careful within applying these techniques prior to globalizing its features. Basically mainly because normally these methods may crash as perfectly as finish in reduction of profit or even quite possibly closure of the business. I counsel assisting audience for acquiring more facts with this concern. For example, they might contact the corporation, beneath secretariat of Overseas Offer, ideal Chambers of Commerce or even each other community or even own corporation positioned in Egypt or even in another state. They will could possibly also employ any sort of stockpile or even website usually means. (Akkaya, 2005) Inside of the region of abroad marketing and marketing, your concern on the degree of standardization or even version possesses entertained a big component of past investigate. The situation, nonetheless thoroughly reviewed, hasn’t been fatigued yet, provided that, in-depth statistical examination as well as way of measuring of the similar bodyweight of factors affecting your selection will even now be needed to improve every of our awareness on it. This particular review makes a considerable stage towards taking away that room and offers an critical health supplement both of those to assist theoretical comprehending and managerial packages on the subject. Vignali as nicely as Vrontis (1999) expose until finally this query initiated due to the fact 1961, any time Elinder (1961) imagined to be this with respect to around the globe advertising and marketing. In that time period of time, advertising and the want for overseas standardization ended up currently being in the centre of your problem (Kanso as well as Kitchen’s, 2004). Intercontinental internet marketing standardization can have necessitated a regular internet marketing strategy relating to marketing ads of global enterprises. This certain problem subsequently expanded via advertising and marketing to the marketing blend and currently will involve the entire advertising and promoting blend (Schultz as nicely as Kitchen’s, 2000 Kanso as well as Kitchen’s, 2004 Kitchen’s as perfectly as de Pelsmacker, 2004). Remarkably, virtually 50 percent a hundred yrs later on, your question on standardizing marketing and internet marketing internationally, can be constant (Vrontis as very well as Kitchen’s, 2005). Even a cursory overview of your literary is effective pinpoints a pair of main strategies together with awesome endurance, that is, edition as properly as standardization of abroad promotion and marketing and advertising procedures. Ryans(2003) claim that in the very last forty five decades there is a sizeable enlargement of faculty study in your neighborhood of overseas promoting and promoting standardization. In the course of this period, scientists applied substantially much more remarkable statistical tactic. Also, they reveal which fiscal as properly as aggressive circumstance have modified around that time time period. Just before, fiscal progress finished up remaining concentrated within the excessive of exports about imports. Organizations had been concentrated purely upon minimizing expense as nicely as raising exports. Nevertheless, as a end result of enhancements inside fiscal circumstance, corporations comprehended which expense minimization by you can be insufficient. By usually means of modifying, corporations grew to develop into considerably far more buyer oriented and far more excellent techniques experienced been designed as properly as provided to confirm as well as satisfy consumers’ wants. Fans of standardization thought of locations simply because more and extra homogeneous as well as throughout the world inside of placing as well as stage as effectively as presumed the essential pertaining to your survival as properly as expansion is a multinational’s capacity to standardize items as well as organizations (Fatt, 1967 Buzzell, 1968 Levitt, 1983 Yip, 1996). Fans of standardization stipulate which clients desires wants as well as requires are inclined not to differ significantly throughout spots or even nations all-around the planet. The typical conceptual disagreement can be the globe has grown far more and far more equivalent inside of text of environmentally friendly factors as properly as shopper demands as perfectly as no make a difference bodily spots, clients establish the equivalent calls for. For instance, Levitt (1983) in a pretty landmark papers, proposed which standardization of the advertising and internet marketing blend and the style of an sole system for your globally marketplace, offers companies of stage inside of output as effectively as advertising and marketing and marketing as properly as furthermore can be constant with specifically what he or she termed your “mobile consumer”. Conversely, promoters of edition like Kashani (1989) expose complications inside by employing a standard method and as a consequence aid industry tailoring as effectively as variation to healthy your “unique dimensions” of assorted abroad parts (Thrassou as nicely as Vrontis, 2006). Much more specifically, supporters of the overseas Edition College of Believed argue there are insurmountable variances regarding countries and also concerning destinations in the equivalent land (Papavassiliou as very well as Stathakopoulos, 1997). It is proposed which marketers normally are ruled by quite a few macro-environmental elements, like local climate, fight, topography, vocations, flavor, laws, culture, technological innovation as well as fashionable culture (Czinkota as perfectly as Ronkainen, 1998). Paliwoda as effectively as Thomas (1999) broaden that amount to incorporate consumer choices, disposable funds circulation, taxation, nationalism, local community work charges, literacy as well as numbers of training and mastering. Supporters with this university stipulate which international businesses need to have to obtain out how to adjust his or her advertising and marketing system as properly as techniques (marketing mix components) in get to match marketplace needs. Every faculties of considered within by themselves feel to be realistic, sensible as well as coherent, showcasing associate applications as properly as rewards which a worldwide business enterprise could attain by making use of both system. It is only if 1 focuses on your extreme placement of possibly which they generally periods develop to be not useful as nicely as incoherent. Promoting and advertising actuality pertaining to multinationals will not relaxation inside possibly of the a couple of polarized positions, due to the fact the two operations may very very well coexist, possibly within the identical organization, manufacturer products line, or even manufacturer (Kitchen, 2003 Vrontis, 2003 Soufani et al., 2006).These certain papers swells on current operate on the topic to review your subtle interrelationship of assorted parts worried for the adoption of the pair of strategies (adaptation as nicely as standardization). This provides beneficial insights into your degree as very well as character with this link as effectively as pinpoints practical complications in relation to overseas advertising and marketing and advertising and marketing techniques. Specially, that paper investigates your techniques used within the finest a single thousand United kingdom-dependent multinationals in terms of assorted business accessibility processes. “Multinationals” in the context with this analyze necessarily mean corporations which in transform are by now functioning inside of or even transferring to help unconventional regions on the volume of no significantly less than a few many years. Your look with this examine stems from its outstanding statistical modeling system, which in convert corroborates further than study via substantially a lot more in-depth statistical assessment as well as through its results, that are fitted with proven the promoting and internet marketing great explanations yanking toward edition or even standardization are inclined not to have the equivalent diploma of relevance inside tactical carry out (advertising mix structure). Additionally, the examination isolates these types of in “significant” as properly as “peripheral” variations as effectively as includes success in prescriptive effects as nicely as managerial implication. (Vrontis, 2009)