Globalization of business

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Oles Honchar Dnipro National University, Ukraine

Globalization of business

Pashaeva L. M., Rieznik M. A.

A major change that has taken place in the world in the last fifteen years is the globalization of business. The world has become a global village and business has become global in its character. Organizations are venturing beyond national boundaries in the pursuit of business opportunities. Toyota Motor Corporation makes its cars in the USA and India, Mc Donald's sells its burgers in India and hamburgers in China, and Marks and Spencer sells its products in India. Every other product sold by Wal-Mart stores Inc. is made in India. This is the time when buildings are conceptualized in the US, designed in India and built in China. Very recently, Ford Motor Co. (Ford) announced its plans to invest $ 1 billion in products and plants in the Asia-Pacific region in the next few years to maintain its presence in the fast-growing markets.

Multinational corporations require employees who can adapt to different cultures, customs, social practices, values, economic and political systems and management approaches, who can work with other employees from various backgrounds. This has resulted in new challenges for HR managers. The HRM of a company must develop systems that will help individuals from different cultural backgrounds to work together. Human resource managers must ensure that employees with the required knowledge, skills, abilities, and cultural adaptability are available so that they may be successful in global assignments.

Another recent change faced by HRM in the present business scenario is that of Mergers and Acquisitions. Companies today need to be fast-growing, efficient, profitable, flexible, adaptable, and future-ready and have a dominant market position. Without these qualities, firms believe that it is virtually impossible to be competitive in today's global economy. In order to gain access to new markets and fresh ideas, companies often choose to grow via Mergers & Acquisitions (M&A) rather than concentrating their efforts on their own business activities. Such inorganic growth is often viewed as a faster way to achieve growth for the company. Especially in technology driven industries, where growth is often accelerated through increased innovations, and one way for the firms to compete is to align themselves with those companies that are developing the innovative technology. Such alignment is achieved through M&A activities. Successful manifestation of such activities involves complex procedures and processes in order to integrate both organizations and align them as companies having a common unified objective. management decision business global

This has created certain problems for an organization. One of the problems associated with mergers and acquisitions is the retrenchment of staff that becomes unnecessary due to the rationalization of operations. For example, in the financial service sector, M&A activity between 1996 and 2006 caused an aggregate employment decline. Due to M&A, sector experts predicted a loss of more than 300,000 jobs in the banking sector between 1999 and 2002. When negotiations for M&A are on, employees of the concerned firms are subject to several rumours that cause insecurity about the future. Thus, HRM is faced with several challenges before, during, and after the M&A decision.

In the present era, the competitive advantage of organizations is linked to 'knowledge'. There is a lot of emphasis placed upon dissemination of knowledge and knowledge workers within organizations. Therefore, there is an increased focus on management of the knowledge resource in organization. Thus, in the 21st century, the HRM function has a key role to play in shaping the competitive position of the organization. To compete effectively in the knowledge economy, a firm must have what Ulrich calls 'organizational capabilities'. HRM plays an important role in creating, developing and managing the organizational capabilities that are essential to compete in the knowledge economy. Human resource managers have to create effective teams within a diverse workforce; tap talent throughout the organization by recruiting, retaining and developing people at all levels; build and integrate cultures as mergers and acquisitions become common; and develop employee commitment toward organizational vision. Human resource management is confronted with major challenges in the present knowledge economy. Thus, HRM is no longer simply focused on 'managing people' or confined to traditional HR functions rather; it is now responsible for managing the capabilities within the organization.

Thus, the business environment affects the HRM. External business environment includes the political, economic, social and technological aspects. The external environment affects the internal environment of an organization which, in turn, influences the decision-making of the organization. Traditionally, the main aim of organizations was to earn profits. But now modern-day organizations have to think about 'Corporate Social Responsibility', not at the cost of earnings, though, because earnings are the main source of survival in the competitive market. The smooth and congenial external environment will ensure smooth functioning of an organization. There is a lot of interdependence between the two. Since the world is now considered to be a global village, the integration of global and business environment is very important.

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