The Effects of Globalization and Technology on Business

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Technology has had an enormous effect on the business world.
Technology has had an enormous effect on the business world. (Image: Thinkstock/Comstock/Getty Images)

Globalization and technology have both had an astounding effect on businesses small and large. Globalization refers to expanding a business to operate at the global level. This is often made possible because of the advanced technologies being announced every day. In many ways globalization and technological advances have improved business, but there are also negative effects.

Jobs

Globalization has the unique ability to both create and destroy jobs. Expanding production or operations can often result in new job positions being created, which is definitely beneficial to the economy. Conversely, operating globally also opens the company up to new sources of cheaper labor, which results in existing employees losing jobs due to outsourcing. This can be seen with many customer service call centers. The jobs are outsourced to people in India who work cheaper than their American counterparts. This is good for India, but not so good for America. Technology often leads to fewer blue-collar jobs because machines and automated procedures are able to replace employees at a fraction of the cost.

Incomes

Greater income disparities are seen due to increased globalization and technology. Educated professionals have the background and skills to be competitive in the global marketplace and potentially earn higher wages. Production and service workers, on the other hand, are forced to work for lower wages or lose their jobs to workers in third-world countries.

Economies of Scale

This economic term refers to reducing production costs by increasing production. Advanced technologies and a larger demand for product due to the global market affords companies the ability to increase production and lower the cost of each item produced. These savings can either be passed on to consumers by way of lower costs or they can mean increased profit for the company.

Sweatshops

Many third-world countries are plagued by sweatshops where adults and children are working in substandard conditions for poor wages. A direct result of globalization, sweatshops are dangerous and sometimes involve forced labor. Sweatshops are very common in the clothing and sports shoe industries. Nike came under criticism for employing sweatshops in the production of its sneakers.

Brain Drain

Brain drain is the migration of skilled workers from poorer countries to richer countries. The advantages for skilled workers are improved education, better technologies, increased income and an improved quality of life. The problem with brain drain is that poor and developing countries are losing out on potential income that could be gained if these workers remained in their own country. It is estimated that India loses $2 billion each year due to the emigration of computer experts to the United States, and Indian students studying abroad cost the country approximately $10 billion annually.

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