Globalization as A Problem To Small Scale Businesses In Developing Countries
Currently the gigantic world has been networked in a single society where leading to improvement on the trading system, a process referred to as globalization. Basically, the process is regarded as the integration of the world into a single community. Even though it’s claimed that globalization promotes productivity, cultural intermixing and cash flow within third world countries, there have been many business problems attributed to this approach. Globalization involves free flow of enhanced technology, inventions and innovations. There has also been emergence of multinational and transnational corporations and increased investment in different states. Due to globalization there has been elevated the rate of investment and increase of wealth through economic gains. Through globalization, trade barriers have been removed since a country’s economy is usually integrated within the world’s economy. Though globalization has been linked with a lot of benefits in business; there have emerged a lot of problems especially in small and medium scale businesses.
Globalization is a business problem in such a way that it leads to unequal competitions between Multinational Corporation and emerging small scale businesses which are dominant part of the developing countries economy since they promote the bigger part of production export and employment. Competition in all aspects business has become so intense since the world is just a small community where countries struggle with game plans to sustain their economy by establishing policies and incentives to support their economy. Due to globalization, many business organizations are finding it challenging to establish a more rigorous and competitive advantage in order to sustain continuity and development. Globalization has led to emergence of monopolies and cut throat competitions have been one of the biggest problematic strategy to small businesses since local markets have greatly been affected. Globalization is a business problem in that it has led to outsourcing where a lot of skilled labor had been lost due to cheap workers. Small scale businesses have also been replaced by e-business due globalization since it’s cheaper to mange few employees. Globalization is a direct attack on small local industries because global industries ruin traditional industries through monopoly and cut throat competition. Therefore, the concept of globalization cannot only be regarded as beneficial since its adverse effects have mostly been experienced in small scale businesses in developing countries (Radovic, 2012)
Data Analysis
Data below illustrates ways in which globalization is a business problem especially to small scale business in developing countries. The data used has been selected from India which is a developing country where small scale businesses have been regarded to be the primary player of the economy. The effects of globalization have been measured in terms of the growth rate in the number of small scale businesses and the rate of production.
Growth Rate in the Number of Small Scale Business
The table below shows the number of working small scale business units in the period befor and after globalization
In regards to the data in the table above, the Annual Average Growth rate of the number of small scale businesses before the error of globalization that is from 1973-74 to 1989-90 was 9.36 percent. However, this declined to a great extent during the era of globalization and liberalization which was 4.07 percent. Before globalization, the annual growth rate of small scale businesses was higher than average growth rate in the previous years that is from 1984-85 to 1989-90; the annual growth rate was below the average rate of growth. Is has also been observed that the rate of annual growth was smallest in 1989-90 in the pre- globalization period. However, after globalization, that is the year 1990-91, there was the most intensive after which it declined to very low levels of up to 3.98 and 4.12 percent. In the bigger part of the period, the annual growth was below the average rate of growth. In 1990 to 2000, the yearly growth and the average rate of growth was the same. The number of small business units was becoming high in the study period, while the average and annual rate of growth was elevated in the period before globalization than the period during globalization period.
Production in Small Scale Businesses
The table below provides data about the growth of small scale business on production from during the period before and after globalization
From the above table, the yearly rate of production growth in the pre-globalization period that is from the year 1973-74 to 1989-90 was 19.45 percent. On the other hand the year growth rate of the period after emergence of globalization reducd to a level of 13.57 percent. During the period before globalization, the annual growth rate was declining in the previous years. However, there was an increasing trend in the year 1986-87. After globalization emerged in the 1990-91, the yearly growth rate was vey low. Most of the time during this years, the annual production growth rate remind below average. From the data in the table it’s quite clear that the yearly growth rate was high during the period of before globalization compared to the period after globalization. This implies that globalization is not always associated with benefits alone, but there are severe detrimental effects of globalization especially to small scale businesses in developing countries
Results
This paper has examined and analyzed how globalization has been a business problem to many small and medium scale entrepreneurs. The comparative analysis of the growth pattern of primary elements before and after globalization errors illustrates that globalization was a major constraint on the progress of small scale businesses measured in terms of units, production and exports. The decline in the rate of growth of number of units after emergence of globalization was intense, hence making the concept a very serious business problem. The analysis implies that globalization is almost an entire barrier to the development front. According to the recent trend of the growth in the small scale units in India implies that, the country’s economy in regards to globalization has fall short to render a beneficial impact on the growth of small scale businesses in developing countries.
Results of the study are such that from 1990-91, the growth of small scale business was very high from around 6 to 273 percent. Consequently, there was an intensive decline in the rate of production. This was basically due to state of open market and globalization where products from the highly developed states were highly sold since they were cheap and of higher quality compared to the developing country. Globalization reduced the demand of products hence affecting the rate of production. Generally, the results show globalization is a very signi9ficant barrier in business and especially to the growth and expansion of small scale businesses.
Recommendation
The detrimental global impact experienced by small scale businesses in developing countries in the international markets call fro implementation of mechanisms and internal capabilities. Thins will enable the small scale entrepreneurs to overcome the problems associated with globalization the course of operations. Small scale business enterprises play a very significant role in promoting the economies of many countries. This is basically because they provide employment opportunities, stimulates and promotes the growth of economy. Due to the benefits accrued as a result of small scale entrepreneurs drastic measure need to be undertaken to increase the efficient of small scale businesses in both local and international markets.
Various approaches can be undertaken to overcome the poor effects of globalization small scale businesses while the same moment exploiting the benefits of globalization. For instance, small scale businesses in a given country may establish a niche market strategy whereby small scale businesses become the global distributors of specialized niche products (Brown, 2011). The approach would be able to overcome competition from universal competitors. Consequently, small scale business may also employ the strategy networking in which they collaborate with other global firms in order to enable them over global business barriers. However, implementation of successful and strategic networks with other global firms requires small scale entrepreneurs understand various parameter of networking such as network structure, relationship content and governance. Small scale entrepreneurs may also use electronic commerce in their international operations so as to be able to reach the increased number of consumers via the internet source. Using electronic commerce enhance the reduction of business problems due to globalization.
Reference
Brown, G.(2011) Beyond the Crash: Overcoming the First Crisis of Globalisation. Simon & Schuster, Limited: New York
Kansal, D.R (2009).Globalization and Its Impact on Small Scale Industries in India. PCMA Journal of Business.Vol.1 No.2 pp.135-146.
Radovic, M. M.(2012) Impact of Globalization on Organizational Culture, Behavior, and Gender Roles (Hc). IAP: North Carolina
