Small- or medium-sized enterprises (SMEs) are the backbone of the economy in most countries, and often provide over 50% of the workforce (Gunasekaran, Rai & Griffin , 2011). Globalization offers a huge market for Small businesses to expand into the global market, but it also exposes them to stiff competition from multinational companies who produce the same products at a cheaper price. In order for small businesses to compete effectively, it should incorporate online and ecommerce platforms into their business processes in order to reduce the barriers of international trade.
Although it has been argued that globalization leads to low standards of living among the poor ( Gunasekaran, Rai & Griffin , 2011) explains that using technologies such as e-commerce platforms has leveled the playing field for the small businesses which were previously isolated from the world due to their remote geographic locations, enabling them compete effectively with the big players. This benefit outweighs the negative impact of job losses that globalization brings to the economy.
Delegate your assignment to our experts and they will do the rest.
First, Global competiveness reduces operating costs through subcontracting and outsourcing non core business activities such as accounting, business and financial consultation (Gunasekaran, Rai & Griffin , 2011). This explains why most multinational companies move to countries that have low labor costs especially when they are looking for small businesses to partner with. For these small businesses to appear competitive, they most often adopt ecommerce platforms to be able to do business abroad.
Second, globalization also provides employment opportunities to export driven economies such as the textiles and clothing industries. Most businesses specializing in garment export are located in export processing zones, sweatshops, or homes under informal employment arrangements (Carr & Chen, 2002). To compete effectively with the large clothing multinationals, most of these businesses have incorporated ecommerce platforms to their sales processes and home deliveries through social media sites.
Third, a global economy also encourages production and distribution of standardized products globally. For example, big companies such as coca-cola have standardized their production process all over the world, yet most small businesses depend on middlemen such as refiners and exporters of raw materials such as Shea butter, (Carr & Chen, 2002) in order to find markets for their products. A direct platform to connect the buyers and sellers considerably improves the revenues of such small businesses.
Although globalization grows competitive businesses, the negative impact of globalization to the economy brought about by low production costs is the low pay the unskilled worker gets. A situation that is further aggravated by the closure of small-scale business that are unable to compete favorably with cheaper imported goods; most of those employees lose their source of livelihoods, which has a negative impact to the economy.
Carr & Chen, (2002) explains that one way of dealing with such a crisis is diversifying into sectors that are less skill intensive or crowded and promise higher levels of income. For example, households that produce cash crops have higher income than those that do not. Small businesses in the textile industries should also continuously monitor their manufacturing processes to identify key areas for investment. Last, governments should put in place local mechanisms that protect local economies from the negative impacts of globalization.
References
Carr, M., & Chen, M. A. (2002). Globalization and the informal economy: How global trade and investment impact on the working poor (pp. 92-2). Geneva: International Labour Office.
Gunasekaran, A., Rai, B. K., & Griffin, M. (2011). Resilience and competitiveness of small and medium size enterprises: an empirical research. International journal of production research , 49 (18), 5489-5509.
