Over the last decades, political relations, human and social dynamics and the global environment has become intertwined (Fuchs, 2007). This has led to more global economic integration as well as global forms of governance which further promotes globalization. All big firms are expanding their businesses to other countries so that they can have more customers and increase sales. In the theoretical view of globalization, many businesses go global with one major intention; to increase sales and profitability (Fuchs, 2007). However, many economists have questioned the relevance of the profit maximization goal for going global. Hirst et al. (2014) argue that globalization is more complex and goes beyond just making profits. While firms seek economic growth and development in the international markets, the issue that arises is how sustainable is globalization. Globalization can enhance sustainability through value creation, fostering economic growth and profitability by application of fair practices that will adhere to the social, economic and environmental pillars of sustainability (Hirst et al., 2014).
According to Crane and Matten (2016), global economic growth theory claims that globalization is good not only for the firm that goes global but also for the local market and the home country as a whole. As a firm goes global, more people both at the local and international markets are employed. Reports show that globalization has led to more than 15% job creation according to World Bank (Crane and Matten, 2016). As firms get to international markets, the focus shifts to the division of labor where skilled workers have to be employed to take part in various production processes. To achieve sustainability in the global labor market, firms strive to meet the social pillar of sustainability. This aspect involves shifting focus on balancing the needs of individuals with the needs of the group. Most successful firms that go global take initiatives to make social programs that create ties with their corporate missions and culture (Crane and Matten, 2016). For example, Walmart which is an international business promotes its sustainability by implementing a market-specific skills training programs, work safety initiatives as well as sustainable agriculture (Peng, 2016). This ensures that even as it goes global, it will continue to have skilled labor and continuous supply of materials needed for production. Globalization has therefore led to the economic growth and job creation as well as improved skills among employees. However, the firm has to take keen measures on the social pillar of sustainability to ensure continued future growth (Peng, 2016)
While global economic theorists view globalization as a way to improve economic growth through building the talents of the employees, globalization can also help a firm get access to greater talents in the global market (Sloterdijk, 2013). Some countries have more talents than others and hence going global can make a firm get better-skilled workers than in the home country. Accessibility to skilled labor is the key to the productivity of an organization and hence sustainability. Globalization will enable a firm get highly skilled labor at a fair cost which will enable it to maximize production and minimize cost (Benn et al., 2014). According to Benn et al. (2014), accessing and maintaining skilled labor force is the key to the future sustainability of a business. It is argued that due to high demand for skills by businesses, firms which will not be able to acquire and retain the right kind of skills may experience the labor shortage in future, a factor that will impact negatively on the ability of the firm to sustain itself into the future. Globalization is thus good for the firm to access and retain skilled workforce necessary to support future growth (Crane and Matten, 2016).
A group of economists is of the opinion that globalization can increase the market base of a firm, increase sales and subsequently the profits. They further say that as long as the firm put appropriate mechanisms for cost minimization and profit maximization, it will continue to operate into the unforeseen future (Chandler and Werthe, 2013). The prosperity theory of globalization and sustainability argue that when a firm continues to make profits in the international markets, it will be able to sustain its existence into the future. The theory focuses on the prosperity of the firm in the global market which results from the increased sale as a result of more market coverage (Milanovic, 2016). Due to the advancement in technology, firms that go global find it easy to manage all the outlets just from one point. Technology has therefore promoted globalization through cost reduction management enabling a firm to maximize its profits and thus creates sustainability into the future (Milanovic, 2016). According to Palan (2013), only firms that make profits can have future sustainability and will be able to operate as a going concern. Globalization is hence important because it can increase the prosperity and profitability of a firm, a situation that makes a firm to sustain itself and continue to exist (Palan, 2013). It is good for firms to expand to the international market to seek more market for future sustainability. Due to the growing business competition, businesses that remain local may not sustain themselves into the future because as more firms join the industry, they take away customers from competitors. According to Palan (2013), it is majorly through globalization that firms will acquire more customers that will enable it to continue going.
Another theory that discusses the importance of a business going global and the sustainability is the resource accessibility theory. According to Erez et al. (2013), when a business operates at a home market for long, resources and materials may get depleted or reduced. However, for future continuity of operation, a firm must have access to resources and raw materials. Crossing over to the international market can provide a firm with new sources of resources and raw materials which it can utilize for its production. Global market provides an opportunity for continuous access to raw materials and other resources that are necessary to ensure a firm continues to operate (Rupert and Smith, 2016). To maintain sustainability and continue as a going concern, a firm must have a constant supply of raw materials. Globalization is thus a good idea because it enables a firm to access new sources of raw materials which will enable it to continue operating and maintain sustainability (Rupert and Smith, 2016).
Other theorists support globalization on the grounds of market diversification. If a business has only one or two areas where it sells its products, it can be negatively affected when the market experiences a drastic shift due to a disaster which was unforeseen (Cavusgil et al. 2014). Taking a business global allows a firm to enhance market diversification and continue with revenue generation even if one section of the market is affected (Cavusgil et al. 2014). This also helps if the domestic market is slow. A firm can continue to sell into the foreign market and increase revenue. The future sustainability of a business depends on the market it commands and the number of customers it adds every time as asserted by Peng (2016). Going to a global market increases the number of customers and promises continued future profit generation and sustainability (Fuchs, 2007). Controlling a small range of customers may put the future of the business at risk because a predicted drop in revenue which will then make a firm to run at a loss and finally collapse. Globalization is hence good for firms that want to diversify the market and maintain more customer into the future (Fuchs, 2007).
Despite many theorists supporting globalization, another group of theorists is against the act. According to creation theory, globalization leads to overuse and depletion of resources which God created man to conserve (Milanovic, 2016). The theory claims that going global will soon render firms non-operational because they will lack resources to use in production. It further claims that globalization goes against God’s words that human beings should protect the environment. Another group of economists also argue that globalization is the main factor that denies firms future sustainability. According to Bretos and Marcuello (2017), the negative impact of globalization is resource depletion. As firms continue to explore new markets, they continue to use all the nonrenewable resources as stated by Chandler and Werther (2013). This according to them, will affect the future sustainability because they will not operate into the future. They, therefore, view globalization as something risky for the future continuation of the business. However, these arguments may not be valid in concluding that globalization is risky given the many evident positive impacts of globalization. As long as a firm applies fair practice while going global, sustainability will continue to remain in globalization (Sloterdijk, 2013).
While globalization is fruitful for both the firms and the whole economy, firms that go global must adhere to the three major pillars of sustainability. The first pillar is the social aspect of sustainability (Duić et al., 2015). A firm going global must know that labor force is limited and the shortage of skilled labor will be experienced in the future. It must, therefore, initiate programs that will lead to building and retaining the required skills in the organization into the future. This can be done offering certain training programs to improve skills while at the same time maintain the safety of the existing skilled employees (Rupert and Smith, 2016). The second pillar of sustainability that a global firm must consider is an environmental aspect (Gao and Bansal, 2013). It is undoubtedly true that resources are limited. At the same time, production has certain negative impacts on the environment such as pollution (Gao and Bansal, 2013). For a global firm to ensure sustainability, it must ensure that the rate of resource harvest does not exceed the rate of generation. It should also regulate environmental pollution (Gao and Bansal, 2013). For example, Walmart ensures sustainability by having a zero waste, energy consumption management as well as reducing pollution (Duić et al., 2015). The final pillar of sustainability is an economic aspect. This involves ensuring that resources are efficiently utilized to maximize profitability. Profit maximization guarantees a firm of future sustainability and success.
In conclusion, several theorists and economists support globalization and see it as a good thing that promotes economic development, builds skills, enhance profitability and cost minimization while at the same time ensuring access to new raw materials which guarantees future sustainability according to Palan (2013), firms should aim at expanding to global markets to get the many opportunities that exist. However, firms must adopt certain best practices as they go global as these will increase the chances of future sustainability (Chandler and Werther, 2013). They must be sensitive to environmental and resource conservation while at the same time focusing on maintaining the future skilled workforce (Cavusgil et al., 2014). Globalization is a good thing despite the few challenges that come with it and those who get into it must adhere to the three pillars sustainability and best practices.
- Benn, S., Dunphy, D. and Griffiths, A., 2014. Organizational change for corporate sustainability. Routledge.
- Bretos, I. and Marcuello, C., 2017. Revisiting globalization challenges and opportunities in the development of cooperatives. Annals of Public and Cooperative Economics, 88(1), pp.47-73.
- Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.
- Chandler, D. and Werther Jr, W.B., 2013. Strategic corporate social responsibility: Stakeholders, globalization, and sustainable value creation. Sage Publications.
- Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.