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Globalisation and corporate governance

Introduction

Globalisation is a leading concept which has become the main factor in business life during the last few decades. This phenomenon affects the economy, business life, society and environment in different ways, and almost all corporations have been affected by these changes. We can see these changes mostly related with increasing competition and the rapid changing of technology and information transfer. This issue makes corporations more profit oriented than a long term and sustainable company. However, corporations are a vital part of society which needs to be organized properly. Therefore we need some social norms, rules and principles in society and business life; this is the role of governance.

Globalisation

Globalisation can be defined as the free movement of goods, services and capital. This definition does not cover all the aspects of globalisation or global changing. Globalisation also should be a process which integrates world economies, culture, technology and governance. This is because globalisation also involves the transfer of information, skilled employee mobility, the exchange of technology, financial funds flow and geographic arbitrage between developed countries and developing countries. Moreover globalisation has religious, environmental and social dimensions. In order to encompass this broad impact area globalisation covers all dimensions of the world economy, environment and society. Moreover it is apparent all over the world and the world is changing dramatically. Every government has a responsibility to protect all of their economy and domestic market from this rapid changing.

The question is how a company will adapt to this changing. First of all companies have to know different effects of globalisation. Globalisation has some opportunities and threats. A company might have learnt how to protect itself from some negative effects and how to get opportunities from this situation.

Globalisation affects the economy, business life, society and environment in different ways:

o Increasing competition,

o Technological development,

o Knowledge/Information transfer,

o Portfolio investment (fund transfer between developed countries and emerging markets),

o Regulation/deregulation, International standards,

o Market integration,

o Intellectual capital mobility,

o Financial crisis-contagion effect-global crisis.

Competition

Globalisation leads to increased competition and therefore increased competition is a consequence of globalisation. This competition can be related to product and service cost and price, target market, technological adaptation, quick response and quick production by companies, in addition to such things as quality and customer satisfaction. When a company produces with less cost and sells cheaper, it will be able to increase its market share.

Customers have too much choice in the market and they want to acquire goods and services quickly and in a more efficient way. And also they are expecting high quality and a cheap price which they are willing to pay. All these expectations need a response from the company, otherwise the sales of the company will decrease and they will lose profit and market share. A company must be always ready for price competitions for product and service and for changes in customer preferences because all of these are global market requirements.

Exchange of Technology

One of the most striking manifestations of globalization is the use of new technologies by entrepreneurial and internationally oriented firms to exploit new business opportunities. Internet and e-commerce procedures hold particular potential for SMEs seeking to broaden their involvement into new international markets (Wrighta & Etemad, 2001). Technology is also one of the main tools of competition and for enhancing the quality of goods and services. On the other hand it necessitates quite a lot of cost for the company. The company has to use the latest technology for increasing their sales and product quality. Globalisation has increased the speed of technology transfer and technological improvement. Customer expectations are directing markets. Mostly companies in capital intensive markets are at risk and that is why they need rapid adapting concerning customer and market expectations. These companies have to have efficient technology management and efficient R&D management.

 
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