Globalization
can be defined in many different ways due to the environment in which it is
occurring is constantly changing. One way in which it can be defined is,
“globalization is the free movement of goods, services and people across the
world in a seamless and integrated manner.” (Management Study Guide) This
definition outlines the opening up of the global economy and increase in trade
between nations. As a result of globalization, countries all across the world
are becoming more connected and countries can attract global capital by opening
up their economies to multi-national corporations.
There are two types of globalization, offshoring and outsourcing. Offshoring is when businesses set up offices or factories in different countries and get work done in that country. Outsourcing is contracting work out to a 3rd party or an external organisation. (Diffen, 2019) Offshoring is beneficial due to the lower costs associated and can make a more skilled workforce available which can get work done faster through a global talent pool. However, there are some risks with offshoring such as language barriers between different countries which can lead to poor communication. Outsourcing is beneficial for a company as they can take advantage of specialized skills, cost efficiencies and labour flexibility however with outsourcing, there can be a lack of knowledge with regards to business operations and how things are done. (Diffen, 2019)
There are many advantages globalisation can bring to a country, one being the employment opportunities it provides. Due to businesses being able to set up in different countries, more job opportunities are made for the habitants of that country as well as employees in the home country being given the opportunity to travel with their work. Another benefit of this is that SME's could potentially create a more skilled workforce wherever they may be based as they can gain more experience from people who work in the same field but do things a different way and use these new skills and ways of doing things to enhance their business
.
As well as this, globalisation can help to provide more opportunities for global growth to SME's as businesses tend to seek the best possible option to expand in countries where there are lower start-up costs as well as lower labour costs as wages for those working in less developed countries are less than those working in the UK for example where the national living minimum wage increased to £8.21 on the 1st April 2019.(Minimum wage, 2019) However there is a downside of this as SME's could receive backlash from the public if they feel the business is exploiting workers in foreign countries and could lead to a newly expanded SME having bad public image which could affect marketing and investment activities.
There are two types of globalization, offshoring and outsourcing. Offshoring is when businesses set up offices or factories in different countries and get work done in that country. Outsourcing is contracting work out to a 3rd party or an external organisation. (Diffen, 2019) Offshoring is beneficial due to the lower costs associated and can make a more skilled workforce available which can get work done faster through a global talent pool. However, there are some risks with offshoring such as language barriers between different countries which can lead to poor communication. Outsourcing is beneficial for a company as they can take advantage of specialized skills, cost efficiencies and labour flexibility however with outsourcing, there can be a lack of knowledge with regards to business operations and how things are done. (Diffen, 2019)
There are many advantages globalisation can bring to a country, one being the employment opportunities it provides. Due to businesses being able to set up in different countries, more job opportunities are made for the habitants of that country as well as employees in the home country being given the opportunity to travel with their work. Another benefit of this is that SME's could potentially create a more skilled workforce wherever they may be based as they can gain more experience from people who work in the same field but do things a different way and use these new skills and ways of doing things to enhance their business
.
As well as this, globalisation can help to provide more opportunities for global growth to SME's as businesses tend to seek the best possible option to expand in countries where there are lower start-up costs as well as lower labour costs as wages for those working in less developed countries are less than those working in the UK for example where the national living minimum wage increased to £8.21 on the 1st April 2019.(Minimum wage, 2019) However there is a downside of this as SME's could receive backlash from the public if they feel the business is exploiting workers in foreign countries and could lead to a newly expanded SME having bad public image which could affect marketing and investment activities.
SWOT analysis of Japan and their business environment
Strengths
·
Japan has a
well-developed and transparent tax system
·
Their
government is democratic and stable
·
Japan has an
advanced and non-discriminatory legal system
·
Japan’s policy
on foreign investment is liberal
·
World class
educational system can help in building a strong economy
|
Weaknesses
·
Japan’s
corporate tax burden is high in comparison to other East Asian countries
·
A high overall
cost structure makes market entry and expansion expensive for foreign
investors
·
Japan is at
high risk of natural disasters
·
High public
debt
·
Low birth rate
and an ageing population
|
Opportunities
·
High disposable
income which means more investments in sustainable, long-term products and
services
·
Emerging
markets- Japan is emerging for global consumer products- provides opportunities
for Japan to grow its economy further
·
Growing
e-commerce presents an opportunity to boost economic growth
|
Threats
·
Potential
economic collapse- Japan is prone to long-duration recessions
·
Trade
restrictions- strict rules and regulations with regards to international
trade opportunities
·
High tax rate-
means either lower profitability or higher costs of products
Table Ref:
AIG, 29th March 2018
Marketing91,
11th January 2019
|
PESTLE analysis
Political
| Japan is a
political monarchy with the emperor being head of state. Japanese monarch has
a very limited say on the political affairs of the country. However, the
people and constitution of Japan regard the emperor as being the "symbol
of the state and the unity of people." Japan has a post-war
pacifist constitution. It plays a considerable role in international
community and is a major aid donor (BBC, 2018). Japan has a very close
relationship with the US and this relationship is part and parcel of Japan's foreign
and security policy. (Howandwhat, June 2018) Japan has a stable internal political environment however they have a long history of diplomatic challenges with their neighbours including political disagreements with countries such as Russia, China and North and South Korea. (Howandwhat, June 2018) |
Economic
| Japan has a
very strong economy and is in fact in the top 5 largest economies in the
world. However, Japan's unemployment rate is on the rise with a value of 5%,
this may not be as high in comparison to other countries due to the major
population size and as a result is a worrying factor for Japan. (www.pestleanalysis.com) Japan is the 2nd largest economy in Asia and is a member of the G7, G20, APEC and ASEAN. Japan has a world renowned automobile industry and is home to some of the largest vehicle manufacturers in the world including Toyota, Mitsubishi and Yamaha. As well as this, Japan relies heavily on imports of oil, gas, coal, copper and aluminium and gets these imports from countries such as China, USA, Germany, South Korea and Australia. (Howandwhat, June 2018) Japan needs to pay corporate tax on the income they generate in Japan and abroad however companies operating in Japan only pay tax on the income they generate in Japan. (Howandwhat, June 2018) |
Social
| With
regards to Japan’s population, there is a decrease in birth rate which can
result in an increased population of elderly people, this means more
opportunities would be presented for elderly and healthcare. In relation to social class, there is a low poverty rate and not that many rich people therefore, there is a large middle class segment and stable society which is good for business. (Yuri Igarashi, 30th September 2016) Japan employees are well skilled and educated due to large investment in schools and colleges, according to Yuri Igarashi, “70% of people enter at university level and 91% of people complete their degree in universities.” Having well skilled and educated employees in Japan means they can enter businesses and excel in their careers as well as presenting opportunities to travel with their work and pass on their skills to other countries. |
Technological
|
Japan has one of the most advanced telecommunications
systems in the world, they have made it possible to connect to Wi-Fi anywhere
in populated areas and the Japanese can send emails and pass on contact
information by simply holding their phones together.
As well as this, Japan make components for
Apple products such as the iPhone which is sold internationally and
worldwide. Japan employs over a quarter of a million robots and are well
advanced in the robotic field. A revenue of robotics is estimated to be $700
billion by 2025. (Yuri Igarashi, 30th September 2016)
|
Environmental
|
Japan is prone to many
natural disasters such as tsunamis and earthquakes due to the country being
surrounded by water. As a result of this, areas such as Tokyo, its capital,
are highly populated due to much of the country being inhabitable. (PestleAnalysis)
|
Legal
|
Japan is pretty much the same as EU laws, especially when it comes to working laws and regulations as all acts such as minimum wage have to be followed by the employer. Japan's prefectural minimum wages range from ¥714 to ¥932 per hour for all workers. Industrial minimum wages applies for certain industries and usually set higher than the prefectural minimum wage. (MinimumWage, 2019)
Japan have some laws which associate around the import of meat. For example, Whale meat is available in Japan but importing it into the UK/EU is illegal under the Convention on International Trade in Endangered Species. Any importation of whale meat into the UK will result in seizure of the goods, possibly a fine of up to £5,000 and a custodial sentence. (www.gov.uk 2019) As of the 1st April 2019, penalties are imposed on those in Japan who import meat illegally as It’s forbidden by Japanese law to bring meat products (including sausages, bacon and ham) into Japan without permission from the Japanese Animal Quarantine Service. |
Global drivers
Global drivers can be described as factors associated with some type of business growth. Main global drivers include; cost, technology, the market and the government. (eNotes Editorial, 27 Sep 2012)
Cost is a driver which plays an imminent role in globalization. Cost drivers can help the continual of achieving economies of scale. As well as this, if companies are achieving better economies of scale, it allows them to be able to set up factories and companies in other companies where some businesses achieve better productive capability and lower labour costs. Cost affects everything a business does from manufacturing to selling.
Technology is becoming more and more advanced and has allowed for many businesses to grow and develop in an international environment. With the right technology, many businesses can easily grow and sell their products and services anywhere in the world with the click of a button. E-commerce has emerged into the global business environment with ease and has allowed for businesses to develop websites to offer their products and services to consumers online and as well as this it allows businesses to gain a wider target market due to the increased availability of products and services.
Businesses use the internet to quickly contact and resolve any issues that may occur in the business whether it be in one country or another, technology provides easy access to do so. A lot of information can be stored on the internet with regards to the business and its inventories for example. In addition to this, the internet can be used as a tool for market research as businesses can receive feedback from consumers on their website. This allows a business to see what is working for them based on customer feedback as well as aiding them to set objectives on how they can improve for the better of their customers. Big online retailes such as Booking.com and Amazon use this as a way of receiving feedback online.
The government is a key factor more in terms of the legal processes and laws enforced in different countries. In relation to Japan, most goods don't require an import licence and goods can be freely imported into Japan. Import licences are required for certain goods such as hazardous materials, animals, plants and perishables. (HKTDC, 22nd June 2018) Japan's tariffs are amongst the lowest in the world, the Customs and Tariffs Bureau of Japan's ministry of Finance administers tariffs.
Simple average applied Most Favored Nation (MFN) tariff:
- Total -- 4.0%
- Agriculture products -- 15.7%
- Non-agriculture -- 2.5%
- Non-electrical machinery -- 0.0%
- Electrical machinery -- 0.1%
- Transport equipment -- 0.0%
- Manufactures, n.e.s. -- 1.2%
- Clothing -- 9.0%
- Chemicals -- 2.1%
(Japan Country Commercial Guide, 9th June 2016)
Market drivers are one of the key influences of globalization in terms of market forces, consumer goods and services are now universally available regardless of the geographic location or setting. As a result of international marketing campaigns and corporate brand promotions, consumer desires and lifestyles around the world are increasingly converging. (Bizfluent, 26th September 2017)
In relation to markets, international firms today support reasonable labour and environmental laws as this can help aid them for expansion into future markets for their goods and services.(Pearson 2019)
Gobalisation for a business is heavily determined by where the markets are and all of the background information that comes with them. Market research and worldwide research is essential when looking at what drives globalisation as it can be different in some areas than others.
In relation to markets, international firms today support reasonable labour and environmental laws as this can help aid them for expansion into future markets for their goods and services.(Pearson 2019)
Gobalisation for a business is heavily determined by where the markets are and all of the background information that comes with them. Market research and worldwide research is essential when looking at what drives globalisation as it can be different in some areas than others.
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