Journal of Applied Science and Agriculture. The Effects of Globalization in Iran In Terms of Economic Management

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1 AENSI Journals Journal of Applied Science and Agriculture Journal home page: The Effects of Globalization in Iran In Terms of Economic Management Musa Reza Pouraslan Faculty of Management and Economy, Yerevan State University, Armenia ARTICLE INFO Article history: Received 18 October 2013 Received in revised form 20 November 2013 Accepted 23 November 2013 Available online 25February 2014 Keywords: Globalization, Economic, Management, Iran ABSTRACT Globalization has important advantages such as increased world trade and more efficient use of resources in production and has generally helped millions of people in at least some poor countries escape poverty. However, globalization also carries significant negative effects for many workers in developed-nations who are vulnerable to service outsourcing and to the continuing migration of manufacturing to low wage countries. And some of these negative impacts may ultimately lead to significant risk in the global economy (1). All countries undergoing economic modernization are forced to adapt their national economy to the standards of the modern world economy and due to its considerable benefit from the international division of labor in the global and regional levels. On the one hand, any national economy is an integral part of the world economy. On the other hand, the development of the national economy is influenced by internal - both objective and subjective factors, such as the initial development, heritage, natural resources, etc., as well as political, legal, socio-cultural, ethnic and religious factors. This study aims to explore and examine the relationship between global determinants and the expected changes in management activities based on the practitioners point of view in the Iran industrial sector. To the best of the author s knowledge, this research is the first to touch upon that subject from an operational perspective and to bridge the gap in the literature AENSI Publisher All rights reserved. To Cite This Article: Musa Reza Pouraslan., The Effects of Globalization In Iran In Terms of Economic Management. J. Appl. Sci. & Agric., 8(7): , 2013 INTRODUCTION All countries undergoing economic modernization are forced to adapt their national economy to the standards of the modern world economy and due to its considerable benefit from the international division of labor in the global and regional levels (Stanley Hoffman; 2002). On the one hand, any national economy is an integral part of the world economy. On the other hand, the development of the national economy is influenced by internal - both objective and subjective factors, such as the initial development, heritage, natural resources, etc., as well as political, legal, socio-cultural, ethnic and religious factors(dennis A; 2000). The Middle East and North Africa (MENA) is an economically diverse region that includes countries with a common heritage, at various stages of economic development. The nature and specific features of transformative processes in MENA countries, particularly in Iran, are determined based on the analysis and synthesis of theoretical studies of socioeconomic development in MENA countries (Corporaciόn Latinobarόmetro; 2005). The relation between the global economic development and Iran economic development is defined. The effects of globalization processes in Iran as well as in the whole world are considered (see tables 1 and 2). Methodology: The results of the study can be applied to the development of economic reforms in the countries of the Middle East and North Africa (MENA), to solve the problems occurring during the implementation. The ratio between the economic development of Iran and the development of globalization is determined. However, according to management scholars, the levels and types of uncertainty regarding the management of the production function of a going enterprise differ substantively from the entrepreneurial challenge of convincing suppliers of resources that a viable future production function exists. A growing literature in management, finance, and sociology attempts to examine how entrepreneurs assemble resources given these uncertainties. Much of the literature on private equity and venture capital, for instance, highlights how entrepreneurial finance involves special kinds of contracting designed to mitigate the problems of uncertainty and overcome information asymmetries between financiers and entrepreneurs (Abed, George T., 2003; Alfaro et Corresponding Author: Musa Reza Pouraslan, Faculty of Management and Economy, Yerevan State University, Armenia

2 1291 Musa Reza Pouraslan, 2013 al., 2003; Bennett, Adam, 2003; Fischer, Stanley, 2003). Some researchers have shown how venture capital firms seek to deal with these issues through the structure of their securities, the staging of investments, appropriate screening and syndication, and by providing on-going advice and monitoring as the entrepreneurial opportunity is exploited. Work on the organizing process of the new firm's highlights the many stages of new organization creation that entrepreneurs go through, often using the completion of one stage to gain credibility to obtain resources to carry out the next stage. In addition, sociologists have emphasized the ways in which new firms mimic well-established ones in order to gain the legitimacy needed to acquire other resources. Score of Iran s economic freedom is 42.3, making its economy the 171st freest in the 2012 Index. Iran`s score has increased by 0.2 points from last year, with a notable decline in business freedom offset by small improvements in five of the 10 economic freedoms. Iran got rank 16th out of 17 countries in the Middle East/North Africa region, and its overall score is well below the world and regional averages. The trade and market weighted tariff rate is tightly high at close to 20 percent, with layers of non-tariff barriers further restricting trade activity. The investment regime is heavily regulated by the state and foreign investment is banned in many sectors. Strict government controls limit access to financing for businesses. Stateowned commercial banks account for a majority of total banking-sector assets, with credit allocation directed by the government. As we discussed above, effects of Globalization are manifold and are varied, affecting various aspects of the world economy to bring about overall financial betterment. These effects exert intense influence on the financial condition as well as the industrial sector of a particular nation. Globalization gives birth to markets based on industrial productions across the world. This in turn, widens the access to a diverse variety of foreign commodities for consumption of the customers, owing to the marketing strategies undertaken by different corporations. Nowadays Globalization facilitates the formation of a common worldwide market, on the basis of the liberal exchange of both cash and kinds. As far as Political Globalization is concerned, it helps in the formation of a world government to normalize the existing interactions among countries. It also ensures the rights emerging out of Economic and Social Globalizations (Berg, Andrew, and Anne Krueger, 2003; Bisat, Amer, Mohamed El-Erian, and Thomas Helbling, 2007). The results of the study can be applied to the development of economic reforms in the countries of the Middle East and North Africa (MENA), to solve the problems occurring during the implementation. The ratio between the economic development of Iran and the development of globalization is determined. However, according to management scholars, the levels and types of uncertainty regarding the management of the production function of a going enterprise differ substantively from the entrepreneurial challenge of convincing suppliers of resources that a viable future production function exists. A growing literature in management, finance, and sociology attempts to examine how entrepreneurs assemble resources given these uncertainties. Much of the literature on private equity and venture capital, for instance, highlights how entrepreneurial finance involves special kinds of contracting designed to mitigate the problems of uncertainty and overcome information asymmetries between financiers and entrepreneurs (Abed, George T., 2003; Alfaro et al., 2003; Berg, Andrew, and Anne Krueger, 2003; In R Feenstra,). Some researchers have shown how venture capital firms seek to deal with these issues through the structure of their securities, the staging of investments, appropriate screening and syndication, and by providing on-going advice and monitoring as the entrepreneurial opportunity is exploited. Work on the organizing process of the new firm's highlights the many stages of new organization creation that entrepreneurs go through, often using the completion of one stage to gain credibility to obtain resources to carry out the next stage. In addition, sociologists have emphasized the ways in which new firms mimic well-established ones in order to gain the legitimacy needed to acquire other resources. This study is the attempt to analyze the effects of globalization in Iran. The most important results and conclusions of the research are as follows: 1. The factors most affecting the economic development of Iran are analyzed. 2. The integration of the Iran economics into the world economy is considered. 3. The economy of Iran is heavily dependent on international relations, and the relationship tends to increase. Iran is actively involved in the international exchange of goods and services. Oil is the commodity that has accelerated the process of globalization in the world, and that makes Iran's participation in the world trade strategically important both for Iran, and for the countries consuming Iranian oil.

3 1292 Musa Reza Pouraslan, 2013 Fig. 1: MENA, MENA Oil, and Comparators: Real GDP per Capita Indices Sources: IMF, World Economic Outlook; and IMF staff calculations Fig. 2: MENA and Comparators: Exports Shares Sources: IMF, Direction of Trade Statistics for various years, Information Notice System; and IMF staff calculations. Results: 1- Those manufacturers in Iran should pay more attention to the importance of technology as one of the very fundamental paths for confronting globalization threats. 2- It is expected that globalization will create severe competition between manufacturers on quality bases. Thus the Iranian manufacturing firms should formulate the relevant strategies for continuous improvement in the quality of the products and services the operation produces in order to keep pace. 3- The findings of the current study enhance understanding of the impact of globalization on capacity planning and control in manufacturing firms. In this regard, policy makers in the Iranian industrial sector should augment the capacity of manufacturing firms [i.e., through increased funding and grants] in order to be able to respond to any unexpected increase in demand as a result of globalization. 4- In today s global economic environment, companies are often looking for business partners all over the world. Understanding of how manufacturing companies in other countries, such as Iran, are preparing themselves for the globalization era is very important for decision makers in Western corporations. 5- The exploratory findings in this study identify certain characteristics of Iranian manufacturers. This will enhance the ability of policy makers in Iran to take a mixed grill approach and provide the necessary

4 1293 Musa Reza Pouraslan, 2013 professional assistance, such as enhancing training programs for improving workers skills, and financial assistance, such as grants and incentives. Empirical validation of the conceptual model proposed provides a stronger conceptual foundation for the research in this area. I hope that the insights provided in this study will enable further research in this area. Although no practical guidelines were provided in this study qualitative understanding of the global factors and the probability of changes in economic activities should be viewed as being equally valuable. The research in this area still requires further refinement and development. Further research could be directed at the following areas: Possible extensions of the study including more Middle East countries, to seek further generalization. Comparative study can be undertaken between less developed countries and developed countries concerning the impact of globalization on activity studied field. Having established the significance of the independent factors [i.e., global factors] to economy activities exposed to change, future efforts can be undertaken to include more global factors, such as organizational, social, information and logistics factors, and more P/O activities, such as layout, location, scheduling, process design and loading. Conclusion: 1- The study demonstrates manufacturing companies in Iran attain the same expectations regarding the operational changes that must be associated with globalization. 2- In 22 out of 34 countries around the world, the weight of opinion is that economic globalization, including trade and investment, is growing too quickly, according to a BBC World Service Poll of 34,500 people. On average one out of two [50%] hold this view, while 35 percent say globalization is growing too slowly. 3- In the G-7 countries whose finance ministers are meeting this weekend an average of 57 percent say globalization is growing too quickly. 4- Related to this unease is an even stronger view that the benefits and burdens of the economic developments of the last few years have not been shared fairly. Majorities in 27 out of 34 countries hold this view on average 64 percent. 5- In developed countries, those who have this view of unfairness are more likely to say that globalization is growing too quickly especially in France, Italy, Spain, South Korea, Japan, and Germany [and to a lesser extent Britain and the US]. 6- In contrast, in some developing countries, those who perceive such unfairness are more likely to say globalization is proceeding too slowly. These include Turkey, the Philippines, Indonesia, Brazil, Kenya, Mexico and the countries of Central America. 7- Only 19 percent overall say globalization is growing much too quickly, while 32 percent say it is growing a bit too quickly. Steven Kull of PIPA comments, Few want to slam the brakes on globalization, though many want to press the brakes lightly. 8- Also, people in some developing countries still want to accelerate globalization and appear to believe that this will help break down some of the inequities in their country. 9- The survey was conducted for the BBC World Service by the international polling firm Globe Scan together with the Program on International Policy Attitudes [PIPA] at the University of Maryland. Globe Scan coordinated fieldwork between October 31, 2007 and January 25, Though interviews [except in India] were completed before the sharp fall in global stock markets in mid-january, there was already a predominant view that economic conditions were getting worse in their country [on average 52% worse, 41% better] as well as in the global economy [46% worse, 40% better]. 11- Globe Scan President Doug Miller says, There is real public unease about the direction of the economy, but it s not only about a downturn. It also has to do with how fairly benefits and burdens are shared, and the pace of globalization. 12- Perceptions of domestic economic conditions vary widely. In ten countries, a majority perceives improvement [led by China 84%, Canada 72%, Australia 71%, UAE 69%, Russia 63%, and India 56%], while in twenty-one a majority perceives their country worsening [led by Italy 86%, the Philippines 76%, Indonesia 76%, USA 74%, and Portugal 72%]. 13- The perception that the benefits and burdens of economic development have not been fairly distributed in their country is highest in South Korea [86%], Italy [84%], Portugal [84%], Japan [83%], Chile [82%], Lebanon [82%], and Turkey [82%]. In just six countries, majorities perceived their economy as fair UAE [72%], Australia [58%], Canada [58%], China [58%], Ghana [53%], and Nigeria [53%]. The view that globalization is growing too quickly is especially widespread in Egypt [77%], UAE [77%], Australia [73%], China [72%], Spain [68%], and France [64%]. The only countries with majorities saying that globalization is growing too slowly are the Philippines [71%], Turkey [71%], Indonesia [53%], and Brazil [51%].

5 1294 Musa Reza Pouraslan, The correlation between the perception of economic fairness and attitudes about globalization varies across countries. In twelve countries the most common view is that the economy is unfair and that globalization is going too fast. This is primarily true of highly developed countries [France, Italy, Spain, South Korea, Japan, Germany, and to a lesser extent Britain and the US]. However it is also true of Lebanon, Argentina, Israel and Chile. 15- However, in eight cases the most common view is both that the economy in their country is unfair and that globalization should be sped up. These include Turkey, the Philippines, Portugal, Indonesia, Brazil, Kenya, Mexico and the countries of Central America. In eight countries the most common view is that their economy is fair but that globalization is nonetheless moving too quickly. These include three developed countries Australia, Canada and UAE; as well as five developing countries Egypt, China, India, Ghana, and Nigeria. 16- Russians, widely agree that the economy has been unfair, but they are divided as to the pace of globalization. 17- In total 34,528 citizens in Argentina, Australia, Brazil, Canada, Chile, China, Costa Rica, Egypt, El Salvador, France, Ghana, Germany, Great Britain, Guatemala, Honduras, India, Indonesia, Israel, Italy, Japan, Kenya, Lebanon, Mexico, Nicaragua, Nigeria, Panama, the Philippines, Portugal, Russia, South Korea, Spain, Turkey, UAE, and the United States were interviewed face-to-face or by telephone between October 31, 2007 and January 25, Polling was conducted for the BBC World Service by the international polling firm Globe Scan and its research partners in each country. In 16 of the 34 countries, the sample was limited to major urban areas. The margin of error per country ranges from +/-2.4 to 4.4 percent. 18- The findings show that manufacturing companies expecting changes in their operational activities as a result of globalization embraced a marketing strategy combination of make to order and make to stock products. 19- The findings show that the need to survive and grow in the new era of global competition for the Iranian manufacturing firms requires achieving effectiveness of the existing capacity and technology, and improving quality. REFERENCES Abed, George T., "Unfulfilled Promise," Finance & Development, Washington, pp: Alfaro, Laura, Sebnem Kalemli-Ozcan, and Vadym Volosovych, "Why Doesn't Capital Flow from Rich Countries to Poor Countries? An Empirical Investigation" [unpublished; Houston: University of Houston] pp: 34. Bennett, Adam, "Failed Legacies," Finance & Development, pp: Fischer, Stanley, "Globalization and Its Challenges," Richard Ely Lecture presented in January 2003 at the American Economic Association Meeting in Washington, DC. Berg, Andrew, and Anne Krueger, "Trade, Growth, and Poverty: A Selective Survey," IMF Working, pp: 03/30. Bisat, Amer, Mohamed El-Erian, and Thomas Helbling, "Growth, Investment, and Savings in Arab Economies," IMF Working paper, pp: 97/85. Corporaciόn Latinobarόmetro, Latinobarόmetro Report 2005, Santiago, Chile: Corporaciόn Latinobarόmetro (2005). Dennis A. Rondinelli and Jack N. Behrman, 2000 The Promises and Pains of Globalization, Global Focus International Journal of Business, Politics and Social Policy, pp: Makdisi, Samir, Zeki Fattah, and Imed Limam, "Determinants of Growth in the MENA Region," Arab Planning Institute Working, pp: 0301 [Kuwait]. Prasad, Eswar, Kenneth Rogoff, Shang-Jin Wei, and M. Ayhan Kose, Effects of Financial Globalization on Developing Countries: Some Empirical Evidence, IMF Occasional, pp: 220, forthcoming. Rodrik, Dani, ed., In Search of Prosperity: Analytical Narratives on Economic Growth [Princeton, New Jersey: Princeton University Press]. Stanley Hoffman, Clash of Globalizations, 2002, Foreign Affairs, pp: "Growth Strategies," in The Handbook of Economic Growth 2008, forthcoming. Arvind Subramanian, and Francesco Trebbi, "Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development," IMF, pp: 02/189. Sala-i-Martin, Xavier, and Elsa V. Artadi, "Economic Growth and Investment in the Arab World," Columbia University Discussion, New York, pp:

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