About globalization
- 1. 1 | P a g e Introduction There are a lot of people are talking about globalization, many of whom have strong and often conflicting views about the subject. Some authors see globalization as a rather positive thing in the meaning of the consumer society and benefit to shoppers of more things to buy and services to get in Western world. Other authors and many non-governmental organizations like Third World Network are much more critical, seeing globalization as colonization of the developing world. Globalization is seen as complicated processes, focusing on how events, decisions and activities in one part of the world can have consequences in other parts of the world. What is globalization? Globalization is difficult to define. Globalization scholars regularly debate what is actually meant by the term. However, most agree on two things: 1. globalization is happening 2. globalization is a process of increasing Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. Globalization is not new, though. For thousands of years, people—and, later, corporations—have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914 Globalization is a process that comprises two simultaneous processes: global compression of the world and the intensification of consciousness of the world as a whole. Globalization does not simply refer to the objective process of increasing interconnectedness. It also refers to conscious and subjective matters (namely the scope and density of the consciousness of the world as a single place Globalization cannot be reduced to the impact of round-the-clock round-the-globe, of leading edge information technologies, of integrated world markets. But globalization can be given a much wider meaning - one that emphasizes the impact of global tradition. environment changes, the threat of social and political conflicts that cannot be walled off by tough immigration or asylum policies or policed by superpowers, and the growth of hybrid world cultures created by the mingling of global-brand culture and indigenous From the above discussion we can say that, Globalization is increasing interdependence of national economies in trade, finance, and macroeconomic policy.
- 2. 2 | P a g e Globalization is diffusion of practices, values and technology that have an influence on people`s lives worldwide. Globalization is a process fueled by and resulting in, increasing cross- border flows of goods, services, money, people, information, and culture. Globalization as a development in the structure of geography is closely interrelated with concurrent developments in structures of production, governance, identity and knowledge. According to Oxford English Dictionary (OED) Globalization is “the act of globalizing“; from the noun “global“ meaning “pertaining to or involving the whole world“, “worldwide“; “universal“ According to International Forum on Globalization (IFG) “Globalization is the present worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments“ According to World Trade Organization (WTO) Director-General, Pascal Lamy “Globalization can be defined as a historical stage of accelerated expansion of market capitalism, like the one experienced in the 19th century with the industrial revolution. It is a fundamental transformation in societies because of the recent technological revolution which has led to a recombining of the economic and social forces on a new territorial dimension“ According to the World Bank “Globalization - the growing integration of economies and societies around the world“ According to World Health Organization “Globalization, or the increased interconnectedness and interdependence of people and countries, is generally understood to include two interrelated elements: the opening of borders to increasingly fast flows of goods, services, finance, people and ideas across international borders; and the changes in institutional and policy regimes at the international and national levels that facilitate or promote such flows. It is recognized that globalization has both positive and negative impacts on development“ Types of globalization There are different types of globalization. They are given below 01. Political globalization Political globalization refers to the amount of political co-operation that exists between different countries. These ties in with the belief that “umbrella” global organizations are better placed than individual states to prevent conflict. The League of Nations established after WW1 was certainly one of the pioneers in this. Since then, global organizations such as the World Trade Organization (WTO), United Nations (UN), and more regional organizations such as the EU have helped to increase the degree of political globalization.
- 3. 3 | P a g e 02. Social globalization Social globalization refers to the sharing of ideas and information between and through different countries. In today’s world, the Internet and social media is at the heart of this. Good examples of social globalization could include internationally popular films, books and TV series. The Harry Potter/ Twilight films and books have been successful all over the world, making the characters featured globally recognizable. However, this cultural flow tends to flow from the center (i.e. from developed countries such as the USA to less developed countries). Social globalization is often criticized for eroding cultural differences. 03. Economic globalization Economic globalization refers to the interconnectedness of economies through trade and the exchange of resources. Effectively, therefore, no national economy really operates in isolation, which means national economies influence each other. This is clearly evidenced by global recession from 2007 onwards. Economic globalization also means that there is a two-way structure for technologies and resources. For example countries like the USA will sell their technologies to countries, which lack these, and natural resources from developing countries are sold to the developed countries that need them. 04. Market Globalization This type of globalization involves merging of formerly separate and independent national markets into a global one. This renders it meaningless to refer to markets of individual countries. Market globalization facilitates international trade as it enhances the removal of trade barriers. The respective tastes of consumers from different parts of the world are homogenized to form global standards, which enable them to receive the same products from different companies. Globalization of markets also leads to stiffer competition as businesses compete for customers from different parts of the world. 05. Production Globalization This type of globalization makes it possible for companies to source for goods and services from different parts of the world. This helps them to take advantage of differences in quality, cost and the performance of things like raw materials, land, capital and labor. Companies have a better chance of increasing both volume and quality while they lower their costs at the same time. Companies become more competitive as they develop their respective international production networks. Closely related to this is the globalization of products that comes into play due to the constant need of ever-newer products, which are made available to consumers from different parts of the world 06. Cultural Globalization: Culture has increasingly become a commodity. Popular books and films have international markets. Harry Potter has readers almost all over the world. English movies are seen almost in all countries. Western pop music has become popular in developing countries. The reverse flow of culture is in significant. The flow of culture is mainly from the North to the South. In the last few years the media owners of the West have shown interest in entering developing countries Effects of Globalization Globalization has brought benefits in developed countries as well as negative effects.
- 4. 4 | P a g e Positive Effects It would be rather difficult to discuss the extent of the positives that globalization has had on the world at large. But still, here are some of the positive effects of globalization and the positive impacts they have had on so many demographic segments of society. 01. Global market. Most successful emerging markets in developed countries are a result of privatization of state owned industries. In order for these industries to increase consumer demand many of them are attempting to expand and extend their value chain to an international level. The impact of globalization on business management is seen by the sudden increase of number of transactions across the borders. In protecting yields and maintaining competitiveness, businesses are continuing to develop a wide range of their footprint as it lowers cost and enjoys economies of scale. Multinational corporations are a result of globalization. They occupy a central role within the process of globalization as evidenced through global foreign direct investment inflows. Their concentrations within Europe in western economies has led to size constraints, therefore there is a need for new geographical areas to operate whereby they will face a lot of competition in the market. Through this they will enlarge their market and enjoy economies of scale as globalization facilitates time space compression, economies compete at all levels including that of attracting investors 02. Cross-cultural management Globalization tends to be the realm of elite because in many parts of the world they are the only people who are affluent enough to buy many of the products available in the global marketplace. Highly educated and wealthy people from different backgrounds interact within a westernized milieu. Western styles, since are symbols of affluence and power, the elite often embraces western styles of products and pattern of behavior in order to impress others. Today Western culture and patterns of behavior and language are staples of international business. 03. Foreign trade Globalization has created and expanded foreign trade in the world. Things that were only found in developed countries can now be found in other countries across the world. People can now get whatever they want and from any country. Through this developed countries can export their goods to other countries. Countries do business through international trade, whereby they import and export goods across the global. These countries which export goods get comparative advantages. Organizations have been established with a view to control and regulate the trade activities of the countries in the world so to have fair trade. World trade organizations emerged as a powerful international organization capable effectively influencing individual governments to follow international trade rules, copyrights, policies on subsidies, taxes and tariffs. Nations cannot break rules without facing economic consequences 04. Resource Imperative Developed countries need natural and human resources of the developing countries while developing countries need capital, technology and brainpower of the wealthier countries. Developed countries' economies are increasingly dependent on the natural and human resources of the developing nations. Growing interdependence of nations and their activities on one another fostered by the depletion of natural resources; as well as overpopulation. 05. Foreign investment One of the most visible positive effects of globalization in India is the flow of foreign capital. A lot of companies have directly invested in India, by starting production units in
- 5. 5 | P a g e India, but what we also need to see is the amount of Foreign Investment Inflow that flows into the developing countries. Indian companies which have been performing well, both in India and off the shores, will attract a lot of foreign investment, and thus pushes up the reserve of foreign exchange available in India. This is also one of the positive effects of globalization in US and other developed countries as developing countries give them a good investment proposition. 06. Competition One of the most visible positive effects of globalization is the improved quality of products due to globe competition. Customer service and the 'customer is the king' approaches to production have led to improved quality of products and services. As the domestic companies have to fight out foreign competition, they are compelled to raise their standards and customer satisfaction levels in order to survive in the market. Besides, when a global brand enters a new country, it comes in riding on some goodwill, which it has to live up to. This creates competition in the market and a survival of the fittest situation. 07. Culture The positive effects of globalization on culture are many! Not all good practices were born in one civilization. The world that we live in today is a result of several cultures coming together. People of one culture, if receptive, tend to see the flaws in their culture and pick up the culture which is more correct or in tune with the times. Societies have become larger as they have welcomed people of other civilizations and backgrounds and created a whole new culture of their own. Cooking styles, languages and customs have spread all due to globalization. The same can be said about movies, musical styles and other art forms. They too have moved from one country to another, leaving an impression on a culture which has adopted them. . Negative Effects Globalization also has its side effects to the developed nations. These include some factors which are jobs insecurity, fluctuation in prices, terrorism, fluctuation in currency, capital flows and so on. 01. Jobs insecurity. In developed countries people have jobs insecurity. People are losing their jobs. Developed nations have outsourced manufacturing and white collar jobs. That means less jobs for their people. This is because the manufacturing work is outsourced to countries where the costs of manufacturing goods and wages are lower than in their countries. They have outsourced to developing countries like China and India. Most people like accountants, programmers, editors and scientists have lost jobs due to outsourcing to cheaper locations like India. Globalization has led to exploitation of labor. Safety standards are ignored to produce cheap goods. "In practice, however, the recent experience in Latin America has been that many such open-handed multinationals moved their operations to, for example, China or South East Asia because of cost and market considerations" 02. Fluctuation in prices Globalization has led to fluctuation in price. Due to increase in competition, developed countries are forced to lower down their prices for their products, this is because other countries like China produce goods at a lower cost that makes goods to be cheaper than the ones produced in developed countries. So, in order for the developed countries to maintain their customers they are forced to reduce prices of their goods. This is a disadvantage to them because it reduces the ability to sustain social welfare in their countries.
- 6. 6 | P a g e 03. Unemployment Globalization is blame to world's unemployment situation though it brought some jobs opportunities. Despite the fact that it brought jobs opportunities to the global but it is still blame to the current situation. "It’s true that global economic integration and increased travel have resulted in increased competitiveness at the national and enterprise levels, forcing producers to find ways to cut costs, improve efficiency, and raise productivity" 04. Spread of fast foods chain. Fast foods chain is growing very fast. But some of the most rapid growth is occurring in the developing countries; where it's real changing the way people eat. "Kentucky Fried Chicken (KFC) is the largest, fastest growing and highest potential units" 05. Western culture. Globalization has led to the spread of western culture and influence at the expense of local culture in developing countries like Africa. Most people now in developing countries cop what people in developed countries do. So, it’s like they ignore their own culture and practice western culture. Advantages and Disadvantages of Globalization Some of the benefits of globalization include: 01. Foreign Direct Investment Foreign direct investment (“FDI”) tends to increase at a much greater rate that the growth in world trade, helping boost technology transfers, industrial restructuring, and the growth of global companies. 02. Technological Innovation Increased competition from globalization helps stimulate new technology development, particularly with the growth in FDI, which helps improve economic output by making processes more efficient. 03. Economies of Scale Globalization enables large companies to realize economies of scale that reduce costs and prices, which in turn supports further economic growth, although this can hurt many small businesses attempting to compete domestically. 04. Information sharing availability The main legal entity that businessmen and women would register in the past, aside from a local company, would be the offshore legal entity with an offshore corporate bank account. This would allow them to i) minimize domestic and international tax ii) appoint this entity as the parent company to multiple businesses iii) protect their assets and iv) benefit from the confidentiality possibility, through both the company and the bank account. 05. Business development We have seen many companies opening their offices in multiple countries at the same time. Their desire to expand quickly comes from the endless opportunities in the free and open market, a direct outcome of globalization. While sometimes one company is enough to conduct business internationally (mainly for soft services), some countries will still request a local company in each country to conduct full business activities
- 7. 7 | P a g e Some of the disadvantages of globalization include: 01. Interdependence Globalization leads to interdependence between nations, which could cause regional or global instabilities, if local economic fluctuations end up impacting a large number of countries relying on them. 02. National Sovereignty Some see the rise of nation states, multinational or global firms and other international organizations as a threat to sovereignty. Ultimately, this could cause some leaders to become nationalistic or xenophobic. 03. Equity Distribution The benefits of globalization can be unfairly skewed towards rich nations or individuals, creating greater inequalities and leading to potential conflicts both nationally and internationally as a result. 04. Pollution As China is on the rise to become a large economic power, they have inadvertently contributed to a huge environmental impact on the world. China has increasingly become one of the countries chosen by many of its developed counterparts for factory establishment due to its ability to produce goods with low costs. However, with the increased number of factories setting up in China, it has resulted in the release of a huge amount of poisonous industrial gases into the air causing air pollution. 05. It can lead to increased likelihood of economic disruptions of one nation affecting all nations and hence unsettling the whole world leading to chaos across the world. 06. Smaller domestic firms may lack the resources to compete with big international companies and therefore may be forced out of business. 07. Since globalization involves traveling of people as well as goods from one country to another It can lead spread of some of the deadliest infectious diseases known to humans.