Globalization & Its Impact - Introduction to International Business, International Business | International Business - B Com PDF Download

WHAT IT IS:

Globalization is the integration of national economies through trade, investment, capital flow, labor migration, and technology.

HOW IT WORKS (EXAMPLE):

Globalization results from the removal of barriers between national economies to encourage the flow of goods, services, capital, and labor.  While the lowering or removal of tariffs and quotas (see General Agreement on Trade and Tariffs, or GATT) that restrict free and open trade among nations has helped globalize the world economy, transportation and communication technologies have had the strongest impact on accelerating the pace of globalization.

Thomas L. Friedman describes the "flattening" of the world economy through globalized trade, outsourcing, supply-chaining and political liberalization.  The use of technologies allows businesses, such as large multi-national corporations, to maintain customers, suppliers and even competitors on a world-wide basis.  The breakdown of businesses into components along its value-chain creates opportunities for multiple businesses located at various spots on the globe to participate in the production of a single good or service.  This global network, even for a single enterprise, is part of globalization.

Several organizations have either been created or have evolved into key roles in the process of globalization.  The World Bank and the International Monetary Fund, for instance, deal primarily with issues of free trade in developing economies and with international monetary policy, including debtand trade balances between dbieloping and industrialized countries.  The World Trade Organization, along with the General Agreement on Trade and Tariffs (GATT), has been involved with removing trade barriers and reducing the cost of trading.

WHY IT MATTERS:

Increasingly, businesses must recognize that their success depends on efficiency and scalability – being able to ​quickly mobilize global resources and reach world markets.  

 

Globalization is the key to growing businesses in the 21st Century.

At the same time, globalization has led economic decision-making away from local control.  As a result, decisions about a company's plans, including expansions, relocations, or closings are increasingly made independently of the considerations of local markets or local managers. 

The Benefits Of Globalization

For some people, globalization is synonymous with world destruction. In the end – who knows – maybe this will be true. But in reality there are many good things that have resulted from globalization. In this section, I will still focus on the economy, but I would also like to touch on some social advantages, as well. For more information regarding the positive impact of globalization, check out this blog post on the benefits of globalization in the modern era.

• More Efficient Markets

Many Americans do not appreciate how efficient our markets are (efficiency here meaning supply and demand). These efficient markets allow economies to grow, and in a global world, when one economy grows, it spurs growth in all the other economies that are connected to it. In this way, reverberations of success are felt across the world, even when they are most profound in one area. Needless to say, this is a very good thing.

• Wealth Equality

This is partially a result of what I just mentioned, but wealth equality around the world goes much deeper than that. Perhaps a better phrase than wealth equality is “standard of living.” Globalization does several things nobody can deny: it creates jobs, it improves infrastructure and it allows more people to live at a higher global level every day (access to medicine, clean water, food production, housing, etc.).

• Friends With Benefits

Globalization results in partnerships between countries and organizations. This makes relations much more stable between both. Agreements are agreed to, and as long as these are upheld, a kind of world-cooperation is sustained. Having these friends with (economic) benefits provides both stability and security for countries that wish to remain peaceful and prosperous.

New Solutions

Globalization allows important processes to happen more efficiently and important ideas to become reality. There is a certain irony involved in this, however. For example, globalization is going to allow the world to work together to (hopefully) solve our apocalyptic environmental predicament; but of course, this predicament is a result of globalization.

Still, it allows the human race to push forward, which at this point we must recognize as a necessity of our species. Progress is written in our DNA, and globalization has allowed us to accomplish truly incredible things (the International Space Station being one of the most far-reaching).

The Disadvantages Of Globalization

Because globalization is 100% inevitable, we must tell ourselves that the benefits outweigh the disadvantages. But do they? It depends where you’re coming from, but let us first take a look at what these disadvantages are before we form an opinion.

• Competition: Someone Has To Lose

Unfortunately, while competition is generally thought to be a good thing, it does not come without a sour side. If I were to say, “Some companies won’t survive because of globalization,” then you might say, “Then they don’t deserve to survive; that’s the beauty of it; the companies worth sticking around usually do.”

I won’t deny the truth in that, but what about the borderline monopoly that the largest companies in the world have created for themselves? Apple, Exxon, Google, etc. Whereas they were once innovators, they are now so big that politics and strategy are more important than innovation. The result of this is that smaller companies with innovative ideas have an incredibly difficult competing. And how can they? If they’re lucky, they’ll be bought out and walk away with a pay check; if not, they’ll just be crushed, often purposefully, by a competitor that is literally a billion times bigger than them.

• When The Home Team Loses

I was raised in what was once the Apple Capital of the World: Winchester, VA. Over the last two or three decades, this title has (inevitably) been stripped from us; first it was by Pennsylvania, but then Pennsylvania had it stolen by China.

So now China is the Apple Capital of the World. They produce the cheapest apples, which account for roughly half the world’s supply of apples. A lot of people up and down the East Coast lost their jobs, but here’s the kicker: China isn’t allowed to export apples to the U.S. This might change soon, but for the time being, China is able to put a lot of people on the East Coast out of business without even selling apples in the same country.

The lesson of the story is that another country can do what you do better and put you out of business without even looking you in the eye. That’s globalization. But to be fair, the damage we’ve done to China and the benefits we took advantage of (cheap labor) are vastly more significant. Sorry, did I say “to be fair”?

• Environmental Devastation

I hardly need to spell this out, but I will add a thought or two. Globalization has created a global-sized need for energy and industry, and this need has been abused and ignored to the extent that the future of life as we know it has been brought into question. You may or may not believe in global warming, but you cannot deny the existence of the conversation. Does the fact that this conversation is happening not say something in itself?

Have we bulldozed our planet into trouble? Obviously, yes. The argument against this fact is that we could not possibly have caused so much destruction to our enormous planet. The facts say otherwise: we’ve logged over half of the world’s tropical forests. And as far as how difficult it would be to change the composition of the atmosphere? The atmosphere ends a mere 60 miles above the surface of the Earth. It’s just not that voluminous. It’s not limitless. It’s actually small, and when we work together globally, even the negative side effects of all the amazing things we accomplish are, in a word, globalized.

Good, Bad, Inevitable

Unfortunately, or maybe fortunately, globalization is simply and utterly good, bad and inevitable. Hopefully the good will out-weigh the bad, but the continued existence of both is inevitable. Because of this, we are better off accepting the truth and, like we do best, moving forward. But make no mistake: environmentalism is gaining speed. Whether you want to join the cause or just be on the front lines of a new opportunity.