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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.
But policy and technological developments of the past few decades have
spurred increases in cross-border trade, investment, and migration so
large that many observers believe the world has entered a qualitatively
new phase in its economic development. Since 1950, for example, the volume
of world trade has increased by 20 times, and from just 1997 to 1999 flows
of foreign investment nearly doubled, from $468 billion to $827 billion.
Distinguishing this current wave of globalization from earlier ones, author
Thomas Friedman has said that today globalization is "farther, faster,
cheaper, and deeper."
current wave of globalization has been driven by policies that have opened
economies domestically and internationally. In the years since the Second
World War, and especially during the past two decades, many governments
have adopted free-market economic systems, vastly increasing their own
productive potential and creating myriad new opportunities for international
trade and investment. Governments also have negotiated dramatic reductions
in barriers to commerce and have established international agreements
to promote trade in goods, services, and investment. Taking advantage
of new opportunities in foreign markets, corporations have built foreign
factories and established production and marketing arrangements with foreign
partners. A defining feature of globalization, therefore, is an international
industrial and financial business structure.
Technology has been the other principal driver of globalization. Advances
in information technology, in particular, have dramatically transformed
economic life. Information technologies have given all sorts of individual
economic actors—consumers, investors, businesses—valuable new tools for
identifying and pursuing economic opportunities, including faster and
more informed analyses of economic trends around the world, easy transfers
of assets, and collaboration with far-flung partners.
Globalization is deeply controversial, however. Proponents of globalization
argue that it allows poor countries and their citizens to develop economically
and raise their standards of living, while opponents of globalization
claim that the creation of an unfettered international free market has
benefited multinational corporations in the Western world at the expense
of local enterprises, local cultures, and common people. Resistance to
globalization has therefore taken shape both at a popular and at a governmental
level as people and governments try to manage the flow of capital, labor,
goods, and ideas that constitute the current wave of globalization.
There are countless indicators that illustrate
how goods, capital, and people, have become more globalized.
The value of trade (goods and services) as a percentage of world
GDP increased from 42.1 percent in 1980 to 62.1 percent in 2007.
Foreign direct investment increased from 6.5 percent of world GDP
in 1980 to 31.8 percent in 2006.
The stock of international claims (primarily bank loans), as a
percentage -of world GDP, increased from roughly 10 percent in 1980
to 48 percent in 2006.
The number of minutes spent on cross-border telephone calls, on
a per-capita basis, increased from 7.3 in 1991 to 28.8 in 2006.
The number of foreign workers has increased from 78 million people (2.4
percent of the world population) in 1965 to 191 million people (3.0
percent of the world population) in 2005.
The growth in global markets has helped to promote efficiency through
competition and the division of labor—the specialization that allows people
and economies to focus on what they do best. Global markets also offer
greater opportunity for people to tap into more diversified and larger
markets around the world. It means that they can have access to more capital,
technology, cheaper imports, and larger export markets. But markets do
not necessarily ensure that the benefits of increased efficiency are shared
by all. Countries must be prepared to embrace the policies needed, and,
in the case of the poorest countries, may need the support of the international
community as they do so.
The broad reach of globalization easily extends to daily choices of personal,
economic, and political life. For example, greater access to modern technologies,
in the world of health care, could make the difference between life and
death. In the world of communications, it would facilitate commerce and
education, and allow access to independent media. Globalization can also
create a framework for cooperation among nations on a range of non-economic
issues that have cross-border implications, such as immigration, the environment,
and legal issues. At the same time, the influx of foreign goods, services,
and capital into a country can create incentives and demands for strengthening
the education system, as a country's citizens recognize the competitive
challenge before them.
Perhaps more importantly, globalization implies that information and knowledge
get dispersed and shared. Innovators—be they in business or government—can
draw on ideas that have been successfully implemented in one jurisdiction
and tailor them to suit their own jurisdiction. Just as important, they
can avoid the ideas that have a clear track record of failure. Joseph
Stiglitz, a Nobel laureate and frequent critic of globalization, has nonetheless
observed that globalization "has reduced the sense of isolation felt
in much of the developing world and has given many people in the developing
world access to knowledge well beyond the reach of even the wealthiest
in any country a century ago."
FORCES OF GLOBALIZATION
Why Go Global?
The playing field is wide open for small business. Here's why both men
and women should consider going global:
— Increase sales.
— Generate economies of scale in production.
— Raise profitability.
— Insulate seasonal domestic sales by finding new foreign markets.
— Create jobs, productivity growth and wealth.
— Encourage the exchange of views, ideas and information.
Small business in particular can take a mentoring role in educating other
men and women in going global. They can establish educational programs,
conferences and other activities to advance their colleagues, and in doing
so, promote professional growth and leadership among all small business
owners. The best is truly yet to come.
What Does It Take To Go Global?
Any small business owner must be adaptable, strategic and willing to
take calculated risks. But becoming a successful global small business
requires the following commitments:
— Be comfortable with change.
— Welcome new experiences; and learn as much as possible about the culture
in which you are interested in doing business.
— Be willing to take risks, even though it may create short term challenges.
— Push yourself to continuously innovate.
The negative impact of globalization in European job market
Globalization was not too much accepted by the European companies. They
depend on the local labor for good production and better management. The
business process outsourcing reduces the wages cost and the work load is
transferred into the outsourcing destination like Asia and Africa. As a
result the European nations like Germany and the UK are facing some unemployment
problem of skilled laborers during the 90s. The cost cutting management
process of private companies in Europe and negative managerial process change
the picture of job market. To face such economical declined some serious
steps are taken by the European nations.
As an industrial location the European nations changes their taxation system
and encourage industrial countries in employment of local employees to solve
this problem in a positive solution. The impact of globalization changes
the global business opportunities. Not only have the investors chosen the
Asian countries as a destination for outsourcing their back office jobs
but also set up new business processing firm in countries like Indian to
employed low cost skilled labors. The fashionable concept of globalization
removes the barrier of country border and the international market of open
for the job seekers.
Business center and even the educational institute expand their services
globally for international customers. This increases the business opportunities
for the small and medium investors of Third worlds countries and open new
job opportunities for the educated skilled workers. The managerial success
of a company highly depends on the profit and growth and it is highly depends
on the cost efficiency of labors. The European labors market faced a negative
impact due to globalization in mid 90s. The employers moving ability from
one place to another in searching of low waging cost reduces the job opportunity
of Germany and the UK job seekers. Skilled works from different fields like
IT and Automobiles loss their job as because those companies have opened
their business center in Asian market. They reduce the local work forces
and increase the international working force for low costing. They made
no compromise with their product or services and successfully running their
business for European market as well as the Asian markets also. The extra
ordinary competitions in labor market are helping the employers with the
facility of choosing the best services at low prices. However this makes
a new scope for European job seekers to find their suitable job in management,
HR and IT in India and this country is the best place for living as the
cost of living is comparatively lower than the salary that provide by any
EFFECT OF GLOBALIZATION ON DIFFERENT ASPECTS
Globalization is an interesting phenomenon since it is obvious that the
world has been going through this process of change towards increasing
economic, financial, social, cultural, political, market, and environmental
interdependence among nations. Virtually, everyone is affected by this
process. Given these changes, globalization brings about a borderless
world. Globalization drives people to change their ways of living, prompts
firms to change their ways of conducting business, and, spurs nations
to establish new national policies. Events transpiring in different parts
of the world now have dramatic consequences to other parts of the world
at a faster pace than anyone could imagine in the past. For example, the
Asian financial crisis in 1997 has severely affected businesses around
the world and the outbreak of SARS (Severe Acute Respiratory Syndrome)
in 2003 has shown how globalization permits the rapid spread of the disease,
which affects many airlines, the hospitality industry, and other businesses
around the globe.
On the positive side, globalization enables firms to outsource and find
customers around the world, e.g., the auto and electronics industries.
The globalization of production and operations benefits firms through
the realization of economies of scales and scope. Hence, no one can deny
that globalization has changed the way we conduct business.
Although globalization is a worldwide phenomenon, the extent to which
each country is globalized is not identical. To measure the degree of
globalization of each nation, a globalization index was recently developed
by a cooperation between Foreign Policy Magazine, AT Kearney and EDS Company.
The index indicates that some small developing countries in emerging economies
such as Singapore and Malaysia were among the top twenty most globalized
nations from 2001 to 2004 with Singapore being ranked as the most globalized
nation. Thus, it is clear that globalization is an important phenomenon,
one that cannot be simply ignored, because every nation — regardless of
size or level of development — is globalized and affected by globalization.
With the prevalence of this worldwide phenomenon, it is not surprising
that businesses are inevitably affected.
Throughout this dissertation, the effects of globalization are classified
into two broad Categories:
These two major effects are chosen to be investigated here because they
are frequently cited in the past literature as the most apparent and immediate
effects of globalization. Global market opportunities refer to the increases
in market potential, trade and investment potential and resource accessibility.
Global market threats refer to the increases in the number level of competition,
and the level of uncertainty.
1) Global market opportunities and
2) Global market threats.
Present scenario of the topic
A core element of globalization is the expansion of world trade through
the elimination or reduction of trade barriers, such as import tariffs.
Greater imports offer consumers a wider variety of goods at lower prices,
while providing strong incentives for domestic industries to remain competitive.
Exports, often a source of economic growth for developing nations, stimulate
job creation as industries sell beyond their borders. More generally,
trade enhances national competitiveness by driving workers to focus on
those vocations where they, and their country, have a competitive advantage.
Trade promotes economic resilience and Flexibility, as higher imports
help to offset adverse domestic supply shocks. Greater openness can also
stimulate foreign investment, which would be a source of employment for
the local workforce and could bring along new technologies—thus promoting
Restricting international trade—that is, engaging in protectionism—generates
adverse consequences for a country that undertakes such a policy. For
example, tariffs raise the prices of imported goods, harming consumers,
many of which may be poor. Protectionism also tends to reward concentrated,
well-organized and politically-connected groups, at the expense of those
whose interests may be more diffuse (such as consumers). It also reduces
the variety of goods available and generates inefficiency by reducing
competition and encouraging resources to flow into protected sectors.
Developing countries can benefit from an expansion in international trade.
Ernesto Zedillo, the former president of Mexico, has observed that, "In
every case where a poor nation has significantly overcome its poverty,
this has been achieved while engaging in production for export markets
and opening itself to the influx of foreign goods, investment, and technology."4And
the trend is clear. In the late 1980s, many developing countries began
to dismantle their barriers to international trade, as a result of poor
economic performance under protectionist policies and various economic
crises. In the 1990s, many former Eastern bloc countries integrated into
the global trading system and developing Asia—one of the most closed regions
to trade in 1980—progressively dismantled barriers to trade. Overall,
while the average tariff rate applied by developing countries is higher
than that applied by advanced countries, it has declined significantly
over the last several decades.
The implications of globalized financial markets
The world's financial markets have experienced a dramatic increase in
globalization in recent years. Global capital flows fluctuated between
2 and 6 percent of world GDP during the period 1980-95, but since then
they have risen to 14.8 percent of GDP, and in 2006 they totaled $7.2
trillion, more than tripling since 1995. The most rapid increase has been
experienced by advanced economies, but emerging markets and developing
countries have also become more financially integrated. As countries have
strengthened their capital markets they have attracted more investment
capital, which can enable a broader entrepreneurial class to develop,
facilitate a more efficient allocation of capital, encourage international
risk sharing, and foster economic growth.
Data series begin in 1995 for central and eastern Europe and the Commonwealth
of Independent States.
Yet there is an energetic debate underway, among leading academics and
policy experts, on the precise impact of financial globalization. Some
see it as a catalyst for economic growth and stability. Others see it
as injecting dangerous—and often costly—volatility into the economies
of growing middle-income countries.
A recent paper by the IMF's Research Department takes stock of what is
known about the effects of financial globalization. The analysis of the
past 30 years of data reveals two main lessons for countries to consider.
First, these pictures support the view that countries must carefully weigh
the risks and benefits of unfettered capital flows. The evidence points
to largely unambiguous gains from financial integration for advanced economies.
In emerging and developing countries, certain factors are likely to influence
the effect of financial globalization on economic volatility and growth:
countries with well-developed financial sectors, strong institutions,
sounds macroeconomic policies, and substantial trade openness are more
likely to gain from financial liberalization and less likely to risk increased
macroeconomic volatility and to experience financial crises. For example,
well-developed financial markets help moderate boom-bust cycles that can
be triggered by surges and sudden stops in international capital flows,
while strong domestic institutions and sound macroeconomic policies help
attract "good" capital, such as portfolio equity flows and FDI.
The second lesson to be drawn from them is that there are also costs
associated with being overly cautious about opening to capital flows.
These costs include lower international trade, higher investment costs
for firms, poorer economic incentives, and additional administrative/monitoring
costs. Opening up to foreign investment may encourage changes in the domestic
economy that eliminate these distortions and help foster growth.
Looking forward, the main policy lesson that can be drawn from these
results is that capital account liberalization should be pursued as part
of a broader reform package encompassing a country's macroeconomic policy
framework, domestic financial system, and prudential regulation. Moreover,
long-term, non-debt-creating flows, such as FDI, should be liberalized
before short-term, debt-creating inflows. Countries should still weigh
the possible risks involved in opening up to capital flows against the
efficiency costs associated with controls, but under certain conditions
(such as good institutions, sound domestic and foreign policies, and developed
financial markets) the benefits from financial globalization are likely
to outweigh the risks.
Globalization, income inequality, and poverty
As some countries have embraced globalization, and experienced significant
income increases, other countries that have rejected globalization, or
embraced it only tepidly, have fallen behind. A similar phenomenon is
at work within countries—some people have, inevitably, been bigger beneficiaries
of globalization than others.
Over the past two decades, income inequality has risen in most regions
and countries. At the same time, per capita incomes have risen across
virtually all regions for even the poorest segments of population, indicating
that the poor are better off in an absolute sense during this phase of
globalization, although incomes for the relatively well off have increased
at a faster pace. Consumption data from groups of developing countries
reveal the striking inequality that exists between the richest and the
poorest in populations across different regions.
The future of globalization
Like a snowball rolling down a steep mountain, globalization seems to
be gathering more and more momentum. And the question frequently asked
about globalization is not whether it will continue, but at what pace.
A disparate set of factors will dictate the future direction of globalization,
but one important entity—sovereign governments—should not be overlooked.
They still have the power to erect significant obstacles to globalization,
ranging from tariffs to immigration restrictions to military hostilities.
Nearly a century ago, the global economy operated in a very open environment,
with goods, services, and people able to move across borders with little
if any difficulty. That openness began to wither away with the onset of
World War I in 1914, and recovering what was lost is a process that is
still underway. Along the process, governments recognized the importance
of international cooperation and coordination, which led to the emergence
of numerous international organizations and financial institutions (among
the IMF and the World Bank, in 1944).
Indeed, the lessons included avoiding fragmentation and the breakdown
of cooperation among nations. The world is still made up of nation states
and a global marketplace. We need to get the right rules in place so the
global system is more resilient, more beneficial, and more legitimate.
International institutions have a difficult but indispensable role in
helping to bring more of globalization's benefits to more people throughout
the world. By helping to break down barriers—ranging from the regulatory
to the cultural—more countries can be integrated into the global economy,
and more people can seize more of the benefits of globalization.
STEPS FOR GOING GLOBAL
As with any sound business plan, the first step is doing your homework.
Here are ten action steps for taking on the world:
1. Conduct market research to identify your prime target markets.
2. Search out the data you need to predict how your product will sell
in a specific geographic location.
3. Update your database rigorously with a view to focusing more closely
on those products or services which are in demand and dropping those which
4. Articulate your business plan for accessing global markets.
5. Get companywide commitment.
6. Build a web site and implement your international plan sensibly.
7. Factor in a two year lead time for world market penetration.
8. Make personal contact with your new targets armed with culture specific
information and courtesies, professionalism and consistency.
9. Value the relationship more than the deal; the individual is more important
than closing the deal under discussion.
10. Welcome the unknown.
Advantages of Globalization:
Globalization has several advantages on the
—Economic, —Cultural, —Technological, and
- Social and some other fronts.
Globalization means increasing the
- Connectivity and
- Integration on a
Global level with respect to the
- Economic and
- Ecological levels
Advantages of Globalization
— Goods and people are transported with more easiness and speed
— The possibility of war between the developed countries decreases
— Free trade between countries increases
— Global mass media connects all the people in the world
— As the cultural barriers reduce, the global village dream becomes more
— There is a propagation of democratic ideals
— The interdependence of the nation-states increases
— As the liquidity of capital increases, developed countries can invest
in developing ones
— The flexibility of corporations to operate across borders increases
— The communication between the individuals and corporations in the world
— Environmental protection in developed countries increases
— Increased free trade between nations
— Increased liquidity of capital allowing investors in developed nations
to invest in developing nations
— Corporations have greater flexibility to operate across borders
— Global mass media ties the world together
— Increased flow of communications allows vital information to be shared
between individuals and corporations around the world
— Greater ease and speed of transportation for goods and people
— Reduction of cultural barriers increases the global village effect
— Spread of democratic ideals to developed nations
— Greater interdependence of nation-states
— Reduction of likelihood of war between developed nations
— Increases in environmental protection in developed nation
However, such doubts are futile as globalization is a positive-sum chance
in which the skills and technologies enable to increase the living standards
throughout the world. Liberals look at globalization as an efficient tool
to eliminate penury and allow the poor people a firm foothold in the global
economy. In two decades from 1981 to 2001, the number of people surviving
on $1 or less per day decreased from 1.5 billion to 1.1 billion. Simultaneously,
the world population also increased. Thus, the percentage of s uch people
decreased from 40% to 20% in such developing countries.
Disadvantages of Globalization
— Increased flow of skilled and non-skilled jobs from developed to developing
nations as corporations seek out the cheapest labor
— Increased likelihood of economic disruptions in one nation effecting
— Corporate influence of nation-states far exceeds that of civil society
organizations and average individuals
— Threat that control of world media by a handful of corporations will
limit cultural expression
— Greater chance of reactions for globalization being violent in an attempt
to preserve cultural heritage
— Greater risk of diseases being transported unintentionally between nations
— Spread of a materialistic lifestyle and attitude that sees consumption
as the path to prosperity
— International bodies like the World Trade Organization infringe on national
and individual sovereignty
— Increase in the chances of civil war within developing countries and
open war between developing countries as they vie for resources
— Decreases in environmental integrity as polluting corporations take
advantage of weak regulatory rules in developing countries
Globalization is not better for developing countries because the developing
counties have less capital, insufficient, infrastructure, low technology
and unskilled manpower. Due to all these reasons developing countries
can not adopt the globalization structure.
In a globally environment there is tough competition tough competition
of local producers to struggle. Because the larger producers is in market
and capture the whole market. Many persons have a good structure but they
have not enough finance to compete the multinational organizations.
There is trade deficit faced by the developing countries. This is the
major problem. And due to that problem many countries is not in favorable
condition to compete with developed countries.
Globalization open the new horizons for investment in any other country
either the country developed or not. Availability of waste market is a
big advantage for multinational companies to explore the new markets.
Transfer of technology is a big advantage of globalization for the developing
countries so it is essential for these countries adopt and enjoy the benefit.
Globalization is the threat for small and medium entrepreneurs so it is
necessary to protect that industry.
Threat of decrease in government revenues in shape of taxes is another
problem so it is necessary to avoid and draw new policies.
Protest against globalization is another issue so it is necessary to protect
the consumers, small industries and developing and poor countries from
the risks and develop new policies to avoid above mentioned factors.
Globalization also helpful for the different economies to agree on a specific
single currency so the balance is maintained. Loan also provided by the
companies to finance at international level and there is no more restriction
for small and medium entrepreneur's to obtain loans from the financial
This Term Paper is comprised of the effects of globalization on firms.
The first thing advances prior knowledge on globalization and business
by empirically investigating how this phenomenon affects firm performance.
They explore the role of firms' cooperation in alliances in enhancing
their performance amid globalization by specifically focusing on co-marketing
alliances and international marketing performance of firms. A particular
emphasis is paid to this type of alliance since superior marketing is
crucial for firms to build a sustainable source of unique competitive
advantage. Such advantage eventually enables firms to achieve long-run
success in a hypercompetitive terrain under globalization. While this
project also proposes a conceptual framework relating globalization effects
to alliance cooperation and firm performance. Given that globalization
is a complex phenomenon, there is a scarcity of empirical research investigating
its effects on businesses. Hence, there are several significant contributions
of this term paper. First, the effects of globalization on firms are classified
into two key dimensions—global market opportunities and global market
threats— based on an extensive review of scattered literature on the topic.
Second, these major effects are operational zed and empirically tested
in two conceptual models to examine the relationships among these effects,
cooperation in alliances, and firm performance. Third, literature on international
business, strategic management, and marketing are integrated to address
the effects of globalization on firms' marketing conduct and outcomes.
The first thing discussed in this term paper is how globalization affects
firms. It draws from environment-organization literature. Building on
this stream of research, macro environment such as globalization represents
a context in which organizational characteristics and outputs are strongly
shaped. For this reason, this term paper attempts to demonstrate and address
how globalization influences firm performance.
The term paper proposes a conceptual framework to investigate relationships
among globalization effects, degree of cooperation in co-marketing alliances,
and international marketing performance. This term paper focuses on relationships
between globalization effects and alliances because past research often
mentions that globalization drives more collaboration and alliance participation.
Thus, this term paper explores how firms with international marketing
activities can enhance their performance in the global marketplace through
increased cooperation in co-marketing alliances. Building on market power
perspective and transaction cost economics; this term paper proposes that
increased global market threats, including competitive threats and market
uncertainty, will encourage more cooperation in alliances while global
market opportunities will not. While transaction costs economics considers
alliances as a strategy enabling firms to expand their strategic capabilities,
market power perspective regards alliances as a means to reduce competition
and minimize uncertainty evoked by globalization.
Such cooperation eventually increases international marketing effectiveness
of firms engaging in co-marketing alliances. Whereas an increase in cooperation
is influenced by higher global market threats (i.e., both competitive
threats and uncertainty), it is not affected by global market opportunities.
The absence of any effect of global market opportunities on alliance cooperation
can be attributed to the fact that ample opportunities in the markets
may result in the lack of collaboration among firms. Moreover, it is found
that increased cooperation in co-marketing alliances helps firms enhance
international marketing effectiveness but not efficiency. Since higher
expenses may arise from such cooperative attempts, efficiency becomes
difficult to realize. In sum, these results validate globalization-alliance
literature by showing that globalization actually drives more cooperation
Managers should be prepared to cope with these diverse effects by capitalizing
on global market opportunities while carefully managing the inherent threats.
Alliance participation and cooperation presents a viable option for firms
to navigate successfully in this new competitive landscape. From both
theoretical and practical perspectives, globalization is a complex phenomenon.
The three manuscripts included in this dissertation are among a few empirical
studies emphasizing the effects of globalization on firms. Given that
globalization is multifaceted and only a few key dimensions of its effects
were explored here, many issues remain to be addressed.
Bibliography and References
I've taken all the information from official sites of govt. Of India
and Indian companies and few data from books, online journals and news
paper which are given below:
www.globalization101 .org www.globalpolicy.org/globalization.html www.economywatch.com
www.tradechakra.com > Indian Economy -
-www.indiastudychannel.com > ... > Education -www.eurojournals.com/IRJFE%206%20goyal.pdf
- The Hindu, published by B.C.Acherakar ('Nov '09) Business standard
(21 october 09)
1- International business environment by 'Robert' Published by Pearson
2- International business by 'Stephen' Publishes by Tata Mc'graw Publication
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