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The Factors Affecting Globalization Business Essay

Paper Type: Free Essay Subject: Business
Wordcount: 3044 words Published: 1st Jan 2015

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Robertson, professor of sociology at University of Aberdeen, was the first person to define globalization as “the compression of the world and the intensification of the consciousness of the world as a whole.”

Globalization is that the method that defines the worldwide economy. If it’s viewed merely as describing the development of international trade, globalization has been happening for hundreds of years. Recently, the development has been formalized and inspired by numerous free or liberalized trade agreements, like the 1948 General Agreement on Tariff Trade (GATT) and therefore the framework determined by the planet Trade Organization (WTO). Such trade (which includes the exchange of capital, data, and people) is “free” within the sense that it’s not underneath the management of anyone state. Globalization may be understood as a holistic development associated with general systems theory, wherever business arrangements and transactions finished in one domain can have effects in others, whether or not this square measure requested, invited, desired, or otherwise.

The term “globalization” indicates a aristocratic topic, however, and one which will be understood in many alternative ways in which, every of that reveals totally different sides of its complexness, including Change. The word “globalization” describes processes of social modification having any reasonably international dimension: ever changing economies, power relations, communication, cultures, and organizations.

The origin of globalization goes back to human civilizations. The first phase of globalization began around the 1870 and ended with the World War 1st in 1919 driven by the industrial revolution in UK, Germany and USA. The import of raw materials by these countries from their colonies and exporting finished goods were the main reason for the sharp increase in trade during this phase. Below shows the process of globalization since the 15th century, this explains to us how exactly enhancement in technology and communication enhanced globalization over centuries:-

In the 15th & 16th centuries, Europeans made essential discoveries in their exploration of the World Ocean. They began cross Atlantic travel to the “New World” of the Americas.

In 17th &18th centuries, Colonization of land took place and movement of people, good and ideas.

In 19th century, Development of new forms of transportation, steamship, railroads and telecommunications.

In 20th century, road vehicles and Airlines shaped transportation even quicker, the arrival of electronic communications, most notably mobile phones and therefore the net, connected billions of individuals in new ways in which leading into the twenty first century.


Globalization is very arguable. In an exceedingly 1997 world Finance article, Jim Kelly, corporate executive of United Parcel Service, took a positive stance: “So why go global? As a result of any company which will, should it isn’t a matter of growth for the sake of growth it is the value of admission to today’s marketplace.” At the 1996 Inaugural Lecture of Malaya Fellowship Exchange Programmed, Malaysian Prime Minister Dato’ Seri Mahathir Mohamad questioned the impact of globalization: “The result of economic globalization would be the ending of the little corporations primarily based within the developing countries giant international companies originating within the developed countries can take over everything.” Some say the implications of the globalisation conflict are helpful in understanding the trend.

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Economic Implications:

One advantage of globalization is that buyers have a far wider alternative of products and services. It additionally permits makers to spot new markets once their domestic markets have reached saturation. Such gap of markets will inspire the event of recent product. Businesses will reap increased profits from exploitation low-cost foreign labor or commerce cheaper foreign raw materials or elements.

However, globalization opens foreign markets to sell cultural resources way more simply, resulting in company cultural dominance. World selling includes political concepts, social understandings, and cultural mores also as product and services. it’s here that the development is most often criticized owing to the social associate degreed cultural changes that such an economic model brings concerning. Critics say that by indoctrination cultural data values into foreign markets and reinforcing this paradigm over time, businesses square measure ready to carry on wants for product, maybe unnaturally. Also, most globalization efforts originate in wealthier countries, notably the U.S, European Union, and Japan. The advantages square measure derived for the most part by the home country like bigger alternative of products, employment rises, and gain derived from exports.

Cultural Implications:

Faster and fewer overpriced communication, like currently provided by ICTs, successively have an effect on cultural boundaries and identities. Today, increased access to data concerning alternative nations is on the market, and people became additional awake to cultural diversity and their role as world voters.

Political Implications:

Even though globalization specifically relates to economic events, it’s all the same attached alternative social problems. several argue that there square measure solely edges to be gained from additional open markets which world establishments is accustomed remedy world inequalities others believe that this direction would possibly reduce the ability of individual nation states. V. Mosco, in his 1996 book, The economics of knowledge, notes that others believe that there square measure deeper rifts of sophistication, gender, power, and wealth than before, disguised by the utilization of the term “globalization.”


The major expression of globalization lies in corporations, which emphasizes the importance of this development for RIM professionals. There square measure few enterprises these days that haven’t any international connections, partially owing to the overall framework of the worldwide economy. Owing to the assorted modes of international activity, there seems to be a substantial vary from domestic corporations to internationalized corporations. Such international activities embody commerce and mercantilism product and raw materials, investments, using foreign labor, and combos of those.

It can not be assumed, however, that trade at intervals a economic system is non global whereas trade across national state boundaries is world. Several corporations square measure international however not world (e.g., domestic corporations with subsidiaries abroad) some square measure multinational however involve solely 2 countries (e.g., us and Canada). Others square measure transnational (involving many countries in numerous ways) few square measure world. Few operate wholly and completely at intervals a domestic market with no imports or exports.

Multinational corporations:

It is necessary to differentiate between transnational and world corporations. Several read transnational corporations (MNCs) because the actuation behind globalization. Associate degree MNC could be a company that has established offices in many countries. The countries within which it owns or controls production facilities, the foreign work force it employs, and foreign possession of corporations all indicate a company’s transnational standing. The 1999 World Investment Report estimates that there square measure 63,000 such corporations worldwide with concerning 500,000 foreign affiliates.

Global corporations:

Many believe that MNCs square measure naturally world, though this term is reserved for those corporations with activities all told the world’s continents or perhaps several countries. There little question, however, that a lot of MNCs square measure ready to distribute their services and product wide across the world. A world company is additionally one that’s ready to shift, with a point of ease, practices, labor, or production capability among countries looking on ever changing native conditions.

Formation of trade bloc:

For years the champion of multilateralism was the U.S. However, multilateral trade negotiations within the 1980 were slow and tedious, so leading the U.S. to far away from its policy of supporting solely multilateral trade negotiations as a mechanism for encouraging trade. This new U.S. policy fosters the event of each multilateral easing trade and advantageous trade agreements.

Since the mid1980s there has been a profound modification within the structure of the international economy because of the widespread growth and internal sweetening of regional mercantilism blocs all told elements of the world. The planet Trade Organization (WTO), as an example, notes that just about all of its 134 member’s square measure signatories to regional trade agreements with alternative countries. As of February 1999 the GATT/WTO has been notified of 184 regional trade agreements of that 109 square measure presently in result. These regional trade groups, in step with Fred Bergsten of the Institute for International economic science, account for roughly 60 % of world trade (Anon. 1999).

Among the foremost notable and impactful of those trade arrangements embody the North America free trade Agreement (NAFTA) and therefore the international organization (EU). They decided to establish the Asian Pacific Economic Cooperation cluster by 2020 (2010 for developed economies; 2020 for developing ones) ought to be associate degree equally necessary development (APEC Secretariat 1999).

The U.S, Mexico, and Canada created a free-trade space that became effective in Jan 1994. The members of NAFTA have declared their aspiration of incorporating a lot of geographical region and therefore the Caribbean, so ultimately establishing a trade space of world (FTAA) Efforts square measure in the works to create the FTAA a reality by 2005. This space put together can have a gross domestic product (GDP) of $2 trillion with a population of virtually 500 million by the year 2000. In step with the President of Pakistan’s Institute for Development analysis, 87 % of world trade is presently accounted for by 3 blocs of 33 countries; specifically NAFTA, the EU, and APEC (Anon. 2000).

The European Union’s intensification of its program with its membership currently totaling fifteen members and a brand new common currency for eleven of its fifteen members presently leads to the institution of the world’s largest single market. Additional growth is anticipated, significantly into Central Europe, with the addition of up to 10 new members over successive few years. It’s calculable that the EU generates 31% of total world output and commands over 20 % of world trade (Weindenfeld 1999).

The Asia-Pacific Economic Cooperation (APEC), in spite of the money issues the world fully fledged in 1997 and 1998, remains one among the fastest growing regions within the world. By 1998, APEC’s twenty one member economies created a Gross Domestic Product of over US$16 trillion; this represents close to 42 % of world trade (Asia-Pacific Cooperation 2000). In distinction to alternative regional integrations, APEC, associate degree open regional organization, represents associate degree approach to integration that’s concordant with the multilateralism of the WTO (Kim and Koo 1997).

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While the history of trade is replete with regional trade alliance formation, we all know very little on why or however these blocs type. At first, it absolutely was implicitly assumed that the trade blocs shaped as a result of there have been some inherent edges to the participants. However, a review of the prevailing information of this space calls that proposition into question.

Factors affecting Globalization:

1) Technology (communication): Globalization is in part where it is today due to the advancements that the world has made in technology in general. Technology is one of the leading factors in the evolution of globalization. Information technology is helping further develop globalization. The cost efficiency of many technologies is increasing, and these technologies are beginning to impact everyday life. For example, the cell phone is becoming more and more available to the average consumers who rely on it. Cell phones are used for anything from family conversations to business calls, but for many they have become a way of life. Life might become impossible without the reliance on the cell phone. Another example of information technology is the Internet, which has drastically changed since its big debut in the 1990’s. 

2) Transportation: Faster and cheaper transportation systems allow multinational corporations to build manufacturing facilities across the globe while maintaining scheduled, frequent deliveries of parts and finished products. For example, advances in the aviation system allow businesses to substitute just-in-time deliveries from remote manufacturing plants in place of large inventories.

3) Deregulations: From the 1980s ahead (starting within the UK) several rules and regulation in business were removed, particularly rules concerning foreign possession. Privatization additionally materialized, and enormous areas of business were currently receptive purchase or take over. This allowed businesses in one country to shop for those in another as an example, several United Kingdom of Great Britain and Northern Ireland utilities, once and government businesses, square measure owned by French and USA businesses.

4) Removal of capital exchange controls: The movement of cash from one country to a different was additionally controlled, and these controls were raised over identical amount. This allowed businesses to maneuver cash from one country to a different in an exceedingly seek for higher business returns; if investment in one’s own country looked unattractive, a business may purchase businesses in another country. Throughout the 1990s large sums of cash, in the main from the USA, have acquire the United Kingdom economy.

5) Free Trade: Several barriers to trade are removed a number of this has been done by regional groupings of nations like the EU. Most of it’s been done by the WTO. This makes trade cheaper and thus additional engaging to business.

6) Consumer tastes have changed, and consumers are more willing to try foreign products: The arrival of world television, as an example, has exposed shoppers to world advertising shoppers square measure additional awake to what’s out there in alternative countries, and square measure keen to allow it a strive.

7) Emerging markets in developing countries: Indonesia, as an example, while still not significantly wealthy, has some 350 million shoppers. Both India and China square measure terribly poor countries, however there square measure little middle categories United Nations agency do okay and have cash to pay. Though these teams square measure little within the context of the country, the populations square measure thus large (over 1 billion) that a tiny low social class adds up to several scores of shoppers.

Positive Aspects of globalization:

As more cash is poured in to developing countries, there’s a bigger probability for the individuals in those countries to economically succeed and increase their customary of living.

Global competition encourages power and innovation and keeps costs for commodities/services under control.

Developing countries square measure ready to reap the advantages of current technology while not undergoing several of the growing pains related to development of those technologies.

Government’s square measure ready to higher work along towards common goals currently that there’s a bonus in cooperation, associate degree improved ability to act and coordinate, and a world awareness of problems.

There could be a bigger access to foreign culture within the sort of movies, music, food, clothing, and more. In short, the planet has additional selections.

Negative Aspects of globalization:

Outsourcing, whereas it provides jobs to a population in one country, takes away those jobs from another country, going away several while not opportunities.

Although totally different cultures from round the world square measure ready to act, they start to meld, and therefore the contours and individuality of every begin to fade.

There could also be a bigger probability of unwellness spreading worldwide, also as invasive species that would prove devastating in non native ecosystems.

There is no international regulation, associate degree unfortunate incontrovertible fact that may have dire consequences for the protection of individuals and therefore the setting.

Large Western driven organizations like the International fund and therefore the United Nations agency create it straightforward for a developing country to get a loan. However, a Western focus is usually applied to a non western state of affairs, leading to failing progress.

“The world isn’t flat; it’s rough and you cannot see what is ahead. As new markets expand and globalization will increase, opportunities have become more durable to seek out.”

Not farewell past, mature-market corporations, moon-faced with shrinking prospects reception, looked to rapid-growth economies as their best hope for gain. for his or her half, rapid-growth-market corporations, buoyed by strong domestic economies, began to expand into neighboring countries and therefore the developed world.


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