Professional Documents
Culture Documents
Theoretically
• Globalization opens up markets and ensures competition
• Removes inefficiencies and leading to greater growth.
• Ensures specialization takes place in areas of comparative
advantage.
• For labor abundant economies this means increased employment as
well as growth.
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CAUSES OF GLOBALIZATION AND ITS HISTORY
The origin of globalization can be traced back till the 16th century
when the West started to explore and discover for the new worlds and
continents, bringing the English to India in form of East India Company,
there first multinational was born for us and the rest is recorded
history. The process of global economic integration was perpetrated at
the behest of World War II and the first Great Depression, when the
leaders of Britain and the US fumbled with the idea of reconstructing
the war-torn world monetary system with a focus on favoring free of
capital internationally, turn endure a liberal, capitalist world at the end
of war to counter the shadows of Socialism and Marxism. To promote
the new monetary world order, a conference was convened in July
1944, at Bretton Woods, New Hampshire, to create the world's most
powerful institutions: the International Bank for Reconstruction and
Development (the World Bank), and the Internationally Monetary Fund
(IMF). With the development of international financial markets in 1970s
and the debt crisis of developing countries, several developing
countries opted for stabilization and structural adjustment programs,
to qualify for the loans from IMF and WB. The first IMF/WB Structural
Adjustment Loan (SAL) was given to Turkey, in the backdrop of
appropriate market oriented policies, accompanied with
conditionalties, in 1980. These programs in a nutshell were aimed at
liberalization of developing-countries markets. The reforms and
conditionalities imposed laid basic foundation to open economies to
steer the mechanism of economic integration giving birth to the most
controversial of all among international organizations, the World Trade
Organization.
EFFECTS:
Globalization has various aspects which affect the world in several
different ways:
Industrial
Emergence of worldwide production markets and broader access to a
range of foreign products for consumers and companies. Particularly
movement of material and goods between and within national
boundaries. International trade in manufactured goods increased more
than 100 times (from $95 billion to $12 trillion) in the 50 years since
1955. China's trade with Africa rose sevenfold during 2000–07 alone.
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Financial
Emergence of worldwide financial markets and better access to
external financing for borrowers. By the early part of the 21st century
more than $1.5 trillion in national currencies were traded daily to
support the expanded levels of trade and investment.
Economic
Realization of a global common market, based on the freedom of
exchange of goods and capital.
Job Market
Competition in a global job market. In the past, the economic fate of
workers was tied to the fate of national economies. With the advent of
the information age and improvements in communication, this is no
longer the case. Because workers compete in a global market, wages
are less dependent on the success or failure of individual economies.
This has had a major effect on wages and income distribution.
Political
Some use "globalization" to mean the creation of a world government
which regulates the relationships among governments and guarantees
the rights arising from social and economic globalization.
Politically, the United States has enjoyed a position of power among
the world powers, in part because of its strong and wealthy economy.
With the influence of globalization and with the help of the United
States’ own economy, the People's Republic of China has experienced
some tremendous growth within the past decade. If China continues to
grow at the rate projected by the trends, then it is very likely that in
the next twenty years, there will be a major reallocation of power
among the world leaders. China will have enough wealth, industry, and
technology to rival the United States for the position of leading world
power.
Informational
Increase in information flows between geographically remote locations.
Arguably this is a technological change with the advent of fibre optic
communications, satellites, and increased availability of telephone and
Internet.
Competition
Survival in the new global business market calls for improved
productivity and increased competition. Due to the market becoming
worldwide, companies in various industries have to upgrade their
products and use technology skillfully in order to face increased
competition.
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consider such "imported" culture a danger, since it may supplant the
local culture, causing reduction in diversity or even assimilation.
Others consider multiculturalism to promote peace and understanding
between people. A third position that gained popularity is the notion
that multiculturalism to a new form of monoculture in which no
distinctions exist and everyone shifts between various lifestyles in
terms of music, cloth and other aspects once more firmly attached to a
single culture. Thus not mere cultural assimilation as mentioned above
but the obliteration of culture as we know it today. In reality, as it
happens in countries like the United Kingdom, Canada, Australia or
New Zealand, people who always lived in their native countries
maintain their cultures without feeling forced by any reason to accept
another and are proud of it even when they're acceptive of
immigrants, while people who are newly arrived simply keep their own
culture or part of it despite some minimum amount of assimilation,
although aspects of their culture often become a curiosity and a daily
aspect of the lives of the people of the welcoming countries.
Technical
Development of a Global Information System, global
telecommunications infrastructure and greater transborder data flow,
using such technologies as the Internet, communication satellites,
submarine fiber optic cable, and wireless telephones
Increase in the number of standards applied globally; e.g.,
copyright laws, patents and world trade agreements.
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NEGATIVE ASPECT
Income inequality:
This has resulted in a growing gap between the incomes of the rich and
poor. This trend seems to be greater in the United States than other
industrial countries. Income inequality in the United States started to
rise in the late 1970s, however the rate of increase rose sharply in the
21st century; it has now reached a level comparable with that found in
developing countries.
Brain drains:
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exporting.
• Higher profits.
Your profits can rise faster, if your company's fixed costs are
covered by domestic operations.
• Reduction of dependence on traditional markets.
You can strengthen your company by diversifying into
international markets.
• Diversified markets.
Companies that market internationally can take advantage of
booming export markets.
• New knowledge, experience and enhanced domestic
competitiveness.
Expand your horizons! Often, new ideas, new approaches, new
marketing techniques learned from exposure the global
marketplace can be successfully applied domestically.
• Global competitiveness.
Today, many companies outside your country are entering your
local market, as they are exporting worldwide. Exporting paves
the way to global competitiveness.
Another advantage of going global is that it creates jobs, productivity
growth and generates wealth. You can also tap potential investors if
your business is exposed worldwide. By finding new foreign markets,
you can insulate seasonal local sales and you can have cost cutting by
doing global outsourcing.
Your business will not stay dependent on the existing market if you go
global. By having a wide scale market, you can easily find new markets
and producing dynamic sales.
With this new venture, you are open to new ideas, new strategies, new
markets and the confidence to dominate the world with your business
Disadvantages
* It could lead to a more rapid depletion of exhaustible natural
resources.
* It is a long distance trade and as such it becomes difficult to maintain
close relationship between the buyer and the seller.
* Each country has its own language. As foreign trade involves trade
between two or more countries, there is diversity of languages. This
difference in language creates problem in foreign trade.
* Foreign trade involves preparation of a number of documents which
also creates difficulties in the way of foreign trade.
* Some restrictions are imposed on export and import of commodities.
These restrictions stand on the progress of foreign trade.
* Foreign trade involves a great deal of risks because trade takes place
over a long distance. Though the risks are covered through insurance,
it involves extra cost of production because insurance cost is added to
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cost
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Getting paid for goods and services
Collecting payments from customers can be a big problem for small
companies, but there are avenues available to help overcome this
barrier. One of the safest ways to collect is by wire transfer before a
product or service is delivered. The explosive growth of the Internet
has leveled the playing field globally, but the Internet also makes
entering international markets easier for U.S. small businesses and
entrepreneurs. The Internet and the resultant improved
communications between global suppliers and prospective buyers help
make it easier to set and negotiate prices. Better communication and
agreements make it less likely there will be miscommunications when
it comes to payments. One such advantage is e-mail communication,
which is faster and cheaper than past telephone communications, and
provides a paper trail to document the communication in case there is
a dispute about prices and payments (Exporting Process Complicated,
2007). Businesses can also seek payment terms that provide
guarantees to the exporter. One of Ex-Im Bank’s most popular
products is credit insurance, which protects the small business owner
in the event of buyer default (DeBaise, 2006). A policy covers commer-
cial risks, such as buyer bankruptcy and slow payment, along with
some political risks, includ-ing war and terrorism (Czurak, 2007).
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Lack of information about foreign markets
Learning about foreign markets is often complex and constitutes a
major barrier for small business owners who want to enter
international markets. Fortunately, a wide array of programs and
resources is available to small businesses from federal agencies,
including the U.S. Department of Commerce …. Some small businesses
create strategic alliances with foreign business partners. Others
engage the services of commissioned brokers or export management
companies to help market their products.
Costs to export
Costs, of course, are always a concern for small businesses and with
entry into global markets comes the need to finance the purchase of
inventory, labor, and other associated costs, such as working cap-ital
financing. Ex-Im Bank and the Small Business Administration offer joint
working capital loan programs that provide guarantees (up to 90%) to
private commercial banks for small businesses to assist their entry into
global markets. Recently, privately owned merchant finance
companies have be-gun to finance trade by providing purchase order
financing (Koch… 2007). Ernst & Young publishes business guides for
more than 40 countries, covering governance, compliance, fraud,
outsourcing, and tax advice (Trembley, 2008).
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business should try to go beyond national borders. Believe it or not,
there are many advantages for a small business in the international
market, than huge corporations. For example, exporting products can
absorb excess inventory, soften downturns in the domestic market and
extend product lives. It can also spice up dull routine work of a
business.
Small businesses have several advantages over large businesses in
international trade. They are:
• Overseas buys enjoy dealing with individuals rather than with
large corporate bureaucrats.
• Small companies can usually begin shipping much faster as there
is no huge queue.
• Small companies provide a wide range of suppliers.
• Small business organizations can give more personal service and
more undivided attention, because each international account is
a major source of business to them.
These are some of the compelling reasons why you, as a small
business entrepreneur should think positively and seriously about
taking your span of business abroad. No matter what others say, if you
think that you have what it takes to expand, then you should go for it.
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virtually all firms, large and a small, face. Firms that want to survive in
the 21st century must confront this all encompassing force that
pervades every aspect of business. In a wide range of industries from
automobiles to food and clothing, firms face the pressures of global
competition at home as well as in international markets. Choosing not
to participate in global markets is no longer an option. All firms,
regardless of their size, have to craft strategies in the broader context
of world markets to anticipate, respond and adapt to the changing
configuration of these markets.
Navigating global waters successfully and establishing direction to
guide the firm in an increasingly turbulent world environment is a key
challenge facing today's managers. To date, this has largely been
perceived as the purview of large multinationals with diverse far-flung
operations in all parts of the global market. Of key importance is the
need to remain responsive to local markets, while at the same time
achieving global efficiency through integrating and coordinating
operations across world markets and allowing for the transfer of
learning from operations in one part of the world to another.
Competition
Increasing intensity of competition in global markets constitutes yet
another challenge facing companies at all stages of involvement in
international markets. As markets open up, and become more
integrated, the pace of change accelerates, technology shrinks
distances between markets and reduces the scale advantages of large
firms, new sources of competition emerge, and competitive pressures
mount at all levels of the organization.
As more and more firms venture into global markets, competition
proliferates, posing new threats and dangers to be reckoned with. In
addition to facing competition from well-established multinationals and
from domestic firms entrenched in their respective product or service
markets, firms face growing competition from firms in newly
industrializing countries and previously protected markets in the Third
World, as well as emerging global networks or coalitions of
organizations of diverse national origins.
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At the same time, spurred by new advances in communications
technology and rapid obsolescence, the speed of competitor response
is accelerating. No longer does a pioneer in global markets enjoy a
substantial lead time over competitors. Nimble competitors, benefiting
from lower overhead and operating costs, enter rapidly with clones or
low-cost substitutes, and take advantage of the pioneer's investment
in R&D and product development. Modern communications and
information technology also encourage rapid competitor response to
price changes, or new distribution and promotional tactics, and further
heighten the pace of competition.
Confronting Competition
Not only is competition intensifying for all firms regardless of their
degree of global market involvement, but the basis for competition is
changing. Competition continues to be market-based and ultimately
relies on delivering superior value to consumers. However, success in
global markets depends on knowledge accumulation and deployment.
Firms that win in the market place will be those that can use
information to their advantage to guide the delivery of superior value.
Further, the increased blurring of product market boundaries and
interlinking of markets means that how value is perceived and by
whom is less clear.
Conscience
The fourth challenge relates to the firm's moral and social
responsibilities in the global marketplace. A host of such
responsibilities can be identified, covering a broader spectrum of social
and corporate issues. Environmental issues, for example, have
emerged as a key theme in the 90's. Companies have become
increasingly aware of the need to take measures to limit destruction of
the environment. These include measures to limit pollution of the
atmosphere through the emission of gases and other toxic substances,
to conserve resources such as paper and plastic, whose production
results in environmental destruction, and to produce and design
products and packaging which are environmentally friendly.
Conclusion
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