Globalization Impact on Modern Economy
What is Globalization?
Globalization is seen as a socio-economic process that results in the growing interconnectedness and interdependence of national economies, political and social systems, and countries’ environmental and cultural characteristics. Globalization is a product of the postmodern era and determines the transition of the world economy to the post-industrial stage of economic development. This economic phenomenon contributes to the increase in trade in goods and services between countries, encourages the mobility of production factors, and promotes the internationalization of the world economy.
Impact of Globalization on Domestic and Global Markets
First of all, a supply-side perspective shows that globalization leads to a change in corporate structures, the geographical location of production, and the outsourcing of individual processes to increase overall efficiency. Therefore, globalization processes have led to greater openness of national economies, having a positive effect on the employment level, gross domestic product, and incoming and outgoing investment flows of countries. Secondly, the positioning of the brand as an international manufacturer has a positive effect on the demand for products (Mandler, et al., 2020). Thirdly, consumers also benefit from globalization, as it facilitates the efficient allocation of resources between countries and reduces the prices of the final product.
On the other hand, transnational corporations that have emerged as a result of globalization are condemned for unfair working conditions, non-compliance with environmental initiatives, and social injustice. Additionally, globalization creates a privatization process and leads to unequal and unfair distribution of global wealth (Mandler, et al., 2020). Scientists also note that due to the constant increase in production, the world’s environmental situation is deteriorating, and health risks to society are increasing. Moreover, consumers are generally critical of the process, as evidenced by Brexit, the current US protectionist policies, and the promotion of ethnocentrism by European political parties. Outsourcing is also a concern for the economically active population, as competition for jobs creates a reduction in wages. Accordingly, it leads to a deterioration in the living and working conditions of the workforce.
Globalization of the Company
The mobility of labor, information, capital, and technology allows the company to gain a competitive advantage through economies of scale and scope. The company can save money at each stage of production by distributing technological processes between companies in different countries or hiring cheaper labor. However, the decision to enter foreign markets must take into account the economic, political, social, cultural, and other determinants of a country’s development. Since the legal framework for regulating business activities between countries is not entirely unified, it is not easy to objectively assess the prospects for business development in another country. Differences in tax policy, customs activities, and risks of political instability will negatively affect the global company’s operations (Verbeke, et al., 2020). Therefore, a company should enter international markets if it has sufficient financial resources and has analyzed the demand conditions and the economic situation of selected countries.
Globalization is a mutually beneficial process for producer and supplier countries. From a more personal point of view, I believe that companies should use globalization tools to increase the wealth of the world economy as a whole. Studying this course has changed my mind in terms of understanding that such companies must act ethically towards all stakeholders, namely consumers, employees, investors, governments, the environment, and so forth.
Mandler, T., Bartsch, F., & Han, C. M. (2020). Brand credibility and marketplace globalization: The role of perceived brand globalness and localness. Journal of International Business Studies, 32(2), 128-160. Web.
Verbeke, A., Coeurdereroy, R., & Matt, T. (2018). The future of international business research on corporate globalization that never was… Journal of International Business Studies, 49(1), 1101-1112. Web.