The impact of globalization
Globalization is a term that has increasingly become very popular in the present world and is applied differently in various contexts of the literature. However, the most general definition for globalization is that it is a process of integration and interaction among governments, companies, and individuals of different regions, a process driven by information technology and international trade, among other factors. Globalization is arguably one of the most significant forces impacting the world economy today, and is usually characterized by its many incessant effects on political systems, on culture, on the physical well-being of humans in regions around the world and also on economic prosperity (Kraemer, 2002).
As it would be observed, the trend of globalization is not new to the world, for people and corporations separated by great distances have been trading with each other for thousands of years. However, the recent policy and technological advancements, as observed over the past recent decades have opened economies locally and internationally for many countries, thus triggering increases in cross-border investment, trade, and migration. This paper provides a general analysis of the major impacts of globalization and the effects this would have on the global business.
The issue of globalization is deeply controversial and a highly contested issue in the contemporary world. Whereby its proponents believe that it facilitates economical developments in poor nations, the opponents would have a different perception that the outcomes of this universal trend over the years have only succeeded in benefiting Western multinational corporations at the expense of local cultures and enterprises. Globalization is also viewed by proponents as an irresistible force that will certainly bring economic prosperity to people all over the world. This, however, comes as the critics continue blaming the phenomenon for all the uncountable economic nightmares facing the world today.
As a matter of fact, the impacts and implications of globalization for a global economy are immense, but people of all regions should first of all be able to identify the policy choices facing their societies and how these would impact globalization. This way, people would be able to see the right balance between costs and benefits associated with the disruptive trend. The most interesting fact and important aspect, at the same time here, is that nowadays, globalization greatly influences the world from business and economic points of view.
Even though the phenomenon of globalization has been there since the beginning of time, it was only in recent years when its impacts on global societies would be visible (Levitt, 2003). The many macro-economic impacts and implications of globalization being witnessed today had become most notable with the close of the cold war. These effects, however, have advanced with changing global aspects such as establishment of trade agreements, the advancing multinational footprint of business, the stabilizing impact of Euro on world currency markets, communication/technology improvements, development of third world nations and emerging markets, and the highly liquidity of more efficient and sophisticated capital markets.
As it would be observed, globalization has brought many impacts to the world economy, and it has dominated the globe for many years now, instilling new changes in various segments of human existence. The trend of globalization has had varied impacts on various sectors of the economy, and the heightening intensity in the overall process of this trend is evident in the increment of financial transactions, as it is observed in the global markets.
Some of the positive impacts of globalization are; it has enabled technology transfer through developed and developing countries, thus paving the way for better productivity and improved living standards; the trend has also brought many varied business opportunities for both developed and developing countries through the way of integration. More importantly, the phenomenon has established ways through which developing countries and societies could have better and direct access to the developed markets. At present times, the integrated global economy gives great chances to the world to make the level of life better by improving the developments. Following is a summary of other common positive impacts of globalization on the global economy.
Trade-In Goods and Services
The international trade, which comes as a result of integration, ensures there is a consistent allocation of resources across diverse regions. This specialization is most likely to result in better productivity levels. International business can be useful to the emerging economies under the condition that all the resources are used fully. This is where the benefits of minimizing the barriers of tariff and non-tariff come in. Apart from increasing the income between developed and developing countries, globalization has also played a key role in increasing global production. The establishment of international markets offered potential opportunities for economic growth to both developed and developing countries.
The current economic growth and advancement, as witnessed in various countries, have paved the way for other developments in the regions, thus bringing employment opportunities to citizens around those regions. More importantly, commercial demand, as a result of economic expansion, has generated demand for a modern style of infrastructure. Important economic assets such as industrial, office, multi-family, hospitality, and retail are all facing rising demand.
Movement of Capital
Foreign capital inflow, which is normally encouraged by international trade, plays a significant role in a country’s economic developments. Capital flows across countries enhance the production base of any growing country, thus placing a direct impact on the expansion of the overall productive capacity of the country (Sklair 2002).
Globalization has had an enormous contribution to the development and advancement of various economies around the world. For instance, the world has witnessed the rising of China and India as future economic giants over the last decade. As it would be observed, nations with an export guided economy do possess a strong basis for economic advancement compared to an inward-looking country or economy.
As it is has been noted, the rapid integration of financial markets has been the most dramatic globalization element for the last two or so decades. One of the major features of the globalization process is the development of the capital market. In that case, mobility and growth in capital of the trade of foreign exchange have facilitated better resources transfer across borders (Sklair 2002).
Improvement of infrastructure
Recent globalization trends have led to improved and efficient utilities, communications, and transport facilities. As a matter of fact, all these crucial aspects are much improved nowadays, over what people would have experienced in the past two decades or so.
Rising economies as a result of globalization would facilitate the development of markets that represent urbanization, growing numbers of well-learned and skilled professionals, growing consumer grounds, rising incomes, and an expanding middle class, among other positive outcomes in the society.
Opening Up of Closed Markets
Globalization has continuously contributed to the sprout of successful business and markets, which have been evolved in various regular changes of values in society. These would include the legal process, property rights, and published statutes and regulations. More importantly, specific reforms in the sector concerning foreign direct investment and privatization of industries owned by the state have all encouraged investment plans, thus leading to economic success.
Stabilizing Factor for the Global Economy
One of the most important contributions of the globalization phenomenon to the modern world is that it has acted as a stabilizing factor to the world economy (Sklair, 2002). Current petroleum pricing, constricted flow of funds, housing bubble crisis, especially in U.S. and China, and the overall living costs are major problems that would be worse today, had it not been for this interruptive phenomenon known as globalization. With most of the negative economic metrics in place today, there is no doubt that the global interest rate is not much far from taking after that of the 1980s. However, the only difference here may be that the present financial landscape, unlike that of 1980, has been interrupted by a much stronger global economy, which serves as a stabilizing to the economy.
The examples highlighted are some of the many positive impacts of globalization on the global business and economy as well as the society in general. However, with those opportunities as stipulated by globalization also come a number of visible and unforeseen potential risks and threats to the global business world. Apart from the many positive impacts that come along with globalization, there are also open varied challenges and other implications such as volatility in the financial market, inequality within and across different countries, and worsening environmental situations. Another outstanding negativity of the phenomenon is that many of the developing nations have stayed away from the global limelight owing to what the opponents of globalization would tend to see as domination and exploitation of third world nations by the western powers in the name of integration.
Apart from the universal consequences of globalization, as observed in the above paragraph, there are also various issues that are aligned to global issues that are observed to be triggered by the trend. One of the major global business problems arising from the phenomenon is corruption. Nowadays, the issue of corruption has gone beyond the government, where it is thought to take place most often, and it has even permeated through society, affecting every sector of the economy at this level. At a global level, corruption has been facilitated by the current economic system known as ‘The Washington Consensus’ which has been fraught with numerous failures in its policies and missions to the global economy.
The incessant practice of corruption at all levels has contributed to painstaking results in all levels of life. The incessant issue of corruption has contributed to poverty to the developing nations and stagnation of economic strength and power to the developed countries. Even though the practiced is observed to touch all elements of the society in one way or another, the poor nations are the most affected, whereby the effects are felt through ways such as undermining democracy, political development, people’s health, democracy, and more.
One good example of a sector where corruption has widely applied is in the ‘drug trade’ where the policies of the rich and developed nations are observed to foster violence and corruption (Jenkins, 2004). This way, firms from rich and powerful countries would bribe officials and rulers from third world countries to access export contracts in drugs and other illegal products such as arms. Corruption has also been used by rich and developed countries to induce the effects of commodity purchases. For instance, international corporations from the developed countries have taken full advantage of the developing countries by using their powerful influence to exploit them of natural deposits of valuable minerals and other natural deposits such as oil. In that case, the effects of corruption as castigated by globalization are immense, and they pose great challenges to the global business and economy.
The practice of globalization has constantly contributed to increased illicit activities across the border. This would include vices such as the rise of multinational crimes, increased evasion of tax, as well as drug and commercial sex activities. Another significant effect of globalization on global business is the issue of multinational and multi-cultural management. This has actually been a major challenge to businesses and business managers across the world. As it would be observed, a business environment that is multi-cultural is characterized by a lot of challenges and complexities (Thankappan, 2001).
A multi-cultural employment sector is likely to be characterized by a cultural diversity of employees across the globe. In most cases, it is not easy to manage these employees effectively in various organizational settings since their varied cultures would make them react differently to motivation and incentives in those settings. The heightening issue of globalization has also led to inequality and poverty whereby the rich and developed nations are observed to grow richer and richer by the day, while the poor nations continue to suffer the plight of exploitation of their resources from the rich, powerful western nations. This has continued to weaken the positions of third world countries in the global economic grounds as it shapes the position of the developed nations.
Globalization opponents across the world have always observed that the impacts and implications of the trend in developed and developing nations differ greatly. As the more developed nations continue to benefit from globalization, it is the other way round for the poor developing nations. One perfect example indicating the economic improvement of the developed nations is the economic situation of most Asian countries. The economic improvement of most Asian nations has led to a reduction in the overall distribution of income between developing and developing nations.
As it happens, globalization has also been negatively perceived when it comes to wages and labor standards in various segments of employments. It has always been feared that the progressive process of globalization is likely to lead to lowered working standards as countries and institutions try to comply with the call of competition, which is obvious to arise. In that case, it has not always been easy for many institutions to address the rights of their workers appropriately. More importantly, lowered taxes, wages, and regulations would be the most common aspects under such grounds.
Another outstanding effect of globalization that has continued to pose great challenges to the current global business world is the issue of bad economic policies. Misguided economic systems and policies have always caused serious economic turbulence and imbalances in the last few decades. The financial crisis of the year 2007 is the latest blow whose implications are yet to subside completely in many parts of the world. This has posed long-standing obstacles to global business activities. As it would be observed, the overall social contract between the market, governments, and civil society remain unraveling. National boundaries are increasingly becoming less important and undervalued as a result of globalization.
Globalization has also contributed enormously to high rates of unemployment in developing nations in the world as firms compete for highly skilled people to work on their premises. This, however, is likely to have its part of implications. First of all, people from developing nations, who can’t get employment in their mother countries, are likely to be forced to seek better employment opportunities from the developed countries, rather than continue competing for the available low wages and poor working conditions in their native countries.
Recommendations to global business issues as posed by globalization
Globalization is observed to be an unavoidable process that is likely to continue taking place in the world forever. However, all businesses having the desire to compete successfully in the foreign market should be ready to comply with ethical and legal rules placed on them by the international business regulation systems of their countries. International business institutions should introduce ways of dealing with the ethical problems facing them in business. To ensure that this is achieved, these institutions should police, regulate, and manage the entire marketplace to promote a successful establishment of multinational agreements or treaties governing the global market system. For instance, countries taking part in the global market should stop entertaining the ill wills of corrupt powerful leaders.
Globalization plays a key role in trying to address and solve the development problems witnessed in developing regions such as Africa. However, countries in those regions should be prepared to adopt good trade policies that they would follow in venturing into the global markets. More importantly, the concern should be raised where it is appropriate to help address the many social and economic issues affecting the continent, thus making it hard to embrace the full force of economic development. It is also important to note here that Western powers and other rich countries should come up fully to support the developing nations towards developments rather than thinking of using unintended ways to exploit third world countries. Developing countries from all parts of the world should try to improve their wages, which are observed to be highly competitive. This would bring hope for new opportunities for negotiations, which are likely to make positive changing on the labor standards of developing countries. Trying to resist globalization is not helpful at these levels, considering the fact that those regions that have tried to take an active involvement in the entire process are better placed in the current economic standards compared to those places where the trend has been rejected in one way or another. For this reason, the best way to deal with globalization is to refer to it by the right policies that are likely to bear positive economic results in the long run. I personally believe that policymakers in the global market sector have a big responsibility of analyzing the future prospects of globalization and trying to enhance economic stability.
Jenkins, R. (2004). Globalization, production, employment and poverty: debates and evidence. Journal of International Development, 16 (1), 1-12.
Kraemer, K. (2002). Impacts of globalization on e-commerce adoption and firm performance: A cross-country investigation. Center for Research on Information Technology and Organizations, University of California, Irvine.
Levitt, T. (2003). The globalization of markets. Readings in international business: a decision approach, 249 (15), 77-83.
Sklair, L. (2002). Globalization: Capitalism and its alternatives. Recherche, 67 (19), 2.
Thankappan, K. (2001). Some health implications of globalization in Kerala, India. Bulletin of the World Health Organization, 79 (9), 892.