Human societies around the world have established continuously closer contacts over many centuries. Recently, the need of globalization has increased. Advance technologies in communications, transportation, and computer have given the process new movement and made the world more interdependent than ever.
Multinational corporations manufacture products in many countries and sell to consumers around the world. Raw materials, money and technology move more swiftly across the world. Therefore laws, social movements, and economies are forming at the international level. Since 1981, the word “Globalization” has been used by economists; however, until the latter half of the 1980's and 1990's its concepts did not become popular. Globalization has been defined by many scholars in different ways. The term is very vast so there is no complete definition that covers all aspects of the globalization. However, some of the definitions of globalization are as following:
“Worldwide movement toward economic, financial, trade, and communications integration. Globalization implies opening out beyond local and nationalistic perspectives to a broader outlook of an interconnected and inter-dependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labour and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately”
“Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization refers to the integration of economics and societies all over the world. Globalization involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation, and infrastructure”
“Globalization describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and execution”
According to me globalization means to become boundary less. The world Globalization is actually derived from the world GLOBAL which means the whole world so when an organization becomes globalize it means that now it is going to start business with the whole world. People from all around the globe may be their customers and they may make purchases from anywhere in the world. Fast communication is the key of globalization. Internet is the main pillar that gives boom to become boundary less. Globalization have opened doors towards new technology, cost minimization, economies of scale, increase in market size etc. Transnational companies and Multinational companies hold strong positions in different channels of globalization. They are the source of foreign direct investment (FDI), they are very active in trade, with one third of world trade taking place within and not between companies, and they transfer the bulk of technology and knowledge across borders via intra-firm transactions. McDonald, KFC, Sony, Dell, Wall Mart, HP are some examples of boundary less organizations. Catherine Schnabel in her study has found that ‘about half of the total franchises of McDonald are outside the united states in more than 120 countries and McDonald's has over 1.5 m franchises in the United States.
Exceptional performance in communication and transportation technology, combined with free-market ideology, has given goods, services, and capital extraordinary mobility. Northern countries like Denmark, Finland, Iceland, Norway, Sweden wants to open world markets to their goods and take advantage of plentiful, cheap labour in the South. They use international financial institutions and regional trade agreements to force poor countries to “integrate” by reducing tariffs, privatizing state enterprises, and relaxing environmental and labour standards. The results have uplifted profits for investors but offered pittances to labourers, provoking a strong criticism from civil society. Globalization is the main source of foreign direct investment. There is a dramatic increase in foreign direct investment over the last 20 years. This kind of investment brings private overseas capital into a country for investments in services or manufacturing (for example, In the Philippines, General Motors building an auto factory). FDI can bring tremendous growth. Governments of many poor countries see foreign capital as a means of economic growth, and they have taken steps to encourage it. There are different drivers of globalization. They are market drivers, cost drivers, government drivers and competitive drivers.
Per capita income converging among the industrialized nation is the main source of globalization. Businesses corporate want to invest in those countries where the per capita income is high. The reason behind it is the high rate of return. McDonald and Mark and Spencer are more willing to invest in any European country then to Asia due to this reason. Life styles and tastes of the people act as a market driver of globalization. Companies always target the culture and the living standards. There are 1.5m McDonalds franchises are in US because to eat junk food is in their culture and due to time shortage its becomes there need as well so fast food companies always tries to invest in those countries where the life style demands for that product. To increase the brand name worldwide and to run the similar advertisement for the purpose creating a global image of product there is a need of globalization.
Western companies are fully aware of the labor cost savings they can achieve by investing in China, India, Mexico, Pakistan and several Eastern European countries. Here I want to cote example of Body shop. The Body Shop International plc is a global manufacturer and retailer of naturally inspired, ethically produced beauty and cosmetics products. Founded in the UK in 1976 by Dame Anita Roddick, now have over 2,500 stores in 60 countries, with a range of over 1,200 products and is the second largest cosmetic franchise in the world. In 2008 company expanded its business in Asia's developing countries e.g. India, Pakistan and the countries like Namibia, Poland, Slovakia, Egypt and Monaco. Thus 2008 help body shop to increase its stores count by 124 more (The Body shop International PLC Value report, 2009). Company make purchases from the countries like Africa brazil at low prices and have given it a name of cultural trade.
In globalization, Labour is not the only cost advantage available. Companies can also save money by reducing their capital investment requirements, lowering the cost of parts and components, achieving economies of scale, and taking advantage of available government incentives. Labor costs, of course, are the greatest source of savings, accounting for approximately 60 percent of the total cost advantage. A factory worker in the United States or Europe typically costs between $15 and $30 per hour. In contrast, a Chinese factory work earns less than $1 per hour. Lower capital investment costs account for 25 percent of the typical cost advantage. In China and many other countries as compare to the West, it costs much less to build and equip a factory. Some companies report saving as much as sixty percent to seventy percent. Thus, a factory that costs fifty million dollars to build in the United States might cost as little as fifteen million dollars to twenty million dollars in a low-cost country. Such large savings not only can help boost a company's balance sheet, but enable the company to recover its investment faster and faster company growth. Government incentives are a third source of cost advantage. The Chinese in particular have become extraordinarily nation at using incentives to attract Western investment. Tax and other incentives that are offered by China's central government and Chinese provinces have made several companies to claim that they were able to build factories virtually cost-free. In addition to the upper mentioned benefits, companies are also able to save money by sourcing needed raw materials, supplies and services locally. Cost advantage also is affected by the greater economies of scale available in low-cost markets. Producing in bulk almost always tends to reduce costs and many countries where the cost is low, offer huge domestic markets. The largest market in the world for machine tools is China, for transmission and distribution equipment it stands on 2nd number and the fourth-largest market for passenger cars and trucks and yet it is growing fast continuously.
Effects of globalization:
- Industrial:- emergence of worldwide markets, production and broader access to a range of overseas products for companies and consumers.
- Financial:- emergence of worldwide capital markets and better access to external financing for national, sub national and corporate borrowers.
- Economic:- realization of a global common market, based on the freedom of exchange of goods and capital.
- Political:- political globalization is the creation of a world government which regulates the relationships among nations 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, China has experience 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 the flow of information all around the globe.
- Cultural - Circulation of desire to enjoy and consume foreign products and ideas, participate in a “world culture” and adopt new technology, practices and relations.
- Social - the accomplishment of free circulation by people of the whole world.
Greater international cultural exchange
Spreading of multiculturalism, and better individual access to cultural diversity (e.g. through the export of Hollywood and bollywood movies). However, the imported culture can easily merge with the local culture, causing reduction in diversity. The most prominent form of this is Westernization that has taken place over most of Asia.
It also helps to increase international travel and tourism. Spread of local consumer products (e.g. food) to other countries. World-wide fads and pop culture such as Idol series, YouTube, Orkut, Face book, and MySpace. World-wide sporting events such as FIFA World Cup and the Olympic Games.
Sexual awareness- Globalization may also have social effects such changes in sexual inequality, and to this issue brought about a greater awareness of the different (often more brutal) types of gender discrimination throughout the world. For example, Women and girls in African countries have long been subjected to female circumcision- such a harmful procedure has been since exposed to the world and the practice is now decreasing in occurrence
Advantages and Disadvantages of Globalization
- inflated free trade around the globe
- amplified liquidity of capital that attracts the investors in developed nations to invest in developing nations
- Organizations have better flexibility to work across boundaries
- universal mass media have bounded the world together
- Increased flow of communications allows vital information to be shared between individuals and corporations around the world
- transportation for goods and people becomes simple and swift
- Increases the global village effect and cutback of cultural barriers.
- Spread of democratic ideals to developed nations.
- Greater interdependence of nation-states.
- Likelihood of war between developed nations has reduced.
- In developed nations there is an increases in environmental protection.
- Increase in the flow of skilled and non-skilled jobs from developed to developing countries for the sake out the cheapest labor
- Increased likelihood of economic disruptions in one nation effecting all nations
- 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 independence
- Increase in the chances of civil war within developing countries and open war between developing countries as they vie for resources
- reduction in environmental integrity as in developing countries polluting corporations take advantage of weak regulatory rules in developing countries
We have concluded that technology plays the main role in modern globalization. Dramatic advancements in technologies like communications, transportation, and computer let the dreams to come true. The real agents of globalization are the multinational corporations - the ‘super-companies'. Globalization is nothing more than the product of the multinational corporation's search for profit. So, rather than being driven by positive things like a wish to bring the world closer together, globalization is driven by corporations seeking to maximize profits and part of that search for profits involves the search for cheaper labour. Many companies move into less developed countries to take advantage of the lack of organization of labour there which allows these companies to pay below the minimum level wages. So, rather than making the world a more friendly place, globalization is leading to things such as “Export Processing Zones” - places where millions of people - mostly women - make products which are then shipped into the more developed countries and sold for a huge profit. These zones are integral to what globalization is and does. So, the next time someone talks about the global community, ask yourself if this is something we really want.