Positive and Negative Impacts of Globalization - Essay Example

?Introduction: Globalization is the phenomenon of the 21st Century. The foundation for this phenomenon was laid by world leaders through their initiative to form the GATT, which latter on transformed into the WTO. These organizations along with other global institutions and business visionaries started to take measures which diminished the geographic boundaries separating nations. These institutes brought national governments under their umbrella and in this way provided previously rival nations with a platform where they were allowed to communicate their grievances with their rival nations (Hobson, 2004). When all the grievances were resolved between nations, than the oblivious outcome of these talks was an advancement of trade, investments and cultural exchange between nations. This progressive change provided the impetus for the formation of a global economy. To augment these efforts from the national governments, a side by side evolution in internet technology also facilitated the formation of a globalized world. This new internet technology enabled previously nation companies to expand their operations to new undiscovered markets. Thereby bring the concept of global demand into the business arena. Previously national companies started becoming global companies catering to the global demand of consumers. This led to the erosion of national sovereignty because in this situation national governments had little say in the countries trade and foreign policies. It was these global institutes which started to make or take extra interest in the countries economic, foreign and trade policies. Those countries who tried to resist the dominance of these global institutions, found themselves isolated from the international world. The most profound impact of this was on the exports of the country, which were not allowed to enter foreign land. This in turn had a drastic impact on the revenues of the country which heavily depend upon exports earnings. Having faced these problems, countries started to open their borders for international trade, liberalized their foreign and economic policies and started to avoid posturing. Literature Review: Introduction: Globalization is that phenomenon which has shifted individual economies towards a more integrated, independent and evolving world economy (Bhagwati, 2004),. Over the past several decades, the individual economies of the world have become increasingly linked together through an expansion in international trade services along with primary and manufactured goods, through portfolio investments directed towards international loans and purchases of stocks, and through foreign direct investment which is the medium used by multinational companies to make investment in foreign land (Stark, and Bloom, 1985). During this period private capital has reduced the flow of foreign aid in the developing world. These linkages have a profound impact on the developing countries. Due to these linkages developing countries are importing and exporting more from each other. These countries have also started to import from and export to developed countries. Investment is being poured into these economies from the developed countries (Clayton, 2004). The term globalization is most frequently used when discussions about development, trade and international political economy is underway. As can be inferred from the word that globalization is a process by which economies of the world become more and more integrated. This economic integration in turn leads to global economic policy making, which is the domain area of global institutions like the World Trade Organization (WTO). The Global Culture: Globalization has also given rise to a global culture. This culture is characterized by people consuming goods and services which are similar across countries. English has become an internationally acclaimed language for business. These changes promote economic integration and fuel its continuous evolution (IMF Team., 2000). However, in its economic sense globalization refers to increased openness of economies to international trade, financial flows and foreign direct investment. Globalization has played a major role in enhancing the interconnection between national government, national firms, and most importantly between people. The interconnection affects everyone involved in the globalization process. But the impact of globalization is felt more in developing countries than developed countries. Positive and Negative Impacts of Globalization: People who have studied globalization have come to form different opinions about the phenomenon for instance some say that globalization is a mean which brings exciting business opportunities, it leads to a rapid growth of knowledge and innovation, and it creates a world which is free from the threat of wars and conflicts between countries and regions. However for many experts of globalization, the phenomenon is not free from troubling concerns. Amongst the concerns are fears that this phenomenon may well lead to enhanced inequalities both across and within countries, it has the potential to accelerate environmental degradation, and it will enhance the international domination of resource rich countries making poor regions suffer. Experts believe that some of these concerns have been exaggerated but there is no doubt in the minds of experts that these concerns are legitimate and deserve special attention if these issues with this phenomenon need to be avoided (Perkins, 2004). From the above written literature it is clear that the phenomenon brings with it benefits and opportunities but there are cost and risks involved as well. These risks are more dangers for people residing in low-income and resource poor countries. For these people the stakes of globalization are very high. Even potential upsides of globalization are also high for developing countries. Since globalization has the potential to erase global poverty, it can be classified as a remedy for the global disease of poverty (Pavcnik, and Pavcnik, 2005). As globalization enables an indirect or direct interaction between people of poor countries with people of richer countries, this can have a potential positive impact on the development of poor countries because by this globalization is facilitating the exchange of culture of different societies, social values, scientific and technological advancements and most importantly trade and finance (McAlister, 2005). Globalization has also enabled the diffusion and adoption of new productive ideas. Now the time between innovation and adoption of technologies around the world has decreased drastically. This has a profound impact on the spread of new knowledge and technologies to developing countries thereby helping them increase their rate of progress and development. Globalization and the World: Globalization of the world economy has lead to the creation of a single large market. And as the notion goes: the larger the market that can be sold to, the greater the gains are from trade and division of labor. Moreover, this also provides incentives for innovation because in this scenario the potential returns are much greater. Globalization has been successfully used by low-income countries like China and India as an opportunity (Hoekstra, 2008). These two countries account for a large fraction of the world population. These two countries and especially China have used globalization to accelerate their rate of catch-up by growing faster than the developed world. In this way the country has reduced some international inequality. By inequality may be accentuated both across and within countries as much of African continues to fall further behind, with continuous decline in per capita income and growing regional inequalities within countries. Within China there is a disparity existing between population residing in coastal China and the population residing in Inland China (Kuruvilla, 2008). Concerns regarding the negative impacts of globalization stem from the fact that the previous wave of globalization was extraordinarily uneven in their impact. The areas which were affected the worst due to this wave of change include Africa which is still recovering from the effects (Cyranoski, 2009). Observers of this wave of globalization are therefore skeptical and in this regards they are try to discern the variables which have changed in this wave in contrast to the previous one. It will not be enough to say that the pervious wave was characterized by conquest and subordination by colonialism but this wave is free from it. Arguments regarding this need to be based of facts which advocate effective rules for international trade, investment, finance, and assistance to the poor. In order to protect the developing countries from the harmful impacts of globalization, efficient rules of the game needs to be placed. These rules should make strides in leveling the globalization playing field. Some of this leveling process involves international changes and some involves national changes that can be facilitated y international community. Emergence of Global Institutions: As the markets are globalizing and increasingly business activities are transcending national borders, institutions’ are needed to help manage, regulate and police the global marketplace. These institutions also need to play a role in the establishment of multinational treaties to govern the global business system. In this regards number of global institutions have been created with the aim of facilitating international trade and spreading of globalization. These institutions include GATT (General Agreement in Tariffs and Trade) and its successor the infamous World Trade Organization; the IMF (International Monetary Funds) and its sister institutions the World Bank and the United Nations. These institutions were raised after the voluntary agreements between individual nation-states adhere to the rules laid down in the trade treaties signed by the member countries of the World Trade Organization. The World Trade Organization is responsible for monitoring the world trading system and ensuring by acting as a regulator that nation state adhere to the rules laid down in the treaties signed by the World Trade Organization member states. Since large number of participant is present in the World Trade Organization therefore this organization has a tremendous amount of scope, influence and responsibility. The history of World Trade Organization and General Agreement in Tariffs and Trade is filled with efforts to lower trade barrier between countries and facilitate the movement of cross-border trade and investment. World Trade Organization has acted as an instrument of its member states to build a unified global business system unencumbered by barriers to trade and investment between countries. Without World Trade Organization, the pace at which the process of globalization has occurred would have not occurred and if it had than most probably it might have halted in halfway (Bridges, 2002). The International Monetary Fund (IMF) is the lender of last resort for countries whose economies are in chaos and currencies are losing their worth against those of other countries. International Monetary Fund loans come with strings attached. In return for loans, International Monetary Fund would make its borrower countries to adopt specific economic policies aimed at bring back these troubled economies to the path of stability and growth. Many policy makers have considered these policies of the International Monetary Fund to be unreasonable and some of these policy makers believe that by tell a nation to adopt the guidelines of the International Monetary Fund, the institute is interfering with sovereignty of that state (IMF, 2000). The United Nations is that institute which is committed to the preservation of world peace and harmony. It does this by taking actions which ensure international cooperation and collective security. Today almost every nation in the world is a member state of the United Nations. To be a member state the country needs to accept the obligations of United Nation Charter. This is an international treaty which defines basic principles of international relations. Theoretical Analysis: Political, Economic, Social and Technological Analysis: Political: The company should expand into South Eastern countries like Malaysia, Thailand and Singapore. Since the governments of these countries are strongly attached to liberal governing policies, therefore it is clear that these governments are in favor of globalization. These countries are also laying infrastructure which is supportive of changes brought under globalization. Thus it can strongly be inferred that these countries want to get integrated into the world economy. Economic: This region of the world is the only region that has managed to divert the negative waves of the world recession of 2007. All other parts of the world have been hit by negative effects of the world recession, by varying force, but these countries have some how remained strong at the time of recession and not only that these countries have made considerable progress ever since this recession has engulfed the world. These encouraging trends in the economy are attracting foreign direct investments into these countries. The effect of this has been very positive for the regions population; the per capita income of this region is also good enough to support consumers’ expenditure. The business environment in also very vibrant and consumers are willing to try new things. Social: This region is overseeing a period of prosperity. The population of this region is engulfed in changes, impetus for which is provided by globalization. The consumers of this region, supported by high income per household, are willing to spend extra money on new products. These consumers are adopting products which were previously alien to their culture; as a result of this a vibrant market for diverse range of products is created. Consumers of this region have become technology-oriented or more specifically technology savvy, these customers want to get hold of new technology that enhances their ability to socialize with their friends, family and peers. Technology: The motivation to stay connected with family, friends and peer groups is taking these consumers’ towards technology that enhances their ability to stay connected with their loved ones. Mobile commerce has evolved as a result of this development. Internet access over the mobile phone has allowed these customers to stay connected 24/7 with their friends, family and peers. Not only are mobile phones catering to these needs but also technological advancements like personal digital assistants (PDAs) and iPhone are allowing the same benefits. Ansoff Matrix: According to this matrix the company should opt for the Market Development Strategy. The products it wants to offer in a different market are same as that offered in its current market. The fundamental difference over here is that of the market comprising of consumers who are different from the company’s current customer base. In order to offer its products in this market, it needs to tailor its offering in a manner that synchronizes with the preferences and aspiration of the consumers of this market. Every aspect of the company’s promotional campaign should address the cultural norms and standards of this region. The company has an added advantage in the South Eastern market that it has regulations on its side. The liberal government policies create utility for their product offerings. Government has strictly regulated the freeware market; as a result of which consumer cannot get hold of free antivirus software’s that easily as they did when there were no such regulations. Also there is an encouraging trend prevailing in these markets; consumers are inclined to buy licensed products rather than freeware’. Case of globalization: Amazon.com is an example of a company that has evolved as a result of globalization. This company started its operations as a virtual bookstore for the book readers of American. When the company’s website started to generate enough traffic, it started to attract popular companies brand, products and services for display on its website. This response encouraged the company to go global. Today Amazon has a network of warehouses located at different places of the world. Form these distribution centers customer orders are dispatched. Customer orders are booked through the company’s website, when this happen activities in the company’s pull based business model gets initiated. By tracing the IP of the customer, the most nearest warehouse receives the order and dispatches it to the customer. So in this way internet is used by the company as a toll to tap into the global demand for the products which are displayed on its website (Santos, 2003).. This website of the company can be seen by a customer present in any part of the world. In this way the company transcends national borders and reaches its customers. The company uses postal systems of the country to deliver its ordered products, in this way it employs the concepts which have emerged with the evolution of globalization. Using the postal system of a national can be called outsourcing. This has been made possible because Amazon has been very good in identifying and discerning its core activities from its supporting activities. Amazon has also been very astute in keeping its process of customer interaction as an in-house activity. This is an important development in this globalized world. By handling this activity through its in-house customer representatives, the company has been very sensitive to the demands of its customers. This initiative has also allowed the company to enhance its customer satisfaction and ultimately customer loyalty process. The fundamental reason behind this success is Amazons selling conditions, one of which allows a customer a full refund incase he does not receive his ordered product (Santos, 2003). Amazon is also very generous when the customer comes back to the company and tells it that they have finally received their package. Amazon will let them have that package for free; it would not ask the customer for any repayment. This sort of dealing has enhanced customer satisfaction and created customer loyalty. The attitude of Amazon towards its customers make these customers go back again to the website for shopping. Amazon has recently been transformed into a platform for different brands and products. The company has shifted its attention from being just an online virtual store to more than that. The company has not expanded into the Asian market like India; in this market the company is fulfilling the role of intermediation. Rather than selling products that it has in its inventory, the company is offering a platform for renowned brands both local and international to reach out to new customers. In this way the website of Amazon is helping to facilitate the roots globalization (Santos, 2003). Analysis and Evaluation of the Project: The theme of this project was inspired by globalization, this phenomenon that is leading the world into a new paradigm so it is worthwhile to understand the implications of this phenomenon. The company selected for this project was taken up on the grounds that it consists of product offerings which are natural to this globalized environment. Also the group, after a thorough analysis of other companies in the list that was generated after a brainstorming session, had a consensus of opinion that this the company that needs to take a massive stride if it wanted to survive this wave of globalization or even enjoy its benefits. This company had products which the group thinks are deep and sophisticated enough to become part of the global product portfolio. Supporting this claim of the group is the fact that the company in its current market is facing setbacks when its two key product offerings are available in the market for free. The government of this market is not taking prudent steps to stop the illegal software market which is very robust in this country. As a result of this market, the company is unable to realize its true profit potential. The group firmly believes that the company needs additional avenues for selling its product offering. In this regards the group has proposed a region, where the group believes that the company’s products will find their true worth. However, the company needs to be very careful when designing is promotional campaign. It needs to be sensitive to the cultural dynamics of this region. The company has to incorporate this sense of cultural sensitivity into the marketing elements of the promotional campaign. The group also believes that the company should take the idea of going international very seriously, because it would not be feasible for it to keep fight a lost battle in its current market. The company has to seek other avenues other than the South Eastern region because it needs to achieve economies in its operations. Moreover, the company needs to seek help from lobbying organizations which could help the company to influence or reach out to policy makers. This is one measure that has become highly relevant and necessary in today’s globalized world. The group also believes that the company should not go into a foreign market without making provisions for safety. The company in order to secure itself from unpredictable market response for its products should undergo strategic alliances with local companies who having been working in this domain in these countries. The company can even think about outsourcing its marketing function for operations in this region to a third party marketing agency. This will help it to avoid the problems which would arise if the company is not successfully able to address the cultural intricacies of this region. These are the various risk mitigation strategies which the company needs to undertake if it wants to ensure success in this alien land. Conclusion: Globalization is that phenomenon that has transformed national companies into global companies. In this paradigm shift these global companies are catering to global needs of global customers. In order to go global a company needs to develop products which can find acceptability in the global arena. These companies also need to take special care when addressing the cultural intricacies of these regions. They should tailor marking program and message according to the cultural dimensions of these regions. Moreover, a company in order to influence the regulatory environment of a region should utilize the services of lobbying agencies, so that it gets a substantial return on its investments in the region. Reference list Bhagwati, J., (2004), In Defense of Globalization. Oxford, New York: Oxford University Press. Bridges, G. (2002), ‘Grounding Globalization: The Prospects and Perils of Linking Economic Processes of Globalization to Environmental Outcomes’. Economic Geography, vol. 78, no. 3, pp. 361–386. Clayton, T., (2004), ‘Competing Conceptions of Globalization, Revisited: Relocating the Tension between World-Systems Analysis and Globalization Analysis’. Comparative Education Review, vol. 48, no.3, pp. 274-294. Cyranoski, D., (2009). ‘Materials science: China's crystal cache’, Nature, vol. 457, no. 7232, pp. 953–5. Frank, A., (1998), Reorient: Global economy in the Asian age, California: U.C. Berkeley Press. Hobson, J., (2004), The Eastern Origins of Western Civilisation, Cambridge: Cambridge University Press. Hoekstra, A., (2008), The Globalization of water. Sharing the Planet's Freshwater Resources, United Kingdom: Blackwell Publishing. IMF Team. (2000). ‘Globalization: Threats or Opportunity’, IMF Publications, Available at http://www.imf.org/external/np/exr/ib/2000/041200.htm [Accessed 15 May 2012] Kuruvilla, R., (2008). ‘Economic Development Strategies And Macro- And Micro-Level Human Resource Policies: The Case Of India's "Outsourcing" Industry’, Industrial & Labor Relations Review, vol. 62, no. 1, pp. 39–72. McAlister, E., (2005), ‘Globalization and the Religious Production of Space’, Journal for the Scientific Study of Religion, Vol. 44, No 3, pp. 249–255. Pavcnik, N., and Pavcnik, N., (2005), ‘Child Labor in the Global Economy’, Journal of Economic Perspectives, vol. 19, no. 1, pp. 199–220. Perkins, J., (2004), Confessions of an Economic Hit Man. San Francisco, California: Berrett-Koehler Santos, J., (2003), ‘E-service quality: a model of virtual service quality dimensions’, Managing Service Quality, Vol. 13, no: 3, pp. 233 - 246 Stark, O., and Bloom, D., (1985), ‘The new economics of labor migration’, The American Economic Review, vol. 75, no.2, pp. 173-178. Read More