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Globalization of Financial Markets - Essay Example

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The purpose of this paper is to examine how the globalization of financial markets is going to force many corporations to change their business strategies, and what these strategy changes are. …
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Globalization of Financial Markets
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Download file to see previous pages The impact on the stock markets themselves is difficult to predict, and could change investments and trading styles in ways that cannot be suggested from this naïve point (Sabri, 2006). For example, moving all stock exchanges from the physical to the electronic will create what is essentially one grouped exchange, meaning that any differences in the exchanges and their consequences will be eliminated (Sabri, 2006). Additionally, there may be consequences for the NASDAQ because of this conglomeration, as lower performing exchanges are incorporated into the more resilient. It is difficult to say whether this will improve the poorer performers or decrease the impact of the vital markets, but it is evident that there will be a distinct change in market performance (Arshanapalli & Doukas, 2003).
The globalization of financial markets will also have inevitable consequences for the way that corporations themselves do business. If financial markets were truly globalized, there would be a need for many corporations to offer a 24-hour trading system to match the state of the exchanges, and thus many would require a greater financial output and labour input (Sachs, 1998). The globalization of financial markets could also lead to a greater amount of competition in many markets, with Eastern companies utilizing cheaper labour sources to provide cheaper services. This could cause corporations a number of problems, and introduce a need to investigate how to further improve profit margins to become competitive on a global scale. (Lahiri, Perez-Nordtvedt & Renn, 2008). Another element for business that is often discussed in the literature is a change in mind set. Along with more physical changes, an increase in globalization will require a number of changes in interaction with foreign markets, and understanding differences in financial systems worldwide. Lahiri, Perez-Nordtvedt & Renn (2008) suggest that there are a number of different elements that are required for the success of a corporation in the global market, including an increased appreciation of communication and cooperation, readiness to deal with temporal and cultural differences, and realizing sources of unexpected competition. These all come from an increased diversity in the market and a number of difficulties that come from dealing with previously unknown customers and investors. In conclusion, there are a number of ways in which financial markets are going to need to ...Download file to see next pagesRead More
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