The Implications of Globalisation for the National Economies - Assignment Example

?Explain The Implications Of Globalisation For The National Economies In General And Its Impact On The Business Environment In The United Kingdom Table of Contents Table of Contents 2 Abstract 3 Introduction 4 Theoretical Background 5 Empirical Evidence 7 Interpretation & Discussion 11 Conclusion 13 References 15 Bibliography 19 Abstract This paper intends to explain the implications of globalisation for the national economies in general. Moreover, it will also discuss about the impact of globalisation on the business environment along with the national economy of a country i.e. the United Kingdom. In this context, it can be viewed that the economic conditions of the UK have undergone a rapid growth throughout the years. This growth is due to the increased level of globalisation, which can also be regarded as one of the prime factors for the financial growth along with the development of the nation. Therefore, this paper has focused on conducting a detailed study about the aspect of globalisation and its impact on national economy and the business environment of the UK. Introduction Globalisation is a concept which has never been able to define in a crystal clear manner. But in general sense, globalisation refers to the process by which all the people of the world can come together into a similar global society (Al-Rodhan, 2006). Globalisation involves several significant aspects such as economic integrity, cultural constancy and transfer of various policies among diverse nations of the world. The impact of globalisation has covered a wide area in the field of economy and business. During the previous few decades, globalisation has been quite successful in developing the economies of various nations of the world through raising internationalisation of trade and commerce at large. It has also been denoted as the foundation of correlated methods for binding the economies of different nations in a single rope. Globalisation has been basically introduced after the World War II, but it hastened up in the mid 1980s. The major reasons for the hastening up of globalisation were increased liberalisation in the capital markets and introduction of innovative technological advancements (The World Bank Group, 2013). It can be stated in this regard that the liberalisation of the capital market mainly occurred due to the risks arising from the foreign competitors. Most of the governments were unable to protect their market from the foreign competitors and got attracted by the import tariffs. On the other hand, the introduction of advanced technologies has reduced the costs of communication and transportation by a certain degree (Shangquan, 2000). Likewise, this paper will provide a study of the enhancing factors and the major impacts imposed by globalisation in developing the economy and also the business environment of the UK. Theoretical Background There has always been a strong linkage between globalisation and growth along with development. Globalisation is duly considered as one of the major aspects in the modern economic scenario and is also regarded as one of the vital factors determining the future prospect of economic growth and development. This can be justified from a theoretical perspective that it affects the productivity of goods or services of a nation. In addition, it also affects labour employment and the elements utilised in the process of production by a greater extent. One of the major impacts of globalisation, in general, can be apparently observed as the growth in Foreign Direct Investment (FDI). The FDI growth rate is much higher than the entire growth in the world trade in the course of globalisation. The reduction in trade barriers and the increment in the global income of FDI have led several countries towards attaining superior competitive position with better economic growth along with development. The growth in the FDI rate eventually lead towards the introduction of pioneering technological advancements and the establishment of huge enterprises on the global level. Thus, the combination of all these factors raises the probability of developing the economy of a particular nation. On the other hand, the evolution of globalisation brought massive innovation in the technological aspects of the countries. Specially mentioning, the growth in FDI and the invention of newer technologies are duly considered to be the enhancing factors of globalisation (Intriligator, 2003). In a general sense, globalisation is used to refer the expansion of business from a developed to a rising economy (The Economists, 2008). In the same manner, the countries that underwent through a rapid economic growth are quite successful in reducing poverty and developing living standards of the local people. It has been apparently observed in earlier days that the lower intensity of barriers in investments and the increment in global income have eventually led several countries towards growth in their respective FDI. The total FDI amount in the year 1975 was stood at US$23 billion, whereas in the year 2003, it grew up to US$575 billion (Bliss, 2010). The introduction of advanced technologies as the consequence of globalisation has reduced the costs, involved in the process of communication amid various nations of the world. Generally, these are the basic implications of globalisation on the national economy. The major impact of globalisation typically lies on the employment and the earnings of the nation. The vital aspects of an economy that are mostly affected by globalisation include Gross Domestic Product (GDP) rate, FDI income and international trade along with commerce (United Nations Economic Commission for Europe, 2011). According to various theoretical perspectives, globalisation can be termed as a compound phenomenon which imposes considerable impact upon numerous significant aspects. In this regard, globalisation can be defined on the basis of three basic elements. With regard to those elements, globalisation can be explained as a strengthening method of global flow relating to production factors in respect to the modernized techniques of transportation and communication. Globalisation, on the basis of the second element is often regarded as the density of time which signifies that incidents of one part of the world have immense impact on the other part. Lastly, the third element denotes that globalisation is the representative of historical renovation of national culture and economy (Stefanovic, 2008). The concept of globalisation is a very vast area of study and thus, it has been classified into three dimensions in order to make the study easier and understandable. These dimensions include hyper globalists, sceptics and transformationalists. The hyper globalists view globalisation as a historical progression which relies completely on capital and labour market. Moreover, they believe that globalisation is socially acceptable as it provides greater contribution to the modern economy. The theoretical perspective of globalisation in accordance with the viewpoints of hyper globalists is completely of social nature, which is based on the notion of capital market. In this perspective, the globalisation is said to be making greater contribution towards developing human civilization. The skeptic perspective develops a critical analysis towards the subject of globalisation. This particular perspective laid emphasis on the belief that the transparency of the prevailing economy and the level of amalgamation in the capital market are fully unacceptable. Rather, they strongly believe that the capital flow and the internationalisation of trade along with commerce among the nations of the world are of prime importance in respect to globalisation. The last classification is the transformationalists who possess the most moderate form of believe regarding the transparent economy and level of amalgamation in the capital markets. They are often recognised as strict defenders of skeptic belief. In this similar concern, one of the renowned transformationalists named Anthony Giddens defined globalisation as the phenomena comprising factors such as capitalism, industrialisation, politics and also military power among others (Stefanovic, 2008). Empirical Evidence The globalisation is creating a huge impact on the world economy which can be apparently observed in the business environment of the United Kingdom. The major impact of globalisation is on the capital market, international trade along with commerce and also on the employment of the nation. The international trade in relation to the products has grown much faster in the nation as compared to others. The increment was not only observed in the trading of products but also in certain other sectors such as transportation, communication and banking. The employment rate in the UK had a rapid increase along with the augmentation in the income of the people belonging to the nation. Moreover, the country also went through a rapid increase in terms of conducting international financial based transactions. Due to these developments, it can be affirmed that the poverty rate of the country declined by a certain degree (MacKinnon & et. al., 2011). The impact of globalisation in the business environment of the UK lies in the situation wherein the international trade binds national economy with world economy. This situation is made possible with the implementation of a variety of modern marketing techniques such as e-commerce, e-mail and the World Wide Web (www). These techniques benefited the multinational companies (MNCs) of the UK in terms of developing newer products and focussing much more on delivering quality services to the customers (Farnham, 2005). The grounds on which the impact of globalisation is being determined are the economic and political system of a nation. In the earlier period, it can be viewed that the UK had adopted the globalisation as an approach for developing its business markets through introducing effective economic policies. The globalisation acted as an external challenge for the UK economy in the early years. This might be owing to the reason that it required numerous changes towards the promotion of growth along with development in the business sector of the country. Along with the passage of time, the developed form of globalised policies has been implemented, which brought into focus the flexible form of labour market in the country. The innovation of the new form of labour supplies in the country brought about a ‘global labour surplus’, influencing the labour market of the UK towards becoming globalised. The proportion of national income of the workers reduced creating a weakened form of bargaining power of the labours. The UK labour market was much affected positively with all these changes in the labour power, as the changes had driven the market towards growth in the wage structure of the companies and also the employment rate. In return, all the companies of the UK were benefited by the developed labour structure, as maximum number of labours was engaged in the production process. It can be affirmed that the increased labour supply had raised the opportunities for employment, which in return provided the larger companies with maximum forces to develop their respective production process (MacKinnon & et. al., 2011). The growth of labour force in the year 2008 was the highest in the UK. This has been depicted in the form of the following graphical illustration. (Source: Brooks & et. al., n.d). Based on the above depicted graphical illustration, it can be affirmed that the increment in the labour force of the UK was due to the impacts of globalisation. The UK can be regarded as the major beneficiary from the impacts of globalisation that led reduction in the national income of the workers and weakened the bargaining power of the labours. The growth of the labour market in the UK increased the Gross National Income (GNI) of the country by 129788.5 GBP million till the year 2013. This statistical information can be represented in the form of a pictorial representation which has been provided below. (Source: Trading Economics, 2013). The impact of the globalisation on the business can be better understood with the case example of Dr. Martens and Fickle Fashion. In this regard, it can be affirmed that most of the teenagers in the world change their habits frequently. The ad agency BSB Worldwide carried a study on the teenagers changing their habits periodically. During the conduct of the study, it can be observed that the most preferable brand of the teenagers were of Dr Martens steel toed black shoes and later preferred the shoes with the colours of a rainbow. On the other hand, a small footwear manufacturer named R. Griggs and Co. started to manufacture and sell shoes in England, irrespective of the ongoing fashion. After a certain period of time, the company analyzed the way people have been customizing the shoes that they purchase and thus decided to convert their business on the basis of global norms. This particular impact of globalisation made R. Griggs and Co. to develop and attain a rapid growth in its business. By the year 1999, the company also started to offer sportswear along with footwear to the teenagers according to their requirements and demands shifted from the footwear to the sportswear. At that time, Dr Martens launched a new footwear brand which later on could not capture the UK market. Due to the launch of this brand, Dr Martens faced a loss of $38 million by the end of the year 2002. This case study shows that the smaller companies can be impacted from the advent of globalisation (Parker, 2005). Interpretation & Discussion From the above study, it can be clearly identified that the major impact of globalisation is on the UK labour market, which in turn increased the opportunity of better economic growth along with development (Schneidman, 2005). The global trends adopted by the UK labour market have given rise to low wages labour force in the market, resulting in developing better economic conditions at large. The notion of globalisation has imposed a major impact especially on the economy of the UK and it is anticipated that it would make greater effect in near future. The UK economy is often viewed to be one of the most transparent forms of foreign investment, which led by the international standards. The increased capital mobility due to the globalisation makes a positive move towards the development of the foreign investments of the companies situated in the UK. Along with the reduction in the bargaining power of the labours globalisation also increased the purchasing power of the people belonging to the UK. This increase can be recognised as a consequence of the available import goods against relatively lower costs of economy. It can be affirmed that the increment in the purchasing power of the individuals will lead the country towards attaining superior growth in Gross National Income (GNI). The GNI and FDI are the two major factors that determine the growth along with the development of national economy (United Kingdom Parliament, 2007). In accordance with the UK economy, both these factors lie in a better position. This can be justified with reference to the fact that the UK economy possesses a transparency in its foreign investment, which ultimately provides ample chances for the companies in the UK to attain sustainable growth along with development. A few of the evidences state that the UK business market is much interested in forming better affiliation with the Indian investors due to common legal systems prevailing in both the nations along with and similar business techniques. The UK based business organisations realised that huge benefits can be acquired in terms of making foreign investments as there lay the possibility to explore newer business strategies and innovation of goods or services. The UK government was forced to revise its annual estimate of Gross Domestic Product (GDP) in the year 2006 after a sudden increase of the growth in the labour force of the nation. The UK economy was profited by the improved labour market due to the migration of proficient workers from the other nations along with increased level of globalisation in the modern business market (United Kingdom Parliament, 2007). Conclusion The aforesaid study reflects detailed information about the impact of globalisation especially on the national economy in general and also on the business environment of the UK. It has already been observed in the earlier description that the UK economy was the major beneficiary of globalisation. The reduction in the income of the labour and the fall in the bargaining power of the labour force are the major aspects that have been attained from the impact of globalisation. One of the vital impacts of globalisation on the UK economy and also on the business environment of the UK can be viewed as that the major portion of the companies has become much international in nature. Moreover, the reputation of a British company has risen extensively in recent days as compared to the prior days of globalisation. The notion of globalisation in the business environment of the UK impacted the nation in terms of determining proper administrative based rules relating to business tax rates. Along with the introduction of business tax rates, globalisation also ensures that the companies are paying a fair rate of tax to the government. It can be affirmed that the fair tax being paid by the companies to the government enhances the business sector towards maintaining international standards in the global market. The business taxes or the corporate tax helps to render a growth in the economic development of the country. Globalisation helps the countries to develop their national economy in accordance with the provision of growth in the business environment. It has also been observed that with the advent of globalisation, UK has been quite successful in becoming the most powerful nation in terms of labour force by the year 2008 (Brooks & et. al., n.d). Additionally, globalisation also led the country with ample scope of employment for all kind of workers i.e. low wage or high wage workers. It is worth mentioning that one of the famous writers named Joseph E. Stiglitz has opposed the impacts of globalisation in the nations such as in the UK. According to the writer, the global financial system of the world is not working well as it is intended to. The writer affirmed that if the global system is working well, then why the global crises are occurring in various nations of the world. In recent years, it can be viewed that the net flow of funds has been transferring from the poor countries to the richer ones, but the actual incident should be the opposite one. However, in order to cope up with the problem, the writer has also suggested that the government and the larger organizations must keep in mind certain important aspects while performing business at the global level. The companies must possess effective labour force in their capital market. On the other hand, the duty of the government in this course would be to ensure fair payment of corporate taxes by the organisations. 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