The Process of Globalization in the International Business - Term Paper Example

 Globalization Globalization is the process of international integration among people, companies and governments of different countries arising from the exchange of worldviews, culture, products and ideas among other factors (Stigllitz 2007, p .3). It is facilitated by advancement of the transport and telecommunication industries, which make the world to be a small village where people can communicate and interact anytime. Since the beginning of 20th century, there has been a tremendous growth in globalization and with the continual advancement in technology, it is expected to continue increasing. There is need for increased globalization since there are many benefits associated with it that ought to be fully utilized for common good of all nations in the world. Thus, the problem is that there is no much globalization for countries to effectively utilize these advantages that accrue to it. As countries, continue to interact and integrate their economies, the dividing walls of hostility that separate trade between countries are broken. This results to free trade where goods and services are exchanged freely across the borders of countries involved with minimal restrictions from the relevant authorities and agencies. Free trade necessitates countries to specialize in the production of only the goods and services, which they have a comparative advantage over the other nation probably because of better resource endowment or other factors that make them to be best suited. Specialization leads to production of goods of high quality since most of the resources are channelled towards production of a specific good and repeated production of the same product is likely to lead to improved quality. Specialization is also associated with incurring of less cost of production which is translated to the final price presented to consumers hence it makes products to be cheaper. Globalization results to movement of labourers from one nation to another without incurring heavy costs that are normally associated with migration and without spending a lot of time (United Nations & Ocampo, 2002 p. 73). Free movement of workers is beneficial to workers since it provides employment opportunities that are not available in the home country hence making them to be economically stable. The workers in turn contribute to economic growths of their home countries when they repatriate back their savings in form of investments and other income generating ventures. The host countries benefit from the services of the foreign workers which are not locally available or which may be very expensive. Furthermore, some countries especially the developed ones may be lacking enough labourers so the migrants in this case from developing countries become crucial in filling the existing gap. Thus, it is clear that globalization helps to solve the global challenges that are related to high rates of unemployment or lack of qualified labourers either directly or indirectly. Globalization leads to availability of wide range of commodities in the market for the consumers to choose since multinational producers supply their products to almost all countries in the world (Das 2009, p. 104). The wide range of commodities to choose from is associated with an increased consumer satisfaction because the consumers’ diverse needs are likely to be satisfied by the different products presented. Increased variety of goods leads to more competition among the producers, which is beneficial to the consumers because it often leads to elimination of oppressive monopolies from the market. Since monopolies are associated with, charging of high prices while offering goods of low quality, their removal leads to reduced prices and improved quality of the goods and services offered. Increased economic, social and political interactions among countries often lead to increased levels of investment in the respective countries (Paus 2005, p.24). This is because it opens door for many interested investors to come in and start their programs as opposed to a closed economy, which limits the investors to the ones within the country’s borders. It is thus true that the more a country or a region adopts the concept of globalization the more the developments it will experience as a result of the increased investment that accompany globalization. This has been witnessed in China, India and in majority of developing countries especially in Africa where globalization has opened doors for multinational companies and other corporations to invest in several multi –billion projects. The projects have been significant in stimulating the economies of these developing countries to grow from low income to middle-income economies. The chart below shows the increase in the Gross domestic product in China and India because of embracing globalization more than U.S. Adapted from http://www.globalsecurity.org/intell/library/reports/2005/nic_globaltrends2020_s1.htm Globalization enables firms and other similar organizations to have a worldwide access to sources of cheap raw materials, which are effective when used in production. As a result, the firms can be cost competitive both in their home market and in the foreign markets they trade in. This reduction of the production cost enables realization of higher level of profits by the shareholders as opposed to the low profit incurred when the cost of production is high. The increased profits when injected into the economy they boost it and thus significantly contribute to economic growth. For example, globalization has made china to utilize in production the cheap raw materials that have been idle for a long time in most of the developing countries (Street & Matelski 2003, p.7). As a result, China’s economy has grown tremendously and stimulated many other economies around the globe to grow at a fast rate. Increased interactions among people from different backgrounds is instrumental in bringing to an end the disadvantageous and primitive aspects of culture that some people groups have upheld to for a very long time. Some of these practices include wife inheritance, female genital mutilation, poor health practices, nepotism, racism, tribalism and resistance to education, among other practices. As the people interact and socialize, they are able to recognize the detrimental effects of these practices and thus respond accordingly through adopting the good practices presented by other cultures (Barker, 1999, p.28). Furthermore, as people from diverse backgrounds come together, they are enlightened and develop a greater worldview that encompasses all people as opposed to a local perspective of the world. For example, many communities in Africa had refused to let go of their traditional practices that were disadvantageous to them in many ways but with globalization, the situation changed. Many of these countries today have embraced the positive aspects of western culture and have thus improved their living standards. Globalization has reduced the world to be a global village where people can interact and socialize freely and within a very short period. A student in America can have friends from china whom they interact over social network sites and share information regarding various life issues. In the same way, a doctor in Guinea can interact with other doctors from all over the world and inquire more on the cure for Ebola. Globalization has thus united the human race like never before, and thus people react to global challenges in a collective way and instantly (Barlow 2003, p 83). This has been witnessed recently by the ways countries across the globe have responded simultaneously to the global threat posed by terrorism and Ebola. Globalization has completely revolutionized management and the information industry for the better by introducing new efficient approaches of management and sharing information (Gomez-Dierks 2001, p.226). The traditional procedure based system of command has been replaced by an approach that makes all employees despite their rank to have a common set of vision and goals. In addition, better means of rewarding the employees and empowering them to be more productive in their work have been introduced. On the other hand, the advent of affordable computer power, which previously was a reserve of few large corporations, has led to a positive revolution of the information industry. Many small size firms are now able to access good computing which translates to better researching, communication and interaction with the rest of the world. As a result, information has now become the main issue of concern for any cooperation and the greater transparency of the information system has led to establishment of many markets in different regions. Despite the many benefits associated with globalization there are disadvantages because of increased globalization and that pose a challenge to the whole exercise. In spite of the many benefits of free trade there are some shortcomings that are because of free trade and the main one is that free trade hurts developing economies. When multinational companies are allowed into small developing countries they displace the local infant industries because they are firmly established in the market whereas the local industries are just growing and hence not established (Cortell 2006, p.225). The closure of the local industries is harmful to the economy of the developing countries since the local investors are likely to be demoralized and furthermore the multinational companies will be repatriating most of the earnings to their home countries at the expense of their host countries. Free trade also leads to excessive economic dependence on other nation in the provision of essential commodities such as food, medicine, security and education among others. This kind of dependence can lead to political slavery where a country is controlled by another and thus becomes hard for it to make uninfluenced decisions. Free movement of labour may be disadvantageous especially to developing countries because it may lead to brain drain where the skilled workers migrate from the home country to foreign nation in search of better employment opportunities (Zajda 2010, p.28). This may lead to the developing countries lacking qualified personnel in most of the important fields that are crucial for smooth running of a country’s activities. Brain drain also implies that the country where the workers are leaving is operating at loss because it spends on educating its people but instead of the people giving back to the community, they end up migrating. Globalization thus leads to the developing countries to have increased difficulties when trying to prevent their workers from migrating since they usually lack enough resources to pay them adequately. Globalization has led to increase in the rate of environmental pollution as it has led to increased use of non-renewable resources (Rom & Markowitz 2007, p.1730). This is because firms engage in a game with the authorities where if the current authorities impose penalties on pollution they outsource their operations to countries where laws on pollution are less strict. This has led to increased pollution of the environment and of late, there have been concerns on the effects of the multinational corporations on global warming. Scientists argue that the gasoline gas and other non-renewable forms of fuel used by aircrafts have led to many emissions to the air, which have adversely affected the ozone layer. Globalization has also led to increased consumption of goods, which has caused firms to increase their production levels, and therefore because of increase in production environmental pollution has increased. It is argued that since there has been a lot of transportation of commodities from one place to another because of the increased interactions among people, the amount of fuel used in transportation has also increased hence increasing pollution. The bar graph below shows how carbon has continued to increase over the years because of globalization Adapted from http://shrinkthatfootprint.com/the-globalization-of-carbon Increased integration of people from different nations as threatened cultural diversity since it has led to the Americanization where people dispose their culture in favor of the American one. Culture defines people’s way of life and it usually serves as a distinctive tool that shows the uniqueness of a people group over other groups of people. Therefore, it is an important tool acting as a sense of identification, and in the past, many communities have strongly maintained their ways of live. However, with globalization there has been a threat since there has been the misconception that America’s culture is superior to all other cultures and this has led to some people leaving their good culture to adopt a new one that may not be the best for them. (Herting 2012, p.50). This is because the media through the different programs it presents and the global market have been strong in depicting that the western culture is associated with affluence and presenting all other forms of culture as backward. As a result, globalization has led to a situation that sociologist call relative deprivation, which is the feeling, reached when people in a group negatively compare themselves with the people in other groups. The people from the developing countries thus tend to believe they are poor and the only result of coming out of the poverty they believe is through adopting the modern culture. Globalization can also lead to increased rate of spreading of all forms of diseases be they human, animal or plant across the world (Ritzer 2010, p.397). This is mainly because the increased movement of people from one geographical area to another because of improved transport system makes people to transmit diseases from one area to another. Before the advent of these means people used to be restricted in one place and thus it was difficult for a disease to be transmitted from one geographical area to another distant area. Furthermore, globalization has been linked with increased levels of tax avoidance and tax competition especially among multinational companies, which use their dominance in different regions to evade tax (Acocella 1998, p.337). They shift their operations from time to time to regions which charge low levels of corporate tax while channelling their profits through their subsidiary companies hence the governments of developing countries which are usually the victims end up collecting very little amount of money in form of taxes. This habit forces the affected governments to increase the income tax of their workers and the value added tax to be able to raise enough funds to meet their daily operations. The increased taxes have their impact upon consumers and local citizens hence they end up paying more out of their little earnings at the expense of the rich multinational corporations. In addition, globalization has made firms that use illegal means to escape from paying tax to either directly or indirectly transfer this bad behaviour to other organizations across the world (Standing 2009, p.70). This has led to a global challenge of increasing number of companies evading tax payment to earn a lot of profit. In conclusion, it is evident that though globalization has led to both advantages and disadvantages to different groups of people the overall benefits outweigh the shortcomings. There is need for the process to be streamlined to lead to an improved system that is devoid of the challenges discussed above since the problem of globalization is that there is no enough of it. Globalization should thus continue to be pursued using the right measures to fully utilize all the benefits that are associated with the process. References Acocella, N. 1998. The foundations of economic policy: values and techniques. New York: Cambridge University Press. Barker, C. 1999. Television, globalization and cultural identities. Buckingham: Open Univ. Press. Barlow, A. L. 2003. Between fear and hope: globalization and race in the United States. Lanham, Md.: Rowman & Littlefield. Cortell, A. P. (006. Mediating globalization: domestic institutions and industrial policies in the United States and Britain. Albany, NY: State University of New York Press. Das, D. K. 2009) Two faces of globalization munificent and malevolent. Cheltenham, UK: Edward Elgar. Gomez-Dierks, R. 2001. Introduction to globalization: political and economic perspectives for the new century. Chicago: Burnham. Herting, S. 2012. Globalization a threat to cultural diversity in Southern Ethiopia? Hamburg: Diplomica-Verl. Paus, E. 2005. Foreign Investment, Development, and Globalization Can Costa Rica Become Ireland? New York: Macmillan. Ritzer, G. 2010. Globalization: a basic text. Malden, MA: Wiley-Blackwell. Rom, W. N., & Markowitz, S. 2007. Environmental and occupational medicine. Philadelphia: Wolters Kluwer/Lippincott Williams & Wilkins. Standing, G. 2009. Work after globalization building occupational citizenship. Cheltenham, UK: Edward Elgar. Stiglitz, J. E. 2007. Cram101 textbook outlines to accompany : Globalization and its discontents. Moorpark, Calif : Academic Internet Publishers, Street, N. L., & Matelski, M. J. 2003. American businesses in China: Balancing culture and communication. Jefferson, NC: McFarland & Company, Inc. United Nations, & Ocampo, J. A. 2002. Globalization and development: [Economic and Social Commission for Latin America and the Caribbean], Twenty-Ninth Session, Brasilia, Brazil, 6 - 10 May 2002. Santiago: United Nations, CEPAL/ECLAC. Zajda, J. I. 2010. Globalization, education and social justice. New York : Springer. Read More