Globalization of Economic and Business Activity - Coursework Example

GLOBALIZATION OF ECONOMIC AND BUSINESS ACTIVITY INTRODUCTION Globalization has become a widespread phenomenon these days. World trade has flourished,and trade barriers between countries are now eliminating each day (Ghauri, & Cateora, 2010). This wave of trade liberalization has much to offer socioeconomically for multiple countries. Various variables can be identified that are contributing excessively in this context be it, technological, political, social or economical (Verbeke, 2013). With numerous benefits, there are some serious reservations on the proposed idea of globalization as well. All of these aspects are under discussion in this essay. GLOBALIZATION AND FACTORS CONTRIBUTING TO ITS GROWTH Globalization can be referred as a process of development of an increasingly integrated global economy derived heavily by free trade. Globalization calls for a broader perspective, which implies looking at issues and economic activity beyond the boundaries (Eden, Dai, & Li, 2010). It emphasizes on creating the entire world a global village where inter-connectivity and inter-dependence among states exist to achieve their socio-economic objectives. Globalization in terms of trade stresses on a free transfer of goods, capital and services from one country to another (McManus, White, & Botten, 2008). The given idea enables countries to focus on their competitive advantages rather than wasting resources. Consequentially, a win-win situation is created for both developing and developed economies (Rugman, & Collinson, 2009). Increased globalization today has largely become possible through better communication and technological advancements most importantly the internet. Internet has played a key role in making global business possible today (Verbeke, 2013). Communication has become much easier; whether it is about online meetings, update systems, high-tech software and much more, all have been made convenient through internet revolution. Concept of outsourcing has become a general happening in today’s world. Growth of outsourcing industry and a major chunk of software and call centers departments to India has been made possible due to the advancement of internet technology and communication. At this point, BPO (business process Outsourcing) industry of India counts for 1% of its GDP; it has provided jobs for over 74,400 Indians and is estimated to have reached a 54 per cent growth in revenue. Indian BPOs handle 56% of the worlds business process outsourcing (Outsource 2 India, 2014) Other factors that have played a key role are economic benefits of country. Many nations have realized that in this modernized era, the only way to survive and strive for achievement is through economic activities. Despite of the fact that many European nations before the establishment of European Union, had some reservations in smooth having political and trade relations with each other, gave up their egos for the aim of achieving regional prosperity (Bagehot, 2011). Establishment of WTO (world trade Organization) was another decisive factor that talked about trade liberalization and eliminating trade barriers. There would be no wrong to call China, the greatest beneficiary of WTO’s trade policies. These policies have now enabled China to become the world’s largest exporter surpassing Japan in 2011. This has also made China as the world’s second largest economy today (Bloomberg, 2010). MNCs (multinational Companies) and Global Companies have presence all around the globe today and have a number of customers which are even much larger than the average population of a country. Their presence has created a sense of association among people from different countries. McDonalds’ (fast food restaurant) operating in more than 116 countries collects 70-80% of its revenues from international markets (Verbeke, 2013). Another example is of HSBC (Hong Kong Shanghai Banking Corporation) has its origin from united kingdom, London but it accumulates 90% of its profits from outside UK (Verbeke, 2013). Coke is another example of a global company that is regarded as a global company today rather than an MNC. Google is a commonly used search engine throughout the globe, generating US $ 50 billion annually. (Google, 2014). There are plenty of instances where it is exceedingly observable that corporations are the biggest beneficiaries of the globalization trends. EFFECTS OF GLOBALIZATION Pros of Globalization of trade Perks of globalization are abundant. Free trade helps countries and corporations to look and explore newer markets, expanding their operations globally, recruiting best human resources from the globe, having access to quality or scarce raw material which those nations had difficulty to find before. These business activities increased competition, resulting in better quality of products that are available in larger varieties for customers at better prices (Hill, & Jain, 2007). This example is quite evident from the establishment of NAFTA (North American Free Trade Agreement). This agreement spells out free trade agreement between U.S, Canada and Mexico. (USTR, n.d.). The signed agreement proved out to be much fruitful for all the three member countries as the greatest part of operating costs for businesses in U.S. is the labor cost. Relatively in Mexico, labor costs are quite low due to high unemployment. Several companies after the NAFTA agreement moved to Mexico and started their operations there, thereby, reducing their overall operating costs and maximizing their profits. In addition to this, employment opportunities got generated in Mexico thereby, helping Mexico’s economy. The largest trade partner of U.S is Canada. NAFTA has even made the flow of trade easier for the two countries helping the two to grow faster and bigger. Foreign Direct Investment (FDI) of U.S. in NAFTA countries 9stock) also grew about 8.8% from 2008 to 2009 after all duties and restrictions were eliminated on 1st January 2008. (USTR, n.d.). Generally throughout the world, Foreign Investment has grown heavily even larger than the pace of international trade. In 1982, global total foreign direct Investment was amounting 457 Billion and recently by the end of 2012, it reached $1.35 Trillion (Globalization101, 2014) Guest workers are another term that has come into emergence due to globalization. Guest workers are people who go to a foreign country legally to perform certain types of jobs. These workers may be called for specific projects and assignment to assist in a particular department. The duration of their services is usually known and is short. These workers are highly desirable especially when economies are growing as these workers provide their expertise to make the project work. Cons of Globalization of trade Despite of all the positive factors of globalization, the concept is also accompanied by few negative connotations. Brain drain is one of the phenomenon that several nations are facing today because of greater employment opportunities in developed economies. Brain drain refers to loss country’s most intelligent, highly educated and skilled labor force. This has become a enormous problem for developing countries as they are getting deprived of their most valuable human assets which they need the most to develop. Ethiopia, Nigeria, Kenya, South Africa and Iran are the top five countries where brain drain is happening with the highest percentage (Online universities, 2011). Statistics prove that in last five years, 2.7 million Pakistanis have left the country. (Tribune, 2013) Another demerit of globalization is an intensification of sweat shops. Various leading brands have been accused of being involved in such illegal practices. Global brands like united colors of Benetton, Wal-Mart, Disney, Nike, Victoria’s Secret, GAP, Sears and Carrefour have been involved in this shameful act, all because of increased globalization (Rees, and Vitello, 2013). Dumping issues are an added feature of global trade. Countries producing surplus of any commodity tend to dump at extremely cheap prices to other countries thereby, demeaning the overall global trade environment. However, WTO tends to revise its anti-dumping laws on a regular basis to avoid these situations but still such incidents keep happening. (WTO, 2014) Critics argue that increased globalization may also result in enlarged inequality and poverty throughout the world. Globalization and capitalism have created a situation where rich is getting richer and poor is getting poorer thus increasing inequalities (Verbeke, 2013). These equalities can be clearly observed by comparing a developed and underdeveloped nation. Underdeveloped nations despite globalization have not seen any socio-economic improvements largely in their country; however things have become more miserable for them. Whereas, developed nations are enjoying all the perks as their profits are not just restricted from their own countries but are coming from all over the globe. In spite, the fact that the world is witnessing massive globalization but the absolute number of people living has remained relatively constant. (Globalization101, 2014). Reviewers are also of the opinion that it is due to globalization and greed for more economic achievements that have served the grounds for amplified terrorism today. The wars with oil producing countries are happening to gain access to oil reservoirs. Economists also holds the view that as U.S has the biggest arms and ammunition industry when the countries are at wars, it indirectly provides revenues to U.S. these were some of the arguments that critics put forward to the idea of globalization. CONCLUSION Finally, it would be no wrong to say that globalization is a broader subject that holds various perspectives and point of views in its context. Nothing in this world is free of demerits in the present days. Each concept holds a pessimistic and an optimistic perspective. It just depends how the things are seen. Globalization can prove to be a tremendously remarkable idea if it is practiced by all the kind intentions and for the pursuit of good to all and not to one. References Bagehot. (2011). Britain and France: the impossible, indispensable relationship. The Economist, Available from http://www.economist.com/blogs/bagehot/2011/12/britain-and-france [Accessed April 24, 2014] Bloomberg. (2010). China Overtakes Japan as Worlds Second-Biggest Economy. Available from http://www.bloomberg.com/news/2010-08-16/china-economy-passes-japan-s-in-second-quarter-capping-three-decade-rise.html [Accessed April 24, 2014] Eden, L., Dai, L., & Li, D. (2010). International business, international management, and International Strategy. International Studies of Management and Organization, vol. 40, no. 4, pp. 54-68. Ghauri, P. & Cateora, P. (2010). International Marketing (3rd edition). London: McGrawhill Globalization101. (2014). Investment. Available from http://www.globalization101.org/category/issues-in-depth/investment/ [Accessed April 24, 2014] Google. (2014). 2014 Financial Tables. Available from http://investor.google.com/financial/tables.html [Accessed April 24, 2014] Hill, C. W., & Jain, A. K. (2007). International business: Competing in the global marketplace (Vol. 6). New York, NY: McGraw-Hill/Irwin. McManus, J., White, D., & Botten, N. (2008). Managing global business strategies: A twenty-first-century perspective. Oxford: Chandos. Online universities. (2011). 10 Countries Facing the Biggest Brain Drain. Available from http://www.onlineuniversities.com/blog/2011/07/10-countries-facing-the-biggest-brain-drain/ [Accessed April 24, 2014] Outsource 2 India. (2014). The BPO Industry in India. Available from http://www.outsource2india.com/india/bpo-industry-india.asp [Accessed April 24, 2014] Rees, A., and Vitello, A. (2013). 23 Brands Caught In Sweatshop Scandals. Buzz Feed, Available from http://www.buzzfeed.com/alexrees/23-brands-caught-in-sweatshop-scandals [Accessed April 24, 2014] Rugman, A. M., & Collinson, S. (2009). International business. Harlow: Prentice Hall. Tribune. (2013). Brain drain: 2.7m Pakistanis have exited country in last 5 years. Available from http://tribune.com.pk/story/649347/brain-drain-2-7m-pakistanis-have-exited-country-in-last-5-years/ [Accessed April 24, 2014] USTR. (n.d.). North American Free Trade Agreement (NAFTA). Available from http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta [Accessed April 24, 2014] Verbeke, A. (2013). International business strategy. Cambridge: Cambridge University Press. WTO. (2014). Anti-dumping. Available from http://www.wto.org/english/tratop_e/adp_e/adp_e.htm [Accessed April 24, 2014] Read More