Globalization and International Business - Essay Example

Globalization Introduction The term globalization can be considered to be a powerful concept in the new system and is one of the most important influential forces that determine the future of a planet. This term has its impact on multiple dimensions such as environment, economy, security, health, political, culture and social dimensions. The focus is on the impact of globalization on the world economy and the major shifts that has resulted due to globalization in the last three decades. The term had been introduced in the year 1980 but over the years this concept has been misinterpreted by many people. The policymakers, activists and scholars has different set of reactions to this concept as some considers this term to be a force that helps in enhancing the world economy while others consider it to be a threat for the world economy. Globalization is often referred by some as a concept that leads to shrinkage of space and time. Globalization can also be stated as elimination of restrictions that are state enforced on various exchanges that take place across the borders and complex and integrated global system of exchange and production as an outcome of the trend. This concept has given a new opportunity to the international business and there have been strategic changes in businesses worldwide. Discussion There have been certain major shifts caused by the trend of globalization over the last three decades. In context of world economy, globalization is considered to be a medium that has increased trade across the globe and has even increased exchanges in the form of borderless, open and integrated international economy (Ritzer, 2009).This concept has caused a remarkable growth not only in the form of exchanges and international trade but also in the form of capital movements, currency exchange, movement of people through migration and international travel, transfer of technology, and even international flow of ideas and information. Globalization has cause an impact on the world economy to such a great extent that there is an increased volume of transactions in terms of international finance with a total of $1.2 trillion that is flowing on a daily basis from the currency markets of New York and even increase in transactions of the international stock market. Globalization has even resulted into a major shift in the form of enhancing openness in the world economy. The global flows have resulted due to the shift towards a borderless world and market integration across the globe. Over the last decades, there have been different sources of this trend (Jenkins, 2005).The most important source has been in the form of technological advancement that has lowered the costs of communication and transportation and even has reduced the costs associated with information storage and data processing. This trend has given rise to certain developments in the form of computer revolutions and invention of microchips. The factor of trade liberalization can also be considered to be a major source of globalization (Henderson, 2007).This trend has been able to cause an impact on the world economy along with wide effects such as effecting the production of services and products across the globe. The other major effect of this trend has been on the labor employment and various other inputs that are essential in the process of production. Globalization has even caused major shifts in terms of investment comprising of both human capital and physical capital. It even affects technology which in turn results into technological diffusion from the initiating nations to other parts of the world. This trend also has major impact on the productivity; competitiveness and efficiency (Ravillion, 2003).However there are certain shifts that have been caused by globalization which needs to be particularly highlighted such as FDI growth. The growth rate of Foreign Direct Investment has been phenomenal and is considered to be much larger in comparison to the growth rate of world trade. This form of investment plays a critical role in the transfer of technology, formulation of various global enterprises and industrial restricting. These factors in turn have a major impact on the national economy. The second major shift that has been caused by globalization is in terms of technological innovation. The evolution of new technologies has been a major factor in the era of globalization. However this trend and increasing competition have caused major advancements in technology and even facilitated technological diffusions with the support of foreign direct investment within nations. The next shift is increase in trade such as information and managerial services, financial services, managerial and legal services and all the other factors that forms an important part of the international commerce (Robert & Gordon, 2006).In the year 1970 the service export comprised of even less than a third portion of FDI but in the present scenario it has become half portion of FDI and which in turn makes intellectual property become most essential commodity in context of world markets. The global flow of FDI in the past few decades can be illustrated further in the form of diagram given below- (Source: EuroStat, 2007) In international and national context the service growth is considered by some to be competence age. The overall positive impacts that have been caused by globalization on the world economy can be subdivided into four parts such as enabling efficient markets, increased competition, stabilized security and more of wealth equality across the globe (Hill, 2009).The efficient markets can be considered to be a major factor that is focused on by an economy. The indicator for an efficient market is when there is an equilibrium being achieved between the willingness of sellers to sell services or products and willingness of buyers to buy services or products. This has created an opportunity for the international business by which services and products can be produced more efficiently through outsourcing or working together with any overseas suppliers who would provide the required services at a much lower rate in comparison to the domestic suppliers (Tallman & Jiatao, 2007).This in turn helps the businesses to lower down the prices which in turn is aligned with the affordability of consumer market and increases demand. The factor of increased competition is a better sign for the buyers as there would be more number of players in the market and so more options available to the buyers. This competition also triggers the businesses to constantly change their strategies so that better quality products can be offered to the customers at the lowest prices and stay ahead of other competitors. Globalization has also created a major shift in the form of stabilized security this is simply because of the fact that this trend has made one economy depend on the other which in turn has reduced the level of conflicts. As per many citizens of United States globalization has negatively impact the living standard but on the other end due to this trend there has been increased employment opportunities and even many individuals has been able to set up their businesses. These shifts caused major impacts on the business that was based in Hong Kong, United States and New Zealand. Before the globalization era United States was considered to be the most dominant player in the export market across the globe. After this trend has emerged China, Germany, Europe, South Korea and many other countries have posed a challenge on the position of United States. This can be clearly stated in the form of a table given below- (Source: International Monetary Fund, 2007) The above figure clearly states that businesses that are located in the other countries have gained equal opportunities in the last few decades due to globalization. The effect on living standard by globalization has also been remarkable as stated in the diagram below- (Source: International Monetary Fund, 2007) The above diagram states that the expansion in investment and trade due to globalization has decreased the level of poverty in many countries. However in certain regions the living standards has fallen miserable due to globalization and this is because of the factor that this trend has resulted into increased unemployment. The below figure shows the exact data related to the level of unemployment across the globe- (Source: EuroStat, 2007) The job opportunities are shifting more towards developing countries from the developed nations. There has been lot of insecurity and inequalities that has increased due to globalization in terms of employment. The graph given below highlights the major impacts that have been created by globalization on various industries across the globe. (Source: Hamilton & Webster, 2009) The above graph states that due to globalization the major focus of industries has been on the manufacturing foreign commodities so as to meet the demand of the customers situated across the globe. During the different time horizons the different industries has been impacted positively or negatively by the trend of globalization. For the international businesses that are located in Hong Kong and New Zealand this trend has created a positive impact as more number of opportunities can be explored by these two regions (Nations, 2011).The domestic market of these two regions did not encompass high demand but due to globalization the businesses in these countries gets easy accessibility to all those markets where the demand is high. The availability of cheap labor makes the international business based on these two regions control their overall costs so that they can offer the best products at the lowest rates across the globe (Schaeffer, 2005).However in New Zealand the businesses have majorly gained in the form of outsourcing as trading can be done easily across the borders. The outsourcing facilities has made majority of the businesses located in this country improve their production process so as to be at par with the competition across the globe. On the other end the Hong Kong market has emerged as the highest revenue generating market in the last few decades (Teal, 2007).The businesses in this market were restricted only to few industries but the shift that has been caused by globalization has been able to expand the scope for businesses in this region. There has been a rapid growth in industrial sector in Hong Kong over the years and this in turn has also increased the employment opportunities in this region. In United States the trend of globalization was not a positive factor as there was a major shift in the form of labor market (Harrison, 2006).The increased competition with other markets has decreased the profitability level of the businesses in United States. The international businesses that are based in this region in the present scenario depend greatly on the foreign direct investment which is the only positive aspect of the trend. This in turn has facilitated companies to expand more rapidly and connect with other markets across the world (Steger, 2010). The businesses due to this trend has got an opportunity to access cheap labor markets of other countries which in turn has reduced the overall cost associated with production and manufacturing processes. The skills and expertise that was a major issue for many businesses located in this region can be easily gained through the borderless and integrated global system. Conclusion The shifts that have been caused by globalization created a positive as well as negative impact on the world economy. The economy has been greatly benefitted through the aspect that globalization has led to the formation of global system that is integrated and due to which trade and investment has become easy across the globe. This trend has also triggered advancements in the form of technology and infrastructure which has created immense opportunities for many countries. The businesses that are based in Hong Kong and New Zealand have gained accessibility to the advanced technologies and mechanisms so as to remain at par with the competitive world. On the other hand the businesses that are based in United States has gained in the form of exploring cheap labor market and acquiring skills which was the major disadvantage for many firms residing in this region before the era of globalization. This trend over the last three decades has been able to create a positive shift in the living standards of many people across the globe. This shift has been reflected in the changed per capita income and also in the form of wide array of choices that are available to the buyers. References EuroStat. (2007). Euro Indicator, Selected Readings, Focus on: Measuring Globalization. Luxembourg: European Commission. Hamilton, L., & Webster, P. (2009). The International Business Environment. New York: Oxford University Press. Harrison, A. (2006). Globalization and Poverty. 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