The History of Globalization - Case Study Example

STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS PRESENTED TO A DEVELOPING COUNTRY BY GLOBALIZATION By Introduction Globalization defines the broadening of local and nationalistic perspectives to a wider outlook of an interdependent and interconnected world. An interconnected world in this context refers to a globe where cultures, policy-making, cultures, markets, industries and economies are not limited to national or local frontiers (Samimi, Lim, & Buang 2011, p.2). Globalization has been fostered to a large extent by advancement in telecommunication, transportation, and the internet. The history of globalization is far-fetched; having emerged in the 1980s. The key constituents of globalization include the dissemination of knowledge, movement and migration of people, climate change, trade, and investment to mention but a few. Banking is one of the aspects that one has to look at in order to understand globalization; from any part of the world, it is possible to transact conveniently. Globalization, like all other emerging trends, has its merits and demerits. Some nations will benefit, and others will suffer from it. In the light of these, the following study paper will highlight the pros and cons of globalization on a developing country by conducting a SWOT analysis of globalization. Strengths Developing nations are always in dire need of development socially and economically wherein globalization can provide both. Economic growth, therefore, suffices as one of the strengths that globalization provides a developing nation. First, it provides the nations with comparative advantage in terms of manufacturing or producing certain commodities (Martin 2003, p.4). Comparative advantage means that every nation has an opportunity to present what it does best and gain from it. Globalization means that a nation has access to the international market and as such, they can take advantage of this strength. For instance, if a country can produce surplus food, it gains access to an international market where it can easily trade and be able to improve and develop its economic status. A developing country, after joining the international community is not only exposed to better chances of trading, but also increased competition. Unlike when a country trades locally or nationally, globalization demands that the country has to advance its competition. In so doing, nations will be forced to apply technology and other relevant innovations to gain dominance at the international markets (Gorodnichenko &Terell 2008, p.5). In the event that a country adheres to this, its productivity increases, thus better returns, overall growth and development. Poverty is another aspect associated with most developing countries. Globalization has the potential to eradicate or reduce such. First, by providing access to global markets, globalization provides a country with a chance to develop itself financially thus be able to sustain itself. Second, the interconnection of the entire globe means that different nations can share problems and brainstorm on them collectively (Wade 2004, p.567). As such, problems like poverty can be tabled by the interconnected nations and solutions are provided in solving them. For instance, a nation may be advised on agricultural methods or changing its business policies so as to perform better. These measures would be harder to come by if a nation had to brainstorm and find solutions to the problems on its own. That justifies globalizations ability to eradicate poverty. In the business context, globalization would be effective in that one producer, region, or nation can profiteer. This is more of a regulatory aspect offered by globalization and would secure the country from being exploited by others. An international market as provided by globalization sets the value and prices of services and goods. This directly reduces inflationary pressure. Concisely, globalization ensures that products and services have standard prices and values. As such, no nation (consumer) will be exploited by a provider or manufacturer. Developing nations will benefit in that; if a particular producer or service provider increases its prices or lowers its quality, then the nation has other options to turn to. These options of diverse markets are provided by globalization. Developing nations will gain informational advantages from globalization (Caprio 2012, p.112). Information is increased by globalization because countries are no longer limited to geographical factors as boundaries no longer exist. Globalization will foster the information of a nation by advancing its telecommunication and transportation networks. The emergence of satellite communication, fiber optic and the internet contribute to these. The strength of being informed means a country accesses information regarding international markets, required standards of services and commodities, inflation, emerging trends, and other matters that might be useful in directing the decision-making of a nation. In making informed decisions, a developing country understands the globe better and takes advantage of the information gained to better itself. Weaknesses One of the weaknesses presented by globalization is unemployment. First, the interconnected nature of globalization means that the world has no boundary, and a region or nation can outsource labor from anywhere in the world. Developing countries will suffer in that if they are termed as high cost locations, then low-cost locations may interfere with their demand. In short, a high-cost location would be overlooked by a service provider or manufacturer if a poor region or nation provides lower worker benefits and wages. The result of this would be the lack of, or loss of jobs from the developing country as the providers or manufacturers turn to the nations or regions posing off as low-cost locations (Eckel 2011, p.19). Closely related to the above factor is that developing countries may be termed as "underdeveloped" thus unable to meet international standards or demands. Due to this factor, a developing country may lose its links with other nations when globalization offers the partner nations better or more advanced goods or services. This occurrence would materialize when a developing country is unable to say, meet set international standards for the production or provision of goods and services. Better put, supreme capitalist corporations such as Coca Cola, Nestle, and MacDonalds make developing countries seem irrelevant since they cannot compete with them. When any of these corporations is established near a local business, it makes it unable to compete internationally leading to its death. This too is a weakness caused by globalization. In as much as globalization provides a platform for free trade, it takes it away in some instances as well. As is the case, poor or developing nations are usually targeted by developed nations for acquisition of inexpensive raw materials and cheap labor (Berberoglu 2010, p.88). The inexperience and desperation of developing nations to fit the international marketplace is taken advantage of by the bigger nations. For instance, developing countries that rely on agricultural exports are mostly exploited by importers of their produce. They do so by subsidizing their agricultural policies thus regulate the prices of the commodities. The result of such is that the developing countries left with no other place to market their produce, end up selling their commodities at poor rates. Compared to what they would earn under free trade, such occurrences add up as exploitation. Globalization has created a universal market, which most of the nations on the globe rely on for economic stability and gain. The weakness with such a system is that a slight effect on the global market affects all the constituent nations equally. However, emerging nations are the most affected in that developed countries have a way of surviving in times of fluctuations. In short, it appears like the bigger nations control the global markets. For instance, occurrences such as 9/11 sparked an international financial crisis. Again, when the subprime mortgage market in the United States collapsed, it resulted in a similar occurrence. The same happens when deregulation of global financial markets occurs. It is evident from these revelations that developing countries may suffer consequences that they were not part of. This weakness is, however inevitable since it is a characteristic of the new global business marketplace. Opportunities A developing country upon joining the global fraternity acquires an opportunity to expand abroad due to the emerging markets. In most cases, local and national markets are rigid, meaning they rarely provide new opportunities for growth. In the light of these, a developing nation that has the capacity to grow finds feasible ground in globalization. Global corporations such as MacDonalds are an example of markets that began locally, and taking advantage of globalization, have gone international. The other characteristic of globalization is that it provides emerging markets of multiple products or services. As such, if a nation is part of the global market, it gains access to constantly varying markets, thus constant demand (Sandbrook & Guven 2014, p.42). Therefore, in being part of the global market, a nation has the opportunity to market its products or services. Second, a nation in the global context will have the opportunity of accessing innovations. Globalization brings nations together, upon which they brainstorm on matters together in finding solutions. Apart from taking part in the brainstorming thus sharpening its innovation skills, a developing country would benefit from already completed innovations. Rather that when it only features locally or nationally, a country in the global context would be exposed to better technologies, financial practices, agricultural innovations, acceptable standards, and better business approaches to mention but a few. Collectively, these innovations are opportunities only accessible through globalization. Comparative competition also poses off as an opportunity for developing countries. Comparative advantage is supported by global markets in that all the producers and consumers meet at a common ground. This means that neither production nor consumption is saturated thus the establishment of a free market. Globalization, therefore, offers a developing nation a platform to showcase what it does best. Additionally, it provides an opportunity for the developing country to compare its services and products to others in the international scene. From this, they can evaluate what they have to innovate and improve so as to gain and maintain competitive advantage (Mishkin 2009, p.76). In a nutshell, globalization offers developing countries a chance to find out what they can leverage on to be profitable internationally. In globalization, a country can access cheap labor and raw materials. This occurrence is related to free trade. As compared to when a country finds its materials locally, it is spoilt for choice when it features in global markets. By mingling with other nations, a developing country can learn of cheaper sources of raw materials and labor. This is because internationally, the markets have as many consumers as there are producers. As such, a developing country has an opportunity to tell which source of raw materials is fairer than the other. The same applies with acquisition of labor. The rigidity of local markets means that the developing country has to continue acquiring labor and raw materials at a fixed price. Pervasively, globalization creates an opportunity for flexibility since the nation will meet multiple partners from whom they can choose the best. In so doing, production expenses would reduce while simultaneously increasing the returns. Threats Globalization is largely affected by factors such as environmental changes and political instability (Lane 2013, p.103). Globalization means the globe is interconnected and as such, any emerging good or bad can be shared. For a developing nation, it means that when tragedies or other occurrences emerge, it must take part in them. Political instability is a common factor that influences globalization. If say, a business partner with a developing country goes into war or is faced by a humanitarian crisis, it may be forced to reduce or terminate its trades or associations. If this occurs, it means that whatever associations they shared will be affected negatively. As such, globalization can be termed as not overly stable. Second, in joining the international scene, a developing country will be exposed to stiffer competitors. It is possible that at local, national or regional level, the country is ahead in terms of competition, but may prove irrelevant in the global context. Competition at the global level may prove to be cut-throat due to several factors. One, some of the bigger nations have specific countries that whom they do business; as such, convincing them that the country will be as good at business poses as a major threat. Second, there are experienced competitors in the global market who may easily outshine the [new] developing countries. The biggest threat to them is that the experienced competitors may easily see them out of business or lead them into being exploited (Hogan 2005, p.293). Concisely, uncertainty at the high markets is a major threat created by globalization to emerging countries. Developing countries may be threatened by cultural diversity, governmental regulations, and taxes amongst others. Emerging countries may not have the full information or recommended infrastructure for featuring in the global scene. This means that the globalization may cripple a developing country in its activities. Factors such as cultural diversity limit communication and business activities. This is because what may be acceptable in India may not be the same in Africa or Asia. For example, a country that is dominated by Christians will not conduct pork business with a country dominated by Muslims. A developing country also risks, regulations and fines by international governments and policies. Owing to their lack of experience and required infrastructure, they may find themselves on the wrong side of international laws or policies (Goldstein 2009, p.60). Europe may cut its business ties with a country if it fails to deliver agricultural produce with recommended quality and chemical content. Breaching international policies and regulations may lead to fines or sanctions. Finally, the risk profile of a developing nation shifts due to globalized operations. One predominant risk is the fluctuation of exchange and interest rates (Caprio 2012, p.9). Globalized operations utilize common currencies such as the dollar and the euro. When the exchange rates of such currencies occur, a country may either gain or lose. This is a risk for a developing country in the event that the fluctuation goes against its expectations because their economies are affected in a large way. This revelation means that as the risks increase in strategy, so do the level uncertainty that they can affect its capital investments. A shifting risk profile may be unhealthy for a developing country since they are usually weak economically, and if such fluctuations occurred, they would interfere with its well being and ability. Conclusion The above study was conducted to evaluate globalization and the impacts that it can have on a developing country. Developing countries are usually vulnerable to economic variations or stability as compared to developed countries. Globalization interconnects many countries meaning they share positive and negative occurrences. There are strengths associated with globalization, such as the emergence of new markets, cooperation, reduction of poverty and economic growth in developing countries. Additionally, there are weaknesses; exploitation, technological challenges, business irrelevancy, unemployment, and market uncertainty. Globalization provides opportunities for developing countries such as expansion grounds, accessing innovations, gaining comparative advantage, and finally access to cheap raw materials and labor. Pervasively, changes in the environment, political changes, currency fluctuation, breaching international policies, and a shift in risk profiles acts as major threats caused by globalization to emerging countries. Bibliography Berberoglu, B 2010, Globalization in the 21st Century: Labor, Capital, and the State on a World Scale, Palgrave: Macmillan. Caprio, G 2012, The Evidence and Impact of Financial Globalization, Academic Press. Eckel, C 2011, “Labor Market Adjustments to Globalization: Unemployment versus Relative Wages”, University of Passau, 1-28. Goldstein, N 2009, Globalization and Free Trade, Infobase Publishing. Gorodnichenko, J,& Terell, K 2008, “Globalization and Innovation in Emerging Markets”, University of Michigan/ IZA 1-43. Hogan, J 2005, Cultural Identity, Pluralism, and Globalization, CRVP. Lane, J 2013, Globalization- The Juggernaut of the 21st Century, Ashgate Publishing. Martin, S 2003, “Globalization and the Natural Limits of Competition”, Krannert School of Management. 1-72. Mishkin, F 2009, The Next Great Globalization: How Disadvantaged Nations can Harness their Financial Systems to Get Rich, Princeton: Princeton University Press. Samimi, P, Lim, G, & Buang, A 2011, “Globalization Measurement: Notes on Common Globalization Indexes”, Universiti Teknologi Malaysia, 7 (1): 1-20. Sandbrook, R, & Guven, A 2014, Civilizing Globalization, Revised and Expanded Edition: A Survival Guide. SUNY Press. Wade, R 2004, “Is Globalization Reducing Poverty and Inequality?” World Development, 32(4): 567-589. Read More