Key Drivers Associated with Globalization - Assignment Example

Exam-IB Student’s Name: Institutional Affiliation: Exam-IB Q1. Globalization is the trend towards greater linkages among global institutions and markets. Discuss key drivers associated with globalization. Globalization refers to the trend of embracing interdependence among national institutions and economies. This interdependence is practiced within economic, cultural, political, and technological contexts. It involves denationalization of economic, social, political, and technological activities. It embraces concepts and theories from sociology, political science, anthropology, philosophy, and economics (Beck, 1999). Over the years, markets have responded to the forces of globalization. This has been in the form of convergence in buyer preferences among the consumers across the globe. This has influenced the marketing strategy of many businesses. For instance, ‘Nike’, a shoe producing company, and ‘Sony’, its electronics counterpart, sell global products that are equally marketed in all countries. Globalization of markets has led to cost reductions, establishment of new markets, and the development of new market opportunities. Globalization of production has also been practiced by many businesses through employing production activities in locations (countries), where cost-minimization and output-maximization will be achieved (Castells, 1996). The key drivers associated with globalization include all the forces that shape the processes in globalization of markets. These are the barriers to trade and investment, and the barriers to technological innovation on the global scenes. This is because these factors are pivotal in leveraging the global business playing field. These drivers of globalization include; Institutional governance, which begins with General Agreement on Tariffs and Trade (GATT) that was established in 1947. The member states of this treaty have been subjected to reduced average tariffs on mechanized trade. They have also had to lower subsidies for agricultural products. In addition, we have technology Innovation. The advancements in technological innovation have made it possible to move goods, data, and equipments across the globe. Various technologies have been developed for this purpose. They include email, videoconferencing, World Wide Web, Company intranets and Extranets (Castells, 2001). The other force that has pushed globalization of business includes promotion of National sovereignty, which has spread democracy worldwide. Many Governments have also pushed reforms that boost international business. Government’s favour of market-based economies, and the decline of centrally planned economies, has also been realized as a result of globalization. Q2. Where were the key accomplishments that came from the 1944 Bretton Woods conference? Why did the Bretton Woods monetary system end? What has now replaced it? Near the end of WWII, the Breton Woods agreement was established. This was to rebuild the then spoilt international economic system. It was used to set up the rules for commercial and financial relations among the world’s leading industrial entities. The key accomplishments that came from the 1944 Brenton Woods Conference, which were captured in the Agreement were as follows: • The success in establishing a Fixed Exchange Rate System. This system established a framework where the price of a given currency doesn’t change relative to the other currency. It also established the gold standard, where each country pegged or tied the value of its currency of gold. • Development of Built-in Flexibility in Currency Devaluation • It laid the framework for World Bank, which has played a crucial role in taking up projects that develop transportation networks, builds power facilities, as well as funding agricultural and educational programs. • Establishment of IMF, which has established to oversee the functioning of the international monetary system. After holding off waves of speculation against the U.S dollar, the Breton Woods Agreement was abandoned in August 1971. This is because of the failure of the agreement to work amidst the changing global scenario. The U.S Federal Reserve Bank is the most prominent bank in the Bretton Woods system. The supply of gold didn’t expand, and this left the alternative option to expand trade to be the US currency. Most countries held the US dollars in anticipation of favourable exchange rates with gold. This led to increased dollars in many nations. As this went by, the countries wanted to redeem gold, but the US failed to have sufficient gold reserves to support this program. This made many countries distrust the ability of the US to redeem its currency, and this led the Breton Woods Agreement to be abandoned in August 1971. Other factors also caused this break down include the cold war (1947-1991), and the increased budget and trade deficit in the United States. This led to the international monetary system based on fixed exchange rates to come to an end. It was replaced by open market-floatation exchange rate system. This system is based on demand and supply of a given currency into an economy. . Q3.Explain the Hofstede framework relating to culture. Can this framework enhance business success in international business? The Hofstede framework compares cultures along five dimensions. The framework was developed from a study of more than 110,000 people working in IBM subsidiaries in 40 countries, and a follow-up study of students in 23 countries. The first dimension is ‘Individualism versus collectivism’. This dimension emphasizes on how culture has been structures in the constraints of individuals verses the groups. Cultures that are individualistic have been presented to foster invention and innovation, whereas the collectivist’s cultures are embedded on the strong feeling of the association to groups, work units, as well as family units. The evident value is to maintain group harmony among the members in these societies. Power distance is the second dimension of Hofstede framework. This dimension looks at culture with regard to its ability to accept or reject social inequality in the society. It suggests that cultures with large power distance are characterized by inequalities between the subordinates and superiors. In this case, organizational structures have high tendencies of being hierarchical. This is said to be the basis by which the top executives of organizations in cultures often enjoy exceptional recognition and privileges. On the other hand, cultures with small power distance display a greater degree of equality. In this case, prestige and rewards more equally shared between superiors and subordinates. The third dimension is ‘Uncertainty avoidance’. It looks at how a culture would avoid ambiguity and uncertainty. Cultures that value uncertainty avoidance has embraced values of security, and invested in building strong systems, policy and procedures in running many of the society’s activities. On the other side, Cultures scoring low on uncertainty avoidance are more open and innovative. Organizations within these cultures tend to welcome the best business practices from other cultures (Hall, 1997). Achievement versus nurturing is the fourth dimension, which emphasizes the need for personal achievement and materials vis-a-vis the quality of life and relationships. These cultures often are characterized by excessive personal assertiveness among its members. On the contrary, the cultures some cultures value quality of life than personal achievement. These cultures are characterized by a relaxed lifestyle. They care for others, as opposed to material gain is valued. Long-term orientation dimension is the last consideration that Hofstede framework considered. It looked at the society’s time perspective, and the need to overcome difficulties. It compared the Eastern and Western cultures. Hofstede framework enhances business success in international business. This framework helps businesses understand the cultural behaviours of the people in their target markets. This understanding will help the businesses to make appropriate inventory and supply chain decisions, as well as other managerial decision that will boost sales for international businesses. References Beck, U. (1999). What is Globalization? Cambridge: Polity Press. Castells, M. (1996). The Rise of the Networked Society. Oxford: Blackwell. Castells, M. (2001). Information technology and global capitalism. London: Vintage. Hall, T. (1997). Beyond culture, New York, NY: Anchor Books. Read More