Evolution of Globalization - Essay Example

Evolution of Globalization Since time immemorial nations, countries and states across the globe tend to have bureaucratic rather absolute control over commodities, individuals and capital crossing their boundaries. Globalization has brought about interdependence among countries, sharing ideas, technologies and products for the greater economic, cultural, political, and technological interdependence. In this perspective, globalization is a trend that is geared towards greater economic, cultural, political and technological interdependence among national institutions and economies. With regard to globalization, national boundaries are of less relevance; and the latter is characterized by denationalization (Abbas, 2000, p. 102). Over time globalization initiated nations interdependence resulting into increased free flow of products, people, money, ideas and technologies across national borders. It should be noted that globalization not only involve multinational corporations and financial institutions but also it embraces philosophy, anthropology, sociology, and political science. Globalization first into play in the 19th century and it has tremendously evolved into the current times. This paper describes the growth of globalization from its first age (1850s – 1920s) to the current form of globalization including events that promoted it across the globe. Further, the paper will discuss the advantages and disadvantages of globalization in its current context. The emergence of international business is coined within the mid 19th century; Singer Sewing Machine is regarded as one of the world’s first multinationals in the 19th century (Godley, 2005, p., 266). In the 1850s, the commercially successfully sewing machine in the world was Singer. During the late 1860s Singer had become the largest manufacturer of the sewing machines across the globe; for instance the company started opening up manufacturing companies in foreign countries including Glasgow and Scotland (Godley, 2005, p., 299). Within a period of twenty years the company had grown into one of the biggest manufacturing companies in the world. It is eluded that Singer was not a technology leader in sewing machines; however, the decision to invest internationally that was made after the end of American Civil War propelled its globalization. While other US competitors invested heavily in the rapidly growing domestic market Singer Sewing Machine focused on global integration. Consequently, other companies faced with similar market conditions during the interwar and post-war years including US-based Colgate Palmolive also decided make foreign direct investments. Large consumer product companies that specialized in selling toiletries and detergents also made foreign direct investment that allowed globalization to grow further. The major forces that have catapulted globalization as established by globalization historians are falling barriers to trade and investment and technological innovations (Godley, 2005, p. 300). These two factors are the backbone of globalization and have increased competition among countries through levelling the global business market. Companies and corporations that were ones isolated due to time and distance through technological innovation and market liberalization can now be accessed by large international companies. Falling barriers to trade and investment as aforementioned plaid a vital role in ensuring success of globalization; for instance, in after the Second World War political leaders from 23 countries came up with General Agreement on Tariffs and Trade (GATT) treaty designed to support free trade through reducing tariffs and nontariff barriers especially to international trade. The treaty was tremendously successful and after approximately four decades in 1980s, the global merchandise had grown to more than 20 times, while average tariffs had decreased from 40% to 5%. A landmark progress in globalization was realized in 1994 when the GATT treaty was revised where countries that were signatories to the treaty significantly reduced average tariffs on merchandise trade and encouraging government support for agricultural products (Abbas, 2000, p., 103). The revised treaty also defined intellectual property rights thus giving protection to copyrights, trademarks, service marks and patents. Another significant accomplishment in 1994 was the formation of the World Trade Organization (WTO). The WTO reinforced globalization process by coming up with rules that govern international trade and helping free flow of trade, while negotiating for further opening of markets together with settling trade disputes among the member countries (Jurgen & Niels, 2005, p., 69). The organization continues to play a critical role in globalization by ensuring member nation commit to maintaining open and fair trade policies. Nations that fault these regulations are exposed to facing heavier trade penalties including trade sanctions. Currently, WTO has 153 member nations that it recognizes (Abbas, 2000, p. 106). Regional trade agreements have also allowed smaller group of nations to integrate their economies through fostering and boosting inter-nation investments such trade agreements include North America Free Trade Agreement (NAFTA), European Union (EU), and Asia Pacific Economic Cooperation (APEC) (Jurgen & Niels, 2005, p., 66). These regional trade organizations are smaller but similar to WTO that creates free trade zones within which they operate. Currently, some countries highly emphasize regional pacts due top heightened resistance to worldwide trade agreements. Countries that have opened up to global through agreements with WTO have experienced greater trade and national output thus making them to grow rapidly economically. Technological innovations across the world has significantly accelerated globalization’s pace. Advancements in transportation methods and information technology has made easier and less costly to moved products globally (Clerence &Klaus, 2006, p. 35). Some significant technological innovations include email and videoconferencing, internet and worldwide web, company intranets and extranets. E-mail and videoconferencing has allowed business to control and coordinate business activities the world over. Information can be relayed across long distances within a very short period of time thus enhancing faster decision-making and general business management. Companies use the internet and the World Wide Web to quickly and cheaply contract managers to ensure that company policies and strategies are implemented and enforced to the latter. Company Intranets and Extranets have made it possible for employees to access information using personal computers. Intranets have enabled business to market its products, acquire raw materials. Extranets give distributers and suppliers access to company information thus allowing them to place orders or electronically restock inventories (Clerence & Klaus, 2006, p. 35). In this regard, networks permit global companies to rapidly and appropriately respond to both external and internal conditions. Advancement in transportation technologies; worldwide retailers rely specifically on imports to restock their stores with goods and to supply factories with raw materials and intermediary products (Clerence & Klaus, 2006, p. 35). The integration of the shipping industry has helped global markets and production by ensuring that the latter is efficient and dependable. Currently, operation of cargo ships is safer and simpler as the ship’s movement can be monitored using Global Positioning System (GPS) combined with radio frequency identification (RFID) technology. In conclusion, globalization as discussed above has made what seemed impossible possible. The following are some of the benefits of globalization. Through globalization there are reduced marketing costs; this is especially possible because of standardization of marketing activities (Metcalfe, 2006, p. 59). For instance, companies selling a global consumer product can make identical products for the worldwide market. Secondly, globalization creates new market opportunities; firms that sell global products can explore international markets especially when the domestic market becomes saturated (Metcalfe, 2006, p. 59). Consequently, globalization levels income streams, by going global a company can supplement the domestic sales with international sales thus reducing wide variations of sales between seasons. Despite the above mentioned potential benefits of globalization, the latter has the following disadvantages. Products that are marketed globally are standardized thus not putting consumer or buyer preferences first. Customized products earn greater market as compared to standard products (Metcalfe, 2006, p. 59). The development of developing countries is prone to stifle with globalization as products from developed countries may erode the market of domestically produced products. Consequently, economic depression in one region or country can trigger adverse reactions across the world. In the same line of thinking, global firms are exposed to face stiffer competition from across the world. With regard to this, smaller companies are at risk of being faced out of the market, as they may not have enough resources to compete globally. References Abbas, A. (2000). Globalization of business: practice and theory. New York: Rutledge Clarence J. M. & Klaus, G. (2006). Borderless Business: Managing the Far-Flung Enterprise. London: Greenwood Publishing Group. Godley, A. (2005). Selling the Sewing Machine around the World. London: Enterprise and Society 266-314 Jürgen, O. & Niels P. P. (2005). Globalization: a short history. Princeton: Princeton University Press. Metcalfe S. (2006). Entrepreneurship and Evolution in Oxford Handbook of Entrepreneurship ed. Mark Casson, et al 59-90 Read More