Impacts of Globalization on Consumers - Research Paper Example

Impacts of Globalization on Consumers Introduction Globalization is the integrative interaction among political, social and economic institutions around the world. Since time immemorial, human beings have crossed economic, social and political boundaries in interactive undertakings. In the Middle Age, the famous Silk Road facilitated interaction between institutions in Europe and Asia. Prior to the outbreak of World War 1, water transportation had solidified globalized interactions among people in Africa, Europe, America and Asia. Currently, globalization has reached an unprecedented rate. Modern advancement in technology and political policies has spurred expansive movement of people and information across national borders. Currently, increased migration of people has turned the world into a global village. In addition, transfer of information in an economic and timely manner through communication technologies has promoted cross-border interactions (Hassan & Michael, 2014). In an effort to describe the current rate of globalization, scholars agree that today, human interactions across borders are not only faster and cheaper, but also farther and deeper. As insinuated earlier, globalization impacts all the social, economic and political aspects of life. Within an economical context, international trade and investments have promoted effective transfer of goods and services across national and regional borders. Politically, governments have legislated policies that facilitate cheaper, faster and deeper movement of goods and services across borders. The social aspect of global acculturation has leveled social barriers of language and transformed the world into an interacting community (Pauline & Parsons, 2009). Globalization of commerce today entails changes in the marketing and production aspects of business. In production, companies are no longer restricted by national barriers in sourcing means of production, specifically raw materials and labor services. On the other hand, the increased decline in social, political and economic barriers has eased the selling of products and services to consumers around the globe. Technically, globalization of marketing and production aspects of business has yielded consequences that substantially impact business stakeholders, especially consumers (Pauline & Parsons, 2009). Consumers in Globalized Markets In the context of marketing, globalization has effects on the manner in which consumers behave. Primarily, consumers refer to persons or organizations involved in the purchase of goods and services offered in the global markets. Personal consumers are known to purchase goods and services for end use. These consumers buy products and services that are used for professional purposes or household consumption. Such products and services include packed food, clothing and financial services among others (Hassan & Michael, 2014). Contrarily, organizational consumers purchase products and services for production purposes. Primarily, goods and services purchased by organizational consumers are used as raw materials for producing other services for secondary personal or organizational consumers. Personal consumers are known to purchase goods and services in small quantities while organizational consumers purchase similar goods and services in massive quantities. In this context, limited economic, social and political barriers in marketing environments today present a myriad of consequences to both personal and organizational consumers. Consequences of Globalization Among the most common consequences of globalization include proliferation of popular economic systems, specifically capitalism, and widespread of knowledge and information within the consumer population. Currently, technology and infrastructural developments facilitate cheap and quick movement of people and information between distinct economic environments. In the past, Western nations like America and Britain adopted capitalism as their chief economic systems. On the other hand, Russia and China were fond of socialism and communism respectively. Nowadays, the globalization of economic environments has led to competitive struggles between different economic systems (Cleverly, 2011). Consequently, capitalism emerged the winner and applies in almost every market across the globe today. In this case, consumers across the world are impacted by effects of capitalism in global markets. Besides the proliferation of capitalism, globalization has improved business interactions through advancement in information and communications technology. Improvement of information and communication technologies presents direct and indirect impacts to consumers. Finally, interconnectedness of economic environments; which is an influential consequence of globalization, effect consumers throughout the world (Cleverly, 2011). In succeeding sections of this paper, detailed analysis of positive and negative impacts of consequences of globalization on consumers will be conducted. Positive Impacts of Globalization on Consumers Knowledge is an influential impact of globalization on consumers. In marketing, information is paramount in the decision-making process. Consumers need knowledge and information in order to make appropriate purchase choices. Prior to enhanced globalization, people needed to traverse long distances prior to acquiring new information on products and services. For example, long distance traders in the Middle East made trips to and from key markets in Europe once or twice a year. Information related to the development of products was transferred during the long-distance travels. Today, globalization of communication facilitates timely transfer and spread of information from producers to consumers (Smith, 2011). Whenever giant electronic companies like Samsung unveil a latest cell phone, information related to the new device reaches consumers around the world instantly. Globalization has made communication cheaper and faster. Any consumer with internet connection can momentarily search for information related to specific products and services. In addition, producers can deliver knowledge to consumers within any market segment in a timely manner. Sometimes, consumers are in a dilemma when about to purchase a product from a convenience store. Fortunately, such dilemma situations can now be resolved by acquiring instant knowledge relating to a product or service through the numerous channels of information sharing, especially the internet. Aside from facilitating informed decision making, globalization enables consumers to avoid harmful products and services before suffering detrimental effects of those products and services. For example, Toyota once discovered that a certain model of its cars had defective mechanical properties (Smith, 2011). Immediately after the discovery, all consumers across the world were aware of the potential dangers of the company’s model of cars. The timely delivery of information through globalized communication channels like television and internet saved many consumers from becoming victims of the defective products. In the past, options that facilitate instant acquisition of knowledge were not available. Occasionally, such options would be available but proved costly. In this case, globalization removed international barriers that hindered spread of knowledge and information in an economic and timely manner. Another positive impact of globalization on consumers is affordability of products and services. Prior to advancement of globalized markets, prices of goods and services were relatively high. Marketing environments were monopolized by few producers. Governments discouraged foreign traders through unfriendly economic policies (Hassan & Michael, 2014). In addition, factors of production like raw materials and labor were restricted to their native locations. Information related to economic value of products was not available; thus consumers could not make informed choices during purchase. However, globalization facilitated liquidation of means of productions like labor and raw materials. In today’s globalized economy, raw materials from distant regions like China are cheaply transported to production plants in America. In the past, cheap transportation of raw materials was hindered by social and economic obstacles between distinct regions (Smith, 2011). For example prior to improvement in information and communications technology, there was no means of communication that enabled traders in China and the US to interact economically. As a result, access to knowledge related to cheaper means of production was restricted by limited globalization. Technically, the cost of production is directly proportional to the cost of products and services in the market. For instance, oil, which is primarily used in transportation and the manufacture of plastics, is not abundant in the United States as in the Middle East. In the absence of globalization, the means of acquiring knowledge and information related to the difference of cost of production factors was lacking. This means American consumers were forced to incur the cost of products and services caused by high cost of raw materials at home. Nowadays, transfer of production means is made cheaper and faster by globalization (Hassan & Michael, 2014). Product manufacturers can contact numerous suppliers of raw materials across the world within a short time, and make informed decisions that will lead to acquisition of cheaper production materials. In addition, the element of labor in production is accessible because of globalization. Companies looking for cheap labor can recruit eligible persons at any region in the world. For example, North American companies source cheap labor from Mexico. In this regard, globalization, which has facilitated cheap means of production, helps in enhancing affordability of products and services. Admittedly, increase in consumer purchasing power can be attributed to consequences of globalization. In other words, it can be said that globalization has contributed to equality in wealth throughout the world. Globalization has transformed the world into a global village. One way of wealth distribution is through labor immigration. Members of poor communities in third-world nations can source employment in first -world nations with ease. In the past, poverty and economic predicaments were restricted to host communities and could not be solved through transfer of wealth from one community to another. For example, jobless Mexicans could never enter United States as labor immigrants because limited globalization restricted immigration. Currently, such jobless Mexicans can apply for employment in the United States and get permission from the US government in an economic and timely manner. Undeniably, transfer of populations through labor immigration distributed wealth across the world (Hassan, S. & Michael, 2014). Third-world workers in first-world nations remit back their monetary gains to their native homes. Consumers in those native nations gain economic power to purchase goods and services in global markets. In this case, it is evident that globalization increases consumer purchasing power. Aside from labor immigration, globalization has increased consumer purchasing power through business competitions. Most globalized markets are free markets where willing buyers meet willing sellers. Prior to globalization, markets were monopolized by state-owned producers. Consumer purchasing power in a restricted market is determined by the tyrannical whims of monopolies. Fortunately, globalization invited increased competition when governments of different nations agreed to liberalize markets. Nowadays, consumers have the power to choose the types of products and services to purchase. Producers set their prices based on consumer behavior (Pauline & Parsons, 2009). When consumers prefer cheap products, producers source cheap means of production that will yield cheap products. Contrarily, consumers interested in luxurious products attract producers offering products and services that suit their customized economic preferences. In this case, competition enables consumers to purchase goods and services that suit their economic preferences. Markets today contain products and services with a wide range of prices. Therefore, the concepts of market liberalization and competition, which are brought by globalization, improve consumer purchasing power (Pauline & Parsons, 2009). Negative Impacts of Globalization on Consumers Consequences of globalization are not without negative impacts on consumers. One of such impacts is decline in the quality of goods and services. Nowadays, consumers are forced to purchase goods and services of low quality compared to those of the past. Globalization opened the gates for capitalistic entrepreneurs. Capitalistic entrepreneurs are persons and organizations interested in profit maximization at the expense of consumer satisfaction (Alden, 2006). For example, instead of using raw materials that produce quality goods, this type of entrepreneurs use materials that will yield ultimate profits, regardless of whether or not the goods produced satisfy consumers. In this case, it emerges that globalization cause degradation of marketing ethics. As mentioned earlier, capitalism and ease of communication are the main consequences of globalization in business. A company in Europe may be planning to employ competitive strategies in order to improve its revenue aspects. Such companies may decide to reduce the cost of production by hiring cheap labor. In most cases, cheap labor comprises of unskilled workers desperately looking for employment opportunities (Alden, 2006). In this case, the products and services produced by unskilled workers are of poor quality compared to those produced by skilled workers. For illustrative purposes, it emerges that giant companies in the United States and Europe are opening subsidiaries in massive markets like China and India. When they enter into such massive markets, Western companies have to struggle with challenges of competition from native companies. In 2012, McDonalds had opened numerous restaurants in India. Typically, common products sold by McDonalds include burgers and pizzas, which are made of beef and other meat products. Consumers in India do not consume beef because of cultural reasons. Faced with stiff competition coupled with a desire to increase its revenues, McDonalds’ chains in India slipped beef into its burgers. Upon the realization of the unethical act of incorporating beef into the burgers, Indian consumers became dissatisfied with McDonalds’ products. In fact, a lawsuit was filed against the American company for offering products or questionable quality to consumers in the globalized Indian market. In this regard, it is evident that capitalism and competition, which are consequences of globalization, impacts consumers negatively through decline on product and service quality. Another negative impact of globalization is reduction of consumer purchasing power, usually because of economic depression. As discussed previously, consequences of globalization translate into increased consumer behavior. Similarly, globalization, through economic recession reduces consumer purchasing power across the globe (Alden, 2006). At this juncture, it is acknowledgeable that globalization causes interconnectedness of economic, social and political institutions across the world. When an economic downturn hit markets in one region of the world, it is highly likely to affect other economic regions, regardless of the physical distance separating the distinct regions. Consequently, economic downturn commonly referred to as recession; reduce consumer purchasing power through inflation and unemployment. Whenever economic recession occurs, like the US recession in 2008, business interactions slow down. As a result of deceleration in business activities, producers either reduce the cost of production or increase the cost of goods and services in order to sustain commercial undertakings. Inflation, which is the general increase in price of goods and services relative to their rational values, is a direct impact of globalization on consumers. Economic recession reduces business interactions within a given economic environment. Consequently, price of goods spiral upwards. Unfortunately, consumers do not receive additional money to cover the rising price of goods. In this case, consumers are forced to spend more money in purchasing of products and services with less value compared to periods before recession. In recession times, inflation is evil forces to consumers whereas unemployment assumes the role of Satan itself. Companies are forced to lay off workers because of decelerating business activities (Alden, 2006). Consumers in remote locations away from the origins of recession suffer alike with those from regions where the recession originated. Technically, the synergistic effect of inflation and unemployment sends consumer purchasing power to the lowest levels. Consumers who could afford luxurious products and services prior to recession may find themselves struggling to get a square meal for themselves and their families when recession peaks. Unfortunately, consumers cannot shield themselves from such negative economic situations, and globalization ensures that such economic situations reach every consumer across the world. Conclusion In conclusion, it is evident that globalization causes influential consequences like spread of capitalism, increased sharing of knowledge and information, and interconnectedness of economic environments. These consequences of globalization yield both positive and negative impacts which affect consumers across the globe. Positive impacts, which include increase in consumer purchasing power and information sharing, help in enhancing the lives of consumers. Contrarily, negative effects of globalization, which include diminishing quality of goods and services, present challenges in the relationships between producers and consumers. Therefore, consequences of globalization force consumers to inevitably encounter both positive and negative effects. References Alden, D. L. (2006) Consumer attitudes toward marketplace globalization: Structure and consequences. International Journal of Economic Research 12(9), 192-203. Cleverly, N. (2011) Effects of globalization on contemporary economy: The consumer society. Journal of International Marketing 34(6), 56-62. Hassan, S. & Michael, E. (2014) Globalization of Consumer Markets: Structures and Strategies. New York: Cengage Learning. Pauline, M. & Parsons, E. (2009) Contemporary Issues in Marketing and Consumer Behavior. Pittsburg: John Wiley & Sons. Smith, G. (2011) Consumers and Citizens: Globalization and Multicultural Conflicts. Minneapolis: University of Minnesota Press. Read More