Globalization and the New American Economy - Essay Example

Globalization and the New American Economy Introduction Globalization has helped the United s to grow at a much higher rate over years. Companies from US are going out to take advantage of the huge market potential across the world. Similarly, the US market is also opened up for the global firms to do business. This essay will give a brief explanation of how efficiently the US firms are working with the international corporations to boost the economy. Main BodyDue to globalization, companies and countries benefit by exploiting the knowhow and resources of inbound companies as well as by spreading across to other countries.

Exports and overseas operations are highly beneficial for a company. US firms increase their profitability and net worth by expanding into potential markets globally. This happens either through a fully direct investment or through partnerships and mergers. Through this market expansion, the US firms earn more profits and market share. Increased profitability of the company will boost the investment climate in the market. An increased investment climate will in turn help to boost the economy.

This is how the whole cycle works. This scenario can be better explained with the help of companies from various industrial sectors. To begin with, let us take the case of automobile industry which is one of the major contributors to the nation’s economy. Ford Motors, one of the largest US auto manufacturers has recently entered into a joint venture with OAO Sollers of Russia to manufacture and distribute Ford Cars in Russia. “The partnership with Sollers also will include engine production and stamping and involve establishing research and development activities, Ford said in a statement.

” (Higgins & Ebhardt, 2011) This arrangement will help to increase the market presence of Ford which has successfully come out from a crisis recently. This increase of market share will kick start the cycle which has been mentioned earlier in the essay. Now let us see the case in a different angle. Companies also increase the profits through cost reduction. Employee compensation forms one of the major components of the total cost of production. US companies have been making huge cost savings by using cheap labor from outside the country.

Most of the companies outsource its back end operations to countries like India and China where the job is done at half the cost incurred in US. Most US IT firms have their full fledged offices in these countries. Outsourcing helps the US firms to increase profits through cost savings. This has helped the companies to increase the profitability over years. The huge profits earned by the companies have boosted investments in the country which in turn has had a direct positive impact on the economy.

Companies also help the economy by fostering the inflow of human resources into the nation. International companies recruit people from overseas and also select people from partner companies to work for them. This is helpful for the economy in terms of availability of qualified human resources as well as more tax income. US economy collects a huge amount of tax from the inbound employees to US. ConclusionIt is evident that with the help of globalization, companies have achieved huge growth rate over years.

This has not only has helped to improve the profitability of the company and economy of the nation but also has paved way for the long term sustainability of the companies as well as the nation. Works CitedHiggins, T. & Ebhardt, T. (2011) Ford Motor Forms Russian Joint Venture with Sollers. Retrieved August 10, 2011. From: http://www.businessweek.com/news/2011-02-18/ford-motor-forms-russian-joint-venture-with-sollers.html