Globalisation and Development - Research Paper Example

GLOBALISATION AND DEVELOPMENT Introduction Globalisation has become a commonly and widely used word around the globe. It is not any more a novel concept in business and educational world. It refers to integration of economic and social system of all countries. Globalisation encourages technological, economic, cultural and political exchanges between countries. Globalisation has its own advantages and disadvantages shaping new opportunities and challenges. It discourages trade barriers, at one side this factor is contributing to economic growth of developed and developing countries through specialisation and low cost advantages but on the other hand, it is effecting negatively on the economic growth of under developed countries due to lack of resources (Goldberg and Pavcnik, 2007). Globalisation allows free trade; it has broken barriers between countries giving boost to trade and world output. Countries are interdependent on each other in terms of production, outsourcing has become cost effective strategy for many businesses. Well globalisation allows liberalisation whereas liberalisation allows specialisation and exchange, so in this technologically advanced era countries can enjoy comparative advantage over one another and can exchange cost effective raw material and finished goods. Due to globalisation number of temporary migrants has increased in developed countries, which is creating demographic imbalance between countries. Some developed and developing countries outsource human resource due to skills shortages, productivity or to cut labor cost. With mobility of labour, mobility of capital has also become a good idea to adopt by many countries. Investment and funding has increased between countries, giving boost to industrial development and perceives as a good source of income for many people. Some researches show that due to globalisation richer is becoming richest and poor is poorer; this means globalisation has given birth to inequality between nations in terms of resources acquired and economic growth. Lack of capital and resources is hindering the growth of underdeveloped countries, while developed countries are taking advantage from free trade economy (Narula and Dunning, 2000). Though IMF emphasis on global-market based strategies is an important factor in the increase of world productivity and GDP but if globalisation sees the whole world as a single economy than it cannot be considered as environmentally friendly strategy as a whole, as it is benefitting developed countries but negatively effecting developing and under developed countries in some way. Developing countries usually faces both good and bad aspects of globalisation whereas it is also beneficial for underdeveloped countries in some aspects but it is discouraging the development of local industries (Ernst, 2002). Factors cheering globalisation Globalisation has become common phenomenon in economic world, there are many factors leading to its successful implementation which are discussed below (Archibugi and Pietrobelli, 2003): Advancement in network infrastructure Advancement in network infrastructure has always fuelled the pace of globalisation; network infrastructure includes transportation and communication which are the two major components of globalisation. Technological advancement especially in communication division has act as a key factor in cheering globalisation. Advancement in communication technology has allowed countries to take advantage from difference in time zones, where cheap and skilled labours are available. As a whole it has created ease in worldwide trade and has given boost to economic growth of many countries. Improvements in transport have fastened the supply chain process, hence playing an important role in globalisation. With aircraft, shipment industry has also developed rapidly over years which have encouraged trade between countries (Ndoye, 1997). Deregulation and flexibility in capital movement From the 1980’s and onwards government of many countries has provided freedom to businesses; flexibility in rules and regulations has permitted privatisation and foreign ownership, which has allowed countries to buy businesses in one another. Flexibility in capital exchange policy has made money movement easy between countries, this allowed businesses to better invest their money in countries where they can get best possible returns on investments (Raluca, 2010). Free trade Removal of trade barriers between countries through regional grouping and by world trade organisation has allowed countries to take advantage from one another on the basis of specialisation and decentralisation. Concept of free trade is one of the key bases for globalisation (Raluca, 2010). Change in consumer preferences Consumers’ taste and preference seems to be changed in comparison to past, through internet and satellite they are more aware of beyond the territory products and are willing to try it. Switch to market-based economy Switch to market-based economies of many countries has advances globalisation and allows businesses to grow geographically. This revolution has contributed a large share to economic growth and productivity of many nations (Raluca, 2010). Impact of globalisation on world output Globalisation refers to amalgamation of economies, technologies and cultures; it encourages the movement of human resource, information and ideas, and goods and capital across the national and regional boundaries. Movement of such factors of production has made economic activity more globally oriented while international trade has become centre of attraction for many countries around the globe, thus largely contributing to the world GDP. There are many factors rising from globalisation which are contributing to the world economic development and GDP, of which some important are progress of international trade, technological advancement, rising share of multinational companies, strengthening influence of world bank, WTO and IMF, and greater outsourcing and mobility of resources (Lituchy and Rail, 2000). Besides of the fact that countries who lack production resources are facing growth issues because of globalisation, as a whole world output and economic activities has increased since the concept of globalisation has evolved. Integration of national markets and growing interdependence of countries Evolution of international trading system due to globalisation from 19th century till present has increased interdependence of countries and has encouraged integration of national markets. Nations are interlinked and interdependent on each other in terms of production and distribution, outsourcing of business processes has become an important cost effective strategy for many nations like UK, USA and Europe (Kabeer and Mahmud, 2004). Low government intervention has allowed countries to implement market based strategies, permitting businesses to act according to demand and supply relationship, it has also created favourable conditions for geographic expansions across the globe. The concept of integration of national markets has gained a lot of popularity since last two centuries, enlarging market access by exchange of factors of production and distribution, by eliminating trade barriers, and by practicing domestic rules and regulations to speed up economic efficiency is a positive aspect of globalisation for many nations. This phenomenon of integration has been a part of many controversies since its evolution, many nations takes it as a very effective source of economic growth while others considers it as a negative impact on growth and market acceptance. This thought of variation gives birth to positive and negative integration which is further elaborated below: Positive and negative integration The goal of positive integration is to promote standardisation of international economic laws and regulations. Countries with positive integration and influence of globalisation can enjoy working on similar trade and tariff policies with another, promoting ease and speed in flow of work. Due to positive integration, countries can enjoy the low cost raw material and human resource to fulfil its manufacturing needs. Positive integration promotes removal of trade barriers and removal of trade barriers promotes low cost of imported raw material, it also promotes employment in developing and underdeveloped countries. Whereas negative integration is an offensive concept for some developing and underdeveloped countries, it allows removal of protective barriers such as tariffs and quotas because of which domestic industries suffer and faces tough competition in terms of cost efficiencies, business processes and finished goods quality. Negative integration discourages the growth of local industries; specially availability of cheap finished goods attracts consumers’ attention and discourages the sale of local products (Beaverstock, Smith, Taylor, Walker, and Lorimer, 2000). Mobility of capital and labour Globalisation has given rise to the concept of mobility of labour and capital; the concept is not new anymore. Arrival of this concept in trade has discovered many growth prospects for countries; mobility in economic activities basically allows the movement of factors of production around the globe and provides a platform to countries that are willing to excel in economic activities. Mobility of labour is movement of human resource from one country to another. Number of temporary migrants has increased in number of developed countries such as UK; there are two aspects of this shift, developed countries outsource human resource to acquire skills and to take advantage of cheap labours. Whereas people prefer to work in developed and some developing countries due to wage differentials as value of money vary from country to country. Advancement in transportation and telecommunication has allowed easy access to cost-effective and skilful labours; in addition development of new labour intensive service sectors and expansion in current, such as nursing and healthcare has increased the need of human resource by developed countries; and relaxation in work permit policies of many developed countries has encouraged people from all over the world to move in developed countries (Lawal, 2006). Mobility of capital is movement of money from one region to another. Due to globalisation countries are able to make investments in other regions, where they can enjoy cost efficiencies and expansion advantages. Many developed and developing countries have invested their money in countries where they can enjoy more return and growth opportunities. Other aspect of mobility of capital is availability of funding option to companies around the globe which are looking for growth and expansion opportunities, this also encourages new-entrants in the market. Easy access to capital for usage of both above discussed purposes is one of the major reason supporting free trade and integration of markets. The global transmission of inequality The preceding millennium of global economic history can be alienated in two differentiating periods with evolution of globalisation. From 1000 to 1800 there was slow economic growth and low technological advancement but there were no large inequalities between rich and poor nations. Comparatively, last two centuries that is from 1800 to 2000 has given rise to productivity and economic activities between and within countries. Big technological advancement has taken place in particularly 20th century, which has opened many production, communication and distribution channels, this revolution was mainly because globalisation. With these major improvements, this period has also welcomed inequalities of income per head and living standards across and within nations (United Nations, 2008). Globalisation aims at global prosperity but with prosperity of some regions, it has also brought inequalities that can ultimately demoralise global integration and prosperity thus hindering long-term economic growth. Inequality brings imbalance between economies and is considered bad for growth (Griffin and Khan, 1992). Global inequalities is the result of two major inequalities, one is national inequality because of deviation in economic performances between countries and the other is national inequality driven by factors such as prices, possession of resources and living standards. Wage inequalities between industrialised countries is discouraging for those possessing low wages, hence it is encouraging those people to move to developed countries where wage rate is high. Though inequalities and economic imbalance was not the purpose of globalisation but because of lack of resources and technological inefficiencies underdeveloped and developing countries is facing the issue of unstable economy whereas rich are enjoying an increase in industrialisation and GDP. Due to globalisation and unequal distribution of resources and income poor countries are becoming poorer while rich countries are heading towards the seat of richest nations. This inequality may contribute negatively to the long-run growth of economic activities and may result as destruction for world economy (Solimano, 2001). Rising issues for developing and under developed countries Globalisation has many positive aspects but with this fact, it has number of negative aspects as well. Free trade market has given rise to many issues for developing and underdeveloped countries; preference of less costly imported products over local products is increasing as the price factor is very important for consumers, secondly outsourcing of cheap labors from developing and under developed countries is diminishing the number of diversified work force in those regions, with workers skills and knowledge also transmits to receiving country which increases its efficiency where the sending country has inverse effect as those transmitted skills and knowledge could be used to generate domestic income, thirdly lack of production resources such as technology by poor countries has allowed rich countries to rule on the planet and to produce cost effective products whereas challenges has increased for poor nations for survival and growth, fourthly due to globalisation nation-states have transferred the share of authority and decision making to private sector and international institutes which is stopping national government to take steps for the protection of local industry, and lastly entry of foreign companies in under developed and developing nations has increased competition for local companies (Stigliz, 2002). Emphasis on Free global market strategies and its impact on world environment and development Global marketing strategies are marketing strategies created and implemented on worldwide scale that is uniformity of marketing strategies; it allows countries to take commercial advantage of universal operational differences, similarities and opportunities in order to achieve global aims and objectives. When it comes to the implementation of global marketing strategies, internet plays a key role not only in its implementation but also its acceptance by many countries. These strategies has gain so much popularity that even IMF mandated the implantation of free global market strategies which has allowed and promoted countries to spread its operations across the world and take advantage from reduction of trade barriers (Stigliz, 2002). Free global marketing strategies have advantages and disadvantages which vary country to country but if globalisation sees whole world as a single economy than it may be considered as non-environmentally strategy because if these strategies are beneficial for even half of the world but not for remaining than it does not fulfil the stated purpose of globalisation which is to provide ease and benefits to all countries around the globe (Stigliz, 2002). Advantages of free global marketing strategies include, economies of scale in production and distribution that is low per unit cost of production, Lower marketing costs due to uniformity and fast communication, stability in brand image, arrival of good ideas quickly due to diversified work force and free trade, ease of marketing practices due to uniformity of operations, it helps to establish relationships across national political pitch, it encourages subsidiary industries to develop around the world, and lastly evolution of internet marketing benefits to conventional marketing (Raluca, 2010). While disadvantages of free global marketing strategies include; variation in consumer needs and preferences can be can be a source of stress, disparity in end user response to marketing mix elements may create fuss in the process, differences in brand and product development stages worldwide may hinder to excel in competitive world environment, difference in legal and administrative processes of host and home country sometimes raises problematic issues, differences in infrastructure may hamper the growth, and differences in product placement may result as a failure of many brands (Raluca, 2010). Free global marketing strategies as discussed earlier cannot be viewed as environmentally strategy in consideration of single economy as it may hamper the growth of underdeveloped countries due to shortage of technologically advanced resources. Alternative available It is not like that if world refuses to the implementation of free global marketing strategies for the sake of equality and economic balance between countries, than there will be no option available. The better alternate to each country well being is to separate the word of free from global marketing strategies and allow the practice of global marketing strategies but with certain protections for host country, so in that way both host and guest country can enjoy equal opportunities (Raluca, 2010). Conclusion To conclude, globalisation has become widely accepted concept but it is viewed as a hindrance to growth by many developing and underdeveloped nations. Globalisation encourages technological advancement, free trade, labour and capital mobility and integration of national markets. The idea of integration of national markets has gained a lot of recognition since last two centuries because of globalisation; it encourages broadening market access by sharing of factors of production and distribution, through free trade, and by practicing home country rules and policies to increase economic efficiency. whereas national integrations has positive and negative aspect, moreover rich countries are taking advantage from positive integration where as number of developing and underdeveloped countries find themselves occupied in negative integration due to globalisation. There are many factors cheering globalisation of which most important are Advancement in network infrastructure, Deregulation and flexibility in capital movement, Free trade, changes in consumer preferences, and switch to market based strategies. There are various factors intensifying globalisation which are positively contributing to the growth of world economies and its GDP, of which some imperative are progress of international trade, technological advancement, rising share of multinational companies, strengthening influence of World Bank, growing WTO and IMF interference, and greater outsourcing and mobility of resources. Besides the fact that nations lacking manufacturing resources are facing development issues due to globalisation, but as a whole world GDP and economic activities has amplified since globalisation has taken place. Though globalisation has accepted largely by many nations and regions but it has also created many critical issues for developing and underdeveloped countries; preference of less costly imported products over local is destroying the local industry whereas outsourcing of cheap labours from developing and under developed countries is diminishing the number of diversified work force in those countries, lack of production resources by poor countries has allowed rich countries to enjoy the seat of superiority. Though Free global marketing strategies many new growth prospects have risen but if globalisation sees whole world as single economy than it cannot be viewed as environmentally strategy in consideration of single country as it may hinder the growth of underdeveloped countries due to lack of resources and in this competitive age their domestic marketing efforts for many brands seems faded because of globalisation and free global marketing strategies. In this clause, developed and number of developing countries avail all possible opportunities to expand while it ruins the local market of home country. The study provides alternative to free market strategies is to separate the word of free from global market strategies and to practice global marketing strategies with some protections given to host country so they can enjoy better growth prospects with entry of foreign companies, thus world can be free from inequalities and injustice. List of References Archibugi, D., and Pietrobelli, C. (2003). ‘The globalisation of technology and its implications for developing countries: windows of opportunity or further burden?’ Technological Forecasting and Social Change, vol. 70, no. 9, pp. 861-883. Beaverstock, J., Smith, R., Taylor, P., Walker, D., and Lorimer, H. (2000). ‘Globalization and world cities: some measurement methodologies.’ Applied Geography, vol. 20, no. 1, pp. 43-63. Ernst, D. 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