Various Aspects of Globalization - Essay Example

Globalization Table of Content Introduction 3 Concept of globalization 3 Businesses’ engagement in CSR 4 Globalization through FDI 5 Role of nation states and impact of MNCs 6 Reasons for Chinese economic growth and its impact on global economy 7 Conclusion 7 Reference 9 Introduction This paper represents detailed study on different aspect of globalization. Some most important areas have included in it. Starting from background of globalization to its impact on different entities, globalization process and role of multinational organization behind internalization of business, and different perspective on theories of globalization have been analysed in this paper. If continuous changing climate across the world has been impacting on sustainable development worldwide especially in business perspective, then globalization is the parallel process created by human beings which has been continuously creating opportunities for sustainable development to developed, developing as well as under developed countries. It is the ongoing process that is linking people, culture, economies and markets of different countries together and at the same time acting as a key driver for global sustainable development. This is universal wind that resulted in our everyday’s lives and being intertwined with the people in all part of the world through the food we eat, the clothes we wear, the movies we watch and even the ideas we innovate and hold. Concept of globalization Globalization as removal of barriers of trade so as to facilitate smooth flow of capital goods as well as services it is driven by trade has reached at an unprecedented pace. It has laid down the path of creating new opportunities that contribute in accelerating economic growth and reduce the level of poverty. Concept of globalization came from increasing trade among all the nations based on standardized regulations. It has allowed the leading domestic firms in different countries to exchange goods and services for fulfilling interest of trading nations. The concept liberalization is based on neoclassical model of economics which has been developed based on unimpeded outflow as well as inflow of goods and services among all the nations participates in international trade. Increasing trend of this international pressurized to minimize or even end the obligations and restriction in terms of different tariffs implied by different nations. This leads to major liberalization in 19th century which was termed as globalization. The rising extent of globalization can be identified with a number of trends started after World War II. It includes global movement of commodities, money, information, innovation and also people. Global development of technology, legal systems, organizations and infrastructure are the key drivers for this movement. Developed, developing and also underdeveloped nations have been enjoying many benefits through internationalization of leading businesses of many countries. International trade has been increased through multinational organizations at a faster rate overall growth in world economy. Global flow of capital has increased through foreign direct investment especially of the leading firms of developed and developing countries. International organization has developed like WTO, IMF, WIPO, World Bank etc for monitoring international transaction of goods and services. Outsourcing of different services has increased dramatically in first decade of 2000 century and it has benefited the MNCs by reducing cost of business operation (Kox, 2001, p.90). Businesses’ engagement in CSR Increasing extent of globalization is nearly proportionate to internationalization of leading firms of many countries. Development in infrastructure, income level of people mainly disposable income and technology advancement is the key motivational factors for internationalisation of firms. There are many entry strategies that the leading firms have identified. Corporate social responsibilities of firms in domestic countries enhance the reputation and goodwill in terms of sustainable business practice. The emerging economies welcome those firms through subsidised restrictions who have track record of good extent of corporate social responsibilities. Currently the leading MNCs have becoming highly responsible for environment and society in domestic as well as foreign markets. These increase the foreign government’s intervention on the firms on foreign business operations. Conducting CSR activities also help the companies to acquire trust of regional customers in foreign markets and thus they are able to lead among the domestic firms despite of having more restrictions in the foreign markets. Globalization through FDI Foreign Direct Investment refers to direct investment by a firm of country in country through diversifying businesses in that new market. The leading multinational firms has opted this strategy as most beneficial strategy for internationalization of their businesses though there are many traditional entry strategies for multinational businesses. Foreign direct investment is directly leads to production activity in host country or target market. Therefore, the companies can produce product by using the resources like raw materials, public infrastructure and manpower of host countries. These will benefit the MNCs to achieve reduced cost production of goods. It has been observed by the leading firms that manufacturing of product in the host countries is much cheaper than exporting good in foreign countries due to high import tariff. Again, FDI enhances competitive power of the foreign firms in domestic market than exporting. The firms can exchange the knowledge and skills of expertise of host countries and this leads to overall growth of a MNC. Market penetration in foreign markets is much higher through direct investment than other ways of internalizations. The firms understand the market trend and estimate new trend of customers though operating business in full extent i.e. manufacturing and sells both. Another important benefit of FDI is that the MNCs can source fund from foreign markets in both equity and debt finance. Therefore, there are positive reasons behind preference of Foreign Direct Investment as a means of internationalising business. Role of nation states and impact of MNCs The states must remove the trade barriers to take full advantage of globalization. Various sectors can also be protected through some legislation. The states should concentrate on development of infrastructures. The involvement of the private sector is due important in the post liberalization era. The focus of the state should be balanced development. If considerable attention is provided on some specific sectors and ignores the other that will lead to unbalanced development and therefore inequality within the economy. The role of the nation states is considered less important now a days in the context of internationalization. The process of globalization called for many multinational corporations and the control of the nation states over the economy kept on diminishing. These corporations integrate the national economies with global linkages. They have expanded drastically and the top 500 companies control a major percentage of global GNP. With the advent of new technologies at rapid rates, the whole global economy under the process of globalization is now linked. The neoliberal agenda of globalization offers minimalist for the nation states. It seems that the nation states are left with no other choice but to surrender to the demands of globalization. Some experts disagree on the diminishing role of the states. They opined that the states still play a dominant role in shaping the economy. They put forwarded the view that states implement the policies of opening up the economies to the international markets which indicates the states have the potential to manage the responses to globalization. So it can be concluded the role of the states are limited in shaping economies rather than MNCs have substantial role on economic development and creating employment opportunities in the nation states. Some look at the nation states as pivotal institutions and argue that globalization has only altered the situation under which the states can exercise their power on the multinational organizations operates in states. Reasons for Chinese economic growth and its impact on global economy It has been observed that the China has been grown rapidly in last two decade. This is due to Foreign Direct Investment inflow to China has increased in major extent. It has become one of the leading business hubs in the continent of Asia to the leading MNCs in the world especially the MNCs of developed markets. At the same time, outward foreign direct investment is also substantial contributor in economic development of this nation. Generally, economic growth of a country is quantitatively measured by gross domestic production of the country. China holds huge resources for businesses including natural resources like agriculture base products, infrastructure, technology and obviously availability of manpower for all level of work. The MNC from developed countries have been attracted by these and the country also reduced restriction for FDIs to high extent. Therefore, domestic production level of goods and services has increased in rapidly from both the domestic and internal firms’ production. Again, Chin’s leading firms penetrated into foreign markets as FDI which indirectly increased the corporate tax level collected by Chinese government. Conclusion The liberalization of some of the developing countries has not translated into qualitative gains. The gains from trade in less developed countries are still not sufficient. The costs of globalization driven by trade may be unsustainable and therefore the inequalities will tend to rise further which is indeed a matter of concern. As a result the countries are becoming prone to external shocks. In order to benefit from globalization a sustainable environment is needed to be created in the context of differentiated trade policy and development landscape. The international trading system has witnessed several changes under the globally recognized challenges. The trading system has recognized the structural as well as the economic challenges that are faced by the developing countries. Reference Kox, H.L.M. 2001. Exposure of the business services industry to international competition. [Pdf]. Available at: http://www.cid.harvard.edu/cidtrade/Papers/kox.pdf. [Accessed on November 14, 2012]. Read More