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Published: Mon, 5 Dec 2016
In this developing society, globalization is being talked about more frequently. But what is globalization? And what is its impact on the individual corporation?
In fact, globalization is not a new word. The earliest forms of globalization were based on business, the international exchange of tangible goods. Take silk as an example, since 110BC, there was some merchantmen engaged in international business between China and Middle Asia, and even to the Mediterranean Sea. Their route was called the Silk Road, which is very famous and is considered to be a sign of early international business and globalization. The early globalization was based on trading, therefore previous theories were also focused on this issue. One of them is Adam Smith’s absolute advantage. He believe that replacing the restrictive mercantile system with free international exchange would led to reduction in levels of poverty and would stimulate social and moral improvement in all participating countries. Smith reasoned that countries should specialize in production of goods for which they could achieve a low unit cost of production and import them if it is cheaper to do so than to produce them domestically. However, Smith had not considered the situation where two countries might both benefit from trade exchange with each other even where one holds absolute advantage over the other in the production of all goods. Based on this, David Ricardo presented his new theory (David Ricardo , 1817)-theory of comparative advantage. And that has become one of the most important concepts in international trade theory. In his theory, the choice of which commodity each country should specialize in is not determined by a simple comparison of the cost of production between countries, as defined by the cost of labour. This comparative advantage is considered as the one of the most common theories in the world because it includes an important factor of production-labour, which is one of the most important factors in international business environment. The theory of comparative advantage is more flexible and more adapt to the modern complex global environment, as well. However, international business is only a part of modern globalization. And in the new age, as there are different focus on the issue, there is not an universal definition of globalization(Jan Aart Scholte 2002 ). Someone define globalization as a concept, refers to both the compression of the world and the intensification of consciousness of the world as a whole. (Robertson,1992). However, this concept does not include maybe the greatest connotation of globalization- its impact on economy. Economy globalization, stands for the globalization of business, investment, finance and production, in other words, it is the best collocate of the production element in the whole world. It is rooted of the great evolution of productivity and international labour distribution, which forcing the more span of ethnic and country boundary. There are two main views on the globalization. Deglobalization, on the one hand, is one kind of the aspects that has been resistance to globalization. In the contemporary world the use of the term “globalism” as a negative comment on what has with equal pejorativeness been described in ideological terms as ‘one-worldism’ or ‘cosmopolitanism’ is not uncommon in political and other campaigns, and of course there is a quite long genealogy of such terms. Their view mainly based on some negative effects of globalization, such as globalization would accelerate the gap unbalance of the world economy, expend the gap between rich and poor countries; it would cause the pollution of the environment in developing countries; globalization must shock local culture as well as local economy. But we have to be very conscious of the fact that negative gestures, gestures of opposition, are typically expressed in contemporary terms and in reference to contemporary circumstances. People who hold this view often come from developing countries, which means they may experience more negative effects rather than positive ones. However, we should view the issue completely, from both side of the globalization. ‘Globalization is here to stay, one cannot back away from that fact, but today’s new order can be tapped for the advancement of the entire world economy through peaceful economic efforts.’
Lawrence R. Klein (2005) Nobel Laureate 1980
Globalization, firstly, is a better way to distribute the capital, technical, product, market, resource and labour all over the world. Secondly, globalization offers great opportunity for developing countries to benefit themselves through their advantages. Thirdly, globalization would accelerate the foundation and development of grand world culture. Moreover, globalization has significant positive effects on the coordinate of international politics as well as international conflicts. In itself globalization is neither good nor bad. Its economic impact can be both welfare-enhancing and dislocating. (Dilip K. Das: 2008)
Factors that influenced globalization:
The most important one is economy. As mentioned before, the earliest aspect of globalization is based on multination good exchange. Different countries have different advantages, they can exchange their own advantages with each other, benefit the both sides, by the measure of international trading. This concept had been rooted in almost all the businessmen and had great effect on their activities. In this day and age, multinational corporations cannot be limited in one region or area, because they need more resources, which are not only high quantity, but also high quality and low cost. In order to meet this demand, they have to go abroad, seeking for new, better material. Meanwhile, the domestic market often being saturation, or have less profit than before, so they have to explore new markets. And foreign country would be their new cake, no matter whether the companies want to do so. And these multinational corporations have effectively promoted the development of globalization. A BMW car, for example, maybe have its engine made in German, and the tires made in UK, final assemble in Greece, and sold to American. It is because different country has different advantage, so that big company synthesis these advantages all together and make its profit max, and cost minimum, as well. In this way the globalization is more common and necessary in present society.
Politics is also one of the factors that impacts globalization. Recent decades have witnessed major growth of planetary-scale regulation through transgovernmental networks and accompanying global administrative law (Raustiala, 2002; Slaughter, 2004; Kingsbury and Krisch, 2006). Kinds of international trade agreements and organizations have great effects on international trade. Take WTO as an example, there are ten benefits which are being listed officially, as a positive effect of their trading system (10 benefits of the WTO trading system http://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b00_e.htm), that are: 1. The system helps promote peace; 2. Disputes are handled constructively; 3. Rules make life easier for all; 4. Freer trade cuts the costs of living; 5. It provides more choice of products and qualities; 6. Trade raises incomes; 7. Trade stimulates economic growth; 8. The basic principles make life more efficient; 9. Governments are shielded from lobbying; 10. The system encourages good government. Despite there are many advantages of global politics, which impact on international business, we cannot ignore the negative effects of politics. Almost every country has some kind of domestic protective politics. These are meant to prevent domestic industries from being beaten by foreign companies. one simply explain is raising the tariff of import good until it is more expensive than domestic one, often by the measures of high tariff or set some limitation of quantity of import good. Yet for all of this institutional innovation and expansion, global governance today still falls far short of needs. However, much more and much better transplanetary regulation is needed to ensure that globalisation impacts positively on core attributes of a good society such as cultural vibrancy, democracy, distributive justice, ecological integrity, material well-being and peace.( Jan Aart Scholte : 2007)
Technical also plays an important role on the globalization. For example, the invention of airplane, had greatly improved the globalization. People can easily go anywhere on the earth by airplane. With the help of airplane, there are more and more communications between different countries. However, modern technical has some negative effect on poor countries. That is, developed countries hold their core technical, secretly, and benefit from it. While developing ones only have to become the factory of richer ones. Then although developing countries benefit from the production, the gap between two groups has became even larger.
Globalization effects on the factors:
Globalization has greatly accelerated the global economy as a whole. As mentioned before, globalization is based on the international business, and, globalization itself has its own aspect on the economy. When it comes to individual companies, as a result of the global changes of labour, capital, and other produce elements, globalization is both an opportunity and a threat, in the swot analysis. On the one hand, globalization provides a broader chance-from resource to sale- to local companies, which means companies can achieve profit maximum and cost minimum. However, on the other hand, globalization will introduce more competitors to the local companies. And some of the competitor may be a great threaten to local ones. international corporations are happy to see this because it is more convenience for them.( Edelberg, Paul B:2005) For example, they can offshore their manufaction department to Africa or Asia, where the cost is lower, and keep the design department and core technical in their nation land, for a high productivity and the keep their advantages.
On the issue of the country, globalization is an undoubtedly trend which every country must experience and adapt to. (Lawrence R. Klein, 2005, Nobel Laureate 1980) As same as aspects on individual companies, globalization has both positive effects and negative on the countries’ economy. Globalization and international production distribution gave a great opportunity to “third world countries”, which means developing countries can benefit themselves by make good use of their advantages, such as low cost labour and a more free policy. It is what we all can see that a lot of regions developed fast in the past 30 years, for example east Asia, including Chinese Taiwan, Korea and other regions, all their achievements can be contributed to the spread of globalization. Meanwhile, developed countries had also benefit from the process of globalization. Companies from developed countries have more advantages compared with companies from poor ones on average and therefore globalization provide the strengthen companies a platform to lead or even dominate the global market. And that means the country as a whole can benefit more than before.
On the controversy, people who antiglobalization have their reasons. Their mainly sustainably reason is that globalization which would import foreign capital that would have greatly influence on ethnic capital and local industry as well as local environment pollution(Bond, Patrick: 2005). Also globalization can raise the risk of the change of the economy in globalization because the feeble changing economy is much more tightly linked with the global and can easily being shocked by the fluctuation of the global market. What is more, globalization threatens the dominion of economy of the country, and expends the gap between developing countries and developed countries. Not only are developing countries suffering from globalization but also the developed countries. The offshore of factory has made a lot of people lost their job in developed countries, and the cost of labour keeping a high lever therefore local products have less competition advantage. And this would cause a lot of local companies closed during the great influence of low-price and high- quality import goods.
Globalization is also promoting the technical development. It is what we can all see that the human genome (the full collection of genes in a human being) is being accomplished by the scientists all over the world. It is hard to image to finish the job without the information and experience exchange inter-countries. Thanks to Globalization, there is now a platform for scientist all over the world to get useful information, publish their new founding, and get feedback, from all over the world.
Moreover, the influence of globalization on the politics is increasingly represented. Regulations of international organizations are more and more influence on the local policy. An agreement of global emission control regulations would lead a great change in the regulation for local automobile factory, for example. In the global village (Marshall McLuhan,1960), the boundary of the countries is becoming weaker while the interact among countries is more weight than ever before.
NIKE, the world’s biggest sports and leisure products company, which can be defined as a multinational corporations (Hood&Young 1979) , had experienced a globalization way.
Phil Knight, the foundation of NIKE, who had finished is MBA at Stanford University. During his study, he had a lesson which changed his life. After the lesson, Phil wrote an essay with the title “Can Japanese sport shoe challenge Germany sport shoes just like Japanese camera challenge Germany cameras?” After that essay, Phil found his way. And after his graduation, he went to Japan to seek opportunity. At one exhibition, Phil met the producer of tiger sport shoe, and Phil claimed he was an American who from” blue riband” in US. And he was wonder in the Japanese sport shoe. At the same time, the tiger company was just looking for their agent in US. Therefore tiger gave the dealership of tiger in US to the young man. After that, Phil went back to US immediately with the dealership and met Bill Bowerman, his former coach in university, and they established the genuine “blue riband” company, which is the former company of NIKE. Tiger is very popular in USA market and the new company benefit a lot from this. Meanwhile, “blue riband” accumulated cash during that period. After that, tiger company covet the great profit in USA market and required to buy 51% stocks of “blue riband”, otherwise they would stop supplying shoes to USA market. “blue riband” refused the requirement and finder their new partner with their own design. In the end of that year, Phil named his company NIKE, which comes from the Greek legend. The first time the name and the swoosh appear together is 1972. In 1980’s Moscow Olympics, the first player who wears NIKE won the gold medal, at the same year, NIKE established its first branch in Netherlands. In the next Olympics, 58 players who NIKE sponsored won 65 medals and Carl Lewis won 4 gold. In 1997, NIKE established two customer service in Seoul and Tokyo. In 1998 NIKE made a 10-year-agreement with Brazilian national football team, preparing for the 1998 world cup and made the special boot for Ronaldo, which is a silver one and became famous during that world cup. In 2000 Sydney Olympics more than 2000 athletics in 25 items wearing NIKE. In 2002 world cup NIKE sponsored 8 teams including the champion Brazil and the best shooter Ronaldo, with 11 goals. With the unstoppable effort, NIKE had occupied 33% of the world market in1979 and even 50%in 1981, which is far ahead Adidas.
Since 1970s, NIKE has established a new model-virtual production. NIKE does not have one factory, while he makes use of his trademark, design and development, through special permit to have a mass production in the regions where the cost of labour is cheap. The company itself devotes all the resources into demanding research, product design as well as marketing. The method of this special production is now being copied all over the world. With the unstoppable effort, NIKE had occupied 33% of the world market in1979 and even 50% in 1981, which is far ahead Adidas. To be more precise, we should consider the expending of NIKE’s global production.
- Year 1964 Phil Knight and Bill Bowerman devoted 500dollars to import “Tiger” to USA.
- Year 1978 The company changed its name to NIKE formally.
- 1970s’ NIKE was mainly produced by two Japanese companies-Nippon Rubber and Nihon Koyo.
- Late 1970s’ Because of the high cost of Japanese production, NIKE was trying to produce in USA and seeking for other producer and supplier.
- Early 1980s’ Korea and Chinese Taiwan had became the main manufacture place. In1982 86% of NIKE shoes were made in the two regions.
- Late 1990s’ Indonesia, China, and Vietnam became the main manufacture place.
- Year 2001 NIKE is manufactured in 51 countries, in more than 700 authorised factories, and by more than 500,000 workers, including:
74 factories and 175,960 workers in China; 30 factories and 104,514 workers in Indonesia; 62 factories and 47,962 workers in Thailand; 12 factories and 43,414 workers in Vietnam. (Richard M. Locke. 2002)
The case of NIKE is adequately indicated the importance of global working distribution. For the multinational corporations like NIKE, international distribution and agency authorised manufacture can effectively reducing the cost of production as well as making their operation more flexible. And for the companies in developing countries, devote in such a distribution system can get approach to international market, therefore benefit them. Also we can see how FDI influence NIKE’s development in the past 20 years. Nike Company get its first profit from international business, and first mainly rely on Japanese company to product. After that, Nike was seeking for better environment for product all over the world, including USA, China, and other countries. Now Nike production is mainly based on the authorised factories in east south Asia. The development of globalization gives companies like Nike a great opportunity to achieve the goal of cost minimum and profit maximum.
In the economy globalization, countries all over the world can develop their preponderant industries and through the exchanging in international market, to get economical profit. And finally promoting the development of the countries and benefit the citizens. And not only companies in developed countries can expand rapidly but also the companies in developing countries. ‘It concludes that, going by the available evidence, globalization on balance is a welfare-enhancing force’. ( Dilip K. Das. 2008)
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