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Human interaction is on pace of increasing day by day with the help of new technology. We first were comfortable interacting at local, then at national and now expanding to international level. It's not only interaction but we are expanding our business at international level. Thus the word used "Globalization".
Globalization is a major driving force for this change the companies in this marketplace are facing. The degree of success of these companies also varies significantly. The question arises, hence, if there is a correlation between the extent of globalization of these companies, and the success they experience in their respective operations. This study has researched this question.
The globalization process involves the establishment of economic, political, social, and technological links among countries. Globalization has become today's need of each and every company. Today's small scale industries aim is globalization. In today's changing world the following are the factors that lead to globalization-
The Internet has served to completely eliminate the physical barrier of distance that used to exist in regards to transmission of information. People from anywhere in the world communicates instantly with people anywhere else through the connection provided by the Internet. Governments have very difficult time restricting information within their borders because the Internet doesn't respect or acknowledge international borders. The result is information freely passing throughout the world. Certain governments fear this freedom of information and take steps to prevent it. China, for example, limits this effect by blocking certain websites within its borders.
The most important tool used in today's world is technology. Its role is vital with reference to business continuity. Technology is the vital force in the modern form of business globalization. Technology has revolutionized the global economy and has become critical competitive strategy. It has globalized the world, which drive all the countries to more ethical standards. Globalization has led to new markets and information technology is one of the technologies fostered to the new market in this increasing competitive world. Technology has helped us in overcoming the major hurdles of globalization and international trade such as trade barrier, lack of common ethical standard, transportation cost and delay in information exchange, thereby changing the market place. Technology has enabled the software experts to work collaboratively over the network with companies from around the world. The technological advancement has helped a lot in creation and growth of global market. Multinational Corporations (MNC) can be seen as a central actor in globalization. Markets have become global at a rapid pace, as indicated by several kinds of trade extended to foreign countries. The innovation in host country is often undertaken by MNC based in one country and due to the technological advancement MNC(s) have expanded to other countries by some kinds of FDI also facilitating the movement of research and development. The researchers have analysed that though the technology has globalized the business but economically well developed countries have been more benefited. While technology has created many opportunities for global networks of tasks it is important to look at the friction in the system to understand the limitations. The sources of friction are many and could bring the system to its knees. Companies and countries that want to thrive in this era of globalization will seek to mitigate the abuses, while dealing with the friction.
Technology is further divided into the following areas like communication technology, Economic Technology, Transport Technology.
Economic globalization is driven ahead by the ability of international businessmen, bankers and brokers to conduct business in ways that were never possible prior to modern technology. Trades and investments are made instantly with little regard for international borders, time of day or distance via today's technology. In addition, products that used to require shipping, and therefore import and export, such as books, CDs and movies are now digitally distributed, further leading to business globalization.
Improving technology has completely changed the transportation industry in the post-war world. Technology advances lead to transportation that was more readily available, more reliable, faster and more cost efficient. In the latter half of the 20th century, it became in many cases more cost efficient to ship certain products halfway across the world than to manufacture them at home. This plays a very important role in the ongoing globalization trend.
Communications of all kinds, even above and beyond the Internet, is another key component to globalization. Not only has communication throughout the world become possible, it has also become affordable. Long distance phone calls cost much less money, fax machines allowed people to transmit full documents even before email came along and cell phones ensure that everyone anywhere can stay in touch. This allows corporations to extend their reach at small cost across international borders, leading to increased globalization of industry.
The Process of Globalization:
Globalization involves the creation of linkages or interconnections between nations. It is usually understood as a process in which barriers (physical, political, economic, cultural) separating different regions of the world are reduced or removed, thereby stimulating exchanges in goods, services, money, and people. Removal of these barriers is called liberalization. As these exchanges grow, nations, and the businesses involved, become increasingly integrated and interdependent. Globalization promotes mutual reliance between countries.
Globalization can have many advantages for business such as new markets, a wider choice of suppliers for goods and services, lower prices, cheaper locations for investment, and less costly labour. It can also carry dangers because dependence on foreign suppliers and markets leaves businesses vulnerable to events in foreign economies and markets outside their control.
Take the examples of Spain and Italy and their dependence on foreign countries for their energy supplies; they illustrate how important the interlinkages brought about by globalization can be, and what can happen when things go wrong. Since the 1980s, natural gas has become increasingly important in Spain as a source of energy. Spain itself produces an insignificant amount of oil and coal. As a result it depends on foreign suppliers for 99% of its natural gas requirements which is growing by 15% per annum. Three quarters of its gas supply comes from three African countries, Algeria, Nigeria, and Libya. These countries are potentially unstable both politically and economically. This leaves Spain's power stations and four million Spanish consumers very vulnerable to any instability with their African suppliers (see the International Atomic Energy Authority web site www.iaea.org; and Isbel).
Italy is dependent on cross-border supplies of electricity from Switzerland. In 2003 major sections of the Italian economy were brought to a standstill.
Let us see the impact of Globalization on in the area of renewable energy and industrial energy efficiency.
Globalization of Renewable Energy
In recent years, the world has seen a dynamic shift of the energy landscape in terms of consumption, which has drastically increased, and with it, the reliance on energy resources, which are terminal. In this backdrop, the necessity to use the existing resources available in the most efficient manner has gained substantial importance, as has the unavoidable necessity to develop perennial energy resources.
There are a large number of companies worldwide active in this area, most of them having started their specialized activities when the topic of energy efficiency and renewability was not as fashionable as it is today. Most of these companies have been small businesses, focused in their region and specific field of operation. In these changing times, these small businesses have grown both in terms of regional coverage of operations, and diversity of portfolio of offerings.
In India, and particularly in Maharashtra, there are several such companies in operation. Not only does a conducive business and production atmosphere lead to start-up and thriving activities of the entrepreneurs of these companies but also the availability of renewable energy resources (such as geothermal resources) in Maharashtra lead to the presence of such companies in this state. The presence of industry leads to a market for industrial energy efficiency solutions.
The growth has, in most cases, brought along with it not only promising opportunities, but also substantial challenges. The strategic direction of the business, careful selection of portfolio elements to ensure profitability on a sustained basis, ensuring the availability of finance to fuel the growth, recruiting, orientation retraining and retaining qualified staff and operations in previously unknown markets are some of the possible challenges faced. The current trends clearly show that businesses active in this area are rapidly gaining market and investor visibility as the solutions provided by them are eagerly sought after by a wide variety of customers in a global marketplace.
Globalization is a major driving force for this change the companies in this marketplace are facing. The degree of success of these companies also varies significantly. The question arises, hence, if there is a correlation between the extent of globalization of these companies, and the success they experience in their respective operations. This study has researched this question.
Renewable Energy & Industrial Energy Efficiency
Renewable energy (RE), as stated by the International Energy Agency (IEA), is derived from natural processes that are replenished constantly. In its various forms, it derives directly from the sun, or from heat generated deep within the earth. Included in the definition is electricity and heat generated from solar, wind, ocean, hydropower, biomass, geothermal resources, and bio-fuels and hydrogen derived from renewable resources.
Energy Efficiency (EE) is the use of lesser amount of energy to produce or provide an unchanged (or higher) level of output. The efforts, mechanisms and technologies used for achieving energy efficiency vary widely, ranging from energy saving lamps and improved thermal insulation in homes and buildings, to highly efficient drives and motors and industrial waste heat recovery for power and heat generation in industry. The term is referred to as Industrial Energy Efficiency (IEE) in an industrial context.
According to the IEA, renewable energy resources and significant opportunities for energy efficiency exist over wide geographical areas, in contrast to other energy sources, which are concentrated in a limited number of countries. Rapid deployment of renewable energy and energy efficiency, and technological diversification of energy sources, would result in significant energy security and economic benefits
Energy efficiency and renewable energy are said, in a report by the American Councils on Renewable Energy (ACORE), and for an Energy-Efficient Economy (ACEEE), to be the twin pillars of sustainable energy policy
Globalization & Success
Globalization has come to be a very widely used term in recent decades in various realms. The most common reference is, though, made in terms of its occurrence and impact in the area of trade and business. Of the many definitions of globalization available in the public domain, the one that identifies it as a generic term for all processes of international integration arising from increasing human connectivity and interchange of worldviews, products, services, capital, ideas, and other aspects of business and culture sums it up appropriately. The significant development in digital communication, especially owing to the advent and rise of the World Wide Web, and in the transportations systems and infrastructure for both humans and goods are major enablers and drivers of globalization, leading to an increased interdependence of economic activities world-wide.
Globalization of companies, as this study has attempted to capture and quantify, has several dimensions, including global presence, source of financing and capital, markets of their end products, elements of their value chain from suppliers, to research & development and workforce etc. Measuring the extent of the companies' globalization using these dimensions has provided an objective basis for making their data and attributes comparable with each other on a uniform scale.
Success as a term does not require further elaboration. In the context of this study, though, success has been seen to have several dimensions, including the viability of a commercial enterprise, market share, shareholder value, financial performance, strategic direction and employee satisfaction, to name a few.
At the start of the 21st century there is one issue that is discussed more than almost any other. That issue is called globalization. Hardly a day goes by without globalization being mentioned by politicians, broadcasters, and newspapers. It has made its way in schools, colleges, and universities too. It can even be heard in discussions among the general public in the street, in shops or at work. It seems almost anything that happens today can be attributed to or blamed upon globalization.
We all have probably heard the expression 'It's a small world'. People have been saying it for years but now it is true. Just check out the labels on your clothes - almost certainly they have been made in another part of the world. Turn on the computer and the internet will give you access to websites almost anywhere. Look at sport on television and you will see that it has a worldwide audience. So why do we now live in a small world? The answer lies with improved travel and communications which have made links with other people and countries around the world so much quicker and easier. These links have increased at such a rapid rate that we now have a new word to describe it. The word is globalization.
But what exactly is globalization? Relatively few people can answer this question. This is not surprising as even the experts cannot agree on what globalization means. Making sense of globalization should be a priority for anyone concerned about the future well - being of the human race and our planet. The word globalization is now so widely used that a typical internet search engine will give you over two million results!
New world or new word?
One of the central debates concerning globalization is the use of the word itself. Many people, including politicians mostly use this word to describe the changing nature of the world around us as we move further into the 21st century. It is used to explain changes in world politics, in the global economy, in trade and industry, in crime and terrorism, in environmental threats and solutions and also social attitudes and behavior.
Others take a more critical view of globalization and say that it does not describe or explain a new word at all. To them it is simply a new 'buzz word' for patterns and processes, such as colonization, migration and international trade that have been happening for decades or even centuries. By labeling these as globalization they argue that people are ignoring the past and the lessons it has taught us.
"Globalization is what we in the Third World have for several centuries called colonization." - Martin Khor, Director of Third World network. Malaysia.
"One can be sure that virtually every one of the 2882 academic papers on globalization written in 1998 include its own definition of globalization as would each of the 589 new books on the subject published in that year." - The Globalization Guide 2002. Australian Apec Study Centre.
Defining the Indefinable?
With so many different views on globalization, defining the term is a very difficult task. However there are some common features of most definitions, which are worth considering at an outset.
Interdependency - the idea that people around the world are increasingly dependent on one another. What happens in one place has an effect on people elsewhere.
Interconnection - the idea that we are connected to people and places that were previously distant and unknown.
Shrinking of Space - The idea that distances are less important. Far off places are now within reach.
Speeding up of time - the idea that the world is operating at an even faster pace. News, money, ideas, information and people are moving around with increasing speed.
Technology - the idea that technological developments, such as jet aircraft, telephones, the internet, satellite television, etc make globalization possible.
Capital - the idea that it is the flow of money and investments around the world that drives the globalization process.
"Globalization is not new, but the present era has distinctive features. Shrinking space, shrinking time, and disappearing borders are linking peoples' lives more deeply, more intensely, more immediately than ever before." - United Nations Human Development Report. 1999
"Today, every part of the natural and human world is linked to every other. Local decisions have a global impact." - United Nations Population Fund (UNFPA). 'The State Of The World's Population' 2001
The world we are in:
Whether we choose to use the word or not, we live in a world where globalization affects all of us. The clothes we wear, the food we eat, the television we watch, the holidays we take, the cars we travel in, the music we listen to , and the news we follow bring us into closer contact with previously distant people and places. Although many of these encounters may pass unnoticed, anyone living in the worlds more developed countries experience some form of global interaction every day. And in the less developed countries of the world, peoples' lives are increasingly shaped by global forces.
This means that globalization is a truly worldwide process. It directly affects each one of us and more importantly affected by us itself.
"New transport, communication, and information technologies intensify competition while allowing firms to spread and manage international operations more efficiently." - United Nations Conference on Trade and Development, World Investment Report, 2001.
A Fast Moving World:
Faster, faster, fasterâ€¦..
Speed is a central element of globalization. All around us the world seems to be moving at an ever faster rate. The best example of this is the movement of information. In 2001 more information could be sent over a single cable in a second than was sent over the entire internet in a month in 1997. The speed of international communications and information flow is getting faster by the day. Technological developments, particularly in the computer and telecommunications industry are so rapid that keeping up can be a real problem. Computers bought only a few years ago can seem almost impossibly slow compared to the latest available models. People can now use their mobile phones to access the internet or have news or sports results sent to them as the events happen to them. None of this was possible just a few years ago. Indeed it seems like something from a science fiction movie as little as ten years ago.
It is this rapid development that makes globalization possible. But it also raises serious concerns for those who cannot keep up with the pace of change. What happens to those who are left out of the technological revolution? This is an issue of great concern to critics of globalization.
Since 1970, the speed of microprocessors has doubled every eighteen months.
On the move:
Some of the greatest technological developments of the past have been in transportation and this plays a vital role in globalization. From the horse drawn stagecoach to the train, from the car to the jet air craft human beings have constantly managed to shrink space by reducing journey time. Today, jet aircrafts have made international travel easier and more affordable. Business leaders can fly to their factories, partners, or clients in other cities or countries in just a few hours. This has helped production, labour forces, and markets to become increasingly international.
The jet aircraft has also caused a boon in travel for personal and leisure purposes. This can be most clearly measured by the growth in international tourism an industry that many consider to be the clearest example of globalization.
In 1950 there were just 25 million international arrivals (people arriving in countries all over the world). In 2000 this figure rose to 698 million which further rose to a whooping 1 billion in 2010.
Improved methods of transport allow faster movement of goods around the world. For instance Kenyan companies use air freight to fly fresh flowers to Europe every night. This is so efficient that flowers can take as little as 36 hours to get from the fields in Kenya to supermarkets in Europe. Without such improvements it would have been impossible for Kenyan flower farms to compete in the European market, as their goods would have perished using more traditional transport such as ships. This is what we call international trade.
Even transport by ship has speeded up, thanks to incredible engineering achievements such as the Suez Canal (connecting the Indian ocean to the Mediterranean, and onwards to the Atlantic), and the Panama Canal (connecting the Atlantic and Pacific oceans). The Panama Canal avoids the need for shipping to travel around the tip of South America saving a distance of up to 8000 nautical miles. Theses canals reduced journey time drastically and boosted international trade - another central element of globalization.
"The creation of a water passage across Panama was one of the supreme human achievements of all time. The canal is an expression of that old and noble desire to bridge the divide, to bring people together" - David McCullough, The Path Between The Seas, 1977.
The world wide web:
The internet is often seen as the ultimate symbol of globalization. It allows us to communicate with people on the other side of the world, to do business with distant companies, and to share experiences with people we may never meet. It brings the world into our schools, homes and offices. Is the internet really as global as we think that it is known as the World Wide Web? Nonetheless it has plenty of users but it is still less than 1 in 6 of the world's population. Most internet use is concentrated in just a few key regions and countries of the world. Around 80% of internet users live in the more developed regions that are home to just 14% of the world's population. The vast majority of the world's people play little or no part in this technological revolution. This has led many to say that "the world wide web" is more like a series of hubs with the rest of the world simply passed by. In fact this makes the internet highly appropriate as a symbol of globalization because time and again as one notices it is the same places that are included and excluded from other aspects of globalization.
"The question we have to learn to ask about new technology is not whether it benefits us, but whom does it benefit most? For the electronic revolution has far more to offer the largest enterprises on the planet than it does to you and me." - Jerry Mander, President of International Forum on Globalisation
Supporters of globalization argue that communications technology will help poorer, less developed countries to catch up with the more developed.
South Asia is home to 23 percent of the world's population, but has just 1 percent of its internet users.
It will provide them with new opportunities to sell their produce, attract overseas investors, and perhaps also encourage international tourism. Critics are also concerned that the same technology also makes it easier for already wealthy economies to take advantage of the same opportunities. If this happens then the benefits may only add to the wealth of the already existing and have less developed regions still catching up.
Globalization is most often discussed in relation to the growth of international trade. Global trading activities have grown enormously over the past few decades because it has become so much easier to move capital and goods from one country to another. Companies and investors can make decisions and transfer goods from once country to another at the touch of a button. The growth of international trade has been equally impressive, with merchandise (raw materials and manufactured goods) trade increasing twenty fold between 1948 and 2000.
"Trade in a more deregulated environment lowers the income share of the poor, whereas trade in a more regulated environment raises the share of the poor." Christian E. Weller and Adam Hersh, The Long and Short of it: Global Liberalization Poverty And Inequality Economic Policy Institute. Washington DC, USA, 2002
Technological developments such as the internet and improved methods of transport help make this possible, but there is another important factor. This is known as the 'opening - up' of economies to greater trade. This simply opening up means that government removes barriers to international trade, making it easier for foreign companies to invest in and trade with their economies. The idea behind this so called 'free - trade system' is to allow companies and individuals to choose more freely where to locate or conduct business. While doing so, they are able to choose lower cost opportunities and maximize their profits. These higher profits can then be reinvested in further projects which in turn will lead to even greater benefits and the cycle moves on. Supporters of globalization believe that by encouraging economies to open up for free trade system it will create more jobs and lead to greater wealth for all. However opponents of free trade system argue that job insecurity and poverty have both increased because of free trade and that it is often the poorest that have been hardest hit.
"Openness to international market forces and competition is expected to allow developing countries to alter both the pace and the pattern of their participation in international trade to catch up with industrial countries." - United Nations Conference on Trade and Development (UNCTAD) Trade and Development Report, 2002.
International hotspots - a select few:
Critics of globalization point out that trade and investment are usually limited to a few international hot spots. This can be easily noticed in the distribution of investments in trade and industry around the world, using a measure FDI. Using FDI, we can see that the critics have a good point. Just three regions, the USA, the European Union, and Japan dominate FDI. Between 2008 and 2010, they account for 85% of outgoing investment and 75% of incoming investment. These figures clearly show that majority of the worlds FDI takes place in these 3 regions. This trend has led to them being called the 'global triad'. Critics argue that as long as the triad continues to dominate international investment, less developed countries will find it very difficult â€¦ to?
"The geographical structure of FDI has become far more complex in recent years, a further indication of increased interconnectedness within the global economy" - Peter Dicken, Global Shift: Transforming the World Economy, 1998.
Supporters of globalization point out that, although still dominated by the triad, the broader patterns of FDI are changing. FDI in developing countries has increase 12 times since 2000. However this increase is unevenly shared and has benefited only a select few countries. Most notable among these is China. It has been the most favored destination for FDI outside the global triad. The main reason for this is because of its good infrastructure, cheap and plentiful labor supply, and low taxes. In 2001, developing countries accounted for just 27.9% of FDI, of which over a third went to china and Hong kong alone. The countries of middle- east and Africa attract relatively low FDI accounting a meager 1% share in global FDI.
Several countries have attempted to attract FDI and boost trade by setting up Special Economic Zones or Free Trade Zones. Today there are over 850 EPZ across several countries employing 27 million people worldwide. An EPZ is an area where in which foreign companies are invited to locate their factories and conduct business. In return for their investment, the host government removes import and export tariffs for several years. The hope is that as companies become established in the EPZ they will choose to make further investments.
In 1998 China had 124 EPZS employing an estimated 18 million people - more than in any other country. In Sri Lanka's EPZs investing companies are allowed to operate tax free for ten years.
"For the investors, free - trade zones are a sort of corporate club - Med, where the hotel pays for everything, and the guests live free, and where integration with the local culture and economy is kept to a bare minimum." - Naomi Klein, No Logo, 2000.
Critics feel that EPZs represent one of the worst sides of globalization. They see them as parasites, taking what they need from the host economy for their own benefit, giving little or nothing in return. The EPZ ends up as an enclave, isolated from the rest of the country. Worse, still investors have no loyalty- they would quickly relocate their business to a competing EPZ if it offered them greater opportunities. In this way investors have been likened to tourists, moving to different resorts as it suits them best. Their ability to shop around for the best deals can even force governments to lower wages or other standards such as health and safety or environmental regulations in order to secure their investment. So why do governments go to such lengths? They hope that by opening their economies, creating EPZs and encouraging FDI, they can share in the wealth and prosperity promised by globalization. But many see this as a false hope, suggesting that following such a path only allows the rich to become richer and makes the poor still poorer. Whatever the truth is, it is clear that money matters a great deal and that the corporations who control this money have a great power in a globalised world.
Corporations - The Global Giants:
In a globalised world the true rulers are the corporations. But these are not just ordinary corporations. These are enormous business enterprises many with sales that are worth more than the economies of whole countries. In 2001, General Motors sale was higher than the national income of both Denmark and Norway and almost 25 times greater than the national income of Jamaica. On a broader scale the ten largest global corporations had sales of US $ 1198 billion which is more than the combined GDP of sub - Saharan Africa and South Asia which together are home to one third of the world's population. So how have these corporations become so large and wealthy?
The key to their success is that they produce and sell their products and services internationally. They are called 'Trans - National Corporations' (TNC) or sometimes Multi National Corporations (MNC). This simply means that they have operations in more than one country. Because they operate internationally, the influence of TNCs in international trade and finance grew rapidly during the last quarter of the twentieth century. Today they account for an estimated two - thirds of the worlds exports.
Globalization allows TNCs to locate their operations wherever they can best maximize profits. If wages are lower in Asia than in USA, then a US based TNC may choose to locate their labor intensive operations in Asia to reduce its wages costs. This type of decision taking by TNCs has given rise to new economic centers such as Bangalore in India where several European and American TNCs have set up data processing, software development and customer support centers to benefit from lower labor costs.
"Get out of the way of big business and the free movements of trade and capital by removing barriers, and every nation will be able to do what it does best." - New Scientist magazine, April 2002
"Business itself is now the most powerful force for change in the world today, richer and faster by far than most governments. And what is it doing with this power? It is using free trade, the most powerful weapon at its disposal, to tighten its grip on the globe" - Anita Roddick, founder of the Body Shop
A TNC located in Bangalore, with its low labor costs, clearly has a comparative advantage over its Californian competitors which can produce the same service or product for less. The savings can be passed on to customers in the form of low prices that in turn will allow the company to gain a share of the market and further increase their power.
Changing patterns of production:
Comparative advantage has existed since the very beginning of trade. The UK, for instance, traditionally had a comparative advantage in steel production. But globalization has changed the entire scenario. For example, reductions of more than two thirds in the cost of sea freight have reduced the importance of being located close to raw materials. Today it is cheaper to take the materials to a location where labor or land and rents cost less. As a result traditional centers of comparative advantage have been in decline. This led to a fall in steel production from 28.3 million tons in 1970 to 17.2 million tons in 1995. Over the same period, steel production in South Korea, one of the new global centers, increased from 0.4 million to 36.7 million tones. Similar shifts can be seen in other manufacturing and industrial sectors as TNCs take advantage of emerging centers of comparative advantage, created by globalization.
TNCs are frequently accused of being 'footloose' because of their ability to relocate their operations as and when it suits them. Critics argue that this leaves countries and their work forces extremely vulnerable. However in reality, many TNCs invest a lot of money in their global operations and will probably be reluctant to simply close them as a result of short term problems or costs. However TNCs are increasingly starting to use contractors or sub contractors for much of their production.
"Since the earliest history of humanity, few of us have been totally self - sufficient and we have learned to specialize so that the benefits can improve the quality of life for many. Trade between nations is based on comparative advantage" - John Dorman, 80:20, Development in an unequal world, 2002.
The foot loose nature of TNC has given them the powers to influence government policies and decisions. For example, in Gambia- government restrictions on tourism development were abolished following pressure from TNCs operating in the countries tourism industry. The Gambian government feared the loss of income if tour operators decided to pull out of their country and so changed the law to keep them happy, despite the social and environmental dangers posed by excessive development.
Strength and Variety:
Many of the giant TNCs have become powerful corporations by carrying products and services they provide. This is normally done by mergers and acquisitions. As TNCs continue to grow in strength, they are beginning to extend their control into new areas of our lives. For example, several TNCs are today involved in providing basic requirements such as water, electricity, and health services. In the future they can be involved in running schools, prisons, and even police forces.
Winners and Losers: For Global Good
Serious questions are currently being asked about the benefits of globalization for all. It is true that several TNCs have managed to use globalization to accumulate wealth and power however millions of people remain barely in touch with the new global era. It is estimated that half the world's population has never made or received a telephone call. Without access to this very basic technology how can such nations and people really be part of the global economy?
Critics of globalization argue that far from uniting the world, globalization is actually making it more divided. Evidence suggests that this is true because in 1960, 20% of the richest world population controlled 70% of global wealth and by 2000, this increased to 88%. Within countries too, the gap between rich and poor have widen.
"Uneven globalization is brining not only integration, but also fragmentation - dividing communities, nations, and regions into those that are integrated and those that are excluded." - United Nations Development Program Human Development Report, 1999
Education is especially important in order to separate in the modern global economy. To use the internet effectively, the ability to read English is essential as it is the main language of nearly 80% of the world's internet sites. This is despite the fact that fewer than one in ten people in the world speak English.
The poorest members of the society are often denied a role in the global economy because they cannot read, write or speak the language. Wealthier people, in contrast can generally afford to pay for their children to be educated to higher levels, so it is they who benefit from globalization.
"In this new competitive world, it is the unskilled that fare worst. They have become/ effectively commodities, easily replaceable by an ever growing overseas supply". - Noreena Hertz. The Silent Takeover, 2001
The most dramatic winners of globalization are a small handful of CEOs of the world's largest TNCs and investors who back them. They have made incredible personal gains as a result of globalization. Example: Bill Gates, the CEO of Microsoft had amassed a personal fortune worth US $ 52.8 billion by 2001 making him the world's richest person, which is equivalent to the combined national income of Kenya, Jamaica, Sudan, Nepal, Ecuador and Georgia. The select few are so wealthy that the richest 200 of them share an income greater than that of the poorest 41% of the world's population. If they were to donate just 1% of their wealth, these 200 people could fund primary education for all currently out of school worldwide.
"If you don't have educated people you don't have infrastructure, you don't have social organization, nobody pays any attention to you, they never put factories there, they don't try to sell to you. You are on the globe but not in the global economy." - Robert Reich, US Labour Secretary.
Just as some individuals make huge gains as a result of globalization, thousands of others indeed whole nations suffer or lose out completely. Globally there remain close to 3 billion people i.e. nearly half the world's population surviving on less than 2 $ a day. These people have not shared in the wealth created by globalization. Worse still those who lack the skills to get connected to this global economy are often attracted away from their home countries to work in those that already benefit the most. This phenomenon has been called a 'brain drain'. For poor countries such losses are especially hard to bear, as they have often spent limited resources educating people to reach those standards. In one year Nike paid Michael Jordan US $ 25 million to advertise its shoes - the same as 35000 Vietnamese workers were paid to make them.
New connections: one benefit of global labor market is that, with citizens working overseas, valuable trade and business links can be established. In 2002, it was estimated that 3% of the world's population lived outside their country of origin. Less developed countries can also benefit from payments that overseas workers send home to their families. In Haiti, remittances account for 17% of the national Income in 2000, and over 10% in five Latin American and Caribbean nations (LAC). In fact, the LAC region received over us $ 20 billion in remittances in 2000, making this form of income more important than aid payments and equivalent to a third of FDI in the region. As labor becomes increasingly international due to globalization, remittances will become even more important to the economies of less developed and developing countries. In 2000, overseas workers from Latin America and the Caribbean made over 80 million remittance payments.
The Global Environment:
People may continue to debate whether culture is truly global or how global the economy is, but there is one issue that is definitely global - the environment. We all share the same planet and we all depend on its ability to support life. More importantly, we are dependent on one another's ability to manage and protect the environment for the benefit of all. This common dependence has led some commentators to refer to the environment as 'global commons'.
Nature provides clear examples of how environmental events in one area have an impact on the global commons. For example, in 1991 the eruption of Mount Pinatubo in the Philippines threw so much ash and gas into the atmosphere that it created a cloud around the whole globe. This cloud blocked out some of the suns energy and temporarily reduced average world temperature by 0.5 to 1 degree Celsius. The El Nino effect, caused by the occasional warming of the Pacific Ocean, is another example of a local event having a global impact.
"The more the economy grows, the more rapid the depletion of the living systems that are the source of all real wealth and the more intense the unequal competition between the rich and poor for what remains - a competition the poor invariably lose" - People Centered Development Forum
Thus volcanoes and EL Nino provide strong reminders that we share the same global environment and we can all be affected by any changes in that environment. Increasingly, however it is human activity that rather than natures that is doing the most harm. Scientists have predicted that global warming will lead to an increase in extreme weather events. The distribution of wild life could change and farming could be severely disrupted as the conditions required for growing crops are altered. Extreme flooding in Europe, long period of drought in eastern and southern Africa are proof of global warming.
A number of environmentalist believe that globalization, with its emphasis on industry, international trade and travel is going to be a major threat.
Waking up to Reality:
Globalization is not at all bad news for the environment. It has made people more aware of the environment and dangers facing it. Greater media coverage, personal travel experiences, and international cooperation have brought environmental issues into the homes of people far removed from where they are actually happening. People are slowly beginning to understand that they are directly connected to and influenced by the state of the environment at both local and global level.
Governments have also taken environmental issues more seriously in recent years. New policies have been adopted by many countries to try to protect the environment better. And globally, governments are working together to tackle some of the biggest issues such as climate change.
"Globalization is getting a bad name, but we have shown that global decisions can be the good of the environment." - Jan Pronk, Chairman of Kyoto climate negotiations.
Environmentalists are especially concerned about the actions of the large TNCs when it comes to environment as their countries of origin introduce tighter controls to protect the environment and relocating their corporation to countries with lesser restrictions. This means that globalization is leading to a transfer of pollution and environmental degradation from the rich to the poor countries. The poor are least able to cope with the effects of pollution.
"Only when people are rich enough to feed themselves do they begin to think about the effect of their actions on the world around them and on the future generations" - Bjorn Lomborg, Danish Environmentalist and Author.
Since the mid 1990s there has been a rising tide of concern about globalization and in particular the role of TNCs. This concern has become so strong that it has turned into a resistance movement, determined to make governments and TNCs redirect globalization for the good of all. What makes this anti globalization movement special is that it is not made up of global experts but of ordinary individuals. Across the world people are frustrated with the way their lives are dominated by the seemingly large corporations and inability of governments to do anything about it. Many people have lost their homes, jobs as a result of globalization, or watched their local environment being destroyed or polluted. Strongest amongst these concerns is the belief that a successful global society should function in the interests of the people, rather than business. 75% of Americans believe that business has gained too much power over many parts of their lives.
"What is the worth of representation if our politicians now jump to the commands of corporation rather than those of their known citizens." - Noreena Hertz, The Silent Takeover, 2001.
In many parts of the world people have now began to take direct action against globalization and its negative consequences. Critics have been quick to point this out and often accuse the anti - globalization movement of having few ideas for an alternative or fairer system.
"I think the protestors have made an important contribution by making people aware of the flaws of the system. People on the street had an impact on public opinion and corporations which sell to the public responded to that." - George Soros, Founder of Quantum Group of Funds.
Some of the ideas are giving all nations a fair chance to compete in the global economy is one of the main aims of the anti - globalization movement. In particular, protestors argue that the crippling debts many of these countries owe to wealthy nations should be forgiven so that they can redirect their money into developing their economies instead of making debt repayments. Campaigners are also concerned that workers and producers should be paid fairly for their labour. Another campaign supported by those resisting globalization is the idea of localization. This promotes a return to local markets and locally produced goods and services. Supporters believe that it would help create strong local economies, build new skills, and reduce environmental impact. Food is used as an example of the potential benefits.
"Anti- globalization has piggy backed on globalization. The resources, infrastructure, and technology of a globalizing world have enabled the anti - globalization movement." - James Harding, Financial Times Newspaper, UK
The Future of Globalization:
A mixed blessing: in the opening decade of the 21st century, globalization remains one of the world's most pressing debates, giving rise to a huge range of conflicts, opinions and ideas and raising far more questions than answers. If globalization is so good and has created so much wealth then why do nearly a billion people stay in poverty? If globalization encourages efficiency and enterprise, why is technology known to be harmful to the people and the environment still so widely used? If the divide between the rich and the poor is getting wider at both a local and global level, then how can globalization be said to bring benefits to all?
It is hardly surprising that globalization has become such a complicated and confusing issue to most people. There are certainly those who have made up their minds and have emerged as strong supporters or critics of globalization but the vast majority of people remain unsure of where they stand and even more certain about the future of globalization.
"There is little sign that the economic benefits of the global village will be evenly distributed. The income gap between the rich and poor has widened over last 50 years. The technology gap has yawned wider still." - Richard Buckley, Understanding global issues, 1998
An inevitable process: many people follow the view of world politicians - that globalization is an inevitable process that is here to stay. They would argue that too many people around the world are now dependent on international trade and global links for it to all suddenly disappear. Many would not want to lose such benefits. They enjoy a higher standard of living than ever before, greater opportunities to travel, and more personal choice in what they eat, drink, wear, and enjoy. But if all this is an inevitable result of globalization vast majority of the world's population living in less developed countries do not enjoy the same benefits. For them globalization has meant loss of their livelihood and the destruction of their environment. To make matters worse, many are now seeing their traditions, beliefs, even their languages are being replaced by culture of those controlling globalization.
A change for the better: far from accepting globalization as an inevitable process, an increasing number of people believe that something can and should be done about it. They point to the success of initiatives such as fair trade movement as examples of how global business can be beneficial for producers, business, and consumers alike. The proceeds of fair trade have paid for thousands of children to start attending school and for hundreds of communities to be given improved health care facilities.
Ecotourism is another global initiative that has bought benefits and led to greater protection of some of the planets most endangered environments. These are just two examples, however many more exist.
"I remain convinced that globalization can benefit human kind as a whole. But clearly, at the moment, millions of people - perhaps even the majority of the human race - are being denied of those benefits. They are poor not because they have too much globalization, but too little or none at all" - Kofi Annan, UN Secretary - General.
"I do not think it makes any sense to be unreservedly for or against globalization. The question is rather how everybody including the poor, can benefit from the advantages of globalization without suffering from any of its disadvantages." - Guy Verhofstadt , Prime Minister of Belgium.
Take it personally:
Despite such positive examples, critics of globalization warn that there are still many reasons to be concerned about the future. One of the biggest concerns however, is the attitude of the general public when it comes to globalization. Too many people believe they are powerless to make any difference to the way society and economies are currently run. In fact some of the lots are so convinced by this that they do not even turn to vote anymore. The truth, campaigners say is very different. Without voters, a politician cannot be heard and without customers a business has no income. They believe that if we all take globalization personally then our actions can make a real difference. Time will tell if they are right.
"Consumers are starting to ask about the origins of the product, about the producers, their working conditions, and their wages. They are also realizing that they can make a difference, that their actions can force business to change" - Body Shop website.
Review of Related Literature
C.R. Kothari, Research Methodology: Methods and Techniques.
The content of this will form the backbone of the research's methodology. The book provides insights into the methods and techniques of conducting methodological and systematic research.
Thomas L. Friedman, The World is Flat: A brief History of the Twenty-first Century, 2005.
The author of this book uses the concept of a worldwide level playing field to explain how individuals, companies, and nations will marshal collaborative technologies, primarily the Internet, to advance in a landscape no longer impeded by regional, national, and political boundaries. The companies, which are the subject of this research, will also be exposed to the rapidly changing business environment at global scale and will need to adapt accordingly.
Paul K. Ward, Making a strong case for going global: A Framework for Analysis, Journal of association leadership, 2006.
This article introduces a market-driven approach to building a business case based on the variation of risk-adjusted rates of return. This approach breaks the management and measurement tasks into global market opportunities and global risks in ways that substantially accommodate companies' demand for both sustainable revenues and growth
George S. Yip, Die Globale Wettbewerbsstrategie: weltweit erfolgreiche Geschäfte  , 1996
This book provides a guide to businesses for developing a global business strategy, including issues of integration of businesses into the global business platform
Theodore Levitt (1989) has authored many books and articles on internationalization and expresses that countries still want to be recognized as different and expect other to respect their individuality of culture, yet at the same time insist wholesale transfers of modern goods and technology.
Demirbas et al. (2010) calculated the chances of the globalization status of a firm changing from year to year and developed the following Transition Matrix
Fig 3??. Transition Probabilities Across Firm Categories
Source- Demirbas et al. (2010), National Institute of Public Finance and Policy, New Delhi
This examination of transition probabilities has three key implications. First, internationalization is relatively 'sticky'; firms tend not to flit around these categories. Second, D firms rarely jump directly to DXI. The process of graduating to globalization generally involves first achieving DX status. Third, the progression towards internationalization is not inevitable. Many firms drop down from DXI to DX and from DX to D.
The observations of their research with respect to globalization were as follows:
Firms in the electricity industry have the lowest proclivity for internationalization.
Firms with lesser tangible assets are more likely to internationalize.
Firms with greater investments in knowledge are more likely to internationalize.
Firms which earn a higher return on equity appear to be slightly less inclined towards internationalization.
Younger firms are more likely to internationalize.
Helpman et al. (2004) predict that more productive firms export and the most productive firms do outbound FDI.
Forrester Consultancy points out that in response to the pressures of globalization, corporations must develop a networked worldwide business model based on flexible technology architecture. Firms must adopt the right business models to drive their global transformation. Companies should give up being vertically integrated and move to an ecosystem of global partners
REN21's Renewable Global Status Report (GSR), 2012
The REN21's Renewable Global Status Report (GSR), 2012 studies the cumulating effect of steady growth in renewable energy markets, support policies and investment over the past years. It provides testimony of the undeterred growth of electricity, heat, and fuel production capacities from renewable energy sources, including solar PV, wind power, solar hot water/heating, bio-fuels, hydropower, and geothermal.
Clean Energy Trends 2012 Report - Clean Edge, Inc
The report deals with tracking, forecasting, and market sizing the global solar, wind, and bio-fuels markets, to detailed analysis of solar PV pricing, the public markets, and venture capital investments, this report series has become the signature report in the clean-energy economy.
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The report presents a pathway towards a 100% renewable energy system for the EU, examining the effects on Europe's energy supply system and on CO2 emissions, while at the same time portraying the economic, environmental and social benefits of such a system. Moreover, the report provides as well as providing policy recommendations for what is needed to fully exploit the EU´s vast renewable energy potential.
Kirsty Hamilton, Chatham House: Scaling Up Renewable Energy in Developing Countries: finance and investment perspective, 2010 (Research Paper)
This research paper provides an evidence-base from private sector financiers involved in developing countries (described as emerging markets) identifying issues faced in making RE investments in the 2008-2009 period. This provides a basis for understanding conditions for scaling up investment in renewable energy. The focus is on scaled-up implementation of available RE technologies, rather than early-stage technology development.
Ernst & Young Renewable Energy Country Attractiveness Indices - Ernst & Young, May 2012
This report by Ernst & Young Environmental Finance team ranks national renewable energy markets, and their suitability for individual technologies. The Country Attractiveness Indices track the relative attractiveness of 40 countries' renewable energy markets across a selection of technologies each quarter.
IEA: Deploying Renewables in Southeast Asia by Olz and Beerepoot 2010
This report investigates the potentials and barriers for scaling up market penetration of renewable energy technologies (RETs) in the electricity, heating and transport sectors in the ASEAN-6 countries. In addition to analyzing the implications of effective policies on renewable energy market growth, it examines how to overcome economic and noneconomic barriers that slow investment in renewable energy, and offers policy recommendations to encourage effective and efficient exploitation of renewable energy in Southeast Asia.
Global Wind Energy Council: Global Wind Report 2011 - Annual market update
GWEC's report focuses on wind power markets around the world. It provides a comprehensive snapshot of the global industry, present in about 75 countries, with 21 countries having more than 1000 MW installed. This edition includes insights of the most important wind power markets worldwide, future trends with projections for 2012-2016, role of public finance and an overview of the current status of global offshore.
Eric Martinot, Renewable Energy Futures: Targets, Scenarios, and Pathways.
The research paper focuses on the future shares of renewable energy (of primary energy, electricity, heating, or transport) shown in scenarios and policy targets. It provides a clear and detailed explanation of the two different (and equally valid) methodologies for measuring "share of primary energy from renewable sources" (the "IEA Method" and the "BP Method", also called the "substitution method").
International Energy Agency: Case Studies in Sustainable Development in the Coal Industry
This publication illustrates that many of the commercial objectives of the coal industry - cost effective achievement of environmental standards, technology research and development, technology transfer and collaboration along the value chain - are also issues that governments can approach positively, in consultation with industry, so that coal is able to have a long-term role in sustainable development.
European Solar Thermal Industry Federation (ESTIF): Solar Thermal Action Plan for Europe , ESTIF, 2007
The Solar Thermal Action Plan for Europe (STAP) addresses solar heating and cooling policies. It considers the current barriers to growth and explains how a mix of policy measures can contribute to their removal. Concrete guidelines on 5 key issues provide much practical help.
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This report presents a series of outlooks on the future of renewable energy in America, by a range of organizations that gave presentations to the Phase II policy conference on November 30, 2006 in Washington, DC. Research has been done with respect to the following areas:
â€¢ Government and Institutional Outlook
â€¢ Industry Outlook
â€¢ Upside Potential
Eric Martinot et al , Renewable Energy Markets In Developing Countries.
The report reviews existing markets and installations for five core applications: rural lighting, productive uses, power generation, cooking/hot water, and transport fuels; gives emerging lessons for rural development, consumer credit, enterprise development, power sector policy, and market facilitation organizations in the developing countries.
Eric Martinot, World Bank: Renewable energy investment by the World Bank, 2001.
This paper considers the implementation challenges of Fuel for thought strategies and the opportunities for carrying them out. The paper distinguishes between agendas in the energy and rural-development sectors, and reviews limitations to implementing these agendas.
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This study analyses empirical qualitative data collected from key stakeholders in the renewable energy industry in South Africa. This paper offers new ways of looking at the financing problems currently being experienced in the industry and proposes an innovative framework to assist the stakeholders in the industry in structuring financing for renewable energy ventures.
North Carolina Renewable Energy & Energy Efficiency Industries Census 2009
This report primarily focuses on the industries contributing to electric generation and studies employment estimates produced by national studies in the Energy & Energy Efficiency Industries.
Assessing Domestic Renewable Energy Markets, the Ad Rem Project
This research report discusses capital structures that can be used to finance solar and wind energy projects. In order to determine the economic feasibility of both solar and wind power, multiple areas are investigated in order to establish the overall profitability of the project, including legal mandates, tax considerations, and all costs, including development and maintenance, of solar and wind power in the Pikes Peak or Colorado Region.
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This report provides an analysis of the opportunities Sustainable Energy for All presents to the renewable energy industry. It identifies specific priority actions renewable energy companies can take to advance the three objectives of the initiative -energy access, energy efficiency, and renewable energy-while also driving increased business value.
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