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Globalization may also be outlined as method of international integration arising from the interchange of world views, products, ideas, and different aspects of culture. Particularly, advances in transportation and telecommunications and infrastructure, as well as the rise of the Internet major factors in economic process and precipitate additional reciprocity of economic and cultural activities. Example: If you look at the tag on your shirt, chances are, we would see that it was made in a country other than the one in which we are in now. What is additional, before it reached our wardrobe, this shirt may are created with Chinese cotton seamed by Thai hands, shipped across the Pacific on a French merchant ship crewed by Spaniards to a Los Angeles harbor. This international exchange is simply one example of economic process, a method that has everything to try and do with geography.
Globalization is the process that defines the global economy. If it is viewed simply as describing the phenomenon of international trade, globalization has been taking place for centuries. Recently, the phenomenon has been formalized and encouraged by various free or liberalized trade agreements, such as the 1948 General Agreement on Tariff Trade (GATT) and the framework determined by the World Trade Organization (WTO). Such trade (which includes the exchange of capital, information, and people) is “free” in the sense that it is not under the control of any one state. Globalization can also be understood as a holistic phenomenon related to general systems theory, where business arrangements and transactions concluded in one domain will have effects in others, whether these are requested, invited, desired, or otherwise.
The term “globalization” indicates a complex topic, however, and one that can be interpreted in many different ways, each of which reveals different facets of its complexity, including change: The word “globalization” describes processes of social change having any kind of international dimension: changing economies, power relations, communication, cultures, and organizations.
The origin of globalization goes back to human civilizations. The first phase of globalization began around the 1870 and ended with the World War 1st in 1919 driven by the industrial revolution in UK, Germany and USA. The import of raw materials by these countries from their colonies and exporting finished goods were the main reason for the sharp increase in trade during this phase. Below shows the process of globalization since the 15th century, this explains to us how exactly enhancement in technology and communication enhanced globalization over centuries-
In the 15th & 16th century, Europeans made important discoveries in their exploration of the World Ocean. They began cross Atlantic travel to the “New World” of the Americas.
In 17th &18th century, Colonization of land took place and movement of people, good and ideas.
In 19th century, Development of new forms of transportation, steamship, railroads and telecommunications.
In 20th century, road vehicles and Airlines made transportation even faster, the advent of electronic communications, most notably mobile phones and the Internet, connected billions of people in new ways leading into the 21st century.
DIFFERENT VIEWS OF GLOBALIZATION:
Globalization is highly controversial. In a 1997 Global Finance article, Jim Kelly, CEO of United Parcel Service, took a positive stance: “So why go global? Because any company that can, should. It’s not a question of growth for the sake of growth. It’s the price of admission to today’s marketplace.” At the 1996 Inaugural Lecture of Malaysia Fellowship Exchange Programmed, Malaysian Prime Minister Dato’ Seri Mahathir Mohamad questioned the impact of globalization: “The effect of economic globalization would be the demise of the small companies based in the developing countries. Large international corporations originating in the developed countries will take over everything.” Some say the implications of the globalization controversy can be useful in understanding the trend.
One advantage of globalization is that consumers have a much wider choice of goods and services. It also enables manufacturers to identify new markets once their domestic markets have reached saturation. Such opening of markets can inspire the development of new products. Businesses can reap increased profits from using cheap foreign labor or importing cheaper foreign raw materials or parts.
However, globalization opens foreign markets to sell cultural resources much more easily, leading to corporate cultural dominance. Global marketing includes political ideas, social understandings, and cultural mores as well as goods and services. It is here that the phenomenon is most frequently criticized because of the social and cultural changes that such an economic model brings about. Critics say that by instilling cultural information values into foreign markets and reinforcing this paradigm over time, businesses are able to perpetuate needs for products, perhaps artificially. Also, most globalization efforts originate in wealthier countries, notably the United States, the European Union, and Japan. The benefits are derived largely by the home country – such as greater choice of goods, employment rises, and profitability derived from exports.
Faster and less expensive communication, such as now provided by ICTs, in turn affect cultural boundaries and identities. Today, increased access to information about other nations is available, and individuals have become more aware of cultural diversity and their role as global citizens.
Even though globalization specifically relates to economic events, it is nonetheless involved with other social issues. Many argue that there are only benefits to be gained from more open markets and that global institutions can be used to remedy global inequalities; others believe that this direction might lessen the power of individual nation-states. V. Mosco, in his 1996 book, The Political Economy of Information, notes that others believe that there are deeper rifts of class, gender, power, and wealth than before, disguised by the use of the term “globalization.”
The major expression of globalization lies in companies, and that emphasizes the importance of this phenomenon for RIM professionals. There are few enterprises today that have no international connections, partly because of the general framework of the global economy. Because of the various modes of international activity, there appears to be a considerable range from domestic firms to internationalized firms. Such international activities include importing and exporting goods and raw materials, investments, employing foreign labor, and combinations of these.
It cannot be assumed; however, that trade within a national economy is non global while trade across national state boundaries is global. Many companies are international but not global (e.g., domestic firms with subsidiaries abroad); some are transnational but involve only two countries (e.g., United States and Canada). Others are multinational (involving several countries in various ways); few are global. Few operate totally and exclusively within a domestic market with no imports or exports.
It is important to distinguish between multinational and global companies. Many view multinational companies (MNCs) as the driving force behind globalization. An MNC is a company that has established offices in several countries. The countries in which it owns or controls production facilities, the foreign workforce it employs, and foreign ownership of companies all indicate a company’s multinational status. The 1999 World Investment Report estimates that there are 63,000 such companies worldwide with about 500,000 foreign affiliates.
Many believe that MNCs are by nature global, although this term is reserved for those companies with activities in all the world’s continents or even many countries. There is no doubt, however, that many MNCs are able to distribute their services and products widely across the globe. A global company is also one that is able to shift, with some degree of ease, practices, labor, or production capacity among countries depending on changing local conditions.
Formation of trade bloc:
For years the champion of multilateralism was the United States. However, multilateral trade negotiations in the 1980s were slow and tedious, thus leading the U.S. to move away from its policy of supporting only multilateral trade negotiations as a mechanism for encouraging free trade. This new U.S. policy fosters the development of both multilateral liberalization trade and preferential trade agreements.
Since the mid 1980s there has been a profound change in the structure of the international economy due to the widespread growth and internal enhancement of regional trading blocs in all parts of the globe. The World Trade Organization (WTO), for example, notes that almost all of its 134 members are signatories to regional trade agreements with other countries. As of February 1999 the GATT/WTO has been notified of 184 regional trade agreements of which 109 are currently in effect (see WTO 1999 web page).’ These regional trade groups, according to Fred Bergsten of the Institute for International Economics, account for approximately 60 percent of world trade (Anon. 1999).
Among the most notable and impactful of these trade arrangements include the North American Free Trade Agreement (NAFTA) and the European Union (EU). The plan to establish the Asian-Pacific Economic Cooperation Group by 2020 (2010 for developed economies; 2020 for developing ones) should be an equally important development (APEC Secretariat 1999).
The United States, Mexico, and Canada created a free trade area that became effective in January 1994. The members of NAFTA have declared their aspiration of incorporating much of Latin America and the Caribbean, thus ultimately establishing a Free Trade Area of the Americas (FTAA). Efforts are underway to make the FTAA a reality by 2005 (Office of NAFTA & Inter-American Affairs 2000). This area collectively will have a gross domestic product (GDP) of $2 trillion with a population of almost 500 million by the year 2000. According to the President of Pakistan’s Institute for Development Research, 87 percent of world trade is currently accounted for by three blocs of 33 countries; namely NAFTA, the EU, and APEC (Anon. 2000).
The European Union’s intensification of its program with its membership now totaling 15 members and a new common currency for 11 of its 15 members currently results in the establishment of the world’s largest single market. Further expansion is anticipated, particularly into Central Europe, with the addition of up to ten new members over the next few years. It is estimated that the EU generates 31 percent of total world output and commands more than 20 percent of world trade (Weindenfeld 1999).
The Asia-Pacific Economic Cooperation (APEC), in spite of the financial problems the area experienced in 1997 and 1998, is still one of the fastest-growing regions in the world. By 1998, APEC’s 21 member economies produced a Gross Domestic Product of more than US$16 trillion; this represents approximately 42 percent of global trade (Asia-Pacific Cooperation 2000). In contrast to other regional integrations, APEC, an open regional organization, represents an approach to integration that is concordant with the multilateralism of the WTO (Kim and Koo 1997).
While the history of trade is replete with regional trade bloc formation, we know little as to why or how these blocs form. At first, it was implicitly assumed that the trade blocs formed because there were some inherent benefits to the participants. However, a review of the existing knowledge of this area calls that proposition into question.
Factors affecting Globalizations:
1) Technology (communication): Globalization is in part where it is today due to the advancements that the world has made in technology in general. Technology is one of the leading factors in the evolution of globalization. Information technology is helping further develop globalization. The cost efficiency of many technologies is increasing, and these technologies are beginning to impact everyday life. For example, the cell phone is becoming more and more available to the average consumers who rely on it. Cell phones are used for anything from family conversations to business calls, but for many they have become a way of life. Life might become impossible without the reliance on the cell phone. Another example of information technology is the Internet, which has drastically changed since its big debut in the 1990’s.
2) Transportation: Faster and cheaper transportation systems allow multinational corporations to build manufacturing facilities across the globe while maintaining scheduled, frequent deliveries of parts and finished products. For example, advances in the aviation system allow businesses to substitute just-in-time deliveries from remote manufacturing plants in place of large inventories.
3. Deregulation: From the 1980s onwards (starting in the UK) many rules and regulations in business were removed, especially rules regarding foreign ownership. Privatization also took place, and large areas of business were now open to purchase and/or take-over. This allowed businesses in one country to buy those in another. For example, many UK utilities, once government businesses, are owned by French and US businesses.
4. Removal of capital exchange controls: The movement of money from one country to another was also controlled, and these controls were lifted over the same period. This allowed businesses to move money from one country to another in a search for better business returns; if investment in one’s own country looked unattractive, a business could buy businesses in another country. During the 1990s huge sums of money, mainly from the US, have come into the UK economy.
5. Free Trade: Many barriers to trade have been removed. Some of this has been done by regional groupings of countries such as the EU. Most of it has been done by the WTO. This makes trade cheaper and therefore more attractive to business.
6. Consumer tastes have changed, and consumers are more willing to try foreign products: The arrival of global satellite television, for example, has exposed consumers to global advertising. Consumers are more aware of what is available in other countries, and are keen to give it a try.
7. Emerging markets in developing countries: especially the ‘Tigers’ of SE Asia e.g. Thailand. There has been high growth of incomes in these countries, which makes large consumer markets with money to spend. Indonesia, for example, whilst still not particularly rich, has some 350 million consumers. Both India and China are very poor countries, but there are small middle classes who are doing very well and have money to spend. Although these groups are small in the context of the country, the overall populations are so huge (over 1 billion) that a small middle class adds up to many millions of consumers.
Positive Aspects of Globalization:
As more money is poured in to developing countries, there is a greater chance for the people in those countries to economically succeed and increase their standard of living.
Global competition encourages creativity and innovation and keeps prices for commodities/services in check.
Developing countries are able to reap the benefits of current technology without undergoing many of the growing pains associated with development of these technologies.
Governments are able to better work together towards common goals now that there is an advantage in cooperation, an improved ability to interact and coordinate, and a global awareness of issues.
There is a greater access to foreign culture in the form of movies, music, food, clothing, and more. In short, the world has more choices.
Negative Aspects of Globalization:
Outsourcing, while it provides jobs to a population in one country, takes away those jobs from another country, leaving many without opportunities.
Although different cultures from around the world are able to interact, they begin to meld, and the contours and individuality of each begin to fade.
There may be a greater chance of disease spreading worldwide, as well as invasive species that could prove devastating in non-native ecosystems.
There is little international regulation, an unfortunate fact that could have dire consequences for the safety of people and the environment.
Large Western-driven organizations such as the International Monetary Fund and the World Bank make it easy for a developing country to obtain a loan. However, a Western-focus is often applied to a non-Western situation, resulting in failed progress.
“The world is not flat; it’s bumpy and you can’t see what’s ahead. As new markets expand and globalization increases, opportunities are becoming harder to find.”
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