Globalization has led to the emergence of numerous trends and challenges for business operations in the 21st Century economies. The contemporary business environment is more dynamic due to the effects of the high rate of globalization. Most economies in the world are growing on a worldwide scale, thus increasing demands on businesses targeting to fill various gaps (Weinstein 100). In an economic perspective, globalization applies as a good whose intensity lacks moderation or ability to diminish. An economist’s view of globalization focuses on opportunities that a business has for expansion and the way people can have more financial reward for their work.
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However, this is contrary to the general understanding of globalization because of the real problems people face because of its development. In the real world, businesses are dealing with higher demands, increased competition, and a lower possibility index for thriving in new economies (Cavanagh and Mander 221). On the other hand, employees working for businesses operating in theses new economies face a higher risk of being jobless because of high competition and reduced demand for labor due to technological advancements.
Economic globalization means that there is an increased level of interaction between various factors that promote human living and business operations. Production of goods and services is happening on the international level due to social and financial developments. Globalization plays a crucial role in helping business to thrive in new economies because it heightens the interconnectedness between various economies.
For example, people often develop an immediate connection to other economies when they purchase goods from foreign markets from their country. Studies have shown that globalization helps to boost the Gross Domestic Product (GDP) of new economies due to an increase in Foreign Direct Investments (FDI). FDI helps to increase the chances of businesses making steady progress in new economies (Cavanagh and Mander 230). Globalization helps business thrive in new economies through foreign investments that help them to have commercial rights for increasing the production of goods and services.
Sources, reasons, and drivers of globalization
Studies have shown that the rate of economic globalization has been on a steady increase since the turn of the century (Weinstein 109). Economies around the world continue to rely on each other for production. Globalization has played a major role in the increasing rate of importation and exportation of goods, human resources, financial resources, and services across various global economies.
This is clear evidence that countries across the world are interacting more and at a higher level in terms of promoting economic growth (International Monetary Fund 45). However, in order to understand the real effect of globalization on businesses, it is important to establish the sources, reasons, and drivers of globalization. Globalization is a characteristic feature of the contemporary business development model and a measure of economic progress of various countries. As earlier mentioned, globalization is characterized by an increase in the level of trade interaction between countries, FDI, multinational production. These three elements act as the main sources of globalization.
Due to the high rate of technological advancements happening in the 21st Century, it has become easier for businesses to invest in foreign markets (Ritzer, 300). Although most countries have developed incentives to regulate the amount of FDI entering their economies, technology has enabled businesses to operate in foreign markets without compromising those regulations. Economic benefits of multinational production have also contributed a lot to the emergence and development of globalization (Tanzi 3).
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Initially, some countries were opposed to production involving other countries. However, the financial benefits of this kind of interaction in terms of boosting the GDP helped to change their stand. FDI also played a crucial role in development of globalization. It helped to increase production and economic interaction by opening up local markets to various foreign investors. An open approach to the production and trading of goods has resulted in increased interaction between people and countries, as the need to develop regulatory incentives arose (Cavanagh and Mander 232). Governments had the will to allow foreign investors in their economies, but had to protect their economic interests by regulating the amount of financial resources the investors set aside for production.
Some of the main driving forces behind the high rate of globalization relate to politics and technology (Weinstein 112). Technology has played a crucial role in the development of globalization since the turn of the century. Technology has made it easy for people to form linkages with foreign investors. Examples of technological advancements that have driven globalization to its current state include innovations in the transport sector, communication industry, and computer technology.
Technological advancements in these sectors created new opportunities for business development. These advancements helped to reduce the cost of production and operating businesses. Political factors have also contributed to the advancement of globalization. Various countries have created a stable political environment that attracts foreign investors (International Monetary Fund 58). The trade policies and incentives developed by political leaders in various countries indicated that countries were willing to grow the GDP through the economic benefits derived from foreign investments.
Countries also have different business cultures that helped to promote globalization. For example, the open and inclusive business cultures of the United States and Asian countries have helped to promote globalization. Foreign investors can easily penetrate those markets and promote their businesses without having the challenge of fulfilling numerous demands (International Monetary Fund 70). However, economists have argued against an overly inclusive business culture because it can lead to overdependence on others for production. Over the last couple of years, the United States has depended a lot on Asia for its production needs. This has hugely affected the competitive nature of the country on the international market, as countries like China are rivaling the United States in the control of the global financial system (Ritzer, 309). The rate of technological advancements in Asia has made some European countries to rely on external production.
Effects of globalization on economies
Studies have shown that globalization has numerous effects on economies. The era of globalization is characterized by advancements in technology, a dynamic business environment, and steady growth of economies around the world. Economies around the world have dealt with globalization differently (International Monetary Fund 79). Some thrive while others find themselves in a constant financial quagmire. Globalization has influenced the process of national policymaking as countries struggle to reduce their vulnerability to its negative effects such as recessions. Globalization has helped countries to achieve sustainable development. In addition, globalization also has numerous negative effects on economies around the world. People have developed various connotations of globalization depending on the kind of influence it had on them.
For countries, globalization is one of the best things to have happened because it has helped to boost their GDP, opened up their economies to foreign investors, and improve relations with other countries (International Monetary Fund 101). Businesses have also thrived a lot due to globalization because they have managed to expand their operations to foreign markets. On the other hand, for many people, especially employees, associate globalization with negativity. It has increased competition in the labor market and reduced demand for labor as many employers are relying more on technology (Tanzi 5). Globalization has had both positive and negative effects on global economies.
Globalization has helped to create markets that are more efficient. An efficient market is characterized by equilibrium in the supply and demand curve. Economies strive to achieve a situation where consumers create demand for products, the desire to pay for them, and have the ability to pay. On its part, the economy should be able to meet the market demand (Lynch 110). Globalization has also improved consumer experiences due to increased competition. Competition between businesses in an economy leads to a variety of goods and services that provide consumers with more choices and increased quality. Consumers receive value for their money. Studies have also established that globalization has helped to grow economies because of stable political environments (Tanzi 9).
Increased interaction between countries due to globalization has helped to stabilize global security, thus making it easier for economies to grow. Finally, globalization has helped to bring equality in the distribution of wealth across major world economies. This phenomenon has made it easy for economies to deal with recessions. Although the interconnection between global economies could make it easy for recession to spread, managing it is much easier because people are stable and less vulnerable (International Monetary Fund 116).
Benefits of globalization
Studies have shown that globalization has numerous benefits to businesses and economies across the world. The benefits of globalization often apply within the contexts of technology, economic growth, political development, and cultural changes. Major economies around the globe are thriving more due to globalization, as people are interacting more at a higher level (Sampat 300). Economies are benefiting a lot from this phenomenon because the spending power and will of consumers is higher due to availability of quality and assorted goods. The economic interdependency associated with globalization has opened up various economies to foreign investors, thus allowing them to grow their GDP. Developing and new economies have benefited the most from globalization. In the contemporary business environment, it is better for national economies to facilitate international business.
The reason for this is that it has numerous economic benefits such as FDI, availability of foreign goods, bigger market for their products, and equitable distribution of wealth. Globalization has also helped in promoting technological innovations around the world. People are yearning to increase their production through application of the latest technology in the market (Lynch 122). Globalization has made technology one of the products with the highest demand, as it makes the production process less costly and more effective. Numerous political philosophies have risen out of the emergence and development of globalization.
Proponents of globalization argue that the free market approach to business creates way for development of social equity. Social equity on a political perspective is achievable through improving the quality of people’s lives. Increased trading, better consumer experiences, and thriving economy play a crucial role in improving the living standards of people (International Monetary Fund 120). Better quality of life helps to stabilize the political environments in countries. Studies have also established that globalization has cultural benefits to various people across the world. The heightened interaction due to globalization leads to cultural interaction that helps people to learn new things, advance their knowledge, and experience life at a different level.
Drawbacks of globalization
Despite the numerous benefits associated with globalization, the phenomenon also has a few drawbacks. Studies have established four main recedes of globalization that have made it less glamorous among certain people. First, globalization can lead to loss of jobs in developing economies due to competition posed by low quality and competitively priced imports from new economies (Lynch 129). Numerous business opportunities created through globalization are responsible for this drawback. Second, globalization can lead to the development of specialized markets that deal with only certain types of goods.
This is a major drawback because it can reduce demand for human resources, thus hurting the economy because of high unemployment. Third, globalization can also lead to poor development and implementation of national policies because of external influence. In a free market business environment, various categories of developers will want to protect their commercial interests, thus leading to poor policy formulation and implementation (Sampat 308). Finally, globalization can lead to heightened rivalry among business developers for new economies. This drawback can easily affect the development of global economies because the focus will shift to meeting the demands of the new economy.
Globalization has played a crucial role in the growth of businesses in new economies, especially in the 21st Century. The era of globalization is characterized by advancements in technology, a dynamic business environment, and steady growth of economies around the world. The benefits of globalization often apply within the contexts of technology, economic growth, political development, and cultural changes. Proponents of globalization argue that the free market approach to business creates way for development of social equity. Economic globalization means that there is an increased level of interaction between various factors that promote human living and business operations. Globalization helps business thrive in new economies through foreign investments that help them to have commercial rights for increasing the production of goods and services.
Cavanagh, John, and Jerry, Mander. Alternatives to Economic Globalization. New Jersey: Read How You Want, 2010. Print.
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International Monetary Fund. Effects of Financial Globalization on Developing Countries: Some Empirical Evidence. New York: International Monetary Fund, 2003. Print.
Lynch, Katherine. The Forces of Economic Globalization: Challenges to the Regime of International Commercial Arbitration. New Jersey: Cambridge University Press, 2003. Print.
Ritzer, George. Globalization: A Basic Text. New York: Cengage Learning, 2009. Print.
Sampat, Preeti. Economic Globalization Today. New York: Books for Change, 2003. Print.
Tanzi, Vito. Globalization and the Need for Fiscal Reform in Developing Countries. California: BID-INTAL, 2004. Print.
Weinstein, Michael. Globalization: What Is New? New York: Cengage Learning, 2013. Print.