People Innovation Excellence

Why Globalization Important

Written by: Novita, S.Kom., MBA

Globalization is the process of international integration arising from the interchange of world views, products, ideas and other aspects of culture. Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence​​ of economic and cultural activities.

Globalization may be defined as the integration of the world’s people, firms and government. In the modern context, globalization is usually the result of closer ties in international trade, known as bilateral trade agreements. The WTO and NAFTA are two examples of such bilateral trade agreements. With such agreements, cross-country investment increases. This increase in investment is aided by the increase in information technology and communications, which has undergone a significant advancement over the last two decades with the rise of the Internet and mobile telephony.

 

from the business perspective, one effect of globalization is that of expanded markets. This means that a business that had previously only sold its goods domestically can start selling products to other countries. One example of expanded markets includes the auto industry. Before the fall of the Berlin Wall, those living in countries under the influence of communism only had access to cars that were produced domestically or in other communist markets. This was due to trade barriers with the West. When communism fell, Western economies, that is, countries that were not under communist influence, were able to expand their markets to former communist countries. This in turn increased their profit potential.

 

Globalization affects every aspect of an individual’s life including, religion, food, transport, language, music and clothing. It affects each individual differently however, depending on a diverse number of factors such as location, education and income.

On a local level, globalization has dramatically changed the nature of business. Many smaller, local companies have been pushed out of business by their TNC competitors. It is often a result of consumers turning to the cheaper retail prices which TNCs can offer, owing to many having manufactured products using cheap foreign labor. In response, campaigns have been initiated to promote local markets being restored and the return of locally produced goods and services. The food industry is often referred to when making the point of just how much we import, how far it has to come and the impact that this is having on the environment.

 

Local cultures have also been affected by globalization. Traditional customs and rituals are being replaced with the popular culture of the United States and the United Kingdom. Local communities are no longer abundant with only local cuisine, but are likely to have fast food chains such as McDonald’s or restaurants with foreign dishes. The languages of local communities are being lost, as is traditional clothing. Younger generations, in particular, are embracing assimilation (the gradual adoption of customs and attitudes) into a more ‘Americanised’ society.

 

Globalization, which is often dominated by finance, economics and business, has naturally had a significant effect on a national level. While nations such as the United States have prospered from the wealth created by globalization, the circumstances of poor nations may have actually become worse.

 

The problem is that for many poorer nations, the situation will continue to worsen. Their citizens are often less likely to be educated, or have the skills to assist in improving the economy of their country. For those who do have the education and skills, they are often granted visas to move to developed, wealthier nations for the chance of a better standard of living. While this improves their quality of life, their country is being left without the skilled workers that are needed to improve its economy.

Wealthier nations are also disadvantaging the poorer ones by reducing the aid that they are providing. This results in a decline in conditions which normally entice foreign investments. A number of nations rely on this money to do things such as repay debts to foreign nations and without it, they are forced to struggle.

Oded Shenkar and Yadong Luo. (2004). International Business. 00. Wiley. United States. ISBN: 0471429376..


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Novita, S.Kom., MBA
LS2 | Binus
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  1. Oleh: Novita, S.Kom, MBA – IBM

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