GLOBALIZATION

Globalization is a term used to describe the increasing connectedness and

interdependence of world cultures and economies.
Globalization is the process by which ideas, knowledge, information, goods
and services spread around the world.

Globalization is a term used to describe how trade and technology have

made the world into a more connected and interdependent place.
Globalization also captures in its scope the economic and social changes
that have come about as a result. It may be pictured as the threads of an
immense spider web formed over millennia, with the number and reach of
these threads increasing over time. People, money, material goods, ideas,
and even disease and devastation have traveled these silken strands, and
have done so in greater numbers and with greater speed than ever in the
present age.

HISTORY OF GLOBALIZATION
Many scholars say it started with Columbus’s voyage to the New World in
1492. People traveled to nearby and faraway places well before Columbus’s
voyage, however, exchanging their ideas, products, and customs along the
way. The Silk Road, an ancient network of trade routes across China, Central
Asia, and the Mediterranean used between 50 B.C.E. and 250 C.E. is
perhaps the most well-known early example. As with future globalizing
booms, new technologies played a key role in the Silk Road trade. Advances
in metallurgy led to the creation of coins; advances in transportation led to
the building of roads connecting the major empires of the day; and increased
agricultural production meant more food could be trafficked between locales.
Along with Chinese silk, Roman glass, and Arabian spices, ideas such as
Buddhist beliefs and the secrets of paper-making also spread via these
tendrils of trade.
Unquestionably, these types of exchanges were accelerated in the Age of
Exploration, when European explorers seeking new sea routes to the spices
and silks of Asia bumped into the Americas instead. Again, technology
played an important role in the maritime trade routes that flourished between
old and newly discovered continents. New ship designs and the creation of
the magnetic compass were key to the explorers’ successes. Trade and idea
exchange now extended to a previously unconnected part of the world,
where ships carrying plants, animals, and Spanish silver between the Old
World and the New also carried Christian missionaries.

The web of globalization continued to spin out through the Age of Revolution,
when ideas about liberty, equality, and fraternity spread like fire from America
to France to Latin America and beyond. It rode the waves of industrialization,
colonization, and war through the eighteenth, nineteenth, and twentieth
centuries, powered by the invention of factories, railways, steamboats, cars,
and planes.

With the Information Age, globalization went into overdrive. Advances in

computer and communications technology launched a new global era and
redefined what it meant to be “connected.” Modern communications
satellites meant the 1964 Summer Olympics in Tokyo could be watched in
the United States for the first time. The World Wide Web and the Internet
allowed someone in Germany to read about a breaking news story in Bolivia
in real time. Someone wishing to travel from Boston, Massachusetts, to
London, England, could do so in hours rather than the week or more it would
have taken a hundred years ago. This digital revolution massively impacted
economies across the world as well: they became more information-based
and more interdependent. In the modern era, economic success or failure at
one focal point of the global web can be felt in every major world economy.

The benefits and disadvantages of globalization are the subject of ongoing

debate. The downside to globalization can be seen in the increased risk for
the transmission of diseases like ebola or severe acute respiratory syndrome
(SARS), or in the kind of environmental harm that scientist Paul R. Furumo
has studied in microcosm in palm oil plantations in the tropics. Globalization
has of course led to great good, too. Richer nations now can—and do—come
to the aid of poorer nations in crisis. Increasing diversity in many countries
has meant more opportunity to learn about and celebrate other cultures. The
sense that there is a global village, a worldwide “us,” has emerged.

Although many people consider globalization a twentieth century

phenomenon, the process has been happening for millennia. Examples
include the following:
 The Roman Empire. Going back to 600 B.C., the Roman Empire spread
its economic and governing systems through significant portions of the
ancient world for centuries.

 Silk Road trade. These trade routes, which date from 130 B.C. to 1453
A.D., represented another wave of globalization. They brought
merchants, goods and travelers from China through Central Asia and the
Middle East to Europe.

 Pre-World War I. European countries made significant investments

overseas in the decades before World War I. The period from 1870 to
1914 is called the golden age of globalization.

 Post-World War II. The United States led the effort to create a global
economic system with a set of broadly accepted international rules.
Multinational institutions were established such as the United Nations
(UN), International Monetary Fund, World Bank and World Trade
Organization to promote international cooperation and free trade.
 3 IMPORTANT FACTORS IN GLOBALIZATION
We see the phenomenon of globalization as consisting of three interrelated
factors- proximity, location, and attitude. Taken together, these three facets
of globalization emphasize the unprecedented lineup and complexity of
relationships that confront a global manager.

Proximity
First, managers now operate in much closer proximity than ever before to a
greater numbers and range of customers, competitors, suppliers, and
government regulators. This proximity, a function of the “shrinking globe”, is
partly a matter of time, as today’s telecommunication technology allows
people around the world to share voice, videos, and facsimile information in
minutes. The increasing technological and managerial capabilities of people
around the globe are another aspect of proximity. Managers find themselves
competing or even collaborating with a new cast of global players. Honda,
for example, moved nearly sixty American specialists to Japan for several
years to work with their Japanese counterparts on design for the 1994 Honda
Accord.
To emphasize this new spirit of closer ties and the insignificance of miles in
today’s business world, Kenichi Ohmae, a longtime consultant to global
business organizations, urges managers to treat all customers as
“equidistant” from their organizations.

Location
Second, the location and integration of an organization’s operations across
several international boundaries is part of globalization. For example,
American Telephone & Telegraph (AT&T) telephones and telephone
switching computers are designed in the United States, manufactured in
Singapore and the United States and sold worldwide to customers who use
the equipment to connect with AT&T long-distance services that reach all
corners of the globe. In 1990, companies based in the United States
employed 2.8million people in Western Europe, 1.8million in Asia, and 1.3
million in Latin America. Toyota, Nissan, and Honda operate auto assembly
plants in the United States.

Attitude
Toyota finds U.S. Workers that share its values. Japanese automobile firms
that have established operations in the U.S. have brought with them their
ideas, processes, and management of quality. Although not all methods that
work in Japan have been transplantable to the U.S. culture, many are
especially if employees are carefully selected. One firm that has used a
careful screening process successfully is Toyota Motor Manufacturing Inc.
of U.S.A., located in Georgetown, Kentucky.

Toyota builds its quality efforts around its employees, recruited almost
exclusively from within Kentucky. In order to match the needs of the
organization with the interests of the potential employees, Toyota conducts
an exhaustive value-based hiring process that allows the company to identify
potential workers with the types of skills it needs-problem-solving and
interpersonal skills. These skills are compatible with the company’s basic
values. The company wants people who can think for themselves and solve
problems; it also wants people who can work on a team. Toyota managers
see each employee selection as a long-term investment decision.

TYPES OF GLOBALIZATION

Economic globalization. Here, the focus is on the integration of

international financial markets and the coordination of financial exchange.
Free trade agreements, such the North American Free Trade Agreement and
the Trans-Pacific Partnership are examples of economic globalization.
Multinational corporations, which operate in two or more countries, play a
large role in economic globalization.
Political globalization. This type covers the national policies that bring
countries together politically, economically and culturally. Organizations
such as NATO and the UN are part of the political globalization effort.

Social/Cultural globalization. This aspect of globalization focuses in a

large part on the technological and societal factors that are causing cultures
to converge. These include increased ease of communication, the
pervasiveness of social media and access to faster and better transportation.

These three types influence one another. For example, liberalized national
trade policies drive economic globalization. Political policies also affect
cultural globalization, enabling people to communicate and move around the
globe more freely. Economic globalization also affects cultural globalization
through the import of goods and services that expose people to other
cultures.

GLOBALIZATION AND COMPETITIVENESS

Competitiveness is an idea that applies in a number of different settings SM

Department Store and Robinsons are competitors for several decades and
perhaps have worried about the entry of new players such as Wal-Mart and
Pure Gold on the competitiveness of their prices. If you participate in sports,
as a player, your teammates, and coaches seek competitiveness in relation
to your opponents by practicing day after day. Or if you watch the competitors
in your industry, you know that competitiveness has accelerated over the last
three decades.

Competitiveness refers to the relative standing of one competitor against

other competitors. Competitiveness is like the game of musical chairs: There
are finite numbers of places to sit, and some are more desirable than others.
One organization that has addressed its desire to remain competitive in the
global economy is Samsung of South Korea. To expand its ability to deliver
quality products and services in a highly competitive industry of mobile
phones, Samsung has developed a Global Leadership Program, to provide
its top managers with a global outlook.

Competitiveness has become a prominent business and government

concern in the era of global business as a contest among nations. Members
of the news media routinely talk about the competitiveness of the United
States versus Japan and the United States versus the Pacific Rim. This
meaning of competitiveness is part of the new attitude of globalization
described earlier. It is a direct consequence of the unprecedented proximity
among nations in the global market place as defined by the International
Monetary Fund or IMF.

EFFECTS OF GLOBALIZATION
The effects of globalization can be felt locally and globally, touching the lives
of individuals as well as the broader society in the following ways:

Individuals. Here, a variety of international influences affect ordinary people.

Globalization affects their access to goods, the prices they pay and their
ability to travel to or even move to other countries.

Communities. This level encompasses the impact of globalization on local or

regional organizations, businesses and economies. It affects who lives in
communities, where they work, who they work for, their ability to move out of
their community and into one in another country, among other things.
Globalization also changes the way local cultures develop within
communities.
Institutions. Multinational corporations, national governments and other
organizations such as colleges and universities are all affected by their
country's approach to and acceptance of globalization. Globalization affects
the ability of companies to grow and expand, a university's ability to diversify
and grow its student body and a government's ability to pursue specific
economic policies.

While the effects of globalization can be observed, analyzing the net impact
is more complex. Proponents often see specific results as positive and critics
of globalization view the same results as negative. A relationship that
benefits one entity may damage another, and whether globalization benefits
the world at large remains a point of contention.

EXAMPLES OF GLOBALIZATION
Multinational corporations are a tangible example of globalization. Some
examples include the following:
 McDonald's had 39,198 fast-food restaurants in 119 countries and
territories, according to its Securities and Exchange Commission filing at
the end of 2020. It employed more than 2.2 million people at that time, the
filing said.

 Ford Motor Company reported in 2021 that it works with about 1,200 tier
1 suppliers around the globe.

 Amazon's recent expansion has it using tens of thousands of suppliers

and employing more than nearly 1.3 million full- and part-time employees.

Through their influence on social and economic development in the countries

that host them, multinational corporations embody the contradictions of
globalization. They bring jobs, skills and wealth to the region they are
investing or doing business in. But they also can destroy local businesses,
exploit cheap labor and threaten indigenous cultures. The benefits they offer
are often unsustainable because the loyalty of multinationals is to their
investors and bottom lines and not to the local people, economies and
cultures where they are doing business.

Another example of globalization is the response to the COVID-19

pandemic. Because the world was able to communicate across boundaries,
nations were able to work together to quickly produce vaccines for the virus.
In addition, doctors traveled where they were needed. For example, Cuba
sent doctors to Italy at the beginning of the pandemic to assist with the crisis
as it developed there.

However, countries also enacted strict travel restrictions and many closed
their borders to cut down on the free movement of people and spread of the
virus.

BENEFITS OF GLOBALIZATION
Globalization enables countries to access less expensive natural resources
and lower cost labor. As a result, they can produce lower cost goods that can
be sold globally. Proponents of globalization argue that it improves the state
of the world in many ways, such as the following:
 Solves economic problems. Globalization moves jobs and capital to
places that need these resources. It gives rich countries access to lower
cost resources and labor and poorer countries access to jobs and the
investment funds they need for development.

 Promotes free trade. Globalization puts pressure on nations to reduce

tariffs, subsidies and other barriers to free trade. This consequently
promotes economic growth, creates jobs, makes companies more
competitive and lowers prices for consumers.
 Spurs economic development. Theoretically, globalization gives poorer
countries access to foreign capital and technology they would not
otherwise have. Foreign investment can result in an improved standard of
living for the citizens of those nations.

 Encourages positive trends in human rights and the environment.

Advocates of globalization point to improved attention to human rights on
a global scale and a shared understanding of the impact of people and
production on the environment.

 Promotes shared cultural understanding. Advocates view the increased

ability to travel and experience new cultures as a positive part of
globalization that can contribute to international cooperation and peace.

NEGATIVE CONSEQUENCES OF GLOBALIZATION

Many proponents view globalization as way to solve systemic economic
problems. But critics see it as increasing global inequality. Among the
critiques of globalization are the following issues:

 Destabilizes markets. Critics of globalization blame the elimination of

trade barriers and the freer movement of people for undermining national
policies and local cultures. Labor markets in particular are affected when
people move across borders in search of higher paying jobs or companies
outsource work and jobs to lower cost labor markets.

 Damages the environment. The transport of goods and people among

nations generates greenhouse gas and all the negative effects it has on
the environment. Global travel and trade also can introduce, sometimes
inadvertently, invasive species to foreign ecosystems. Industries such as
fishing and logging tend to go where business is most lucrative or
 regulations are less strict, which has resulted in overfishing and
deforestation in some parts of the world.

 Lowers living standards. When companies move operations overseas to

minimize costs, such moves can eliminate jobs and increase
unemployment in sectors of the home country.

 Facilitates global recessions. Tightly integrated global markets carry a

greater risk of global recessions. The 2007-2009 financial crisis and Great
Recession is a good example of how intertwined global markets are and
how financial problems in one country or region can quickly affect other
parts of the world. Globalization reduces the ability of individual nations to
effectively use monetary and fiscal policy to control the national economy.

 Damages cultural identities. Critics of globalization decry the decimation

of unique cultural identities and languages that comes with the
international movement of businesses and people. At the same time, the
internet and social media are driving this trend even without the
movement of people and commerce.

 Increases the likelihood of pandemics. Increased travel, critics say, has

the potential to increase the risk of pandemics. The H1N1 (swine flu)
outbreak of 2009 and coronavirus in 2020 and 2021 are two examples of
serious diseases that spread to multiple nations quickly.

FUTURE OF GLOBALIZATION
Technological advances, particularly blockchain, mobile communication and
banking, are fueling economic globalization.
Nonetheless, rising levels of protectionism and anti-globalization sentiment
in several countries could slow or even reverse the rapid pace of
globalization. Nationalism and increasing trends toward conservative
economic policies are driving these anti-globalization efforts.

Global trade is also made more difficult and facing rising threats from other
factors, such as these:
 climate change
 decaying infrastructure
 cyber attacks
 human rights abuses

The takeaway
Globalization is a longstanding trend that is in the process of changing and
possibly slowing. There are advantages to the more open border and free
trade that globalization promotes, as well as negative consequences.