Globalization
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Globalization
What is Globalization?
Globalization is the change in the way countries do business. Countries no longer choose to trade amongst themselves but have expanded their business abroad to nations far and wide. It is this type of transformation that changes the look and feel of the world economy and it requires the cooperation of all countries involved. The world today “is moving towards a world in which barriers to cross-border trade and investment are tumbling; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent global economic system” (Hill, 2005).
Majors Drivers of Globalization
When countries first began developing products, they made just enough to satisfy the countrys demand without any surplus. As companies became larger their output increased and the countrys desire and need for new products grew. There are several motivators or drivers that encourage globalization and the expansion of companies into foreign lands. Examples of these would be:
Increase Company Profits-by expanding overseas, companies are able to produce and sell more of their products and services.
Reduce Fixed Costs-by producing more products the company actually reduces it fixed costs and can increase the profit margin.
Increase Market Share-increased sales lead to an increased share of the market along with increased profits.
Reduce Costs-by operating overseas and hiring cheaper labor companies are able to reduce their cost of doing business leading to increased profits.
So, the basic driver of globalization is to reduce costs and increase the companys profit margin. “Globalization has increased the opportunities for a firm to expand its revenues by selling around the world and reduce its costs by producing in nations where key inputs are cheap” (Hill, 2005).
Two other drivers of globalization include the decline in trade barriers between countries and the advance of technology. “The decline in trade barriers enables companies to view the world as their market, rather than just looking at their domestic market. Technological changes with advances in communications, transportation technology, the internet and World Wide Web, have rapidly lowered the cost of global communication” (Hill, 2005).
Effects of Globalization That Impact My Community & Organization
Globalization affects everyone in some shape or form. Whether it is culturally, financially, politically or in our careers, globalization has an impact. “Globalization promotes integration and the removal not only of cultural barriers but of many of the negative dimensions of culture. Globalization is a vital step toward both a more stable world and better lives for the people in it” (Rothkop, 1997). It also diminishes the current culture in a country by bringing in ideas and practices that are foreign to the country. Critics of globalization argue that the process will lead to a stripping away of separate identities. But others argue that “the decline of cultural distinctions may be a measure of the progress of civilization, a tangible sign of enhanced communications and understanding” (Rothkop, 1997).
Financially third world countries and those needing financial help are benefiting from the effect of globalization. New money making ventures are brought to their country and promoted in other lands where their products are desired. This has led to greater productivity and a higher profit margin for those that dare to venture outside their own domain. “Globalization is creating great wealth. This could be used to massively reduce worldwide poverty and to reduce global inequality” (Short, 2003).
Politically, globalization has caused quite a stir. The World Trade Organization (WTO) is the only international organization that deals with the rules of trade between nations. This was set up in part to ease foreign trade and to bring unity between nations. Globalization has also led to a heightened awareness to what is happening around us and in other countries. It has given us the ability to become involved whether it is for better or worse. It has also allowed