Globalization
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John Adams
Globalization
Abstract
The assignment outlines the contextual differences between the terms “Globalization” and “International Business” by summarizing scientific explanations in the economical literature as well as associated social-cultural and politicly related approaches. It depicts the different contemporary perceptions of both terms and searches for new and unprecedented sets of environmental determinants within the explanations provided for the term Globalization in order to identify differences from International Business
As a conclusion, the assignment argues, that globalization is in fact nothing unprecedented in terms of economy and could be subsumed under the term international business.
Globalization and International Business
Semantic Overview International Business — Globalization
Both terms are not referred to as commonly agreed upon definitions in the literature and are therefore subject to different interpretations in various contexts. However, for further evaluation, the assignment approached both terms’ definition as follows: While “International Business” seems to be used predominantly in a wider and more descriptive sense for economic cross boarder trade, “Globalization” is a fairly new term, used to describe the process of a transforming international trade towards more liberalization and its impacts that can supposedly be associated with social-cultural and political changes on a global scale. It is most commonly used to discuss the relationship of trade increase in the past decades with issues like free markets, dissolving of purely national companies, global inequity developments, reduction of national political influence and reduction of cultural diversity in favour standardization and integration as regions become increasingly interconnected and inevitably dependent
on each other (e.g. Spero/ Hart 2003).
The key semantic difference of both terms as defined in this work shall be, that International Business describes a factual situation, where cross boarder trade does take place and deals with associated developments that influence its operations on the basis of a stable set of environmental determinants. Globalization on the contrary claims the existence of a new, transformational process of economic and social-cultural issues pushing towards a new state of global economy. Although no consensus is reached yet of how to identify or proof its existence or in what way the outcome of this transformational process is going to differ from previous economic systems, Globalization implies to be the reaction to a an unprecedented form of global trade, which is insufficiently described by international business.
Approach
Since that process is interpreted, described and sometimes negated differently in literature, the following approach was chosen to work out the existence of differences between international Business and Globalization: Rather than concentrating on the recognition of a supposedly new transformational process in international trade, the research focused firstly on the identification of new environmental determinants, that might have provoked significant changes in the way trade is been conducted. Because if the past decades had in fact not experienced any unprecedented set of environmental determinants, it is unlikely that a new and revolutionary process could exist which is not already sufficiently described by the traditional term International Business.
The different associations expressed in literature and society in regard to Globalization were therefore consequently evaluated upon their ability to proof the existence of a new set of environmental determinants that have not been known in international business before and that could therefore provide the basis for an unprecedented process.
Several mayor perceptions exist, of how Globalization should be described, here summarized in two: the narrower, pure economical view and the broader, social-cultural approach:
Globalization as an Economic Process towards Globality
Some view Globalization as the third economic system, with Bretton Woods and Interdependence being the other two in the past century (Spero/ Hart 2003). According to them it commenced in 1989 with the fall of communism (others date it back to the 1960’s e.g. Kirkbride 2001), the beginning of world wide deregulation and liberalization and increased interconnectedness. It is characterized by the increasingly reduced market barriers and the drop in transportation costs, which have undoubtedly let to a higher degree of mobility and flexibility for companies to design, produce and sell products wherever they identify favourable conditions (Ohmae, 2000, Yip 1995, Kirkbride 2001). Globalization is therefore viewed by some as a beneficial economic phenomenon based on dissolving trade barriers that allows companies to pick the most efficient locations for production and procurement opportunities to achieve economies of scale, resulting in more or cheaper products through global competition. According to them, globalization is a process, driven by the establishing of several drivers within the past few decades, such as the emerging of global distribution channels, the pressure for cost efficiency and the need for achieving economies of scale and location advantages, economic policies like free trade and deregulations, and global competitors (Yip 1995). Those drivers are argued to push companies to first become international organisations, then multinational, global and finally transnational companies (Bartlett/ Ghoshal 2000) in order to exploit an evolving global market most efficiently.
From a strictly economic point of view, Globalization therefore refers to a situation in which national economies amalgamate into an autonomous global economic system (e.g. Hill, 2002) and the adaptation of companies to that process.
It is claimed, that this already ongoing process of integration of business activities across geographical and organizational boundaries proofs this prediction and will increasingly create companies that