THE EFFECT OF GLOBALIZATION

2
598

By Tum Sokuntararith from CamEd Business School, Phnom Penh, Cambodia

 INTRODUCTION – What is “GLOBALIZATION”?

 Theodore Levitt, a former professor at the Harvard Business School is credited for  coining the term “globalization”. The ideal of “globalization” encourages each country to specialize in what it produces best using the least amount of resources defined by the Peterson institute for international Economics offers a reminder about an age-old process or it is defined as a process that, based on international strategies, aims to expand business operations on a worldwide level, and was precipitated by the facilitation of global communications due to technological advancements and socioeconomic, political and environmental developments. It was divided into three different eras of globalization. The first globalization is a phrase used by economists to describe the world’s first major period of globalization of trade and finance, which took place between 1870 and 1914. The second globalization began in 1944 and ended in 1971. This led to the third era of globalization which began in 1989 and continues today. Large scale globalization began in the 1820s, and in the late 19th century and early 20th century drove a rapid expansion in the connectivity of the world’s economies and cultures. 

It is a historical process started with Columbus’s voyage to the New World in 1492 that began with the first movement of people out of Africa into other parts of the world. Traveling, migrants, merchants and others have delivered their ideas, costumes and products to new land. 

How has Globalization changed the world?

This ideology aims to benefit individual economies around the world by making the markets more efficient, increasing competition, limiting military conflicts and spreading wealth more equally.  

How globalization effect on world’s economies

It has involved increased capital flows, growth of multinational companies, and integration of the global trade cycle, communication and improved transport, effectively reducing barriers between countries. It also helped to reduce inflation rates in Western economies, giving consumers more “bang for buck” especially since it has increased real wages by lowering the cost of consumption. 

More specifically this idea provides business with a competitive advantage by allowing them to source raw materials where they are inexpensive. Globalization also gives organizations the opportunity to take the advantage of lower labor costs in developing countries, while leveraging the technical expertise and experience of developed economies. It provides job opportunities to local people in developing countries which help to sustain the economy of the country especially decrease the poverty line. 

How globalization boosts technological development 

Globalization allows countries to gain easier access to foreign knowledge, it also enhances global and international competition including as a result of the rise of emerging market firms and this strengthens firms’ incentives to innovate and adopt foreign technologies. The positive impact has been large for emerging market economies which have made increasing use of the available foreign knowledge and technology to boost their innovation capacity and labor productivity growth. Over 2004-2014, knowledge flows from the technology leaders may have generated, for an average country sector, about 40 percent of the observed average productivity growth over 2004 and 2014. One important factor behind the buildup of innovation capacity in emerging markets economies has been their growing participation in global supply chains with multinational companies, though not all firms have benefited as multinationals sometimes reallocate some innovation activity to other parts of the global value chain. 

Globalization increase the awareness of global issues and events in faraway parts of the world

Thanks to the result of better understanding and relation between each country due to the practice of globalization, we are able to be aware of many global issues such as deforestation, virus breakout, natural disaster, global warming and alert them to the need for sustainable development. As the current disaster started from the beginning of 2020, Australia’s forest burned, the threat of world war 3, the breakout or pandemic COVID 19 especially Beirut’s explosion were quickly made aware and sent help rapidly in response. China, USA, Russia are trying to find a vaccine for the pandemic, the process of solving and healing the world’ economy after the devastation due to the effect of COVID 19. Inflation and lack of material for fighting the virus are solved step by step. This is all because of the principle of globalization which makes a better relationship between countries and countries to show and help countries which face numerous challenges as well as the disaster. 

How globalization impacts on climate

In recent decades, international connectivity has increased on many fronts, including the flow of information, movement of people needed land for shelter and practice deforestation, trading patterns, flow of capital, regulatory systems and cultural diffusion.  More factories are increasing all around the world to produce millions of products due to the overwhelming need of humans. These developments went hand in hand with an increase in global greenhouse gas emissions, initially, developed regions such as the US and Europe were the main polluters, but over time emerging economies such as China have become the main emitters, After all, an important part of global production has shifted to these countries, where, moreover, less stringent environmental standards often apply. 

How globalization impacts on human welfare

These changes of climate due to the widespread globalization pose fundamental threats to human well-being and health. Many aspects of globalization influence population health, including the accelerated emergence of new infection diseases, the near-ubiquitous rise in the rate of obesity and associated non communicable disease as daily bodily energy budgets (food energy input vs physical energy output) shift into surplus, the spread of cigarette marketing, the effects of climate change, increasing in resistance to antimicrobial agents and the health risks in the workplace due to the deregulation of international labor markets. Looming large in the background as additional determinants of health as the persistent, even increasing, disparities in wealth, education, autonomy and social inclusion. There are, of course, certain aspects of globalization that are beneficial to health, such as the enhanced flow of information, improvements in internationally coordinated vaccination programs and systems to respond to infectious disease and a greater capacity for long distance responses to disaster. 

How globalization impacts on small businesses 

A positive aspect of increased globalization for a small business is they can often have a greater impact with their product or message. A paving stone to globalization is the efficient connectivity of businesses and consumers worldwide by communications (internet) and shipping routes (cargo flights). This means that items can be shipped between countries and economies at a reduced cost and in a very short time. This has broken down the borders between countries and consumers are inclined to turn to the internet in their search for the perfect product and this phenomenon, a small business not only serves their local market but also competitors in the international arena. Globalization has not only given massive corporations the opportunity to expand their reach and try to monopolize every market, but it has also given small businesses access to foreign clientele who place importance on niche products that are manufactured on home soil, outside of sweatshop factories, with increased global awareness, environment impacts  and fair-trade agreements when making purchases, now more than ever, people are on the lookout for quality, reusable products with the X-factor when spending their coin. 

In spite of those positive effects of globalization on small businesses, they also face many challenges too, the most prominent being competition and price wars. Suddenly they look like small fish in a big sea with other small and large fish. The other smaller species compete for the same food while the larger fish simply eat the smaller ones to keep themselves going. With globalization, small businesses can access international markets but the process isn’t that simple, they have to compete with the same size of the businesses in order to make their business keep going. More importantly, small businesses have to compete with the big businesses but it sounds so impossible, small businesses will collapse due to the failure of competition with other big and small companies. As globalization increases, more and more businesses enter the market, so that means businesses now need to improve the quality of their products and lower prices enough to stay competitive. Or else they risk getting kicked out of the markets thanks to this high global competition.

In conclusion 

Regardless of the downsides, Globalization is here to stay. The idea is a smaller, more connected world. Socially, globalization has facilitated the exchanges of ideas and cultures, contributing to a world view in which people are more open and tolerant of one another. 

SOURCES 

2 COMMENTS

LEAVE A REPLY

Please enter your comment!
Please enter your name here