...Globalization; Its Drivers and Effects Globalization, in the most basic sense, can be defined as a trend in which countries across the globe are joining economically. Hill (2009) describes the major facets of globalization to include the globalization of markets and the globalization of production. The globalization of markets is a result of merging local and national markets to create one somewhat homogenous “global” market whereby the individual preferences of regions, or nations, have converged. On the other hand, the globalization of production has allowed firms to split their operations internationally. As a result, each stage of production for these firms takes place in countries around the world in areas where work can be accomplished at the lowest cost. The decrease in international trade and investment barriers and advancements in technology have served as the major drivers of globalization. Furthermore, Hill (2009) identifies that globalization has had an effect on the demographics of the global economy. This paper provides an analysis of the major drivers and effects of globalization and recognizes some of international trade theories that support the need for a global economy. Drivers of Globalization The first major driver influencing the spread of globalization is the decline in barriers to free trade. Since the end of World War II, the advanced nations of the West have advocated the free flow of goods, services, and capitol between nations. Hence, the General...
Words: 581 - Pages: 3
...1. What is globalization, and what are some of the traditional international trade theories that support the concept of globalization? * Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. Globalization is not new, though. For thousands of years, people—and, later, corporations—have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914.This current wave of globalization has been driven by policies that have opened economies domestically and internationally. In the years since the Second World War, and especially during the past two decades, many governments have adopted free-market economic systems, vastly increasing their own productive potential and creating myriad new opportunities for international trade and investment. Governments also have negotiated dramatic...
Words: 905 - Pages: 4
...Global Finance EnvironmentThis paper will analyze the drivers and consequences of globalization, describe the risks associated with global investing, and explain the importance of cultural sensitivity and ethics in global finance. However, there first must be an understanding of what globalization entails. Globalization is the expansion of companies and entities into the international market; working, manufacturing, and selling or buying from two or more countries. Companies that sell to other countries or buy from other countries are not a good example, but those that have investment, manufacturing, or other divisions of the company in another country is definitely globalization. Drivers of GlobalizationMany drivers of globalization affect an organization financially. Improvements in communication and transportation such as internet, emails, mobile phones, formation of trading blocs, depletion of trade restrictions and creating of new trade agreements among nations, comparative and competitive advantage being offered by certain nations and markets are all driving globalization and increasing trade among nations. Today, countries are increasingly becoming dependent on each other and companies are making a foray into global markets, either to increase their sales or to achieve comparative advantage in terms of production and thus satisfying the needs and wants of ever increasing demands of customers. These changes are increasing the resource requirements of global corporations...
Words: 1614 - Pages: 7
...Elements and Drivers of International Business 1. Globalization of Markets: It refers to the merging of national markets into one huge global marketplace. Now selling internationally is easier due to falling barriers to cross-border trade. A company doesn’t have to be the size of these multinational giants to facilitate and benefit from the globalization of markets. It is important to offer a standard product to the worldwide. But very significant differences still exist between national markets like consumer tastes, preferences, legal regulations, cultural systems. These differences require that marketing strategies in order to match the conditions in a country. To illustrate, Wal-Mart may still need to vary their product from country depending on local tastes and preferences. 2. Globalization of Production: It refers to the sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production. The idea is to compete more effectively offering a product with good quality and low cost. For example, Nike is considerate one of the leading marketers of athletic shoes and apparel on the world. The company has some overseas factories where has achieved a super production with low cost. Unfortunately Nike has been a target of protest and persistent accusations that its products are made in sweatshops with poor working conditions. The company has signalled a commitment to improving working conditions...
Words: 3121 - Pages: 13
...Globalization December 11, 2012 Globalization Globalization is a trend of joining countries together economically, socially, informational, industrially, politically, and many more. Even though, globalizing had been around for a long time, such as, “Islamic Golden Age when Muslim traders and explorers established an early global economy across the Old World resulting in a globalization of crops, trade, knowledge and technology” (Wikipedia.com) before the turn of 16th century. In modern term of globalization “is a process of interaction and integration among people, companies, and governments of different nations [with intention of] international trades and investment and exchange of information technologies” never seen before. (Levin Institute, 2009). To most people, they think of as “to bring people of all nations closer together” (Wikipedia.com) as ‘the small world.’ Globalization is a way of eliminating barriers of country borders, to communicate in real-time overcoming time zones, language barriers to form a world language to allow everyone capability to communicate, and many more. Globalization has an effect on many words or terms such as American, Jewish, Muslim in related to religious level could change to one religion recognize by what might be called ‘multiculturalism’. It had been known here in America as “The melting pot” which many different cultural had and is still migrating into America now extends out to the rest of the world. There may be lots...
Words: 1017 - Pages: 5
...significance of key drivers in the globalization of the world economy. Why do some commentators argue that the international business environment has become more regional than global? What would be the implications for production strategies of companies if this is the case? Whenever we listen to it on the news, read it inside the newspapers, catch people chatting about it, the phrase globalization looks like it has a different meaning. So the question, what exactly is globalization? What are the key drivers? How does it affect international business? Through describing the importance of globalization for international business and investigating main ideas of the international business atmosphere, above questions will be answered. Until we have an understanding of some drivers of Globalization we may not be able to see how the business or firms --- as an individual and collectively --- will be like in the future. After that we will begin to understand the changes in the stages of a firm which will come out as a result of this globalization. Globalization is the changes in world economy around the globe due to the rapid changes in technology. Globalization can be explained as a course of action by which the people around the world are interconnected and unified into one society and working side by side. It is a mixture of economic, technological, socio cultural and political forces. As a phrase globalization, is quite often used to relate to economic globalization i.e. desegregation...
Words: 2970 - Pages: 12
...exploit? True / False Questions 1. (p. 7) Globalization refers to the shift toward a more integrated and interdependent world economy. TRUE AACSB: Analytic BT: Knowledge Difficulty: Easy Learning Objective: 1-1 Topic: What Is Globalization? 2. (p. 7) Tastes and preferences of consumers in different nations are beginning to converge on some global norm. TRUE AACSB: Analytic BT: Knowledge Difficulty: Easy Learning Objective: 1-1 Topic: What Is Globalization? 3. (p. 7) A company has to be a major multinational corporation to facilitate, and benefit from, the globalization of markets. FALSE AACSB: Analytic BT: Knowledge Difficulty: Medium Learning Objective: 1-1 Topic: What Is Globalization? 4. (p. 7) In Germany, 98 percent of small and midsize companies have exposure to international markets. TRUE AACSB: Analytic BT: Knowledge Difficulty: Easy Learning Objective: 1-1 Topic: What Is Globalization? 5. (p. 8) Currently, the most global of markets are for industrial goods and materials that serve a universal need the world over. TRUE AACSB: Analytic BT: Knowledge Difficulty: Easy Learning Objective: 1-1 Topic: What Is Globalization? 6. (p. 8) As firms follow each other around the world, greater diversity replaces uniformity. FALSE AACSB: Analytic BT: Knowledge Difficulty: Easy Learning Objective: 1-1 Topic: What Is Globalization? 7. (p. 10) Substantial impediments such as barriers...
Words: 7962 - Pages: 32
...FIN/403 May 4, 2008 Globalization refers to the merging of national markets into one huge global marketplace. In today’s market, selling internationally is much easier due to falling barriers in cross-border trade. Now businesses don’t have to be industry giants to operate and succeed in global markets. Although it can be beneficial to offer a standard product that can be used worldwide, significant differences still exist between national markets such as cultural differences, consumer taste differences, product preferences and legal regulations. It is important to define and understand these differences when merging into national markets. Globalization is inevitable and it’s happening at an astonishing speed in nearly every market possible. The technology era that we are in has enabled businesses to join forces like never before and we are seeing significant changes in the global marketplace. There are main drivers in globalization and this paper will define three of them, as well as describe the risks associated with financial investing, and explain the importance of cultural sensitivity and ethics in global finance. Drivers of Globalization Market drivers Domestic markets are saturated and growth opportunities are often times limited. Expanding globally opens up many new opportunities allowing for real growth within a business. The following lists in detail the specific market drivers that play a key role in globalization; o Convergence of...
Words: 1180 - Pages: 5
...Survey of the Theories of GLOBALIZATION by Wendy M. Jeffus Southern New Hampshire University TABLE OF CONTENTS I. INTRODUCTION II. Internationalization versus Globalization Multinational Enterprises Exporting Licensing/Franchising Strategic Alliances Joint Ventures Wholly-Owned Subsidiary Emerging Economies Developed Economies Universalizers versus Particularists World-systems Diversity of Cultures Global Mindset III. HYPERGLOBALIZATION Conflicting Goals Environmental Consequences Social Consequences Extended Product Responsibility Subsidies and Preferential Treatment of the Corporation Lack of Accountability Misaligned Incentives Short-term Profits Money versus Spirituality Borderless Economy Liberalization Conflicting Goals Misaligned Incentives Short-term Solutions versus Long-Term Growth Protection of Natural Resources Lies, Damn Lies, & Statistics Standardization versus Adaptation Regional Focus New Paradigm IV. GLOBALIZATION AND STRATEGY Global versus Multidomestic Strategies Service Industry Common Global Misunderstandings Developing and Implementing a Global Strategy Organizational Culture V. GLOBALIZATION AND PUBLIC POLICY Approaches to Economic Organization Historical Review ...
Words: 19799 - Pages: 80
...Introduction This paper will outline the question “what is Globalization,” outline some traditional trade theories, major drivers of globalization, and explain some effects of globalization on communities and industry. What is Globalization Defined as “globalization refers to the shift toward a more integrated and inter-dependent work economy. Globalization has several facets, including the globalization of markets and the globalization of production.” (Hill, 2009, Chapter One). Globalization as it affects markets and trade is the development of international supply and distribution chains. Traditionally supply and manufacturing was more localized be region distributed to a final destination. Globalization has permitted the most effective supply chain to be directed to the most cost-effective manufacturing resource and distributed in the most cost-effective way. This is made that a company’s headquarters or main office may not even have a presence at any of the origination points. Companies often source components of their products from regions around the globe and ship them to a manufacturing or assembly plant in another region. Major Drivers There are three major drivers for globalization and those are: cost of materials, labor costs, and regulation. Depending on the product a company may find the components of their product be offered at a lower price, even after shipping in another region of the world, thus allowing for more profit. Companies may find an educated...
Words: 518 - Pages: 3
...for the emergence of international business. International Business, which is the other way to seek an opportunity of brand new markets and a better driver of changing the recent environment (Ramirez-Aleson & Espitia-Escuer, 2001). It is thought as a business or industry that attracts and provides in international economic activities (Peng, 2011). From the views of domestic and international industries, the former competes and collaborates with the foreign entrants, the latter enters an aboard market to get the market share for growing itself up. Peng (2011) argues that International Business includes both international activities and domestic activities. The traditional boundaries of international and domestic business are deliberated blurring, because most of the previously national markets are globalized now. Mention to the current situation about International Business, it is essential to understand what and how International Business is emerged. The variables of why International Business happened have been defined by scholars, first of all, Dunning (2001) believes competitive advantages are quite important to help corporations extend their business. Second, Johnson & Tuner (2003) indicates five drivers of International Business, that are Economy, International governance and regulation, Finance and capital, Communication technology, Social and cultural convergence, etc. Additionally, Huang (2005) and Ashar (2009) argued the improvement of containerization is a...
Words: 2368 - Pages: 10
...Key Concepts In International Business * International Trade - describes the exchange of products and services across national borders * Exchanges can be made through exporting or can also take the form of: * Importing or Global Sourcing - the procurement of products or services from suppliers located abroad for consumption in the home country or a third country. * International Investment - refers to the transfer of assets to another country or the acquisition of assets in that country. Economists refer to such assets as factors of production and they include capital, technology, managerial talent and manufacturing infrastructure. * Foreign Direct Investment - is an internationalisation strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as land, plant, equipment, capital and technology. It is a foreign-market entry strategy that gives investors partial or full ownership of a productive enterprise. * International portfolio investment - refers to the passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns. International portfolio investment and foreign direct investment are the two essential types of cross-border investment. The Nature of International Investment Foreign direct investment (FDI) is the ultimate stage in internationalisation and encompasses the widest range of international business involvement. Firms engage in FDI...
Words: 2728 - Pages: 11
...How changes in technology have contributed Q. Explain How Changes In Technology Have Contributed Towards Globalization Of Markets And Of Production? Answer: Technology has dramatically changed people's way of life all over the world and the world today has become a true manifestation of a global village. Not only the frequency of international travelling increased manifold but the possibilities of cross-border trading of goods and services have also increased exponentially. These impacts are collectively known as globalization. (Hill, 2009) defines globalisation as a process which enables individuals, organisations and governments from different natins to come across each other and interact in an intergative manner. The end result of such intergation would be an intergated globalised market system which can act as a melting pot of indivual economies of different nations. There are two ways in which globalisation can be envisaged, i.e. with the production perspective and thebmarket perspective. (Hill, 2009) defines the markets' globalisation as melting down and convergence of individually independent market places into an amalgamated market place. Sharing of the sources of production from different geographical locations for levaraging the quality and cost of the goods and services produces is the idea behind the products' globalisation. (Hill, 2009) Many institutions have been formulated to help manage, regulate and police the phenomena of globalization and to promote the...
Words: 1856 - Pages: 8
... A study provides a framework for developing global strategies for service businesses. It integrates existing, separate frameworks on globalization and on service businesses, analyzes how the distinctive characteristics of service businesses affect globalization and which do not. It then applies the new framework to numerous industry and company examples, with particular emphasis on the role of information technology. Full Text How do the distinctive characteristics of service businesses affect globalization and the use of global strategy? This is a crucial question for managers in numerous industries. Not only are services continuing to grow rapidly in domestic economies, but international trade in services is increasing, too. The United States, like some other developed countries, has a trade surplus in services that helps offset the deficit in merchandise trade. In contrast, Japan has been much less successful in internationalizing its service businesses.1 So it is essential to national competitiveness that governments, as well as companies, achieve a better understanding of how to develop effective global strategies for different types of service businesses. Most research to date has focused either on why and how service firms internationalize or on different modes of internationalization.2 In contrast, we examine how globalization drivers and the use of global strategy might apply to various types of services, and what differences might exist relative to manufacturing...
Words: 5412 - Pages: 22
...Globalization Globalization is the shift towards a more integrated and inter-dependent world economy (Hill, 2009). Due to falling barriers to cross-border trade and investment companies are able to move goods, services, and investments faster and more consistent to consumers located in many parts of the world. International Trade Theories Some of the traditional international theories that support the concept of globalization are the Absolute Advantage Theory and the Comparative Theory. The Absolute Advantage Theory was created by Adam Smith in 1776 (Hill, 2009) and stated that a country that produces a product efficiently has an absolute advantage over other countries and should trade the product. Smith also argued a country that can purchase a product at a lower cost should never produce at home. According to Hill (2009), the Comparative Advantage Theory was developed by David Ricardo in 1817. However, Ricardo expanded on Smith’s theory of comparative advantage and suggests that although a country is efficient in producing a good or services, it will be cost effective to purchase the same goods/services from another country at lower opportunity cost. The theory also suggested that unrestrictive free trade increases world production. Drivers of Globalization The two macro factors that are major drivers of globalization are declining trade barriers and changes in communication, information, and transportation technologies. Falling trade barriers make it easier for...
Words: 649 - Pages: 3
