Examining world markets and how they benefit from globalization
Introduction
Businesses, consumers, and the Western economy as a whole have benefited from globalization. But right now, we run the risk of experiencing a backlash against globalization and all the opportunities that growing economic freedom has given us over the years. Western society are experiencing a new level of concern that questions long-held beliefs that freer trade benefits all nations equally. There is a growing perception that while globalization may have benefited some nations more than others, wealthy Western nations have ended up on the short end of the stick.
It's important to have a clear knowledge of what the term "globalization" entails before talking about its advantages and disadvantages.
The process through which businesses or other organizations gain international influence or begin operating on a global scale is the official definition of "globalization."
Simply said, globalization is the free exchange of knowledge, technology, and goods between nations and their citizens. The relationships between commerce, geopolitics, technology, travel, culture, and the media all contribute to this openness.
The majority of people don't perceive globalization at work every single day because the world is already so interconnected. However, the world is getting smaller, and businesses need to know what this means for how business will be conducted in the future. Companies that resist globalization run the risk of losing customers.
What Advantages Does Globalization Offer?
Businesses are affected by globalization in many different ways. However, those that choose to pursue worldwide expansion reap a number of advantages, including:
1. Exposure to diverse cultures
With the advent of globalization, it has never been simpler to access international cuisine, entertainment, music, and visual arts. It is possible to order Thai food to be delivered to your apartment while listening to your favorite UK artist or streaming a Bollywood movie thanks to the free flow of people, goods, art, and information.
2. The Proliferation of Innovation and Technology
Knowledge and technical improvements spread swiftly because many nations are continually connected. This means that scientific advancements produced in Asia can be put to use in the United States in a couple of days because knowledge also spreads so quickly in that region.
3. Lower Product Costs
Due to globalization, businesses can create their goods more cheaply. Additionally, it heightens international competition, which lowers costs and gives customers a wider range of options. People in both developing and developed nations can live better on less money because of lower prices.
4. Globally Higher Standards of Living
The standard of living in developing countries has increased as a result of globalization.
5. Obtaining Market Access
Globalization benefits businesses greatly, bringing in new clients and generating a variety of revenue streams. Businesses looking to take advantage of these advantages search for adaptable and creative strategies to expand internationally. International Professional Employer Organizations (PEOs) make it simpler than ever to promptly and legally hire employees abroad. Because of this, many businesses can now expand internationally without having to set up a foreign organization.
6. Obtaining New Talent
Along with opening up new markets, globalization also gives businesses access to specialized talent that isn't present in their existing market. Globalization, for instance, allows businesses to look for tech expertise outside of Silicon Valley, in thriving cities like Berlin or Stockholm. Once more, International.
Impact of globalization on business
In recent decades, the leading idea of globalization has taken center stage in economic life. Almost all corporations have been impacted by these changes, which have an impact on the economy, business world, society, and environment in various ways. The main causes of these shifts include escalating rivalry, quick technological advancements, and information sharing. Companies need to keep in mind a variety of globalization's primary implications in order to combat these changes.
Competition
There is more rivalry as a result of globalization. This rivalry may be based on factors such as target market, technology adaptability, quick company response, cost and price of the product or service, etc. A corporation can expand its market share by producing products at a lower cost and selling them for less money.
Customers now have a huge variety of options available to them, which has an impact on their behaviors. They want to buy goods and services more quickly and effectively than they did in the past. They also anticipate affordable rates and great quality. The business must fulfill all of these demands else its sales will decline, it will lose money, and it will lose market share. A business must always be prepared for changes in client preferences, prices, and product and service offerings
Technology exchange
One of the most noticeable effects of globalization is how innovative, globally focused businesses are using new technologies to take advantage of new business opportunities. For SMEs looking to increase their presence in new foreign markets, the internet and e-commerce processes hold great promise.
Another important element for enhancing competition and product and service quality is technology. On the other side, the corporation will incur a substantial expense as a result. To increase sales and improve the caliber of its products, the corporation must employ the most recent technologies. The transmission of technology and the advancement of technology have accelerated with globalization. Markets are being driven by consumer expectations. Most businesses in capital-intensive markets are vulnerable, which is why they need to quickly adjust.
Transfer of knowledge/information
In the current climate, information is one of the most expensive and important production factors. From one nation to another, information can be traded and moved with ease. A corporation can adapt to this worldwide shifting if it has the opportunity to employ knowledge and information. The problem of technology transfer in international markets is comparable to this one. Because the industry is changing so quickly, it is also necessary to share knowledge quickly and use it effectively.
Disadvantage of Business Globalization
Many supporters see globalization as a means of addressing broader economic issues. However, detractors claim it's escalating global inequality. The following problems are mentioned while globalization is criticized:
Risk Diversification in Business
"Don't put all of your eggs in one basket," advises a well-known adage. This adage, as applied to business, implies that companies that operate in just one nation run a certain amount of danger. Business risk is the possibility that a transaction will go wrong. As the 2011 Japanese earthquake demonstrated, if a company is entirely dependent on one nation from either a supply or market viewpoint, adverse economic, political, or natural calamities in that nation might pose serious challenges. Similar to how distributing one's eggs over several baskets lessens the likelihood that all of them will break, business risk is decreased when a company diversifies across several nations.
Take natural catastrophes like the earthquakes and tsunami that struck Japan in 2011 as an example. The financial repercussions may have been severe if Japanese automakers like Toyota, Nissan, and Honda only sold vehicles domestically. However, because these businesses had operations in other nations, they were shielded from the effects of the events in Japan. In other words, by not being unduly dependent on their Japanese operations, these companies diversified their business risk.
Trends in Canada, the US, and Europe pose a challenge to American cigarette companies like Philip Morris and R. J. Reynolds. As laws prohibiting smoking in public places and restaurants are implemented, high taxes on smoking are maintained, and society's attitudes about smoking are changing, tobacco consumption is dropping in these areas.
Political Danger
Going global also presents formidable hurdles, despite the fact that competing in international markets offers significant potential benefits like access to new customers, the chance to cut costs, and the diversification of company risk.
Citizens in Canada, the United States, and Europe are unaccustomed with the serious political disruption that can result from a military takeover (Thailand), a military or terrorist revolt (Egypt), or outright war due to the relative stability of these nations (Iraq). The "Arab Spring," a term used to describe a series of protests in 2011 in nations like Tunisia, Egypt, Libya, Bahrain, Syria, and Yemen as their populace tried to oust corrupt rulers, is one illustration of broader political transformation.
Similarly, the military conflict between Russia and Ukraine in 2013 and 2014 increased global oil prices.
The nations with the most political risk are typically those with unstable administrations, like Somalia, Sudan, and Afghanistan, where few foreign businesses are prepared to do business. However, a number of the world's significant rising economies, such as India, the Philippines, Russia, and Indonesia, also have high levels of political risk. This is a problem for businesses because these dangerous environments also present great potential for growth. Companies can opt to focus their operations in nations with very low levels of political risk, like Canada, Australia, South Korea, and Japan, but the prospects there are frequently less (Kostigen, 2011).
Financial Risk
Economic risk is the possibility that a nation's regulations, property rights safeguards, and currency exchange rates will have a negative impact on a company's activities there. Executives who oversee multinational corporations must evaluate these numerous factors and attempt to predict how they will impact their organizations. Economic risk provides executives with enormous hurdles since economies are erratic.
The flagship businesses of Hyundai Motor Group, the fifth-largest automotive corporation in the world, are Hyundai and Kia. In 2013, Hyundai Motor Co. saw a decline in car sales in Europe due to a weak general market, but its smaller brother Kia Motors Corp. was able to expand its position there (The Korean Herald, 2014).
Take Kia's operations in Europe, for instance. Since 2008, Kia has increased sales volume in Europe, growing its market share from 1.7 percent to 2.7 percent in 2013. This achievement, which frequently defies the general market downturn, is a testament to Kia's product selection, quality, and warranty. The executives of Kia needed to consider how the state of the economy might affect Kia's performance in Europe as they made long-term plans. It would be more challenging for customers to purchase new Kias if inflation and interest rates rose in that nation. The price of a Kia would increase for European purchasers if currency exchange rates changed and the euro lost value against the South Korean won.
Economic, political, and cultural globalization
Three different forms of globalization exist.
globalization of the economy
The coordination of financial trade and the integration of global financial markets are the main topics here. Economic globalization is exemplified through free trade agreements like the Trans-Pacific Partnership and the North American Free Trade Agreement. Economic globalization is greatly influenced by multinational firms, which have operations in two or more nations.
globalization of politics
This category includes national policies that foster international cooperation on a political, economic, and cultural level. The UN and NATO, for example, are involved in the political globalization process.
globalization of culture
This facet of globalization mainly focuses on the sociological and technological elements that are generating cultural convergence.
Among these are improved communication.
globalization's effects
Locally and internationally, the consequences of globalization can be seen, having an impact on people's lives as well as society at large in the ways listed below:
1.Individuals
Numerous international influences here have an impact on common people. Their capacity to get commodities, pay prices, and travel to or even relocate to other nations are all impacted by globalization.
2.Communities
This level includes how globalization affects local or regional enterprises, organizations, and economies. It influences a variety of factors, including who lives in communities, where they work, for whom they work, and whether they can leave their current community and move to one abroad. The way regional cultures emerge within communities is also altered by globalization.
3.Institutions
The way a nation approaches and embraces globalization affects multinational corporations, national governments, and other organizations like colleges and universities. A university's capacity to diversify and increase its student body is impacted by globalization, as is a government's capacity to pursue particular economic policies.
While the consequences of globalization can be seen, it is more difficult to assess their overall implications. Many times, those who support globalization perceive certain outcomes as favorable while others who oppose it see them as negative. It is debatable whether globalization improves the entire world; a partnership that benefits one entity may harm another.
Conclusion
The availability of a very wide range of job options is the first advantage of international trade. This is due to the fact that trade between nations encourages the growth of new sectors to satisfy domestic and global demand for goods.
This circumstance will undoubtedly aid nations in lowering their jobless rates. In this approach, finding employment will be simpler for those who don't currently have it.
expanding markets and boosting earnings
The expansion of the company's market is the next advantage of global trade. This is accomplished by manufacturing at peak efficiency without worrying about overproduction or declining sales prices. Due to the existence of international trade, business owners can utilize all of their manufacturing equipment to the fullest and export the excess goods they make. High productivity will boost income in this way.
increase a nation's level of prosperity
A significant part in increasing each country's income is played by international trade. This is so that nations with advantages and drawbacks of a certain good can trade and buy the goods they require. International trade activities will help to meet needs and boost income. In this manner, a rise in state revenue will boost a nation's prosperity.
Life's necessities are simpler to meet.
International commerce will also make it simpler for each nation to meet its own demands for goods that are not produced there. This is so that each nation can have its own abundance of resources.