Globalization is generally referred to as the expansion of the flow of products, services, capital, people, and ideas across international borders. Professor Forest Reinhardt, who teaches Global Business at Harvard Business School, claims that “we live in a globalized age.” In other words, national economies are linked to one another more closely than before.
A firm grounding in the fundamentals of business globalization is essential, whether you’re trying to learn more about a multinational company or considering expanding operations abroad. Individuals must understand what it means to be an international firm, things to think about while addressing the global business scene, and how to increase your knowledge are all covered in this primer.
Globalization’s effects on enterprises
Businesses must constantly adapt to both internal and external environment changes. With increased globalization and the use of new technology, change is occurring more quickly, which makes markets more competitive and complex.
Why is there a rise in globalization?
- Expanding options for transnational commerce and streamlining capital transfers.
- Desegregation makes it possible for foreign businesses to compete for local contracts.
- A rise in competition brought on by foreign investment.
- The expansion of emerging markets, such as those in BRIC nations.
- Global strategies building corporate awareness on a worldwide scale.
- Global corporations gain economies of scale and a competitive edge.
- Modern production methods enable resource cost reduction and location flexibility.
- More acquisitions and joint ventures let companies reach international markets.
- Two-way skill transfers as multinationals establish themselves in new markets and hire locals.
- Transport expenses have decreased, for example, with bulk containers.
Different types of globalization
Economic globalization
The continual improvement of procedures, taking advantage of chances and overcoming obstacles in global economic activity. The spread of capitalism, a surge in market trading and exports, and the development of international economic policy are a few examples.
Cultural globalization
The dissemination and exchange of cultural values, customs, and concepts. The development of K-Pop is one example of this (Korean pop music).
Digital globalization
The speeding up and strengthening of global connections through the exchange of data and information through digital platforms. Big tech platforms like Facebook, Instagram, and YouTube are some examples.
Financial globalization
The expansion of international financial systems and the exchange of money internationally. Examples include the global stock market, which is dependent on the whole economy and where the performance of one market affects others.
Geographic globalization
The dynamic organization of many nations and regions in the world. Examples include the exchange of visas between a few nations, which allows citizens to readily travel, work, and reside elsewhere.
Political globalization
The growth and influence of multinational organizations that make decisions about acts and regulations on a global scale. These organizations include the United Nations, the European Union, and even the World Health Organization.
Ecological globalization
Relates to the emerging idea that we should all be accountable for taking care of the Earth as one entity. One instance is the COP26 summit, where nations from all around the world joined forces to combat climate change as a single global team.
Impact of globalization
The lowering of obstacles to selling abroad is referred to as market globalization. Since lower tariffs keep consumer costs lower and fewer limitations when crossing borders make it easier for a company to access a foreign market, this shift will make it simpler for your company to start selling items worldwide. Additionally, it indicates that businesses should consider various cultures when creating their business strategies and may need to change their product offerings or marketing techniques if they are not appropriate in the target nation. In the case of the camera sector, this might not be a problem, but a hamburger company expanding into India would undoubtedly need to review its offerings and business models.
Production globalization is the practice of obtaining goods and services from elsewhere to benefit from regional pricing variations. To cut production costs, you may, for instance, source materials and components for your cameras from several different nations before assembling the finished product in yet another foreign country. Given that the cost of production is reduced, this adjustment should result in cheaper costs for customers. Additionally, it affects employment since production may move from one nation to another, typically from more developed nations to less developed nations with lower average wages.
Summary
No generation before us has had the chance to create a global economy that leaves no one behind. It is a great chance, but it also comes with a lot of responsibility. Globalization must be advantageous to everyone if we are to live in peace and prosperity as one planet. The rising global connectivity of our world in all areas is inevitable, but it’s critical that the risks and difficulties that come with globalization be not overlooked.
So, what can you do right now to combat the problems caused by globalization? You may do your part to keep people accountable by staying informed, involved, and up to speed with the most recent forms of globalization and developing your own ideas on its role in contemporary society.
DeMont School of Management and Technology offers multiple programmes such as the and HND in International Business that offer deeper understanding of the cause, effects, impact and outcomes of globalisation on businesses.
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