Defining Globalization, Essay Example

Globalization is a process that increases interaction and integration among the people, companies, and governments of different nations. Though most people equate globalization with an increase in world trade and economic interdependency among nations, globalization has also been affecting environment, cross-cultural interaction, and living standards among other things around the world (SUNY Levin Institute). It may not be an understatement to claim that the most recent trend of globalization has been triggered by advancements in the internet and information technology sectors. But like most other things, globalization also has its pros and cons but overall, globalization’s benefits outweigh its costs.

Globalization has enabled organizations to become more efficient and profitable. Production costs are lowered due to economies of scale as well as greater choices in terms of suppliers. Organizations now also secure better rates from suppliers due to volume purchases. Many major corporations have reduced the number of suppliers in their supply chain network by as much as 90 percent (Capon & Senn, 2010). The organization’s capital investment needs also decline and asset utilization rates improve because a single production facility could manufacture products for multiple international markets. Fewer protectionist policies mean there is no need to locate a manufacturing plant in every single country in which the firm sells its products.

Globalization has also made the factors of production such as financial capital and human capital more mobile and when companies are looking for talent, they can cheaply access international markets for talent, too. As a result, companies around the world have more diverse composition of workforce which brings greater perspectives and ideas to the table. In addition, employees with local knowledge can help businesses target markets whose market structures, customer lifestyles, and cultures may be quite different. Diverse workforce also improves businesses’ social image and help them gain acceptance in the communities.

Globalization has also been benefitting developing countries including those in Africa through greater foreign direct investment (FDI). 75% of all American investment in Africa comes from the oil companies and the country is still the largest investor in Africa. Similarly, China Exim Bank guaranteed loans worth $13.1 billion to Chinese companies in 2008 for investing in Africa (Wiliams, 2010). In addition, globalization has also been encouraging the formation of politically-stable regimes around the world. Political instability and lack of security discourage foreign direct investment and trade because they increase the risk and degree of uncertainty.

Another benefit of globalization is quicker dissemination of technologies and production techniques around the world. Free trade not only leads to exchange of goods and services among nations but also of ideas. Thus, free trade can speed up the adoption of more efficient as well as environmentally friendly technologies around the world. Even though the developing nations tend to have lighter environmental regulations than their developed counterparts, stricter environmental regulations may follow economic growth bought by free trade.

Globalization has also been increasing the cultural interaction among people from different countries, also thanks to internet technologies. Access to knowledge and communication are much more convenient and cheaper which is why there is a renewed interest in international music, food recipes, and movies. In addition, more and more people around the world have been taking interest in learning a new language and they include primarily monolingual people in developed countries such as the U.S. Some of this interest has also been due to the realization that globalization will result in an increased level of international trade activities and language skills could turn out to be an asset.

One of the main criticisms of globalization is that developed countries have not sincerely followed the spirit of globalization and have used it only to advance their own economic interests without any regard for economic and environmental costs to the developing countries. This may be why we sometimes witness increasing protectionist sentiments in the developing nations. The annual loss to developing countries as a group from agricultural tarriffs and subsidies in rich countries is estimated to be $45 billion (Bardhan, April 2006) which could be considered an act of hypocricy by the developed countries.

Even though globalization has been promoting cross-cultural exchanges, the benefits once again are being accumulated unevenly by different countries. Countries that are developed or rising economic powers are getting more exposure and this may hurt the cultures of countries with low economic or political power. Thus, few cultures such as Indian, Chinese, American, and Brazilian etc. may have been getting greater exposure at the expense of other cultures such as African indigenous cultures. Thus, economic status of any country seems to have a direct impact on the exposure its culture gets in the print and electronic media.

Critics of globalization also argue that companies may establish production facilities in developing nations to escape the strict environmental regulations that are enforced in developed nations. One of the reasons why production costs may be lower in poor countries is absence of environmental regulations that help companies save environmental compliance costs. In addition, waste material is often improperly disposed, making its way into the waterways and irrigated lands. Poor countries often bear with the unethical activities of the big corporations so as not to drive out the foreign investors that may also take the jobs with them. Thus, free trade just becomes a tool of escaping the stricter environmental regulations. Some countries do require compliance with Multilateral Environmental Agreements (MEA) (Brack and Gray) as a condition of trade but that kills the very purpose of free trade. On the other side, countries that comply with MEA may be at a disadvantage against countries that do not have to incur the compliance costs.

Another concern is that globalization has increased competition and as a result, organizations continue to press their suppliers for better rates. The suppliers, thus, feel a pressure to cut corners which results in child labor and unsafe working conditions. Nike’s scandal as well as recent criticism faced by Apple highlights the problems association with maintaining a global supply chain network.

Globalization has both benefits and shortcomings but overall the standards of livings have improved around the world and middle class has been booming in many countries including India and China. Over time, problems associated with global warming such as higher environmental pollution in developing countries and unethical labor practices will decline due to better production techniques and stricter enforcement of ethical labor practices by multinational companies.

References

Brack, Duncan and Kevin Gray. “Multilateral Environmental Agreements and the WTO.” September 2003.

Capon, Noel and Christoph Senn. “Global Customer Management Programs: How To Make Them Really Work.” California Management Review Winter 2010: 32-55.

SUNY Levin Institute. What Is Globalization? 23 April 2012 <http://www.globalization101.org/what-is-globalization/>.

Wiliams, Trevor. U.S. Policy Should Spur Private Investment in Africa. 02 August 2010. 23 April 2012 <http://www.globalatlanta.com/article/24118/>.