#1 Study Of Globalization

Definition 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-beingin societies around the world.
Historical Foundation
Globalization is an historical process that began with the first movement of people out of
Africa into other parts of the world. Traveling short or long distances, migrants, merchants
and others have delivered their ideas, customs and products to new lands. The melding,
borrowing and adaptation of outside influences are found in many areas of human life.
Indicators of Globalization
There are about seven major type of globalization:
 Financial Globalization
 Economic Globalization
 Technological Globalization
 Political Globalization
 Cultural Globalization
 Ecological Globalization
 Sociological Globalization
Nature of Globalization
Liberalization: It stands for the freedom of the entrepreneurs to establish any industry
venture, within their own countries or abroad.
Free trade: It stands for free flow of trade relations among all the nations. Each state grants
MFN (most favored nation) status to other states and keeps its business and trade away
from excessive and hard regulatory and protective regimes.
Globalization of Economic Activity: Economic activities are be governed both by the
domestic market and also the world market. It stands for the process of integrating the
domestic economy with world economies.
Liberalization of Import-Export System: It stands for liberating the import- export activity
and securing a free flow of goods and services across borders.
Privatization: Keeping the state away from ownership of means of production and
distribution and letting the free flow of industrial, trade and economic activity across
borders.
Increased Collaborations: Encouraging the process of collaborations among the
entrepreneurs with a view to secure rapid modernisation, development and technological
advancement.
 Economic ReforEncouraging fiscal and financial reforms with a view to give strength to
free world trade, free enterprise, and market forces.
Reason for Globalization
Main reasons are to improved transport, making global travel easier. enabling greater
movement of people and goods across the globe, reduced the costs of inter-modal transport,
making trade cheaper and more efficient, Improved technology which makes it easier to
communicate and share information around the world, Growth of multinational companies
with a global presence in many different economies, Growth global trading blocks which
have reduced national barriers. (e.g. European Union, NAFTA, ASEAN), Growth of global
media, Financial system increasingly global in nature, Improved mobility of capital,
Increased mobility of labour.
Stages of Globalizaton
 first stage of globalization, companies normally tend to focus on their domestic markets.
They develop and strengthen their capabilities in some core areas.
 second stage of globalization, companies begin to look at overseas markets more seriously
but the orientation remains predominantly domestic, the company gets a better
understanding of overseas markets at low risk, but without committing large amounts of
resources.
 third stage of globalization, the commitment to overseas markets increases. Different
strategies are formed for different markets to maximize customer responsiveness. This
phase can be referred to as the multinational or multi-domestic phase.
 final stage of globalization, the transnational corporation emerges. Here, the company
takes into account both similarities and differences across different markets. firm attempts
to combine global efficiencies, local responsiveness and sharing of knowledge across
different subsidiaries.
Merits & Demerits of Globalization
Merits/Advantages:
 Increase in employment opportunities: As globalization increases, more and more
companies are setting up businesses in other countries. This in turn increases the
employment opportunities that people atone place have. People can get better jobs
without having to move to other countries in search of better jobs.
 Education: With the increase in globalization, it has become easier for people to
move across borders to different parts of the world to acquire better education. This
has resulted in an integration of cultures. People from underdeveloped and
developing countries often move to developed countries to get better education.
 Increase in free trade: An increase in free trade has opened doors for investors in
developed countries to invest their money in developing countries. Big companies
from developed countries have the freedom to operate in developing countries.
 Faster flow of Information: Information flows from one part of the world to the
other immediately, resulting in the world being tied together. Vital information can
 be shared between individuals and corporations at a very fast rate. It has also
facilitated in increasing the ease of transporting people and goods.
 Increase in quality of goods and services: As a result of globalization, people have
access to the best quality of goods and services throughout the world. Companies
have to strive to provide better quality goods and services to the consumer and the
consumer has the liberty of choosing whichever product he thinks is best suited for
his needs
 Decrease in prices of goods and services: As the competition in the market has
increased due to rapid globalization, producers have to price their products
competitively in order to remain in the market. This has become a boon for the
consumer as he can get better quality products at cheaper prices.
 Reduction in cultural barriers: As people move from one country to another,
barriers between various cultures tend to decrease. This has resulted in tolerance
and openness towards other cultures. This has also facilitated communication
between different cultures and hence, nations.
Demerits/Disadvantages
 Environmental degradation: Developed countries can take advantage of
underdeveloped countries’ weak regulatory laws in terms of environmental
protection.
 Unfair working conditions: Many multinationals have been accused of social
injustice by exploiting labor in underdeveloped countries in order to cut costs.
Labor are provided unhealthy working conditions leading to health hazards.
 Fall in employment growth rate: Though the promotion of the idea that the advances
in technology and increase in productivity would create more jobs has been a
cornerstone of globalization, This can also be attributed to the fact that companies
move their production facilities from one place to another in search of cheaper labor
once the workers in the previous country start demanding better wages.
 Rapid spread of deadly diseases: Deadly diseases such as AIDS or other
communicable diseases can spread at very fast pace via travelers or due to other
means as a direct consequence of globalization.
Importance of Globalization
It is the free movement of goods, services and people across the world in a seamless and
integrated manner. Globalization can be thought of to be the result of the opening up of the
global economy and the concomitant increase in trade between nations.
Philosophy behind Globalization: According to a widely accepted great interpretation,
globalization is a science of extensive problems, each of which concern everyone, and
humanity in general as well, in new, qualitative, and in their tendencies existential ways.
In this sense, the legitimate fields of globalization are e.g. the issues of ecology, raw
materials, migration, the global health problems of the world, the global positive or
negative tendencies of population, energy, arms trading, the drug crisis, or dilemmas of
integrationandworldeconomy.