Current Debates and Issues about Globalization, Impact of Globalization on Corporations - Literature review Example

Running Head: GLOBALIZATION Globalization (Name) (Course) (University) Date of presentation: Lecturer: Globalization Globalization is a comprehensive concept for the emergence of a global society in which political, economic, environmental and cultural events happening in one part of the world quickly become significant to the people and governments in other parts of the world (Lechner, 2009). The process is a product of the invaluable advances in transportation, communication and information technologies. The term is widely used to describe the growing political, economic, technological and cultural integration and linkages between countries, communities, businesses and individuals across the globe. Globalization also describes the growth and expansion of multinational corporations and transnational corporations. A number of international institutions that oversee world finance and trade such as the World Trade Organization and International Monetary Fund have been at the forefront in promoting the development of globalization. Ulrich (2000) has noted that although most people continue to live as citizens of one country, they are materially, culturally and psychologically engaged with the citizens of other countries as it has never been before. Technological advance have resulted in a situation where events occurring in distant countries often bring significant and immediate impact on the local people, blurring the traditional boundaries of personal worlds. One of the most dramatic and noticeable evidence of globalization is the increased volumes of trade and the movement of capital between countries in the form of stocks, bonds and currencies. In fact, the volume of world exports rose by more than 20 times between 1950 and 2000 and by 2001, trade between countries accounted for 25% of all goods and services produced in the world (Ulrich, 2000). Remarkable Aspects of Globalization According to Ulrich (2000) three institutions have helped shape the development and current era of globalization. These are: the IMF; the WTO and the WB, all of which have their origin in the end of the 2nd World War following attempts by the US and the United Kingdom attempted to set up new policies and rules for the global economy. The IMF was set up in 1944 to help stabilize currency markets, which had severely deteriorated due to the impact of the war. Shortly after, the World Bank was set up to enhance the rebuilding of European economies, which were devastated during the war. Experts attribute the sudden rise of globalization to improvements in transportation, communication and information technologies. For instance, currencies, stocks and bonds and other investments can be traded across the world around the clock because of the innovations in communication and information processing. In 1930, a one-minute call from New York to London cost an equivalent of today’s US$100, making instant communication very expensive for most people. Today, with the advances in information technology, the cost is insignificant, thanks to more innovative forms of communication such as cell phones and the Internet. Advances in information and communication technologies have cut down on the costs of processing business orders by more than 90%. For instance, using a computer to do banking costs very little compared to the traditional methods. Improvement in technologies has made it possible for people to remain in instant communication despite the distance between them. According to (Roland (2002) advances in communication technologies have the power to instantly unite people around the world. As an example, communication satellites allow global broadcast of events happening in far away countries such as wars, national disasters and sports. Improvements in transportation technologies are part of globalization. Indeed, the world has reduced into a global village due to quick delivery by jet planes. Other advances in the fields of communication and transportation have allowed large corporations to in other countries where the costs of production are cheap. This has significantly reduced the costs of doing business. For instance, the Cisco, the world’ largest corporation as measured the stock market value owns only three factories for making the equipment used to maintain the Internet. The corporation subcontracts most of its work to other companies, which are situated in several countries. Cisco uses the internet to enable companies to bid for subcontracts. The company also interacts with customers and suppliers through the internet. The use of the internet has remarkably reduced Cisco’s costs of doing business by more than 90%. This has resulted in the company making huge profits. Reduced costs of doing business have made it easier for various companies to venture in foreign countries. For instance, about 60% of the vehicles Japan's Toyota Motor Company in North America are manufactured in the United States. Similarly, Germany’s BMW manufactures in the US for its North American market. Besides tangible goods, globalization has made it easy for information and money to move great distances. Migration is another notable trend this era of globalization and remittances constitute an important income source for many countries, both developed and under-developed. In El Salvador, remittances account for 13% of the country’s national income. This value is larger than what foreign aid and investment contribute (Ulrich, 2000). Benefits of Globalization The process of globalization has rapidly improved the economic and social status of many people, especially in the developing world. This has resulted from the rapid economic integration of the rich and poor countries, which has seen win-win change outcomes develop. Backed by rapid democratization of finance, information and technology, globalization has indeed turned out to be a remarkably liberating force. In his book, Roland (2002) has effectively captured the essence of globalization by noting that it helps break the regressive taboos that have been responsible for discriminating against people on the basis of their ethnic, racial, gender and education backgrounds. He further says that globalization has proved the most effective antidote for the fundamentalisms that have for a long time oppressed millions of the worlds’ poorest people. Undoubtedly, globalization has remarkably raised the status of women in some societies that were largely conservative. The education of women has empowered them to seek careers in positions that were traditionally reserved for men and to actively fight for the rights of other women and marginalized people. Globalization has also made it easy for countries to outsource experienced personnel from other countries. This has created opportunities for large corporations to mete out work to their branches and partners and, therefore, get the work done at lesser costs. According to Marthinsen (2008) the ability to utilize capital is mainly a result of the cropping of new opportunities, and markets and this is the most vital effect of globalization. However, this has been more beneficial to the richer countries as they have the financial resources to invest in upcoming markets and opportunities. On the social aspect, incidences of child labor have substantially declined. In one way, this has been due to rapid increases in the levels of income for countries and individual households. Moreover, issues related to ethnic tensions and diversity can be resolved easily due to improved communication and migration. It has been noted that multinational corporations are and shall continue to be the greatest beneficiaries of the process of globalization. These institutions not only get more consumers, employees, assets and profits through globalization, but are also able to curve global images for their businesses. A good example is the soft drink giant Coca Cola which has taken advantage of the opportunities presented by globalization to penetrate markets as far as the scorching deserts of Africa and the remote, isolated villages of South East Asia (Marthinsen, 2008). Over the years, countries like China and India that were a few years ago very poor have benefited immensely fro making themselves part of the global community. Today, China is thought to be the most outstanding example of globalization as it has become the fastest growing economy, with annual growth rates of about 10% or more in the last few years. Challenges and Costs of Globalization Despite the many positive benefits associated with globalizations, there are numerous social and economic costs and challenges associated with the process, and which individuals and governments will have to contend with. In a way, globalization has enabled rich counties to amass more wealth at the expense of poor countries. This has been the case because of the fact that rich countries have the resources required to take advantage of and invest in emerging market opportunities (Roland, 2002). The situation has left poor countries struggling desperately to compete with the developed countries. Another important challenge associated with globalization is that the phenomenon has increased the rate at which non-renewable resources are exploited, while at the same time contributing to increasing pollution and global warming. Countries are also faced with the threat of loss of control over output from industries as firms can outsource production from other countries to the levels at which environmental standards are less strict. Under-developed countries are increasingly faced with the problem of brain drain, which results from massive movement of trained and skilled workers to other countries to search for greener pastures. With advances in information and transportation, it no longer easy for countries to hold on to their skilled workers, when there is the attraction of higher wages in other countries (Jürgen & Niels, 2005). While no one opposes globalization in its entirety, it is strongly felt that certain aspects of it should be changed. For instance, there is a debate over the institution and implementation of best rules for governing the global economy, so that its problems can dissipate as its benefits grow. On this debate, there are those who insist on the benefits of uplifting barriers to free trade. Proponents of this argument insist that it will allow capital to be distributed more efficiently between countries and give consumers increased freedom of choice. Opponents, however, see neoliberal policies as producing greater poverty, social conflicts, inequality, environmental damage and cultural destruction, especially in poor countries. It is strongly argued that developed countries such as Germany, Japan and the UK succeeded because of subsidies and protectionism and not because of free trade. This argument is well supported by the fact that recently-emerged economic giants such as Korea, Singapore and China have had strong state-led economic policies which did not in any way relate to neo-liberalism (Marcelo & Desirée, 2004). Concerns have also been raised that globalization allows uncontrolled inflow and outflow of money from and into speculative investments, which can easily lead to economic bubbles. Economic bubbles are characterised by increasing property values and booming financial markets. When an economy cannot sustain such high expectations, the bubbles burst and investors respond by pulling their money out of the economy. The rise and bursting of economic bubbles had been responsible for devastating global economic crises whose impacts have been worse on poorer countries. Impact of Globalization on Corporations: Case of McDonalds McDonalds is an American fast-food retail giant. The company has active operations in several countries across the globe and records impressive financial performance. Of all the major multinational corporations, McDonalds is one of those which have benefited most from the process of globalization. This has been chiefly due to the company’s close association with the Unite States foreign investment policies. With active operations in120 countries, McDonalds receives 50 million customers each day. To a large extent, the global and competitive success of McDonalds can be attributed its ability to adapt to local resources and cultures. For McDonalds, the challenges of globalizations can be easily turned into investment opportunities through sensitivity to local cultures and values (Gilbert, 2008). The company offers training programs in up to forty different languages, with the primary ones being English, Chinese, French, Spanish, Portuguese and Arabic. This has made McDonalds to preserve and promote the cultures of the local communities in which it operates. As an example, single men in Saudi Arabia eat separately from children and women. Similarly, the company does not sell pork or beef in India. These have proven to be important business strategies for operating in the competitive globalised food market (Gilbert, 2008). The rapid advancement of communication, transport and information technologies has made it easy for McDonalds to outsource products and personnel from many different countries. In addition, the company is able to ship supplies between subsidiaries and to track performance in subsidiaries and their local branches. Undeniably, the benefits of globalization have impacted heavily on McDonald global success. Current Debates and Issues about Globalization In the past ten years, globalization has become one of the debates most discussed. It has also been the subject of numerous books and the cause of major global demonstrations. Critics of globalization have stated that the process has led to massive exploitation of millions of people in poor countries and has caused great disruptions to their lives. Supporters of globalization have, however, pointed out to the huge reductions in poverty levels achieved by countries which have embraced globalization. Such countries include India, China and Vietnam among others. Current debate about globalization focuses on how the process can be regulated to address the perennial problem of wealth inequalities, health and environmental issues, labor rights, national sovereignty issues and cultural diversity issues. Regarding the issue of inequality, there is an apparent income gap between countries and individuals. There are also inequalities in living standards and in the ability of countries to participate in global economic affairs. All these issues present serious political problems in the wake of globalization. Unfortunately, some countries lack the capacity to function at even the basic standards of competence in the globalized economic system. For some countries, the only profitable economic activities are linked to criminal behaviors such as illegal trading of drugs, extortions and smuggling. Governments that are not able to control such activities are ideally failed states. On a bad note, some failed states have become safe havens for foreign criminals and terrorists who use them to perpetrate activities that are harmful to other governments and people (Jürgen & Niels, 2005). Global warming is another important issue closely tied to debates about globalization. Global warming is primarily caused by burning of fossil fuels, which occurs mainly in the industrialized world. Another cause is the destruction of rain forests, which is common in the developing world. The world's glaciers and ice sheets are gradually melting, and weather patterns may be changing slowly. Experts have predicted that if the issue of global warming is not addressed, deserts may advance quickly, and sea levels may rise. This may cause massive flooding of coastal areas and the submersing of a vast number of the world’s ocean islands. In conclusion, globalization had brought about the quintessential connection between technologies, production, logistic and markets. The process has accelerated the development of communication between people in different countries, governments and companies. Nevertheless, it has both positive and negative sides. It has the potential to remarkably uplift the standards of living for many people. In essence, globalization is a process that will surely change the world. Nevertheless, the effects of globalization are not just limited to the economic dimension. The repercussions of globalization can be felt on the cultural, environmental and political dimensions and call for concerted efforts between individuals, organizations and countries to address the issues which pose potential threats to people’s lives.  References Gilbert, S. (2008). The Story of McDonald's. New York: The Creative Company. Jürgen, O. and Niels, P. (2005). Globalization: a short history. Princeton: Princeton University Press. Lechner, F. J. (2009). Globalization: the making of world society. Sydney: Wiley-Blackwell. Marcelo, M. and Desirée, Q. (2004), Globalization: culture and education in the new millennium. California: University of California Press. Marthinsen, J. E. (2008). Managing in a global economy: demystifying international macroeconomics. Ottawa: Cengage Learning. Roland, R. (2002). Globalization: social theory and global culture. New York: SAGE. Stiglitz, J. E. (2003). Globalization and Its Discontents. New York: W.W. Norton. Ulrich, B. (2000). What is globalization? Boston: Wiley-Blackwell. Read More