Globalization of Business Activities - Essay Example

1. Globalisation can be defined as the process where different countries across the globe join together in economic activities and can trade freely as a result of the removal of geographical boundaries. This economic activity taking place across the national boundaries is a result of internationalisation of financial markets which aims to promote free trade as well as direct investment among different states across the world as well as promoting interconnectedness of human activities from different geographical areas. Globalisation liberalised trade where the barriers which used to exist among nations were removed and different countries can now engage in free trade. It should be noted that there are quite a number of key players that drive globalisation and these include the multinational corporations, World Trade Organisation (WTO), World Bank and International Monetary Fund (Rodrick 2001). Different governments are also key actors as they authorise trade to take place between them and the multinational corporations intending to invest in their countries. They are very instrumental in determining the outcomes of trade and investment between the states involved as they would be responsible for regulating the operations of the multinational companies. The WTO also plays a pivotal role in that it facilitates the platform through which international trade agreements are negotiated and enforced among member states. On the other hand, the World Bank and the IMF are major actors in that they provide with loans as well as technical assistance to the governments or multinational corporations that wish to invest in other different countries. 2. The manufacturing sectors in different countries seem to have rapidly expanded on a global scale and the three major drivers that seem to have accelerated the trend of globalisation in this sector include the government, cost, market and competitive. In the manufacturing sector, it can be noted that it is expensive to manufacture certain products in other countries as a result of availability problems of raw materials, transport costs involved as well as labour costs. Against this background, various multinational companies prefer to establish their manufacturing business in areas where raw materials are readily available and in some cases where there is availability of cheap labour. The market drivers are particularly influenced by per capita concentrations in industrialised countries where they seem to have greater control of the means of production hence can determine the places they would want to invest in. The structure of the market is characterised by a top to bottom trend where the industrialised nations are seen taking investments to areas of their choice. In some cases, the poor nations are not yet developed to the extent of focusing on “global values of exchange,” Isaak (2005). The developing countries in essence are not yet industrialized or developed to such an extent where they can match the developed nations. In order for them to undertake fair practices, the poor nations should have measures in place that would try to balance the situation whereby there will also be in a position to benefit technically from the operations of the multinational organisations. Provisions should be made that are meant to train the local people to be competent especially in manufacturing industries as a way of stimulating growth of their own economies through the acquisition of relevant knowledge. It can be noted that the contemporary market is characterised by the convergence of lifestyles and tastes where people have the autonomy to choose what they want to consume from the media. As a result of improved transport services globally, it seems as if the market has been homogenized since people can travel freely between countries and can buy anything from anywhere. The manufactures are aware of these changes taking place in the market and this prompted them to establish world brands which can be accessed anywhere. The cost driver of globalisation has also resulted in the emergence of newly industrialised countries with productive capability and low labour costs and the investors are targeting these countries. Indeed, there are various multinational organisations operating in other areas with huge populations such as China where from the look of things, it would seem that that these multinational organisations would mainly seek to invest in such countries in a bid to get cheap labour from the local nationals. In some instances, the powerful nations prefer to invest in less developed countries in order to get cheap labour as well as raw materials which are repatriated back to their countries for processing in some instances. The rich and powerful nations are in most cases on top of the situation where they are the ones who are seen carrying investment to lesser developed countries. The flow of the wealth is often seen as one sided and there is no equality in terms of sharing of the wealth (Bond 2002). Whilst globalisation is meant to promote development, it is often seen that it is not the case in some instances as diagrammatically illustrated below. FDI Inflows In the same vein, the increasing cost of product development relative to market life also plays a pivotal role in driving the concept of globalisation. Where the costs of producing a particular product are high, the investors would prefer to seek other countries where the costs can be lower. Essentially, is meant to generate profits hence it would defy logic to operate at loss making margins. It can also be seen that the other driver of globalisation is advancement of technological innovation where many countries are developing their infrastructure which makes them suitable for investment. The government drivers that have accelerated the trend of globalisation in this manufacturing sector mainly include privatisation of previously state-dominated economies. Most of the governments across the world used to enjoy the monopoly of controlling the manufacturing sector whereby there were no other competitors who could penetrate the industry before the advent of globalisation. For instance, many parastatals involved in the manufacturing industry in many countries were firmly under the control of government before privatisation. However, privatisation has since deregulated this industry whereby many other actors can operate. As a result of these changes, many global companies are now able to move across the boundaries and can invest in the manufacturing industry in any country where they may wish to do so. Monopoly economies hindered other competitors to penetrate the manufacturing industry in countries where it was practised. Another government driver in the changing trends of the manufacturing industry was a shift to open market economies from closed communist systems in Eastern Europe. Market economies are influenced by market forces such as pricing which is determined by supply and demand factors as well as competition in the market where there are many players operating. Another factor which accelerated this industry to respond to global forces was increasing participation of China and India in the global economy. China for instance is regarded as the world’s fastest growing economy hence its absence in the global economy somehow affected its growth. China boasts of the world’s largest population and is involved in a lot of manufacturing where other countries prefer to invest in it by virtue of the fact that the costs of labour are relatively low compared to the other countries. In terms of productivity, China is also regarded as a powerhouse since it greatly contributes to the global economy. The competitive drivers which have accelerated the trend of globalisation in the manufacturing sector include the continuing increases in the level of world trade where there is also an increased ownership of corporations by foreign acquirers. By virtue of the fact that different investors can invest in any country, competition is promoted and it is healthy to have competition in the market. This has also seen the rise of new competitors’ intent upon becoming global competitors emerging in the global economy. The chances of investment likely growing are high when there is competition in the market. Increases in the level of world trade stimulate investment across the globe since it would be easier to sell the product produced in any country. Another reason which has accelerated the trend of globalisation in the manufacturing industry is the growth of global networks making countries interdependent in particular industries. As a result of the increased formation of global strategic alliances, companies are able to coordinate their operations so as to satisfy various needs of the market demands while upholding the principles of competition. Competition has seen the emergence of various multinational companies investing in different countries across the globe. Competition has seen more companies becoming globally centred rather than nationally centred which has influenced them to concentrate on manufacturing particular products that are meant for the global market. Growth of global networks has seen many countries becoming interdependent in particular industries. A good example can be drawn where some investors particularly put their processing plant in host countries where they would be getting their raw materials. This is beneficial to a network of industries in that exorbitant costs involved in the transportation of raw materials to the processing plants would have been eliminated. 3. Personally, I have been affected by globalization in various ways which are both positive and negative. Globalisation has brought about efficient communication technology such as the internet where I can now access any information in the comfort of my room. It removed physical barriers liker boundaries where different services were previously confined to these geographical locations. I can freely choose to consume what I want from different choices of media products available as a result of the impacts of globalisation. I can as well communicate with friends from different corners of the world instantly which is a positive aspect about globalisation. Basically, new infrastructure brought by globalisation has greatly improved our means of communication as well as doing business. On the other hand, it has greatly affected my culture in that I am caught between two different worlds as a result of the products I consume from the media particularly internet which are more westernized. Globalisation is changing our cultures, our political, legal, and economic systems and affecting our standards of living. According to Isaak (2005), poor countries must protect the interests of the local people and their financial considerations must also be taken into considerations. Our cultural values have been eroded by western culture that is being imposed on us. It should also be noted that each society has got its own cultural values and they ought to be protected. Every person has got a culture and all the people across the globe do have values that are shaped by their culture. It is very important to ensure that the culture of the national people is not violated by the foreigners who come to invest in the country. The values of the people shape their way of behavior hence they ought to be safeguarded. In a globalised economy, the flow of wealth in most cases is one sided and it is seen flowing from the poor countries to the rich and powerful nations. This has also affected me since I just suffer the consequences of globalisation like anyone else in the country. Globalisation has often been criticized for the unfair redistribution of wealth it creates as the rich and powerful nations often end up benefiting from investing in poor countries. The less developed countries in most cases do not have equal powers compared to the richer nations hence national governments of less developed countries should strive to enact legislation which makes it possible for them to have a reasonable stake of shares from any business that is directly operating in their countries. Local people in most cases have little benefits from investment undertaken in their own country compared to the benefits that are reaped by the investors. The investors often get a lion’s share from the proceeds of their operations while the local people get nothing out of the investment deal. Given such an unfair state of affairs, the local government should put in place structures that are meant to safeguard the interests of the local people. Over and above, it can be noted that globalisation is based on the premise that is meant to promote free trade as well as liberalize investment among different countries. However, it seems that the rich and powerful nations end up benefiting more than their trading partners in the less developed world. Overally, globalisation can be said to bring more harm than good especially on smaller and weaker nations since the powerful and dominant countries seek to establish their own values over the weak countries as ideal. There is a tendency by the powerful countries such as the United States of America to dictate to the weaker nations their own preferred systems of democracy as well as cultural values which has negatively impacted on the local cultures in many ways. References Bond P.(2002) Fanon’s Warning: A civil reader on the new partnership for Africa’s Development, Africa World Press. Buckman G (2004), Globalisation: Tame it or scrap i. New York. Zed Books. Isaak R.A. (2005), How the rich get richer and the poor get left further behind: The globalisation gap, Prentice Hall. Shipman A.(2002) The Globalisation Myth, Cox and Wyman Ltd Rodrick A. (2001), Take it Personally: How Globalisation affects you and powerful ways to challenge it , HarperCollins Publishers, UK. What is globalisation? (n.d) Available at: http://www.tssa.org.uk/article-38.php3?id_article=2190Accessed on 11 Apr. 10 What is globalisation? (n.d) Available at: http://www.tssa.org.uk/article-38.php3?id_article=2190 Accessed on 10 April 2010 Read More