The Way Globalization Has Changed Our World

Globalization, definition and concept:

“The world became a one great village” that is how ordinary people would describe our time, and all of that is due to the effects of globalization. Globalization is a common issue, and its always a place of debate and contradiction. thus, we find those who support it and those who oppose it.

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Many considers globalization as a process of removing boundaries and facilitating communication between people, ideas and goods around the world as a whole.

Companies seek growth and expansion. In order to achieve this, most companies turn into global companies, as they are the fastest way to grow. So, you find a single company with multiple administrative headquarters, and even multiple factories scattered around the world. Some companies even acquire others in order to achieve better growth. (the auther)

Globalization, the catchy word, some people think it is the reason for the decline of society, but actually it means the free flow of investment. It is about the growth of business and trade role especially the foreign trade. For some societies globalization determine the type of production or industry, the globalization concept spread between 1980 and 2010. because economies improved dramatically, due to the improvement of flow date and information. (Erixon, P: 18)

Globalization, the ten forces that flattened the world:

Friedman’s in his book “ the world is flat” introduced us to the ten forces which led to the concept of globalization.

Friedman explained that the first phase of globalization took place from 1492 to 1800, during which European countries opened up trade with each other, and with the New World. This first phase was largely driven by military expansion, and success depended on the amount of raw manpower and horsepower countries could employ.

The second phase was from 1800 to 2000, where multinational corporations drove global integration. The dominant technologies were railways and autos. As mentioned earlier, The Lexus and the Olive Tree, focused on the world at the tail end of that era.

In the current phase which Friedman terms “Globalization 3.0” — individuals, as opposed to countries or multinational corporations, are now the key driving force. And the defining technology of our era is a worldwide network of fiber-optic cable, capable of transmitting reams of electronic data from one end of the globe to the other in seconds.

In a rare interview, (Marc Andreessen) the creator of the world’s first commercial Internet browser, spoke about the virtues of Globalization 3.0: “Today, the most profound thing to me is the fact that a person in Romania or Bangalore or Vietnam has all the tools they need to apply knowledge however they want,” said Andreessen. “So as key fields like medicine and bioscience are becoming more computational and less about doing work in actual labs and as genomic data becomes easily available on the Internet at some point you will be able to design new vaccines on your laptop.”

Andreessen is touching on one of the most exciting parts of globalization 3.0, and the flattening of the world in general the fact that we are now connecting all of the knowledge pools in the world together. We are on the cusp of an incredible new era of innovation, an era that will be driven from West and East, and from North and South.

(Bill Gates) explained the meaning of this transformation best. Thirty years ago, when he told Friedman, if you had to choose between being born a genius in Mumbai or Shanghai, or an average person in Poughkeepsie, you likely would have chosen Poughkeepsie because your chances of living a prosperous and fulfilled life were much greater there. ”Today,” Gates says, ”I would much rather be a bright A student born in China than an average student born in Poughkeepsie.” The barriers to entry have almost disappeared.

Friedman’s named the events that led the globalization to appear and spread Ten Forces That Flattened the World, and they are:

1. Collapse of Berlin Wall (11/09/1989): The first event was November 9, 1989 the day the Berlin Wall came down. Freidman sees this as a critically important date because, for the first time in modern history, it enabled people to begin thinking of the world as a single space.

2. Netscape: The second key date was August 9, 1995, the day Netscape – the first commercial Internet browser – went public. This brought the Internet alive by giving us a badly needed tool to display images and data stored on Web sites.

Moreover, says Friedman, the Netscape IPO also triggered the dot-com boom, which led to the dot-com bust, which triggered a massive over-investment of billions of dollars in fiber-optic telecommunications cable. That over-investment, by companies like Global Crossing, resulted in the commercially reckless laying of a global undersea fiber-optic network, which in turn drove down the cost of transmitting data overseas to practically zero, which in turn accidentally made Boston and Beijing next-door neighbors, almost overnight. Suddenly more people could connect with more other people from more different places than ever before.

The first time this became apparent was when thousands of Indian engineers were enlisted to fix the Y2K computer bugs for companies from all over the world. The fact that the Y2K work could be outsourced to Indians was made possible by the first two flatteners described above, along with a third, which Friedman calls “work-flow.”

3. Work Flow Software: is another word for all the software applications that help connect all the computers and fiber-optic cable. To put it another way, if the other trends basically connected people to people, what the work-flow revolution did was connect applications to applications so that machines all over the world could work together in manipulating and shaping words, data and images like never before.

Those breakthroughs in “people-to-people” and “application-to-application” connectivity produced, in short order, six more flatteners, six new ways in which individuals and companies could collaborate on work and share knowledge.

4. Outsourcing: The fourth flattener was “outsourcing.” In this era, all kinds of work can be digitized and shifted to any place in the world where it can be done faster and cheaper.

5. Offshoring: The fifth was “off-shoring.” Simply put, that’s when businesses send a whole factory overseas. This continues to be a cause of great consternation in the United States.

6. Uploading / Open-sourcing: The sixth was “open-sourcing.” Open sourcing occurs when high-minded software engineers collaborate together online, and create new value for free.

7. Supply-Chaining:The seventh flattener was “supply-chaining.” This is Wall-Mart’s specialty. Imagine creating a global supply chain that’s so efficient that if you sell a pair of shoes in Arkansas, another pair is immediately made in China. That’s just what Wall-Mart did.

8. In-sourcing: The eighth flattener was “in-sourcing.” In-sourcing happens when you let a well-run company like FedEx or UPS come inside your company and take over your whole logistics operation – everything from filling your orders online to delivering your manufactured goods, to repairing them for customers when they break.

9. Informing: The ninth flattener was a new form of collaboration that Friedman calls “informing.” These are the search engines like Google, Yahoo and MSN Search, which now allow anyone to find and access virtually unlimited piles of data, data all by themselves.

10. ‘The Steroids’: The tenth and final flattener is what Friedman calls “the steroids,” which include voice-over-Internet and wireless Internet access. Basically, what wireless does is it turbo-charges all of the new forms of collaboration, so you can now do any one of them, from anywhere, with an ever-expanding array of tiny hand-held devices.

So, in summary, Friedman’s first three flatteners created a new platform for collaboration, and the next six are the new forms of collaboration that flattened the world even more. And the world became flat when all 10 of these trends converged around the year 2000. This created a global, Web-enabled playing field that allows for multiple forms of collaboration in real time, without regard to geography, distance or language.

While some of these factors may seem less decisive than others, Friedman nonetheless reminds us how different things were just a few years ago. That alone is eye opening.(Friedman)

Globalization, a new business rules:

After the formation of the World Trade Organization (WTO) and the signing of 24 countries by the General Agreement on Tariffs and Trade (GATT), companies operated beyond the national borders and got access to foreign markets, these companies called multinationals corporation (MNCs), and as any corporation multinationals operated in order to grow, expand, and achieve profits, and they had several advantages:

1) Foreign operations has the ability of overflow absorption, cut the costs, and divide the risks over multiple markets.

2) Foreign operations allow to found low-cost production close to the natural resources needed with a cheap labor.

3) In foreign markets competition might not exist or it would be local and small compared to multinationals.

4) Foreign operations might has less tariffs, taxes, and maybe better political treatment if was the government encouraging investments.

5) Joint ventures can qualify firms to learn the technology, culture, and business practices of other people to to be able to reach potential customers, suppliers, creditors, and distributors in foreign countries.

But, multinational business also had its disadvantages:

1) Corporations face different difficulties: social, cultural, demographic, environmental, political, governmental, legal, technological, economic, and competitive forces. This can make internal communication difficult.

2) Weaknesses of competitors in foreign lands are often overestimated, and strengths are often underestimated. Keeping informed about the number and nature of competitors is more difficult when doing business internationally.

3) Competitors weaknesses are overestimated, and strengths are often underestimated.

4) Gaining an understanding of regional organizations is difficult, but is often required in doing business internationally.

5) Dealing with two or more monetary systems will make international business operations more difficult. (David, P: 332 – 333)

The factor that helped multinational corporations to spread was the openness which was resulted from the digital revolution, but the unlimited exchange of information via the Internet created new business challenges as a result of what they call the markets globalization. The most important of these challenges was:

1. Delocalization:

To cut the high cost of production and manufacturing multinational companies transferred their factories to the low-cost labor countries. But, due to this act they noticed that their share in the local market shrank in favor local companies.

2. The globalization of the purchasing function:

buyers of multinational companies are looking for global buying synergies. So, the multinational companies are seek better co-ordination so they can get a bigger share of the market, and they compete with local businesses to get more customers.

The main target of the multinationals is to maximize the profit and their global market share, and cut down the expenses to the minimum.

3. The growing importance of global networks:

To add value to their offerings the suppliers play the role of system supplier, so, they take precedence towards customer service to achieve a wider perspective of their clients and the supplying process which will lead to higher degree of co-operation and integration between the supplier and the business process.

4. The transition to electronic forms of exchange:

Globalization and the internet founded the virtual markets, and it made the processes of negotiation, communication, supply chain management and marketing much easier.

Though it made the processes easier but, the companies faces the risk of loosing the intellectual property on the internet, or even the data and information get stolen or hacked.

5. Using a network perspective and a qualitative research approach:

This challenge shows the ability of small and medium-sized enterprises (SMEs) to collect data and information to help them to obtain new market knowledge, new customers, and new markets. (Matthyssens and others, p: 481 – 483, 484)

Globalization and management:

We are living the age of the global economy, which almost everything is taken in a worldwide rather than a local or a national scope. It is also the time where the forces of globalization had its effect on the components of the global economy.

A border-less world is what we have today, the nation status is no matter anymore. We are leaving the world 3.0 as Pakaj Ghemawat or the globalization 3.0 as Thomas L. Friedman call it. It is where different economies integrate to form the global economy.

Management globalization is the term used to describe the multinational corporation management, global management depends on what we call global managers, which they are managers with strong global perspectives, are culturally aware, and always stay informed about international developments. (Schermerhorn, P: 108, 109)

Globalization and business ethics:

Nowadays everyone talks about business, society and globalization, this mixture has gained great importance as each side has a direct and indirect influence on the other two. Globalization took an important place, and it represented one of the axes of the Economic Forum in the year 2000 in Davos.

When we talk about globalization and its relationship to work ethics, we must talk about culture for its importance and its fundamental role in shaping societies. Perhaps the best example in this field is China and Europe. In a slowing down economy, there is no problem for some European institutions and companies to suspend some workers and employees, while such behavior is completely unethical in China.

Likewise, child labor is common in many Asian countries, and governments deal with this issue in a very lenient way, while child labor is considered a crime in Europe and the United States of America.

Globalization has increased the responsibilities of the corporations and companies towards: better standards of living, more jobs, better welfare, and more ethical standards and awareness. Globalization has managed to make the government tend to address and prioritize some issues, such as bribery, corruption, charity and taxes.

One of the effects of globalization is outsourcing, as some companies tend to recruit employees from developing countries, because of the salary salaries are much less compared to salaries in the country of the company itself. So, the unethical treatment became the subject of attention and care by different authorities. (Sharma, p: 4 – 5)

References:

1. David, Fred R. Strategic management. Fifth edition. 1995. Prentice international editions. European Center For International Political Economy

2. Erixon, Fredrik. The economic benifits of globalization for business and consumers.

3. Friedman, Thomas L. The world is flat: a brief history of the twenty – first history. First edition rev and expended, 2006. Farrar, Straus and Giroux.

4. Matthyssen, Kirca, and Pace. Business-to-Business marketing and globalization: two of a kind. International marketing review. Vol 25. No 5. 2008. Emerald group publishing limited.

5. Schermerhorn, John R. Management. Twelfth edition. 2013. Wiley.

6. Sharma, Tanu. Business Ethics: Impact of Globalization. Jaypee University – Solan , Himachal Prade

29 April 2022

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