PY7123 Introduction to Skills Based Practice
December 21, 2023
MOG Sample
December 25, 2023
Introduction:
Globalization has raised some serious implications in the domain of business management and the global economy. The transition from international trade to the concept of globalization has been perceived as a major attribute in the development of national economies.
As per Baylis, Smith & Owens, the concept of globalization is controversial owing to the wide assortment of benefits alongside disadvantages which reflect detrimental consequences on national economies. The process of globalization comprises of integration of political, economic and cultural dimensions on a global scale (Baylis, Smith & Owens, 2013).
This research paper is intended to describe the varying impacts of globalization on developing and developed countries specifically referring to the three crucial domains of economic and trade processes, culture effects and education and health systems. As per Beck, the critical reflection on the positive as well as negative impacts caused by globalization would assist in accomplishing specific insights into the industries which are affected by globalization and an estimation of the long-term impacts of globalization. Prominent references to the impact of globalization on world trade would facilitate support for the analysis of varying impacts drawn by countries through globalization (Beck, 2015).
Globalization is prominently associated with various theories in business management depicting the influence rendered in the case of economic processes, health systems, technological developments, social factors, political influences and social factors. One of the formidable effects of globalization has been noted in the proliferation of innovative opportunities such as technology transfer, enhanced productivity, engagement in developed country markets and improvement in living standards (Benería, Berik & Floro, 2015).
However, the detrimental consequences associated with globalization also include references to improving levels of inequity among nations, instability of financial and commercial markets and depletion of natural resources.
Effect of Globalization on Industries and Countries:
Before a discussion on the contrasting impacts of globalization, it is essential to observe that the definition of globalization has been subjected to various ambiguities. The understanding of globalization has often overlapped with the definitions of internationalization, liberalization and regionalization. Globalization can be defined from a generic perspective as the elimination of barriers existing among countries, communities, economies and governments (Crane & Matten, 2016).
While globalization has been largely associated with international and multinational integration of countries country limitations are negative in the case of globalization. Furthermore, the implications of global activities developed novel opportunities for improving the market integration of goods, capital and services. However, the considerable implications of disparities between regionalisation and globalization could be assumed as notable entities for confusion.
According to Crane, Kawashima & Kawasaki, regionalization is perceived as a supporting framework for globalization by various researchers while debates have also been observed in the context of the capacities of regionalization to impose considerable barriers on globalization. Regionalization is prominently associated with the integration of national economies within a specific region wherein the implementation of custom unions, economic unions, free trade areas, monetary unions and common markets (Crane, Kawashima & Kawasaki, 2016).
The association of globalization with the implications of regionalization can be validated only till the economies of scale affect the competence of regional companies allowing them to compete internationally. However, these outcomes can be obstructed by the exclusive nature of particular regional groups which can subsequently deter the process of globalization. Thereafter, it would be essential to consider the impact of regionalization on the prospects for multilateral trade liberalization that is reflective of the prominence of globalization (Dunning, 2014).
On the other hand, the criticisms drawn against globalization have prompted political leaders to restrict the process of globalization and increase emphasis on the aspects of regional integration and regionalism thereby excluding any sort of interrelationship between globalization and regionalism (Fujita & Thisse, 2013).
Therefore regionalisation and globalization could be considered as parallel developing areas without any sort of linear relationship and hence countries which perceive advantages from globalization are more likely to be inclined towards globalization while those countries which associate it with disadvantages are more likely to shift towards regionalism.
Impact of Globalization on Countries
As per Gwynne & Cristobal, the impact of globalization on countries can be aptly recognized through the comprehensive review of data about the interplay between international trade and globalization. Globalization is associated with the concerns for improvement in the wealth of developed countries leading to marginal developments in the economies of developing countries (Gwynne & Cristobal, 2014).
The positive economic developments in developing countries are also characterized by the limitations of pitfalls such as risk marginalization and poverty due to their incapability to participate in the international trade system (Mostert12, 2003). The profound examples of economic improvement in developed countries such as the United Kingdom and the United States of America and its implications in recognition of plausible improvement in the economic situations of various Asian countries. The below figure shows the GDP per capita growth rate of globalised and non-globalised countries
Figure 1: Impact of Globalization on Countries
Source: (Hay & Marsh, 2016)
The economic growth of Asian countries has also led to the reduction in implausible disparities in the distribution of income between developing and developed countries. On the contrary, researchers have suggested that the reduction in disparities among the income distribution in developed and developing countries could be assumed as a potential source for industrial growth in specific developed countries (Hay & Marsh, 2016).
The income gap between developing and developed nations was primarily influenced by the proliferation of serious financial problems in various countries. The low-income countries were able to contribute less than 1% to the globalized cash flows among the total global transactions while the estimates between 1980 and 1990 suggest that more than 90% of the global financial transactions were executed by 25 countries all over the world.
As per Mostert12, the division of the global economy into three prominent regional blocks such as the American, European and Asian blocks suggested that these blocks were capable of realising 43% of global capital transactions as well as 56% of complete portfolio transactions (Mostert12, 2003). These initial developments could be assumed as the platform for the proliferation of a transitional stage in the context of capitalism’s development (Hirst, Thompson & Bromley, 2015).
Impact of Globalization on Industry
Executives are often bothered about the implications of globalization in an industry thereby implying the formation of strategies that can be utilized for capitalizing on the prospects of globalization as well as acquiring a formidable competitive advantage. The existence of a generic characterisation of industries as global does not apply to the analysis of the effect of globalization in an industrial context.
The primary implications towards the probabilities of globalization in the case of industries could be associated with the concerns for elements of globalization in almost every industry (Lechner & Boli, 2014). Hence it can be aptly determined that globalization in the case of an industry could be directly associated with a specific degree depending on the probabilities for globalization, regionalization or hybrid structures.
Therefore, the globalization in case of an industry is dependent on specific factors responsible for modification in strategic choices which need to be identified alongside the disparities between global competition, industry globalization and the extent of globalization of a company’s operations. Global industries imply competition on a global basis and hence business leaders prefer the implementation of global corporate structures to acquire a higher strategic advantage (Papastergiadis, 2013).
Considering the aspect of global competition, it can be inferred that global competition is independent of the degree of globalization of an industry and the competitive environment in the global market does not necessarily imply the reorganization of operational aspects of the organization. Industry globalization is largely influenced by the economies of scope and scale which suggest that minimum volume requirements for addressing cost efficiency cannot be derived from a single region. Global branding and distribution positions are the primary objectives of industries when national market shares are cross-subsidized by companies thereby initiating global competition.
According to Pieterse, the company structures that are followed by globalized organizations are implicative of the association of production and distribution systems with the factors of world-scale volume, cross-subsidization and competitive retaliation on a global scale. Therefore, it becomes ambiguous to determine which industries are more globalized than others and the reasons for the concentration of global industries in specific jurisdictions (Pieterse, 2015).
The examples of automotive, oil and gas as well as pharmaceutical industries can be evaluated as profound examples of global industries while real estate and retailing sectors could be assumed as domestic industries. The dominant location of globalized industries is also a prolific source of concerns for critical evaluation since examples of the Asian dominance in semiconductor and machine tool industries could be considered as a profound contrast to the origin of these industries in the United States.
The dominance of Germany as the hub for the global chemical industry as well as the dominance of the United States in the software and entertainment industry could be included in the analysis of globalization’s effects on countries and industries (Sassen, 2015). These examples create prolific concerns for strategists since governments have to implement public policies that can favour the attraction of industries alongside the perception of changes in global competition by organizations as well as the advantages related to location that can be identified by the companies.
Some prominent theories that could be used for determining the impacts of globalization include the theory of comparative economic advantage which implies that the efficiency of certain countries or geopolitical jurisdictions in the production of certain goods can be attributed to the existence of natural endowments i.e. relative to the availability of natural features such as temperate landmass or favourable landscape for agriculture (Stromquist & Monkman, 2014).
The clustering of industries can be essentially reserved as a relative advantage that can be drawn from the industry itself that is reflective of the relocation of manufacturing facilities that can facilitate ease of access to primary customers. The economies of scale in manufacturing countries can be leveraged in case of limited costs of transportation thereby implying the services of a larger geographical area from a single location. Suppliers could be easily attracted to the industry upon the acquisition of favourable implications in international trade.
The presence of various industries in specific locations simultaneously could lead to the development of concerns for clustering that can be attributed to economic forces. From a practical perspective, the semiconductor industry is characterized by the competencies of Asian and American organizations to address the global trends of demand in the industry (Sassen, 2015). The requirement of intensive capital in the industry alongside higher costs of research and development alongside profound complexity of the manufacturing process as well as the minimal transport costs for the semiconductor industry.
The interaction of interplay between various technological implications related to the clustering of suppliers, the direction of cost and the learning curve towards the realization of scale efficiencies. Transportation costs should be prohibitive and complex realization of scale economies can be assumed as the profound deterrents for clustering. As per Papastergiadis, the globalization of various organizations in the electronics appliance industry such as Whirlpool and GE has been noticed in the varying operational aspects of the organization. The observation of advantages concentration can be observed in the production of value-added components whereas the higher transportation costs alongside the bulky nature of products would make the options for concentration minimal (Papastergiadis, 2013).
Furthermore, the observation of developments in flexible manufacturing methodologies has resulted in the reduction of the minimal scale required for effective production. Hence the classical economic theory of comparative advantage suggests the reasons for the proliferation of clustering initiatives.
Porter’s National Diamond
The explanation of globalization and its relevant impact on countries can be perceived through a cognizable interpretation of Porter’s national diamond of competitive advantage that depicts the representation of a country’s attractiveness for globalization in terms of six definitive factors.
Figure 2: Porter’s national diamond
Source: (Fujita & Thisse, 2013)
The six factors that can be associated with Porter’s national diamond refer to home-country demand, home industry competitiveness, related and supporting industries, chance, factor conditions and public policy. Factor conditions can be associated with a prolific influence on the attractiveness of a specific region for an industry since they can be used to measure the feasibility of natural endowments accessible in the area to cater to industry-specific requirements (Lechner & Boli, 2014). Factor conditions are primarily observed in the natural as well as artificial categories wherein the former is reflective of the availability of minerals and favourable climatic conditions and the latter specifies cognizable references to the capital, proficiency levels and sophistication of infrastructure.
The consideration of the mobility of the factor conditions and the implications for imitation of the conditions by other countries can be assumed as primary validations for the incompetence of factor conditions to impose regional dominance. The profitability of an industry complemented by the reduction of barriers to entry can be assumed as the sources for promoting forces of diffusion and imitation that could subsequently lead to the expansion of the industry on an international level.
Therefore the dependence of the industries on mobile factors such as capital could be considered as a noticeable factor leading to susceptibility of the industry (Hirst, Thompson & Bromley, 2015). The factor of home country demand can be analyzed on the grounds of size and nature of demand in a particular country where the implications of large home market jurisdictions can impinge plausible indications for industry development. The development of home country demand could lead to the settlement of businesses in the home country alongside reflecting on the capacity of firms to acquire experience and explore feasible opportunities in foreign jurisdictions when the levels of saturation in domestic jurisdiction are notably observed (Hay & Marsh, 2016).
The observation of Porter’s second factor of home country demand can be illustrated on the grounds of the composition of the early demand rather than on the location from where demand is proliferated. The fundamental design of a product is generally derived from the requirements of the home market alongside depicting potential sophistication among the home market buyers for obtaining access to a wider global position. The example of the semiconductor industry leveraged home country demand and the nature of early demand for semiconductor chips to establish itself as an attractive industry. These conditions which are responsible for the proliferation of new technologies alongside access to manufacturing opportunities on a wider scale can be considered as flexible drivers of globalization.
The related and supporting industries could be observed in the context of Porter’s national diamond of competitive advantage as an influential driver of globalization. The related and supporting industries could be referred to as the concept of clustering which implies the development of the industry based on the availability of other supportive industries (Gwynne & Cristobal, 2014). For example, the domain of entertainment in Hollywood has been complemented by a wide assortment of other industries that are capable of inducing plausible modifications in the labour market.
The competitiveness observed in the home industry is also a viable indicator of the attractiveness of an industry and the intensity of domestic competition can be assumed as a formidable influence on the probabilities of successful companies engaging in competition on a global scale. The existing dominance of competitive rivalry in the pharmaceutical industry in Germany has drawn substantial inferences towards the establishment of benchmarks for the global market. Public policy and chance are perceived as two other profound elements in Porter’s national diamond of competitive advantage since the government could exercise major influences on the globalization of industries as well as national impacts through incentives, temporary protection, infrastructure and subsidies which are regulated by government policies (Crane & Matten, 2016).
The chance element is associated with the effectiveness of random events such as entrepreneurial initiatives, promising breakthroughs in the domain of science as well as acquisition of sheer luck. The prolific development of the photography industry in the US as well as exercising formidable dominance in the industry can be specifically attributed to the fact that the founders of two leading camera manufacturing firms, George Eastman from Eastman Kodak and Edwin Land from Polaroid, were born in the US and thus can be considered as an element of chance derived from their entrepreneurial zeal to promote the photography industry.
Positive effects of globalization:
The interpretation of the impacts of globalization on industries and countries through the perspective of theories such as Porter’s national advantage and the implications rendered by the aspects of regionalization and globalization has been presented in the research paper. The estimation of positive effects caused by globalization could help perceive the plausibility of globalization as an instrument for comprehensive improvement in the economic and social facets of a country.
The involvement of organizations in a global market could lead to the prospects for access to emerging markets in developed countries that could lead to the expansion of the value chain of such organizations on an international scale. The establishment of multinational corporations, protection of yields, sustaining competitiveness and consistent development of businesses alongside limitations on costs as well as the acquisition of privileges from economies of scale can be considered as profound benefits from globalization (Benería, Berik & Floro, 2015).
The cross-cultural management implications derived from globalization could also imply possibilities for reducing potential barriers among cultures that can be associated with the interaction of Western culture with Eastern countries. The increasing dominance of the consumer culture could be considered as the substrate for the transformation of regions, nations, societies and cultures.
Furthermore, the concerns of mass media, technological change and marketing campaigns directed towards customers could also be assumed as the drivers of cultural diffusion. Foreign trade is one of the major positive impacts obtained from globalization which has increased the availability of products and services (Baylis, Smith & Owens, 2013). The formulation of international agencies such as the World Trade Organization could be assumed as promising initiatives for influencing the domain of international trade through regulations about copyrights, international trade regulations, subsidies, tariffs and taxes. The increasing dependence of countries on foreign capital, trade and access to global financial markets alongside the implications of comparative advantage that can be obtained from foreign trade can be estimated as profound positive effects of globalization.
The negative impact of globalization:
The positive implications of globalization are also subject to the existence of nominal pitfalls such as higher average tariff rates in developing countries, influences of the Western culture, expanse of fast food chains and concerns of unemployment. The concerns for unemployment as a result of globalization could be attributed to the requirement of varying levels of competitiveness at national and organizational levels thereby implying the proliferation of measures to reduce costs alongside improving productivity and efficiency (Benería, Berik & Floro, 2015).
The gradually increasing influence of the Western culture could also be observed as a detrimental consequence for the native culture in developing nations and therefore it can be estimated as a notable setback generated by globalization.
The consistent reforms in the trade policies of developing countries as well as the efforts for attracting foreign investors have led to costly subsidies, incentives and support infrastructure for multinational companies and the longer tax rebates. These measures could impose detrimental influences on the national economy thereby implying a formidable negative impact of globalization.
Conclusion:
The research paper examined the varying implications of globalization, especially in the context of its positive and negative impacts as well as the contextual references to globalization and its effect on countries and industries with the help of academic theories.
References
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