Globalization and It Effect of Australian Business

ISSUES IN CONTEMPORY MANAGEMENT

Examine the implications of globalization for Australian business and discuss whether Australia should become more integrated into the global economy

Australia is an excellent object of study of globalization and its implications for business as its economic structure is at an unusual 'mid-way' point. New market opportunities, competitive threats and opportunities alike have been the key drivers of globalization since the 1980's. This essay analyzes a variety of topics to determine whether Australia should become more integrated into the global economy. Defining globalization and its major players is crucial to the argument. Petrella's definition of the main characteristics of contemporary globalization will be used as a framework to analyze and define the main changes that are a result of globalization. Through this process, the second part of the paper is devoted to analyzing the advantages and disadvantages for Australian business in becoming more integrated into the global economy. A conclusion can then be reached to confirm that the viability of Australia's integration into the global economy is not only advantageous but also a necessary progression.

Globalization is defined by various academics depending on the viewpoint they take. Keenoy and Kelly however most broadly define globalization as . . .

The expansion of international trade and production to the extent that most forms of economic activity are not only interlinked but also interdependent

Globalization can also be defined through its characteristics. Petrella describes globalization as comprising of the following concepts:

 Internationalization of financial markets

 Internationalization of corporate strategies, in particular their commitment to competition as a source of wealth creation.

 Diffusion of technology and related R&D and knowledge worldwide

 Transformation of consumption patterns into cultured products with worldwide consumer markets

 Internationalization of the regulatory capabilities of national societies into a global political economic system.

 Diminished role of national governments in designing the rules for global governance

The internationalization of financial markets is a direct result of globalization and vice versa. Four clear forces have contributed to this: market saturation, disintermediation, deregulation of financial markets and the internationalization of financial markets. A clear conception of what a large part of globalization the industrialization of financial markets is, is clearly outlined by Clarke and Clegg

International financial flows and foreign currency exchanges now dwarf the value of international trade in goods. The global financial system has become extremely volatile and very complex

The deregulation of finances and innovation by investors has created a highly technological financial system that is freely accessed on a global basis. The deregulation of the financial sector and the internationalization of financial markets are now made effortless through the ability to use instant telecommunications.

Globalization with regard to corporate strategies encompasses many different aspects of management, corporate paths and planning. The most important however is changing the way managers think with regard to their use of resources

Global organizations no longer produce their goods in one country and then ship them around the world . . .They design products for world markets and use world-wide production and distribution systems, as well as vertical integration, to gain economies of scale. But may other benefits accrue from pursuing a global operations strategy.

The commitment of corporations to competition as a source of wealth creation has several characteristics. These characteristics include strategic alliances, moving to under-developed countries to manufacture at low costs - hence creating a wider gap between the rich and the poor, and industry convergence.

The increase in technology is a major contributor in globalization. This is clearly shown in the article by Ferguson and James as

The rapid growth of computerization and telecommunication. The Internet is the most obvious, but certainly not the sole, example of networks that have no geographical base. Business is operating in an environment of greater "connected-ness" as authors Stan Davis and Christopher Meyer observe.

As shown, technological progress has the ability to create new knowledge that allows businesses, nations and consumers the avenue of using their resources to an extent that results in a larger output.

The transformation of consumption patterns into cultured products with worldwide consumer markets is another result of globalization. This is a direct consequence of falling trade barriers and organizations focusing on global marketing as opposed to specific target groups.

The internationalization of the regulatory capabilities of national societies and the transition into a global political economic system refers to the removal of trade barriers and other forms of protectionism within a nation. This results in a more global economic system of trade. Australia began its economic policy reforms during the 1980's. At this time it began the slow and topical process of transforming the nation from one of the most inward looking and protected of countries, into one where 'the liberal policy agenda is in ascendancy'. An excellent description of the effects of the internationalization of regulatory capabilities is illustrated by Marc Jones who refers to this process as the extension of nations 'spatial boundaries',

Spatial boundaries refers to the specific geographic location of a firms assets and activities. Where does it conduct its research and development? It's manufacturing? As a firm enters into international business through exporting, its spatial boundaries