Globalization

mpThe subject of this paper will be Globalization, it"'"s affects on the world, and an analysis of whether it promotes Prosperity or on the contrary, Impoverishment. It will be analyzed in detail using multiple sources including but not limited to the Internet, textbooks, encyclopedias, and various other literature pertaining to the broad subject. The method of describing this global phenomenon will be objective and will encompass many perspectives. The final result should empower the reader to make his/her own opinions and judgments.

Globalization as defined in Charles Hall"'"s Textbook International Business '"'refers to the shift toward a more integrated and interdependent world economy'"'. This definition is incredibly vague considering the great depth to the topic, however through research of the material, a greater perception of the concept can be formed. National economies that were originally separated from other countries by barriers such as distance, time zones, government regulation, culture, and countless other differences are now interacting and trading. These differences are shrinking as technologies allow better transportation, communications, and more tolerant opinions towards different cultures and procedures. '"'National economies are merging into an interdependent global economic system'"' PG 4, Hall.

Groups produce goods that provide for people in their microcosm, be it their village, extended local area, or perhaps solely their family. Multiply this over the whole world and you get the world market. Now consider that some of the more technologically advanced groups create firms and can more efficiently produce certain items than other groups and firms. This creates an opportunity for trade in between the different groups such that they can get goods in return for their goods or they could receive monies in which can buy a plethora of different goods to sustain their groups/firms. Keep in mind that trading amongst the groups here in this example is contained in their local areas and not yet international. After some time, producers of goods realize that their market is finite and their sales are stagnant. They then consider expanding into other goods and services to continue the growth of their firm and prosperity of the workers in the firm. So, now they are producing various goods and are able to produce more than is needed to sustain their communities, accordingly, they look for other markets to sell their superfluous products. This is the start of cross border trade and investment! All of the trading (especially the international trading) greatly expedites technology development and the new markets create strong a demand for those products. Now that there is a global market, all of the factors come into play! '"'Globalization has increased the opportunities for a firm to expand its revenues by selling around the worlds and reduce its costs by producing in nations where key inputs are cheap.'"'(Pg 5, Hall)

There are two main components to globalization, globalization of markets and globalization of production. Consumers across the world have different preferences and tastes regarding what they are interested in. America may like corduroy pants whereas Asia may prefer denim jeans. This could be an example a preference/taste. It is now widely argued that the preferences of nations in the world are uniting into a global norm. Companies offer a standardized product throughout the world and this creates a global market, hence the globalization of markets! Giants such as Coca-cola or McDonalds benefit hugely from this market globalization and thereby help create this global norm. Just because a company wants to sell its product in foreign markets doesn"'"t guarantee success in the venture. Many factors such as consumer tastes, distribution means, and even value systems determine the success or failure of these endeavors. Marketing strategies help to determine what will succeed where.

An example of this is that companies will promote different car types to different areas depending on what the marketing strategies demonstrated. Fuel efficiency, local incomes, and traffic levels are all accounted for and the cars promoted and sold there would be affected accordingly.

Nowadays, it is redundant to refer to the German market, the Japanese market, or the British market, in that few to no products are solely associated with certain places. Rather, a global market is the term used to describe production of any given product/service offered across the globe. Generally, the component parts to any product come from various countries and this walks hand in hand with the globalization of production. There are great benefits to producing products with this multinational method of component ordering. Certain areas and nations have aptitude for making different types of components. Cost and quality factors of production (labor, energy, land, and capital) vary so it is wise to source goods from around the globe. By employing those nations to build what they are skilled at producing, the components are of a higher level of quality, and according, the final product is superior. Large firms love this because with greater quality comes increased customer satisfaction, ergo they will become repeat customers and order larger numbers of the product! Not only giant industries such as Boeing or GM can benefit from globalization of production, but also relatively small companies can. These smaller firms ($20-$30 million per year in revenue) are in a mobile position whereas they can order their parts from places with low production costs and still turn out quality products. They are also more able to switch their suppliers due to their relatively small size, which would be more difficult for one of the giant corporations to do.

Now let"'"s consider what enables globalization to continually grow and make the world the smaller place that it"'"s becoming. The most influential and possible most obvious driver of globalization is the decline of barriers to trade and investment. As investment barriers fall, there is an increase in trade, foreign direct investment (fdi), and international trade. As goods, services, and capital are able to flow freely across the globe, costs for everyone drop, most importantly, the consumers at the end of the process. Trade barriers are no new phenomenon however. Throughout history, many occurrences, be it wars, political decisions of countries, and the general greed of individuals has set up barriers such as tariffs on imported/manufactured goods, or the more severe, embargoes

. Granted, the decision of the government was warranted in their tariff placing in that their motives