Week 2- Globalization

Globalization
Corporations gain a competitive advantage on multiple fronts through
globalization. They can reduce operating costs by manufacturing abroad, buy
raw materials more cheaply because of the reduction or removal of tariffs, and
most of all, they gain access to millions of new consumers.

Globalization is a social, cultural, political, and legal phenomenon.

 Socially, it leads to greater interaction among various populations.

 Culturally, globalization represents the exchange of ideas, values, and
artistic expression among cultures.
 Globalization also represents a trend toward the development of a
single world culture.
 Politically, globalization has shifted attention to intergovernmental
organizations like the United Nations (UN) and the World Trade
Organization (WTO).
 Legally, globalization has altered how international law is created and
enforced.

On one hand, globalization has created new jobs and economic growth
through the cross-border flow of goods, capital, and labor. On the other
hand, this growth and job
creation are not distributed evenly across industries or countries.

Specific industries in certain countries, such as textile manufacturing in

the U.S. or corn farming in Mexico, have suffered severe disruption or
outright collapse as a result of increased international competition.

Globalization's motives are idealistic, as well as opportunistic, but the

development of a global free market has benefited large corporations based in
the Western world. Its impact remains mixed for workers, cultures, and small
businesses around the globe, in both developed and emerging nations.

Globalization of Market
It refers to the merging of historically distinct and separate national
markets into one huge global marketplace. Falling barrier to cross-border
trade have made it easier to sell internationally. Coca-Cola, PlayStation,
McDonalds, Starbucks are companies that is of Global scale.

Globalization of Product
Refers to the sourcing of goods and services from location around the
global to take advantage of national differences in cost and quality of factors
of production (Labor, Energy, Land and Capital). By doing this, Companies
hope to lower overall cost structure or improve functionality of their product
offering, allowing them to compete more effectively.

Drivers of Globalization
Two macro factors underlie the trend toward greater globalization.
 The first factor is the decline in barriers to the free flow of goods,
services, and capital that has occurred since the end of World War II.

During the 1920s and 30s many of the world's nation- states erected
formidable barriers to international trade and foreign direct investment one of
the common barriers is tarrif. The typical aim of such tariffs was to protect
domestic industries from foreign competition.

Average Tariff Rates on Manufactured Products as Percent of Value

The following are the common barriers of globalization:

 Tariffs - a tax or duty to be paid on a particular class of imports or
exports.
 Non-tariff barriers to trade.
o Import licenses
o Export licenses
o Import quotas
o Subsidies
o Voluntary Export Restraints
o Local content requirements
o Embargo
o Currency devaluation
o Trade restriction
 The second factor is technological change, particularly the dramatic
developments in recent decades in communication, information processing,
and transportation technologies. The lowering of trade barriers made
globalization of markets and production a theoretical possibility.
Technological change has made it a tangible reality. Since the end of
World War II, the world has seen major advances in communication,
information processing, and transportation technology, including the
explosive emergence of the Internet and World Wide Web.
Telecommunications is creating a global audience. Transportation is
creating a global village.