Introduction to Globalization: Economic Perspective
in other countries instead of domestically doing business?
What is globalization?
Globalization is such a broad coverage that
composing its definite interpretation is still being widely
debated. To give us further understanding what globalization
is, here is of its different interpretation in terms of economic
perspective.
Globalization as Internationalization
➢ It is described as cross-border relations between
countries wherein interdependent countries earn
growth through international exchange through
enlarged movements between countries of people,
money, investments, messages, and ideas.
• In simple terms, internationalization refers to
any mutual activity between countries that
benefits both parties. The presence of foreign
companies, such as McDonalds, in the Philippines
is an example of internationalization.
McDonald’s, a US based company, gives
franchise and/or license to Philippine
businessmen to use its brand for
Filipinos to enjoy its offered products
and services. In return, McDonald’s
receives economic boost as it expands
its economic presence across the
country.
Globalization as Liberalization
➢ It is the process of removing state-imposed
restrictions on movements between countries in
order to create an “open borderless” world economy.
Recently, Filipinos were given free entry
to Taiwan by the Taiwanese
government. This is an example of
liberalization. By granting the free-visa
privilege to all Filipinos, Taiwan will
enhance its bilateral relations with
Philippines through tourism, trade,
investment, technology, agriculture,
economic, cultural, educational, and
people-to-people cooperation and
exchanges.
Globalization as Westernization
➢ The social structures of modernity like capitalism,
rationalism, industrialism, bureaucratism, and so on,
are spread all over the world, normally destroying
earlier existent cultures and local self-determination
process. This may be referred to as Americanization.
Hollywood, for example, has dominated
the world market since 1920’s. It has
become the medium by which people
across the globe see American fashions,
culture, tradition, and recent trends.
Because of its vast influence, countries
afar adapt Hollywood lifestyle to their
respective communities. This is an
example of Westernization.
Globalization as Internationalization
Why Internationalization?
Why some companies have to extend their presence
There are several reasons why a business firm decides
to internationalize. Generally, they are subdivided into two
main parts: proactive reasons and reactive reasons.
*concept map of internationalization
PROACTIVE REASONS
Proactive means to act in advance, to anticipate
something happening, and plan for the situation. Companies
who are proactive in international business are, in most cases,
better positioned than companies that simply react. Here are
some proactive reasons:
a. Profit and growth goals
▪ Bayadog Group of Companies (BGC) aims to increase
its annual profit to $10B by 2020. Currently, its
domestic annual profit is $3.5B. To realize this aim,
BGC has decided to include India, China, and the
Philippines as potential market in the next few years.
b. Technology Competence
▪ Over the past 20 years, Amazon has developed from
a small seller working from a garage in Seattle, to a
global company with 285 million customers
worldwide. This is because of its continuous
development of cutting-edge technology to assist
their employees in their roles and deliver for their
customers.
c. Unique Product
▪ Netflix’s unique video streaming model has shrunk
Blockbuster’s 4000 stores to just 500. Hollywood
studios, meanwhile, are realizing that the company is
once again changing the home entertainment market
with its video streaming model – and are wary about
its still growing power. Its success has spurred Apple
and Amazon to invest heavily in video streaming.
d. Cost Reduction
▪ Instead of creating its own telebanking customer
support in the US. Citibank has signed an agreement
with Convergys Philippines to serve as their customer
service frontline. Philippines offers lower labor cost
compared to the US.
e. Foreign Market Opportunities
▪ Exploring the rising market of construction in the
Philippines, Oliver’s Construction Firm, an Austrian
based firm, signed a deal with the Department of
Public Works and Highways.
f. Managerial Urge
▪ The management of PeopleTV has decided to expand
its presence across Asia as part of its international
marketing strategy.
g. Access to resources
▪ China, being the world’s top gold producer, is being
eyed by jeweler companies as a top destination for
gold supplies.
REACTIVE REASONS
Unfortunately, firms cannot predict every event that
will occur in the future. Thus, sometimes when a company
decides to expand internationally it is a reactive action to an
event. The following are examples of reactive reasons for
expanding abroad.
a. Competitive pressure in the domestic market
▪ Red Alison Beer House is observing a consistent
downgrade of its earnings for the past year because
of the emergence of several beer houses in Sweden.
To save the company from bankruptcy, it has decided
to expand its establishments to other European
countries.
b. Domestic market small and saturated
▪ MLB Pancake House, located at the heart of Monaco,
has celebrated its first year in business. After careful
evaluation, Lourdes, owner of MLB, figured that sales
are up only when there is tourism boost in the
community. With less than 40,000 people living in the
country, Lourdes knew that the business won’t thrive
unless it internationalizes.
c. Overproduction/Excess capacities
▪ Jona’s Jewels is known to be a top producer of
accessories in Venezuela. It is estimated that Jona’s
Jewels can produce 1 million accessories per annum.
Annually an average of 600,000 jewels is sold.
(Continuation at letter f)
d. Unsolicited foreign market orders
▪ Two (2) years ago during the ASEAN Business Expo
2015, Zyper displayed his Kalinga-inspired ready-to-
wear (RTW) dresses. Zyper is successful with his
business locally. But this success is yet to double after
he learned from one of the participants of the
business expo two years ago that his wardrobes are
well accepted in New Zealand, Australia, and Papua
New Guinea.
e. Extend sale of seasonal products
▪ After graduating from fashion school, Trish focused
on making summer wear. Every summer, she figured
her creations sell like hotcakes. Because her product
was well received by clients, and because it sells only
in one season, she imported her products to tropical
countries.
f. Proximity to international customers
▪ As a result of excess capacity, Jona exported some
jewels to neighboring countries such as Colombia,
Ecuador, and Mexico.
Globalization as Trade Liberalization
Why Is Trading Liberalization Important?
Countries trade with each other because trading
typically makes a country better off. In international trade,
competition occurs at the firm level, while citizens of every
country can benefit from free trade. Citizens enjoy a greater
variety of goods and services, and generally at a lower cost.
Imagine a country that decides to isolate itself
economically from the rest of the world. In order to survive,
the citizens of this country would need to grow their own food,
make their own clothes and build their own houses. However,
if this country decided to open its border to trade, its citizens
would specialize in the activities they do best. Specialization
leads to higher productivity, higher income, and better living
standards.
Can every country benefit from free trade? A
fundamental principle of economics – comparative advantage
– holds that when a country produces more of one product, it
will create less of some other product. This trade-off occurs
because resources are scarce and societies want to get the
maximum benefit from them.
Countries benefit from free trade because of their
comparative advantages, which means that there is no single
country in the world that can produce everything more
cheaply than others.
The benefits of comparative advantage are
particularly important to developing nations. In Thomas
Sowell’s Basic Economics, he quotes an unattributed
statement: “Comparative advantage means there is a place
under the free trade sun for every nation, no matter how poor,
because people of every nation can produce some products
relatively more efficiently than they produce other products.”
The relationship between trade openness and
economic growth has been thoroughly analyzed, and the
findings in most papers support the notion that greater
openness to trade generates positive growth effects.
Pros of Trade Liberalization
Trade liberalization promotes a free trade
marketplace. This allows goods to cross international lines
without any regulatory barriers or their associated costs. This
can make it more cost effective for those looking to import or
export goods with other nations and, ultimately, may result in
lower costs to consumers due to lower fees and additional
competition.
It may also provide a mechanism by which a nation
can specialize in the production of a particular good in which it
has an advantage. This can lead to lower production costs,
which may also translate into savings for consumers.
Cons of Trade Liberalization
Trade liberalization can negatively affect certain
businesses within a nation. This can include increased
competition from foreign producers, as well as lower local
support for certain industries. There may also be higher risks
to certain environments if items or raw materials are gathered
from countries with lower environmental standards.
Trade liberalization may also pose a particular threat
to developing nations or economies as they likely cannot
effectively compete against more established economies or
nations. This can lower local industrial diversity or may result
in the failure of certain newly developed industries within a
particular economy.
 *concept map below displays trade liberalization’s definition and
enumerates its concrete examples.
➢ Embargo
It is an official suspension of import and/or
export of some specific or all goods, to or from a
specific port, country, or region, for political, health,
or labor related reasons, for a specified or indefinite
period.

➢ Currency Devaluation
It is a deliberate downward adjustment to
the value of a country's currency relative to another
currency, group of currencies or standard.
Devaluation is a monetary policy tool used by
countries that have a fixed exchange rate or semi-
fixed exchange rate.

Globalization as Westernization

How does Westernization exactly affect a country?

➢ Tariffs
It is a tax or duty to be paid on a particular
For westerner’s conception on the term globalization,
class of imports or exports.
scholars attributed it as part of the growing imperialist
mechanism of American and Western powers, which they
➢ Import licenses
considered as the building blocks of technological and
An import license is a document issued by a
economics innovations.
national government authorizing the importation of
certain goods into its territory.
The idea of Westernization is deeply rooted in the
western world where often associated with the Western
➢ Export licenses
culture and values. This concept is famously used in referring
It is a document issued by a government
the western values system and its influences countries outside
agency to monitor the export of sensitive
its territory and sovereignty. The political, economic, and
technologies (such as advanced computer chips,
technological prowess of United States and European
encryption-decryption software), prohibited
countries are best described in the idea of Westernization.
materials (drugs, genetically-modified plants),
dangerous materials (explosives, radioactive
substances), strategic materials (uranium, advanced
alloys), or goods in short supply in the home market
(foodstuffs, raw materials).

➢ Import Quotas
An import quota is a type of trade restriction
that sets a physical limit on the quantity of a good that
can be imported into a country in a given period of
time.

➢ Subsidies
It is an economic benefit (such as a tax
allowance or duty rebate) or financial aid (such as a
cash grant or soft loan) provided by a government to
(1) support a desirable activity (such as exports), (2)
keep prices of staples low, (3) maintain the income of
the producers of critical or strategic products, (4) *definition of Westernization and the different areas of influence
maintain employment levels, or (5) induce Westernization can have to a certain group of people.
investment to reduce unemployment. The basic
characteristic of all subsidies is to reduce the market
price of an item below its cost of production.

➢ Voluntary Export Restraints

A voluntary export restraint (VER) or
voluntary export restriction is a government-imposed
limit on the quantity of some category of goods that
can be exported to a specified country during a
specified period of time.