OPERATIONAL MANAGMET ASSIGNMENT

GLOBALIZATION

SECTION 8

NAME ID NO

1. Zemen Heliso …………..EMBA/838/14

Submitted To: - Hilemichael (PhD) SUBMITION
DATE

10/31/2022G.C
What is GLOBALIZATION ?

Globalization is a term used to describe how trade and technology have made the world into a
more connected and interdependent place. Globalization also captures in its scope the economic
and social changes that have come about as a result. It may be pictured as the threads of an
immense spider web formed over millennia, with the number and reach of these threads
increasing over time. People, money, material goods, ideas, and even disease and devastation
have traveled these silken strands, and have done so in greater numbers and with greater speed
than ever in the present age.

When did globalization begin? Many scholars say it started with Columbus’s voyage to the New
World in 1492. People traveled to nearby and faraway places well before Columbus’s voyage,
however, exchanging their ideas, products, and customs along the way. The Silk Road, an
ancient network of trade routes across China, Central Asia, and the Mediterranean used between
50 B.C.E. and 250 C.E. is perhaps the most well-known early example. As with future
globalizing booms, new technologies played a key role in the Silk Road trade. Advances in
metallurgy led to the creation of coins; advances in transportation led to the building of roads
connecting the major empires of the day; and increased agricultural production meant more food
could be trafficked between locales. Along with Chinese silk, Roman glass, and Arabian spices,
ideas such as Buddhist beliefs and the secrets of paper-making also spread via these tendrils of
trade.

Unquestionably, these types of exchanges were accelerated in the Age of Exploration, when
European explorers seeking new sea routes to the spices and silks of Asia bumped into the
Americas instead. Again, technology played an important role in the maritime trade routes that
flourished between old and newly discovered continents.

What Are the Benefits of Globalization? 

Globalization helps businesses tap into new markets and expand their business across their
geographic borders. By having access to a diverse workforce, the business benefits from a
variety of cultural viewpoints and value systems. Additionally, globalization improves the local
economies and standard of living of workers. 

Some of the key benefits of globalization include:

Lower Cost of Goods and Services

Businesses that take advantage of globalization can complete work in regions where goods and
services are more affordable. This can result in lower costs and higher profits for the business. 

Greater Innovation

When the global market is tapped into, businesses can benefit from the creativity and
innovation of a diverse workforce. Businesses that stay within a certain geographic area may
not open themselves up to ideas generated by people with different backgrounds, value systems
and ideas. Globalization encourages more connectedness and an appreciation for other cultures
and viewpoints. 

Opening a product or service to a new market can help a business see how others around the
world perceive their offering. This ultimately helps improve the quality of products and the
marketing message. Innovative ideas may help keep the cost of the product low. 

Innovation helps businesses stay competitive in the global market. Free access to labor and
capital around the world helps drive innovation across the globe.

Improved Standard of Living 

Businesses that are interested in globalization often take advantage of developing nations where
production costs less. When they invest in these regions, the standard of living in these areas
often dramatically improve. Additionally, these people may have access to improved
technology and innovation that was not previously available. 

Access to New Cultures

Globalization makes it easier for businesses to tap into and understand foreign cultures. A
foreign workforce can give insight into how people in that culture perceive the product, service
or marketing message. Businesses can then adapt their strategy to the local market.  

Advantages & Disadvantages of Globalization

1. Access to New Markets

Globalization gives businesses the opportunity to expand into new markets, reach
international buyers, and increase revenue.

Over time, companies can experience saturation for demand of their products or
services domestically. By expanding globally, they can continue growing by meeting
foreign demand.

2. Spread of Knowledge and Technology

In order to cooperate globally, companies must share similar technology and a

technological structure. E-commerce, for example, allows companies to sell products
worldwide through Amazon.com.

Similarly, a centralized base of knowledge allows companies to quickly transfer

information and develop innovative solutions. For example, in the healthcare sector
that means new medications and medical devices can go to market faster in different
countries.

3. Enhanced Global Cooperation and Tolerance

Globalization enhances cooperation by enabling countries to specialize. This allows

them to leverage their economic strengths and trade those products for other
resources. For example, a country in South America that specializes in sugar cane can
export it to a developed country in exchange for manufactured goods.

On an interpersonal level, studies have shown that globalization promotes tolerance,

as people are exposed to new cultures and network with others across the globe.

4. Promotes Economic Growth

Studies have found that globalization enhances economic growth by distributing

resources more efficiently because countries can specialize in activities with
comparative advantages. It also promotes growth indirectly through complementary
reforms in terms of capital and financial development.

China, the country with the biggest positive change in globalization, saw a growth rate
in 2000 that is 2.33 percentage points higher than in 1975 due to increased integration.

Disadvantages of Globalization
1. Increased Competition

Although free trade can increase a nation's wealth, it also increases competition. Local
businesses must compete with multinational corporations that produce cheaper goods at lower
costs, which puts them at a disadvantage.

2. Exploitation of Labor and Resources

Wealthy, industrialized nations sometimes enter trade agreements with developing countries in
order to exploit weak labor and environmental laws. For example, the United States has been
known to use foreign sweatshop labor to produce cheaper goods.
Lack of environmental regulations in some developing countries also allows developed countries
to import resources such as precious metals at lower prices. This results in both lasting
environmental damage and human rights abuses.

3. Imbalanced Trade

A trade imbalance, also known as a trade deficit, occurs when a country spends more on imports
than it makes on exports. This creates a shortfall in capital that the country must make up for
either by borrowing money from foreign lenders or permitting foreign investments in its assets.

While lending and investment help promote economic growth, these strategies can be risky-
especially for a developing country. Throughout the 1990s, Thailand, Indonesia, and Malaysia
ran large trade deficits and relied on foreign capital to make up for it. Yet when the Asian
financial crisis hit in 1997, foreign investors backed out, leaving these countries in a precarious
financial position.

4. Domestic Job Loss

When industrialized countries outsource labor, it causes a shortage of jobs domestically.

Laborers whose skills are no longer in demand experience higher unemployment, and struggle to
adapt to the changing labor market.

For example, the U.S. trade deficit with China eliminated 3.7 million jobs between 2001 and
2018, and more than 75% of those losses were in manufacturing.