Chapter 1- The Effects of Globalization on Labour Market.

INTRODUCTION TO GLOBALIZATION 1.1 What is Globalization?

Everyday you hear it on news, you read it in the newspapers, you overhear people talking about it and in every single moment the word globalization means to have a different meaning. So globalization means . the capacity to treat the world as one market while dealing with many culturally diverse merchants (Neol Tichy) the process by which markets expand to include competitors for customers and productive inputs without regard to national boundaries (Paul Danos) doing business with a worldwide focus rather than doing business in an international market with the focus from a home-country viewpoint (Lawrason Thomas)

Globalization is not just a recent phenomenon. Some analysts have argued that the world economy was just as globalized 100 years ago as it is today. Yet the term is used since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions, both trade and financial flows. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication. At a political and economical level, globalization is the process of denationalization of markets, political and legal systems, i.e the rise of the so-called global economy. Globalization refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity. It means world trade and financial markets are becoming more integrated. At a business level, we talk of globalization when companies decide to take part in the emerging global economy and establish themselves in foreign markets. First they will adopt their products or services to the customers s linguistic and cultural requirements. Then they might take advantage of the internet revolution and establish a virtual presence on the international marketplace with a multilingual corporate website or as an e-business.

Globalization is linked to four major aspects:

Trade: developing countries as a whole have increased their share of world trade heavily. The composition of what counties export is important. The strongest rise has been in the

Introduction to International Human Resource Management

exports of manufactured goods. The share of primary commodities such as food and raw materials that are often produced by the poorest counties has declined. Capital movement: private capital flows to developing counties increased during 1990s till today. Thus foreign direct investment has become the important category. Movement of people: workers move from one county to another partly to find better employment opportunities. Thus there is a transfer of high skilled workforce towards industrialized economies. Spread of knowledge (and technology): information exchange is an integral aspect of globalization. For instance, foreign direct investment brings not only expansion of the physical capital stock, but also technical innovation. More generally, knowledge about production methods, management techniques, export markets and economic policies is available at very low cost, and it represents a highly valuable resources for the developing countries.

Drivers of Globalization
1. Market Drivers: Convergence of per capita income Convergence of life-styles Organizations behavior as global customers.

2. Cost Drivers: - Push for economies of scale ( the reduction in long-run average and marginal costs arising from an increase in size of an operating unit ) - Advances in transportation - Emergence of newly industrialized countries with productive capability and low labor costs.

3. -

Competitive Drivers: Growth of global networks making counties interdependent Rise of new competitors intent on becoming global competitors Increased formation of global strategic alliance

4. -

Government Drivers: Reduction on tariffs and other trade barriers Privatization of industry in many parts of the world Creation of trading blocks (EU, NAFTA, AFTA)

Introduction to International Human Resource Management