Globalization and the Business Environment2007IntroductionInter-linkages between economies across different geographies have existed for centuries but it is only recently that the world has become truly integrated into a ‘global village’ rather than in a state of one group of countries exploiting the other. Capitalism and the Industrial Revolution had its roots in technological innovations like the power looms and railroads in Britain in the middle 19th century but it soon spread across Europe and North America, allowing for growth in commerce (Chirot, 2000). The modernization of the European and North American economies was aided to a large extent on the availability of raw materials (cotton from India in the case of Britain) and labor (African slaves for North America) from the colonies.
By the advent of the 20th century, however, the limits of the capitalist development had been reached, leading to the Great Depression of the 1920s in North America and Europe (Giddens, 1986). The two World Wars changed the global economic power balance, with most of the colonies gaining independence over the period and Soviet Russia becoming more powerful and dissociated from the western powers.
Post war reconstruction, growing urbanization and technology improvements revived the North American and European economies while Soviet Russia too developed technological capabilities. However, the world got bifurcated between the capitalist (mainly North America and Europe) and the socialist (mainly the USSR) camps while the Third World countries (the developing or underdeveloped nations, most typically erstwhile colonies of European powers) aligned themselves to either of the two camps. The global economic order has significantly changed since the end of the Cold War in the late 1980s. As the divergence of the world between the two superpowers and their respective beneficiaries in the so-called Third World disappeared, the world has now become a ‘global village’ that is increasingly inter-linked for mutual benefits.
The processes of production and consumption have undergone significant globalization, aided be the nearly free flow of capital and technology across political barriers. In this paper, I will describe the different aspects of globalization that has created the ‘global village’ – the roles of the multinational companies, technology, outsourcing and global capital flows. Thereafter, I will describe the changed business environment with the help of a case study (that of Dell Inc. ) that has been able to exploit the situation to its benefit. The role of multinational companiesThe main agents in the globalization process have been the multinational companies that have endeavored to reap the benefits of low costs and large markets cutting through geographical and political roadblocks.
The growth of multinational companies may be traced back to the 1950s and 1960s when post-war reconstruction in developed countries led to their growth but in the more recent times, these companies have expanded beyond their geographies to exploit the markets in the emerging economies that have by now come out of the shadows of post-colonial days.
There is increasing collaboration between these two sets of economies – their labor and markets – through the free flow of capital and technology. The process of globalization has only been enhanced by the phenomenal growth of telecommunication and the internet across almost all countries of the world.