Globalization of Businesses and Its Beneficial Effect upon the World - Coursework Example

Globalization of Businesses and Its Beneficial Effect upon the World Name Institution Course Date Globalization of Businesses and Its Beneficial Effect upon the World Introduction Globalization is regarded as one of the most significant phenomena of the 21st century. Although globalization is an old concept, it has had profound effective on the world in the recent time to the extent that globalization has become a buzz word (Archibugi & Michie 1997, p. 32; Rothenberg 2003, p. 3; Horowitz 2004, p. 129). Globalization is not just a phenomenon, but is also a movement and a force that affects that affects different dimensions of life, including economic, social, political, environment, health, security and culture among others. Today, the world’s has become a global community because of globalization process that has occurred in the recent past (International Monetary Fund 1997, p. 2). Although globalization is a buzz word, the concept has different interpretations to different people, including scholars, policymakers and activists some of whom see it as a force that helps in advancing world economies while its critics see is as a serious danger to the economic system of the world (Mittelman 2000, p. 94; Intriligator 2003, p. 5). This essay begins by explaining the different interpretations of the concept of globalization. It then proceeds to assess the extent to which globalization of businesses have had beneficial effects upon the world using real world examples. The Concept of Globalization Globalization is regarded as a phenomenon, movement and a force. Although globalization is an old concept as applied to businesses and world economy, the concept emerged in the 1980s that its real effects began to be felt across the globe and is now a buzz word. Despite this being the case, the concept of globalization is not well understood as the concept has had different interpretations; thus means different thing to different scholars, policymakers and activists. Rothenberg (2003, p. 2) defines globalization as the process of integration of the world economies. According to Rothenberg’s interpretation, globalization involves the integration of businesses, people and the government of different nations. Hamilton and Webster (2009, p. 15) define globalization as the linking of political, social, economic and technologies of different nations. Palmer (2002, p. 4) defines globalization as the removal of state-enforced exchange barriers on trade across border and the move towards a more integrated world economic system. Bauman (2000, p. 2) defines globalization as the process involving individuals and communities coming to experience increasingly similar social, economic and social aspects. Although globalization has different interpretations, the common denominator for the concept as can be deduced from all the definitions is that globalization involve the integration of world economies, finance, people and trade. However, it also emerges from the literatures that globalization is a continuous process and that globalization is aided by the technological changes which have significantly accelerated market integration and opened up trade between countries (Archibugi & Michie 1997, p. 41). The greatest effect on globalization is that it has turned the world into a global community where countries exist as if they lack boundaries when it comes to trade. Benefits of Globalization of Businesses upon the World Growth of Foreign Direct Investment Globalization of businesses has no doubt had profound effect on investments Intriligator 2003, p. 51). In particular, the benefits of globalization of businesses have been seen through foreign direct investments that have grown significantly since the advent of globalization. The rate of foreign direct investment has increased significantly throughout the world thanks to globalization of businesses. This is attributed to the fact that globalization has opened up business opportunities for big multinational businesses in foreign countries something that was not possible before globalization (Mittelman 2000, p. 102). By helping eliminate trade barriers, now big multinational companies are able to invest in foreign countries that present business opportunities for their companies and such investments play an important role in promoting technology transfer, industrial restructuring and the development of global businesses all of which have significant impact at the national level (Hill 2009, p. 161). The positive impact of globalization of businesses has particularly been felt in China, where foreign direct investment has increased significantly in recent times, thanks to globalization. According to the 2015 World Investment Report, China overtook the United States as the top destination for FDI this was after it emerged that foreign companies invested $128bn (£84,8bn) in China (BBC News 2015). The rapid expansion of China’s economy has made these Asian country attractive investment destinations for foreign firms that are looking for opportunities in this populous country. Presently, the majority of the world’s largest companies have operations in China. Few among them include Apple, Samsung, General Motors, Ford, Tesco, Wal-Mart, McDonalds, and Woolworths just to name but a few. The amount of FDI in China is expected to increase as more foreign companies continue to look for China as an investment destination. The large amount of FDIs by foreign companies have benefited China in a gig way. The FDIs have helped Chinese industries by providing them with the access to the latest technologies, which helps improve the profitability of the Chinese companies, as well as create jobs for the Chinese population. Besides, the FDIs that flow into China have helped boost China’s exports, providing the Chinese firms with better access to distribution channels and networks in the global markets. In fact, reports indicate that, for every dollar that China generates from FDI, about 95% is retained in China, which is used to boost the economy and for development purposes (BBC News 2015). Technological Innovations Technology has been cited as the greatest facilitator of globalization (Archibugi & Michie 1997, p. 4). However, globalization of businesses has had a beneficial effect upon the world by promoting the emergence and exchange of new technologies. Today, technology affects almost every aspect of human life, including political, social and economic aspects. Hill (2009, p. 121) indicates that globalization has resulted in increased competition between firms from different countries and to remain competitive in the global business landscape, companies have had to become innovative and this has resulted in the emergence of new technologies that are beneficial to the world. Globalization not only promotes the development of new technologies that are beneficial to the world, but also facilitates its diffusion through foreign direct investment. As such, it is believed that, in the absence of globalization, competition between firms could not have been as intense as it is now because companies would be competing only within their domestic boundaries, thus resulting in low rate of innovativeness (Mittelman 2000, p. 106). However, because of globalization, local firms have to compete even with large multinational companies and this creates the needs for innovation and technological advancements to remain relevant in an industry and in the process this results in the development of new technologies. The mobile phone is one of the technological innovations that have proven to be of immense benefits to the world today. The mobile phone technology was first developed by Motorola; A U.S. based company in 1973 (Washington Post Staff 2014). However, because of competition among firms in the global marketplace, other companies, such as Samsung, Nokia, Blackberry and Sony had to follow suit in order to cash on the growing demand for mobile phones by developing their mobile phone gadgets. These allowed these companies to compete with Motorola. However, as competition got stiffer among these technology companies, each of these firms had to become more innovative by introducing advanced mobile phones with new and exciting features. For instance, some companies, such as Apple and Samsung started to introduce smartphones to grab the market that was first developing. The emergence of smartphone was facilitated by globalization in the sense that technology companies felt that to remain competitive, they had to shift from button style mobile phones to a more advanced mobile phone with advanced features, such as Internet access capabilities and cameras among others (Washington Post Staff 2014). Other than promoting the development advancement of mobile phone technology, globalization has also facilitated the spread of mobile phones to different parts of the world through foreign direct investment. Today, mobile phone manufacturing companies have diffused the mobile technology to many parts of the world, including China, Singapore, Australia and even Africa, thanks to globalization. In the absence of globalization, perhaps many parts of the world could not have had the opportunity to use a mobile phone. It is for this reason that globalization has benefited the world in a big way. Besides, mobile money transfer services were discovered in Kenya a couple of years ago. Before then, this kind of technology did not exist in any part of the world (Rice 2007). The mobile money transfer technology allows a person to transfer and receive money through their mobile handset from any part of the world in a matter of seconds. Currently, mobile money transfer service is a big business in Kenya (Rice 2007). However, because of globalization, this technology has been diffused to other parts of the world, such as the United Kingdom, the U.S. and China among other countries that are fast adopting this technology for transfer and receipt of money. This real world example also shows the extent to which globalization of businesses have benefited the world and will continue to benefit the world. Growth of Trade The positive effect of globalization of businesses is felt through enhanced trade. Globalization has been defined by some people as the integration of world economies from local to international levels and this promotes international trade (Horowitz 2004, p. 127). Trade is important for the development of a country. In fact, the growth of the gross domestic products of most countries depends on the level of trade. Fortunately, globalization of businesses has played a critical role in promoting international trade among countries and this has resulted in increased free flow of goods and capital across borders (Bauman 2000, p. 12). The free flow of goods, services and capital across borders has been beneficial to countries as it allows nations with excess goods to have easy access to markets (International Monetary Fund 1997, p. 9). Similarly, the fact that globalization has promoted trade allows a country without a certain good or product to easily import that product from a country that produces it in abundant. Globalization of businesses have resulted in countries forming economic blocks that seek to remove trade barriers between countries, so as to facilitate easy trade in goods and services. The World Trade Organization (WTO) is arguably the largest world economic integration block, whose key mandate is to promote trade between countries by removing trade barriers and providing protection to countries against illegal trade behaviors by their counterparts (International Monetary Fund 1997, p. 14). Since the WTO was formed, the volumes of trade among countries have been so huge and this has helped promote the development of countries’ economies worldwide. The liberalization of trade by eliminating tariffs and trade barriers ensures that countries can trade easily and cheaply (Hamilton & Webster 2009, p. 46). The UK is one of the countries that have benefited greatly because of globalization of economies. Like most countries, the UK is not blessed with everything and has to depend on imports from other countries for certain goods and services to ensure the development of its economy. Without the imports, the economy of the UK would be at stand still. In 2015, the UK imports totaled US$625.7 billion. The major imports include machines, pumps, engines, vehicles, electronic equipment, pharmaceuticals, gems, precious metals, plastics, clothing, aircraft, medical equipment and spacecraft (World’s Top Exports 2016). Amount 22.7% and 11.6% of these imports came from the UK’s Asian and North American partners respectively (World’s Top Exports 2016). Without globalization of economies, the UK would have found it difficult accessing these crucial products that it needs to ensure efficient operations of the country and its economy. Other than benefiting from imports that are facilitated by globalization, globalization has also benefited the UK by enabling it have easy access to the world markets for its surplus products and services. In 2015, the UK’s exports totaled US$460.1 billion. In the same year, exports accounted for approximately 17.3% of the UK economic output (World’s Top Exports 2016). The UK’s major exports include plastics, organic chemicals, aircrafts, spacecrafts, vehicles, oil, medical equipment, engines, machines and pumps among others. The major export markets for the UK goods are Europe, Asia, North America and Africa. It is believed that, without globalization of businesses, the UK perhaps could not have found markets for its surplus products and this would have had adverse effects on its economy and its people. Fortunately, globalization has helped ensure liberations of trade between the UK and foreign countries, thereby allowing it to import deficits and export its surplus products, thus ensuring balance of trade. Cultural Exchange Globalization of businesses has also been felt in terms of cultural integration. As businesses globalize, this brings cultures of different parts of the world together and this has proven beneficial for the peaceful coexistence among different cultures (Hamilton & Webster 2009, p. 61). This is because globalization has resulted in a situation where people from different cultures get to understand other cultures which are good for the world. For instance, McDonalds has spread the fast food eating culture to most parts of the world, including India, China, Brazil, Australia and the UK, just to name but a few. This way, other cultures have been able to adopt the American food culture, which not only promotes the growth of fast food business globally, but also promotes cultural integration. The same applies to language that is increasingly becoming universal in the world because of globalization of businesses (Lynton 2007). For instance, the Chinese language is increasingly being taught in many parts of the world such as Kenya, Uganda, Tanzania and other nations, where the Chinese companies have expanded to so as to ensure that the locals are able to trade and interact with the Chinese investors. Similarly, a large number of Chinese now speak English language, which they have been forced to learn, so as to be able to communicate easily with clients from English speaking nations in the course of transacting businesses. Accordingly, this has helped promote cultural integration, which is beneficial to the world. Employment Creation The beneficial impact of globalization of businesses has been experienced through employment creation (Rothenberg 2003, p. 31). Unemployment is one of the greatest challenges faced by most countries globally. Fortunately, globalization of businesses has helped address the problem of unemployment in the sense that through trade and foreign direct investment, employment is created to the local population (Hill 2009, p. 164). For instance, in the UK, the foreign companies, such as McDonalds, General Motors, Ford, Toyota, Starbucks, Wal-Mart and a host of other foreign multinationals have created many jobs for Britons and this has helped address the problem of unemployment in the country. Conclusion Globalization is certainly the most significant event of the 21st century. Although there are different interpretations for the concept, globalization simply means the integrations of the world economies, finance and trade aided by technological developments. Although globalization has been criticized from some quarters that argue that it pose a serious danger to the world economic system, this assessment has revealed that there are many beneficial effects of globalization of businesses upon the world as well. These include the fact that it promotes the growth of foreign direct investment, technological innovations, trade, cultural exchange and employment creation. 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