Globalization

2012

Globalization
“Globalization has changed us into a company that searches the world, not just to sell or to source, but to find intellectual capital - the world 's best talents and greatest ideas” Jack Welch

Prepared by:

Ibrahim Khairat
Mounir Ezzat Ragab
Sherif Ismaiel

Globalization 2012
Contents
Introduction: ....................................................................................................................................................................... 3
The Forces Driving Globalization ........................................................................................................................................... 3
Globalization Advantages..................................................................................................................................................... 6
Globalization Disadvantages & Challenges ............................................................................................................................. 9
Disadvantages of Globalization ......................................................................................................................................... 9
Challenges of Globalization .............................................................................................................................................11
Conclusions & Recommendations ........................................................................................................................................11
References .......................................................................................................................................................................13

2

Globalization 2012
Introduction:
The Term Globalization is so powerful such that it’s difficult to create a compact definition of it. It may be defined from different perspectives and in several ways. One can say Globalization refers to the combination of Economics and Societies all over the world. It connects technological, economic, political, and cultural exchanges made possible by the progress in transportation, infrastructure, and communication. An alternative definition would be increasing linkages between the world, including the international spread of cultures as well as diseases and crimes, while natural and artificial barriers between nations fall. Finally, the most well-known definition is referring to Globalization as the shrinking of the world into a global village, as borders disappear, distance decreases, and time shorten. Globalization is displayed in the growth of world trade as a share of output, the percentage of world imports to gross world product GWP increased fro m 7% in 1938 to 10% in1970 and to more than 18% in 1996. This is reflected in the surge of foreign direct investment (FDI): FDI in developing countries rose from $2.2 billion in 1970 to $154 billion in 1997. It has also accrued in national capital markets becoming integrated. The Forces Driving Globalization
Many Companies go international to be able to increase the value of their business, as well as the value of their profit.
Therefore; it became imperative for companies to build a long term, sustainable business. There are many factors that companies need to develop to be able to survive in the global market, e.g. the following are a number of factors that have contributed to the increase in growth globalization in recent decades:
1- Increase in and expansion of technology.
2- Liberalization of cross-border trade and resource movements.
3- Development of services that support international business.
4- Growing consumer pressures. (Both local & international)
5- Increased global competition.
6- Changing political situation and climate.
7- Expanded cross-national cooperation

3

Globalization 2012
There are a number of other factors that make rapid international expansion a necessity, rather than an option to be reviewed when the time is right. Those factors include the following:
Market transparency: In the good old days, 8-10 years ago, software companies could develop a product, market it at home,

and then quietly start to sell their technology in overseas markets, often going after one market at a time. With the Interne t, however, a product or a bus iness concept is there for everyone to see, as a result, competitors in overseas markets are able to replicate the product or service. There have been many cases of U.S. companies going to Europe, only to find that their business model, their name and even their Website have been replicated.
Emerging markets: While the U.S. is still the dominant force in technology development, we today see a lot of innovation from new markets such as Sweden, Israel, South Africa, India, Singapore and China. Quite often, th e levels of innovation displayed are impressive, this implies that the U.S. companies will be facing new competitors not from other advanced countries, but from the emerging ones and targeting the same markets. This will increase the competition for client s and channels of distribution, all the benefit of the average consumer World Wide.
Geographic diversity: There are three major trading blocks in the world economy: North America, Europe and Asia -Pacific.
These major trading blocks, don’t move up and down in the same time as they are the most affected ones in the market, so a company can make itself less vulnerable according to the demand in one region by having a diverse source of revenues.
This emerged after the Internet bubble and the technology of telec om. The European market, while slowing down, was not hit as hard as the U.S. market, so companies with significant operations in Europe were able to partially offset the slower sales at home.
Ten flatteners: Friedman defines ten "flatteners" that he sees as leveling the global playing field:
1. Collapse of the Berlin Wall – 11/9/89: Friedman called the flattener, "When the walls came down, and the windows came up." The event not only symbolized the end of the Cold War, it allowed people from the other side of the wall to join the economic mainstream.
2. Netscape – 8/9/95: Netscape went public at the price of $28. The digitization that took place meant that everyday occurrences such as words, files, films, music, and pictures could be accessed and manipulated on a computer screen by all people across the world.

4

Globalization 2012
3. Workflow software: Friedman 's catch-all for the standards and technologies that allowed work to flow. The ability of machines to talk to other machines with no humans involved, as stated by Friedman.
4. Uploading: Communities uploading and collaborating on online projects. Examples include open source software, blogs, and Wikipedia. Friedman considers the phenomenon "the most disruptive force of all."
5. Outsourcing: Friedman argues that outsourcing has allowed companies to split service and manufacturing activities into components which can be subcontracted and performed in the most effic ient, cost-effective way. This process became easier with the mass distribution of fiber optic cables during the introduction of the World Wide Web.
6. Off-shoring: The internal relocation of a company 's manufacturing or other processes to a foreign land to take advantage of less costly operations there.
7. Supply-chaining: Friedman compares the modern retail supply chain to a river, and points to Wal-Mart as the best example of a company using technology to streamline item sales, distribution, and shipping.
8. Insourcing: Friedman uses UPS as a prime example for insourcing, in which the company 's employees perform services – beyond shipping – for another company. For example, UPS repairs Toshiba computers on behalf of
Toshiba. The work is done at the UPS hub, by UPS employees.
9. Informing: Google and other search engines are the prime example. "Never before in the history of the planet have so many people – on their own – had the ability to find so much information about so many things and about so many other people," writes Friedman.
10. "The Steroids": Wireless, Voice over Internet, and file sharing. Personal digital devices like mobile phones, iPods, personal digital assistants, instant messaging, and voice over Internet Protocol ( VoIP).
Harvard Business School Professor Pankaj Ghemawat argued that 90% of the world 's phone calls, Web traffic, and investments are local, suggesting that Friedman has grossly exaggerated the significance of the trends he describes:
"Despite talk of a new, wired world w here information, ideas, money, and people can move around the planet faster than ever before, just a fraction of what we consider globalization actually exists. ”

5

Globalization 2012
Nobel Prize-winning economist Joseph Stiglitz has also been critical of Friedman 's book. In Making Globalization Work,
Stiglitz writes: Friedman is right that there have been dramatic changes in the global economy, in the global landscape; in some directions, the world is much flatter than it has ever been, with those in various parts of the world bei ng more connected than they have ever been , but the world is not flat, not only is the world not flat: in many ways it has been getting less flat.
One of our clear examples of globalization is Aventure Aviation. The company located in Atlanta owned by a Muslim
Pakistani engineer - Mr Zaheer Faruqi provides a unique aviation services for all the global 24/7 overcoming all the obstacles (time, place, people, etc). This company ranked by INC 500|5000 as one of the fastest growing private companies in USA.

Globalization Advantages
Globalization has had significant impacts on all economies of the world. It affects their production of goods and services; it also affects the employment of labor and other inputs into the production process.
Globalization also affects investment in all its forms; it affects technology and its transition from developed countries to developing and under-developed Ones. It has great effects on productivity, efficiency, and competitiveness in both local and international markets. Globalization has many positive, innovative and dynamic effects, which have led the world to produce great economies, great income, and good employment opportunities. Some examples of these good benefits are listed below: 1. Increased Competition: One of the most positive and visible effects of globalization is the improved quality of goods

and services due to global competition. As domestic companies have to fight out foreign competition, they are forced to raise their standards and levels of concern about customer satisfaction issues, in order to survive in the global market. This on-going fight creates competition in the market and a situation where the best and the fittest only can survive.
2. Employment: is one of the positive and negative effects of globalization, depending on the point of view of each

nation. Globalization has given a lot of opportunities to invest in developing, under-developed, and emerging

6

Globalization 2012 markets, and also brought out hidden talents and skills which are available globally. On the negative side, developed countries have lost jobs due to the movement of jobs and investment opportunities to d eveloping countries, thus it is a pinch felt by developed countries and people of the “first world” too. The impact of globalization has affected the employment of women as well, as greater trade openness has increased women’s share of paid employment, as well as multinationals companies having to employ more and more female workers around the world, especially in Asia and in Africa.
3.

Investment and Capital Flows: One of the most visible effects of globalization is the flow of foreign trade and

capital. India has been one of the most developing countries with more cash and investment flow than other countries. Indian companies which have been performing well, both in India and offshore, have attracted a lot of foreign investment, thus pushing up the reserve of foreign exchange available to India. Trade flow also increased
12-fold in the past fifty years as a result of the removal of natural and artificial barriers. Exports are now US $7 trillion a year, with more than a fifth of the world’s goods and services being traded. Capital flows expanded even faster, with Foreign Direct Investment amounting to US$400 billion in 1997, seven times its real level in the 1970’s and portfolio and other short-term capital flows amounted to US $2 trillion in gross terms, thre e times what they were in the ‘80’s. These in turn pave way for what has happened in the foreign exchange markets, where volumes increased over a hundred times between the mid-70’s and the mid-90’s, with a US $1.5 trillion daily turnover in
1998. At the same time, international bank lending grew more than sixteen times, from US $265 million in 1973 to
US $4.2 trillion in 1994.
4. Foreign Trade: While trade originated in the times of early kingdoms, it has been developed and institutionalized

due to globalization. People had to involve in wars and destroy other nations in order to get what they want, but today, it is done in a more human and civilized way through fair trade, Mutual Corporation, trade block agreements and multilateral organizations. A Nation whic h practice unfair trade or operate in an uncivilized way has to face the
WTO and other world organizations that have been established to regulate and control international trade activities, and to draw proper consequences to unfair trade practices among an d between countries and nations.

7

Globalization 2012
5. Spread of Technical Know-How: Without globalization, the knowledge of new inventions and technical know -how

would remain kept in the developed and rich countries which invented them, and the rest of the world would not benefit. But due to globalization and the essential role of WTO, there is flow of information all over the world. The spread of technological know-how was also expanded to include political and economic knowledge; which too has spread far and wide.
6. Cultural Integration: The world as we know it today is the result of several cultures coming together. Societies have

become larger as they welcomed people from other backgrounds and civilizations to create a whole new culture of their own. The world has become a sma ll village, and traditions, customs, diets, and different languages have spread all over the world due to globalization.
7. Spread of Education: The spread of education is one of the most positive and powerful effects of globalization,

especially on women all over the world. Today, a person living in Saudi Arabia can go to another continent for new experiences and educational purposes which one might not find in the home country, and return with great amount of experience and knowledge to spread in their home country. The impact of education on women is even greater, for it made women around the world to gain opportunities for jobs and have better chances to secure their rightful share in employment opportunities.
8. Legal and Ethical Effects: Due to globalization, countries and security agencies of the world have developed

understanding and commitment amongst themselves to prevent and fight global terrorism and other cross border crimes. It is no longer possible for criminals to hide and seek asylum i n a foreign country away from their home
Countries, but instead, they will most likely be brought to their home country to face the justice system therein. This is definitely one of the greatest effects of globalization on societies and global security.
9. Foundation of Organizations for Environmental and Social Concerns: Over the years, humans have done great

amount of damage to themselves and to the environment around them, through the industrial revolution and wars throughout the years. Nations have decided to come together to find a way to save the world from themselves, by finding organizations monitoring climate change and global warming, as well as those which look after the welfare

8

Globalization 2012 of animals and marine life all over the world. The ability to protect th e environment and the world has been one of the most positive effects of globalization and the overall welfare of the world.
Those were some of the positive and bright side of globalization and its effects on nations and human beings around the world. Other benefits from globalization include the gains from trade in which both parties gain in a mutually beneficial exchanges, where the "parties" can be individuals, firms and other organizations, nations, trading blocs, continents, or othe r entities. Globalization can also result in increased productivity as a result of the rationalization of production on a global scale and the spread of technology and competitive pressures for continual innovation on a worldwide basis.

Globalization Disadvantages & Challenge s
“Accordingly, globalization is not only something that will concern and threaten us in the future, but something that is taki ng place in the present and to which we must first open our eyes”- Ulrich Beck
What is the harm if the whole world is coming toge ther on one floor? Why do people even discuss if Globalization is bad for the world? Whereas; the world has benefited from Globalization, there are also negative aspects of it. The bad side of
Globalization (disadvantages) centers around the fact that desires differs from one country to another, coming to a general agreement that any issue becomes more difficult when much permission are needed. The difference between the poor and rich countries can be a major difficulty when it comes to globalization. E ven thought the rich countries will try to help the poor nations to grow, they (the Wealthy Nations) will not give up on their national concerns.

Disadvantages of Globalization
1. Economic Contagion: When the entire world becomes a global Village, any kind of economic interruption in one nation will have a huge impact on several other nations, which are closely related to it in terms of trade and commerce. A disturbance in one Country will result in a chain of multiple disturbances in the other nations.
2. Loss of Cultural Identities: Critics of Globalization say that it will restrict some age -old cultures, which have been religiously practiced all over the world. There are many countries that won’t even think to adjust when it comes to religion and culture. The effect of local cultures , habits, and traditions will slowly get compromised, as migration will become easier. This could lead to loss of Cultural Sovereignty for many Nations. For example, when we look at the

9

Globalization 2012 young people of today in any given country, you will find a great simi larity in most of them in terms of the choices of music, appearance and dress codes, Expressions, eating habits and so on. This is as a result of Globalization; there is nothing local anymore.
3. Unemployment: Some people feel that Globalization is promoting Employment, but the fact is that the opposite is happening. Certainly in developed countries where people are losing their jobs because if outsourcing (Cheap and skilled labor overseas). For Example a huge number of companies in Europe and USA have outsour ced a lot of their jobs to developing nations (China, India, Mexico etc.) in order to cut cost, and this often resulted in unemployment in the home countries.
4. Human Insecurity (Spread of Diseases) : Crimes and diseases are now more rampant than ever, Global ization leads to many cross border crimes such as: drugs, weapons, woman and children trafficking and also to modern day slavery. The outcome of this includes the spread of sexually communicable disease like HIV/Aids and other social vices. The free movement between the boundaries of each country today has come with surge in cross border crimes and created tension in many hot spots wherein, the population growth are not met with increase in means of livelihood, Improvements in infrastructures, Security and general economic activities .
5. Unbalanced distribution of Benefits: Between Countries, the benefits are not distributed equally. Wealth of developed countries continues to grow twice as much as those of the developing world. Within Countries, Income inequity is rising in developed and developing countries, which lead to unemployment and low-income security for unskilled labor. For Example, an IT professional in a developed country may get more value for his work than in a developing country.
6. Contagion of corruption: In addition to other cross border crimes, Globalization also allows Corruption or at least contributes to the growth of it in the developing Nations. For Example, a lot of multinational corporations have been caught committing the crime of corruption, which would have attracted severe punitive measures in their home countries. The Case of Halliburton bribing Government officials to secure Multi Million dollars Contract in the Energy sector in Nigeria readily comes to mind.

10

Globalization 2012
7. Affects Local Industries (in third World Countries): When foreign goods enter the local market, and local consumers begin to buy them with excessive preference, it is usually at the expense of the local goods, precisely in loss of sales, and therefore loss of revenue to the local producers in the developing countries. This in turn affects the growth of local industries in the developing Countries, and the collateral effects include unemployment and evaporation in purchasing power and subsequent decline in overall GDP in these Count ries

Challenges of Globalization
Globalization faces four dramatic challenges that will have to be addressed by different governments, civil societies, and other policy actors.
1. Guarantee that all the benefits of Globalization extend to all countries. This will not happen automatically without the requisite platform to facilitate it.
2. Deal with the concern that Globalization may lead to instability, which is mainly in the developing countries.
3. Globalization and all its major problems must not be used as an ex cuse to eliminate searching for new ways to cooperation between the world’s countries for their benefits.
4. Face the main fear of Globalization in the industrial world, i.e. a rise in global competition could lead to a decrease in wages, labor rights, and a decline in the overall economic environment.

Conclusions & Recommendations
As Globalization describes the process by which regional economies, societies, and cultures have become integrated through communication, transportation, and trade. It increases the market for demand. Many critics wrote about its disadvantages and the bad effect of it. Nevertheless, we need globalization for its many positive effects on nations, but we need to have solutions to its disadvantages as well as to make the most out of globalization. The whole world can get benefit from globalization by minimizing its disadvantage in one of the following way.
The Choices
The main question of globalization: is it worth keeping? And how we can keep it? Actually we have three choices or alternatives, first alternative is to stay with the present situation, i.e. keep the situation as it is.

11

Globalization 2012
Even though globalization increases human insecurity at the same time it opens many opportunities in the market for nations. This alternative is still under studies as it’s become unacceptable.
Second alternative, is to move backwar d, to the time where there was no WTO, which become the symbol of globalization.
But it’s very hard to accept this alternative as WTO is powerful and opens many opportunities for people with endless new systems that have been successfully used. As result, the only acceptable and logical alternative is to manage globalization in a better way, so in doing this, it will downside the inequity, instability, and the insecurity and other negatives attributes that are associated with it so as to minimize the negati ve effects and maximized it’s benefits. Fortunately, the negative trends of globalization can be reversed for the benefit of many nations.
Agenda for Action
While solutions may differ from country to country depending on the cultural and historical context s in which they take place,
The need of certain actual actions at the national level to appropriate economic and social policies are needed to capture the framework of opportunities in trades, as well as capital flow and migration to protect people against t he vulnerabilities’ that globalization creates. For example, Governments can manage trades and capital flows more carefully.

Finally, we cannot live without globalization despite the negative aspects of Globalization one cannot deny its much bigger positive aspects. But, dealing with globalization and its negative effect should be studied and understood thoroughly in order to help people worldwide develop their home nations in the small village that globalization creates.

12

Globalization 2012
References
 Globalization and Factor Mobility - Timothy A.Falade– Obalade – Jan, 2012
 Globalization retrieved from www.Wikipidia.com
 International Business – the challenges of globalization – sixth edition

13

References:  Globalization and Factor Mobility - Timothy A.Falade– Obalade – Jan, 2012  Globalization retrieved from www.Wikipidia.com  International Business – the challenges of globalization – sixth edition 13