Globalization Essay

26th January 2012

What factors have contributed to Globalization?

The term “globalization” has only become commonly used in the past twenty odd years but, in fact, many trade economists have utilized it and taught about it for decades and even centuries. Globalization is defined as the process of international integration arising from the interchange of worldviews, products, ideas and other aspects of culture. It is, in other words, the escalating familiarity and interlinking of numerous economies and societies in the world. Globalization has been driven by a large number of various factors some of which I will elaborate on.

The primary factor of globalization is disputed and therefore controversial but in my opinion it is travel and tourism. Humans have always felt the need to visit new places, see foreign things, hear different languages and interact with distinctive cultures. We want to explore the unknown and we always will want to, therefore I think it is one of the most contributing factors. Without travel and tourism the world would not be so interlinked. Ideas concerning the economy and the society are seen in overseas countries and consequently applied in others.
Nowadays, travel is becoming more and more popular due to the minimal time it takes. There is a continuous increase in the movement of people and workers around the world. Intellectuals from underdeveloped countries seek life in the urbanized and industrialized countries in order to utilize their skills efficiently and earn a fair living. It is now very straightforward to cross borders so therefore travel will almost certainly always be a driving factor of globalization.

Advanced technology and the sharing of skills have resulted in the reduction of transport costs. Transport is used for trade, social means (travel) and immigration and it has become ever cheaper and faster. There has been a drastic fall in cost of shipping due to the developing improvements of containerization. This is the mode of transport of freight on ships overseas.
The cost of shipping has dropped by over 70% in the past 20 years, which has, as would be expected, heightened trade flows. The cost of transport continues to decrease, not only because of containerization but also, because of more businesses bulk-shipping. This is a benefit to the business that is shipping, as it is more cost-efficient and economical.

Another factor driving globalization is the growth of Multinational Corporations (MNCs). An MNC is a firm that fabricates its good or service in at least one country outside of its motherland. Multinationals usually operate in a handful of countries, creating links between their economies as the firm’s flow of production, sales and profit would rely on all of them.
The number of MNCs is slowly but surely increasing due to the bigger opportunity, expansion, increased shareholder value and maximized profit. It is becoming more and simpler to become an MNC due to the other factors driving globalization such as reduction of trade barriers, lower transport costs and advanced technology. A lot of companies become MNCs in order to be able to produce their goods in lands where labour is cheaper. Lots of the manufacturing and labour will be done in less developed countries where the minimum wage is lower. It is said that Multinational Corporations exemplify global interdependence.

Globalization is not only driven by businesses with the motive of expansion and profit. The governments of the world are working together today to a higher degree than ever before in order to keep the economies stable and to prevent another Great Depression which could affect anyone. This is motivated, not only by the free market but also, by the idea that the governments must maintain healthy relationships so as not to obstruct trade. The governments basically encourage and support national businesses to expand across borders because it results in a stream of profit back into the national economy.

As we can see there are numerous factors driving globalization, a large part being due to political and technological developments. But, in my opinion, it is the actions of businesses in the world that accelerate the process most in this day and age. Globalized companies are known to achieve higher profits and they also have a more dominant position in the global markets. Their production is more cost-efficient as there are lower unit labour costs, and the reduced trade/technological barriers make it tremendously trouble-free and facile for them to thrive. In addition, the product life cycles are extended, as the firm is present in more than one market, which leads to maximized profit. The motivations for successful businesses to operate globally are strong and attractive, hence the augment of Multinational Corporations and overseas trading.
With trade becoming easier and technology becoming increasingly advanced and drastically cheaper, I expect the process of globalization to continue to propel further forward in the near future.

Bibliography

http://en.wikipedia.org/wiki/Globalization Page last updated 3rd January 2013. [Date Accessed: 22nd January and 3rd February 2013]

http://www.merriam-webster.com/dictionary/globalization [Date Accessed: 25th January 2013]

http://www.tutor2u.net/blog/index.php/business-studies/comments/qa-what-are-the-main-factors-driving-globalisation Page created: Tuesday, October 27, 2009. Author: Jim Riley. [Date Accessed: 25th January 2013]

http://www.imf.org/external/np/speeches/2000/082500.htm Page created 25th August 2009. Author: Michael Mussa. [Date Accessed: 25th January 2013]

--------------------------------------------
[ 1 ]. http://en.wikipedia.org/wiki/Globalization [Date Accessed: 25th January 2013]
[ 2 ]. http://en.wikipedia.org/wiki/Internet [Date Accessed: 25th January 2013]
[ 3 ]. https://www.google.mu/#hl=en&tbo=d&output=search&sclient=psy-ab&q=what+is+goodwill&oq=what+is+goodwill&gs_l=hp.3..0l4.330.1741.0.1997.16.13.0.0.0.0.469.4421.3-5j6.11.0.les%3B..0.0...1c.1.2.hp.umSngsl3kII&pbx=1&bav=on.2,or.r_gc.r_pw.r_cp.r_qf.&bvm=bv.41867550,d.bmk&fp=3b4a908bbc78cca2&biw=1280&bih=929 [Date Accessed: 2nd February 2013]

Bibliography: http://en.wikipedia.org/wiki/Globalization Page last updated 3rd January 2013. [Date Accessed: 22nd January and 3rd February 2013] http://www.merriam-webster.com/dictionary/globalization [Date Accessed: 25th January 2013] http://www.tutor2u.net/blog/index.php/business-studies/comments/qa-what-are-the-main-factors-driving-globalisation Page created: Tuesday, October 27, 2009. Author: Jim Riley. [Date Accessed: 25th January 2013] http://www.imf.org/external/np/speeches/2000/082500.htm Page created 25th August 2009. Author: Michael Mussa. [Date Accessed: 25th January 2013] -------------------------------------------- [ 1 ]. http://en.wikipedia.org/wiki/Globalization [Date Accessed: 25th January 2013] [ 2 ]. http://en.wikipedia.org/wiki/Internet [Date Accessed: 25th January 2013] [ 3 ]. https://www.google.mu/#hl=en&tbo=d&output=search&sclient=psy-ab&q=what+is+goodwill&oq=what+is+goodwill&gs_l=hp.3..0l4.330.1741.0.1997.16.13.0.0.0.0.469.4421.3-5j6.11.0.les%3B..0.0...1c.1.2.hp.umSngsl3kII&pbx=1&bav=on.2,or.r_gc.r_pw.r_cp.r_qf.&bvm=bv.41867550,d.bmk&fp=3b4a908bbc78cca2&biw=1280&bih=929 [Date Accessed: 2nd February 2013]