Summarise the main effects of globalisation and discuss to what extent they are beneficial to global businesses.
Introduction
Over the past decade there has been a dramatic increase in the world economic growth (Lasserre P, 2007).Some people believed that one of the key factors which have increased the world economic growth is globalisation. While a variety of definitions of the term globalisation has been suggested by many institutes, for example, the Canadian Economy has defined globalization as ‘the increased mobility of goods, services, labour, technology and capital throughout the world.’(
http://www.canadianeconomy.gc.ca/) or globalisation is ‘the growing integration of economies and societies around the world’ which was given definition by the World Bank.(
http://www.worldbank.org/) The phenomenon of globalisation has had widespread effect in many aspects and it is widely believed that globalisation has brought a lot of benefits to world economy, especially financial markets, trade liberalisation and emerging market economy. However, some critics argue that the vast benefits of globalisation has been delivered to only a group of multinational companies and caused the wide income gap in developing countries (Anand S and Segal P, 2006).This essay will divided into three parts. Firstly, will summarise the main implications of globalisation that might impact on world economy, particularly financial market, emerging market economy and trade liberalisation. Secondly, will show the effects of globalisation on global businesses particularly, global marketplaces and multinational companies (global brands). Finally, the conclusion will be mentioned.
The main implications of globalisation that might impact on world economy; financial market, emerging market economy and trade liberalization.
Financial market: In the new global economy, the capital markets have become a central issue for many discussion and debates and also the era of globalisation have been often mentioned in the world’s financial markets because the movement of capital flows is easy to move across the globe by just one click on your laptop, means the value of the Pound in your Pocket, Yen in your Purse, or Dollar in your Wallet is intrinsically linked to the remarkable technology which directly connected to the trading room and enable investors in Singapore to trade in Wall Street stock market, New York. In the similar way, the supporters state that the globalisation has been a key player for developing global capital flows. As shown by, time zones have been replaced by the twenty four hour a day stock market and foreign direct investment (FDI) is a case in point. According to Lasserre (2007), the report stated that the world capital flow has increased significantly from 630 billion US dollar in 1982 to 10,130 billion US dollar in 2005 by FDI. Moreover, banking companies have been a dramatic branch world wide.
However, anti-globalisation claimed that globalisation was brought many disadvantages to financial market due to when a huge amount of fund were move from one stock market to other stock market .This is exemplified by one of the most important events of the 1977s was the Asian financial crisis, when the vast amount of capital flow had been withdrawn from Asian stock market. These caused not only a big crash in Asian businesses; many firms were closed, because of the lack of financial policies in Asian counties such as Korea, Thailand and Malaysia. Furthermore, despite of fact that it also effected in US and Europe stock markets. (Burgess and Connell, 2007)
Emerging market economy: There have been significant reports that show a rapid increase of wage in emerging countries, particularly China and India. This may be because of the movement of international firms that have set up the global production manufactories in developing countries .The reason for these might be to reduce the cost of product and earn more profit with the cheap labour. According to Zhang (2001), the case of China, one of emerging economic countries, where was benefited by globalisation, when the gross domestic product (GDP) rose over 7.8 percent in 1998.
On the other hand, even though, many beneficial report of globalisation have clearly shown in emerging market. However, some authors has argued that the more economic growth has risen rapidly in emerging countries ,the more negative effects has been discovered .As shown by the example of Asian counties where the huge gap of wage has increased sharply between rich and poor and it has risen every years. Moreover, the number of poverty has risen among those countries. (Thirlwall, 2006) Perhaps, might be the globalisation has been going very fast and then no time to wait for societies reformation. Similarly, Stern (2001) who is former senior vice president and chief economist of the World Bank, stated at the Washington DC press conference;
“Globalisation often has been a very powerful force for poverty reduction, but too many countries and people have been left out, important reasons for this exclusion are weak governance and policies in the non-integrating countries, tariffs and other barriers that poor countries and poor people face in accessing rich country markets, and declining development assistance.”
In the future, perhaps may be the policies maker of developing countries should pay more attention to the negative effects of globalisation that might be cause some problem to their countries.
Trade liberalisation: We are now living in the movement of peoples and commerce across the globe. Interestingly, nowadays people from the East of the world would be easily trades with people in the West. This is the advantage of the trade liberalisation which means decreasing the limitations on trade that countries around the world have built over a number of years. The theory of comparative advantage would suggest that opening up world markets and reducing trade barriers (trade liberalisation) would lead to gains from trade for all concerned. The theory is one thing, getting countries to agree to dismantle the complex trade barriers they have erected over the years are far from easy. The example of benefits of trade liberalisation reported by the centre of economic policy research;
"Agricultural liberalization is the key for poverty reduction constituting 28% of GDP in low-income countries and 2% in industrialized countries – but both developed and developing countries must liberalize." (
http://www.cepr.org/)
Even though, the benefits of trade liberalisation have been contributed to many countries but some authors suggest that each countries might be attempt to ensure that domestic industries are protected from competition from foreign producers and can be carried out through a variety of means that through tariffs, which increase the price of goods coming into a country (imports), quotas that a physical limit on the number of goods that can be brought into a country, and other non-tariff barriers such as regulations and legislation that make it very hard for foreign competitors to sell goods into another country.
The effects of globalisation on global businesses; global marketplaces and multinational companies (the example of global brands).
While the globalisation of production and trade along with the rise of Multinational Corporation is part of the globalisation of the economy. The majority of trade organization seems to believe that globalisation has raised the global market capacity due to the free trade areas has been established in many regions such as Europe and Asia-pacific. The consequence of these can be seen in many businesses, computer and software industries, for example, Microsoft, Yahoo and Google have been available around the world and have been recognised as a global brand. Furthermore, the brand names such as McDonald, KFC and SARA have had a big market share when compare with competitors in the global market place. Those examples above have suggested that the globalisation has brought a lot of benefit to global brands and multinational companies.
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