What Is Globalisation, Benefits of Globalisation?
In the post, we learnt the various aspects of international business. We will now broaden our perspective and examine globalisation. Globalisation is a process where businesses are dealt in markets around the world, apart from the local and national markets.
According to business terminologies, globalisation is defined as the worldwide trend of businesses expanding beyond their domestic boundaries It is advantageous for the economy of countries because it promotes prosperity in the countries that embrace globalisation. In this section, we will understand globalisation its benefits and challenges.
What Is Globalisation, Benefits of Globalisation?
International vs. Global Business
Most of us assume that international and global business are the same and that any company that deals with another country for its business is an international or global company. In fact, there is a considerable difference between the two terms.
Companies that deal with foreign countries for their business are considered as international companies. They can be exporters or importers who may not have any investments in any other country, apart from their home country
Global companies –
Companies, which invest in other countries for business and also operate from other countries, are considered as global companies. They have multiple manufacturing plants across the globe, catering to multiple markets.
The transformation of a company from domestic to international is by entering just one market or a few selected foreign markets as an exporter or importer. Competing on a truly global scale comes later, after the company has established operations in several countries across continents and is racing against rivals for global market leadership.
Thus, there is a meaningful distinction between a company that operates in few selected foreign countries and a company that operates and markets its products across several countries and continents with manufacturing capabilities in several of these countries.
Companies can also be differentiated by the kind of competitive strategy they adopt while dealing internationally Multinational strategy and global competitive strategy are the two types of competitive strategy.
Companies adopt this strategy when each country s market needs to be treated as a contained It can be for the following reasons.
Customers from different countries have different preferences and expectations about a product or a service.
Competition in each national market is essentially independent of competition in other national markets and the set of competitors also differ from country to country.
A company’s reputation, customer base, and competitive position in one nation have little or no bearing on its ability to successfully compete in another nation.
Some of the industry examples for multinational competition include beer Life insurance, and food products.
Global competitive strategy.
Companies adopt this strategy when prices and competitive conditions across the different country markets are strongly linked and have common synergies in a globally competitive industry, a company’s business gets affected by the changing environments in different countries.
The same set of competitors may compete against each other in several countries. In a global scenario, a company’s overall competitive advantage is gauged by the cumulative efforts of its domestic operations and the international operations worldwide.
A good example to illustrate is Sony Ericsson, which has its headquarters in Sweden, Research and Development setup in USA and India manufacturing and assembly plants in low-wage countries like China, and sales and marketing worldwide. This is made possible because of the ease in transferring technology and expertise from country to country.
Industries that have a global competition are automobiles, consumer electronics (like televisions, mobile phone) watches, and commercial aircraft and so on.
Benefits of Globalisation
The merits and demerits of globalisation are highly debatable. While globalisation creates employment opportunities in the host countries, it also exploits labour at a very low cost compared to the home country. Let us consider the benefits and ill-effects of globalisation. Some of the benefits of globalisation are as follows:
- Promotes foreign trade and liberalisation of economies.
- Increases the living standards of people in several developing countries through capital investments in developing countries by developed countries.
- Benefits customers as companies outsource to low wage countries. Outsourcing helps the companies to be competitive by keeping the cost low, with increased productivity.
- Promotes better education and jobs.
- Leads to free flow of information and wide acceptance of foreign products, ideas, ethics, best practices, and culture.
- Provides better quality of products, customer services, and standardised delivery models across countries.
- Gives better access to finance for corporate and sovereign borrowers.
- Increases business travel, which in turn leads to a flourishing travel and hospitality industry across the world.
- Increases sales as the availability of cutting edge technologies and production techniques decrease the cost of production.
- Provides several platforms for international dispute resolutions in business, which facilitates international trade.
Some of the ill-effects of globalisation are as follows:
- Leads to exploitation of labour in several cases.
- Causes unemployment in the developed countries due to outsourcing.
- Leads to the misuse of Intellectual Property Rights (IPR), copyrights and so on due to the easy availability of technology, digital communication travel and so on.
- Influences political decisions in foreign countries. The MNCs increasingly use their economical powers to influence political decisions.
- Causes ecological damage as the companies set up polluting production plants in countries with limited or no regulations on pollution.
- Harms the local businesses of a country due to dumping of cheaper foreign goods.
Leads to adverse health issues due to rapid expansion of fast food chains and
- increased consumption of junk food.
- Causes destruction of ethnicity and culture of several regions worldwide in favour of more accepted western culture.
In spite of its disadvantages, globalisation has improved our lives through various fields like communication, transportation, healthcare, and education.
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