Name for the process of increasing the connectivity and interdependence of the world's markets and businesses. This process has speeded up dramatically in the last two decades as technological advances make it easier for people to travel, communicate, and do business internationally. Two major recent driving forces are advances in telecommunicationsinfrastructure and the rise of the internet. In general, as economies become more connected to other economies, they have increased opportunity but also increased competition. Thus, as globalization becomes a more and more common feature of world economics, powerful pro-globalization and anti-globalization lobbies have arisen.
The pro-globalization lobby argues that globalization brings about much increased opportunities for almost everyone, and increased competition is a good thing since it makes agents of production more efficient. The two most prominent pro-globalization organizations are the World Trade Organization and the World Economic Forum. The World TradeOrganization is a pan-governmental entity (which currently has 144 members) that was set up to formulate a set of rules to govern global trade and capital flows through the process of member consensus, and to supervise their member countries to ensure that the rules are being followed. The World Economic Forum, a private foundation, does not have decision-making power but enjoys a great deal of importance since it has been effective as a powerful networking forum for many of the world's business, government and not-profit leaders.
The anti-globalization group argues that certain groups of people who are deprived in terms of resources are not currently capable of functioning within the increased competitive pressure that will be brought about by allowing their economies to be more connected to the rest of the world. Important anti-globalization organizations include environmental groups like Friends of the Earth and Greenpeace; international aid organizations like Oxfam; third world government organizations like the G-77; business organizations and trade unions whose competitiveness is threatened by globalization like the U.S. textiles and European farm lobby, as well as the Australian and U.S. trade union movements.
Globalisation and business - effects on business
The Effects of Globalisation on Business
The effects vary a lot from one part of the world to another and from one area of business to another. Communications infrastructure is important to modern businesses, but not all countries have got one. There is also the ‘non-traded’ sector ie goods and services which are not traded internationally. Domestic services, for example, have to be provided where the house is; you can’t export a clean house.
- Foreign businesses buy into domestic markets.
- Deregulation opens up markets to competition.
- Deregulation encourages innovation in new products and markets which challenges traditional market leaders
Meeting consumer expectations and tastes
- Generally, consumers all over the world are better informed, have higher incomes and therefore higher and more exacting expectations. This forces businesses to meet higher standards.
Economies of scale
Selling into a global market allows for enormous economies of scale, although not all industries benefit from these.
Choice of location
Businesses are now much freer to choose where they operate from, and can move to a cheaper and more efficient location. In the last decade the UK has been seen by many businesses as an attractive business location, especially in financial services, and many businesses have located in the UK which has boosted the UK economy but also provided increased competition for UK businesses. This increased movement of businesses and jobs has, to some extent, forced governments to compete with each other in providing an attractive and low-cost location. Ireland, for example, offers ‘tax holidays’ to businesses…