Impacts Of Globalization On International Trade And Business

HI5016 International Trade and Business

Countries having positive impact of globalization

In the current business scenario, one of the key opportunities that are being faced by the contemporary business organizations is the phenomenon of globalization. On the other hand, it is also one of the key challenges that they are facing in the current situation. Thus, globalization poses both the threat and opportunities for the contemporary business organizations. However, apart from the specific organizations or industries, various countries around the world are also facing both positive and negative implications of globalization (Hitt, Ireland and Hoskisson 2012). This is due to the reason that, globalization involves inclusion of different countries around the world.

However, before determining the impacts of the globalization on the countries and their industries, it is important to have the understanding about concept of globalization. The concept of globalization first started from the late nineteenth century. Industrial revolution further contributed on enhancing the popularity of globalization around the world (Hawken, Lovins and Lovins 2013). This is due to the reason that, with the initiation of the industrial revolution, some of the countries are having surplus production with having less population. One the other hand, developing and under developed countries are having deficit of supplies with having huge number of population. Thus, this helped to generate the concept of globalization.

However, though globalization is having good number of benefits for the business organizations as well as for different countries. However, on the other hand, it is proving some sort of challenges for some countries and business organizations. Hence, it is of utmost importance that, the theory of the globalization is being effectively evaluated and identifies its advantages and disadvantages for the particular sector.

This report will discuss about the concept of globalization along with determining the merits and demerits of it. The countries and the industries that are mostly impacted positively and negatively will also be identified and discussed in this report. Moreover, critical analysis of the concept of globalization will be done with the help of different theories being stated by the different authors.

There are various countries ranging from developed, developing to under developed countries are having positive impact of globalization on their economy. This is due to the reason that, globalization is having holistic impact on all the countries around the world. The following sections will discuss about the positive impact on the countries.

• One of the key beneficiary countries from the initiation of globalization is the developed countries. This is due to the reason that, countries such as United States of America, Britain and Australia are having huge economical and industrial growth. However, the major domestic production of them is being treated as surplus due to the reason that, the population of these countries is low and thus, the demand is also low (Gupta 2012). Thus, it is important for these countries to have more market opportunities to sell their surplus products. Globalization provided this opportunity to them by opening up the market of other countries shaving demand for the similar products. Thus, developed countries are further enhancing their economy by selling the surplus products of them in the global market with the help of globalization.
• Another beneficiary section of countries is the developing countries. This is due to the reason that, developing countries such as India and China is growing at rapid even more than some of the developed countries. However, one of the key contributors in enhancing their growth of economy is the globalization. This is due to the reason that, developing countries are having huge source of population, which reflects in their flow of human resource for the organizations. Thus, business organizations from the developed countries are opting to have their offshore facilities in these developing countries. This is helping them to reduce their cost of employees in their process of production. Moreover, some other organizations are outsourcing their facilities in the developing countries in order to avail the advantage of cheap employees (Schniederjans, Schniederjans and Schniederjans 2015). Thus, this helps in effective and optimal utilization of the human resource in the developing countries and enhancement of employment in the country, which eventually helps in the growth of the economy.
• The lasts section of the countries that are also benefiting from the initiation of the globalization is the under developed countries. These countries including some of the African countries are having huge amount of natural resources, which are not been effectively tapped by their government due to the lack of domestic infrastructure and financial inability. In this case, initiation of the globalization helps in attracting investors and organizations from developed countries to have their facility there and tap the natural resources (Narula 2012). Thus, it helps in growth of the employment in the country along with industrialization. In addition, the natural resources are also being effectively and efficiently utilized.

Apart from the positive impact of the globalization, there are various negative implications are also there for the countries. Thus, it is also important to determine and identify the negative impacts of the globalization in order to analyze the effectiveness of the globalization in the global scenario. The following sections will discuss about the various negative implications of globalization on different countries.

• The use of non renewable source of energy is rapidly increasing due to the reason that, the demand is rapidly increasing due to globalization. According to various reports, use of non renewable source of energy such as coal is rapidly increasing in the global scenario. Globalization has helped in enhancing the connectivity of between the countries. Thus, countries having abundance of non renewable source of energy are exporting to other countries. It is in turn using up the energy sourcing more quickly. Thus, it will have negative implication for the entire global population in near future. Countries having the reserve of non renewable source of energy are quickly depleting their resources, which will deprive them from available energy sources in future.

Countries having negative impact of globalization

Energy consumption of China

• The above figure shows that, the demand and consumption of coal in China is rapidly increasing. Thus, this is one of the key demerits for the countries having reserves of coal. These countries will face scarcity of coal in future, which will reduce their competency in the global market.
• Another demerit of globalization is the outsourcing of the jobs. Due to the initiation of globalization, business organizations from the developed countries are off shoring or outsourcing their facilities in the developing countries. This is due to the reason that, the cost of human resource is much lower in the developing countries compared to the developed countries (Vivarelli 2014). However, this is causing negative implications on the developed countries. Developing countries are losing the job opportunities for their human resources. Thus, rate of unemployment is increasing in the developed countries.
• Global warming is one of the key concerns in the current global scenario. However, initiation of the globalization is enhancing the rate of global warming by increasing the rate of using of non renewable source of energy (McMichael 2013). Thus, developed countries and some other countries are having negative impact by witnessing the climate change and other implications of the global warming.

Carbon dioxide emission globally

• Another demerit of globalization is the exploitation of the underdeveloped countries. This is due to the reason that, developed countries are having the upper hand in terms of technologies, resources and political status compared to the underdeveloped countries. Moreover, due to the reason that, underdeveloped countries are having deficit of supplies along with more population, it initiates the exploitation of the natural resources. Thus, due to the initiation of the globalization, poor countries become poorer and rich countries are becoming richer (Jaumotte, Lall and Papageorgiou 2013).
• Globalization is also having negative impact on the developing countries. This is due to the reason that, developing countries such as India and Brazil are becoming more dependent on the economy of the developed countries. In the recent time, the major time, the major contributor in the gross domestic product of India and China is service sector (Kunnanatt 2013). This service sector is consists of outsourced job from the developed countries. Thus, the major part of the economy of the developing countries is getting dependent on the economy of the developed countries. This will have negative impact on the economy of the developing countries.

Australia is having different positive impact on their business sectors due to globalization. One of the key sectors is the consumer product category. According to the reports, initiation of the globalization helped the consumer goods sector to grow in terms of product assortment and diversification (Kale and De 2013). It is being reported that, due to the reason of the globalization, customers in Australia are having wide varieties of choices and lower price. This is due to the reason that, with the initiation of the globalization, the competition in the sector got increase due to inflow of the foreign competitors. Thus, increase in the competition helped to reduce the price of the products. Moreover, customers in the Australian market are having the access to the modern, updated global products. According to the theory of liberalism, the business sector of consumer goods category is more liberal for the customers due to the initiation of the globalization (Barry and Osborne 2013). It also motivates the domestic producers to enhance their production process and offer updated products in lower prices.

Another business sector that is benefited from the initiation of the globalization is the financial sector of Australia. According to reports, financial sector of Australia have witnessing huge growth in the recent years. Moreover, the contribution of financial sector in the total gross domestic production of Australia is more compared to other business areas.

From the above figure, it is been seen that financial sector is the major and leading contributor in the gross domestic product of Australia. This is due to the reason of the globalization (Coleman 2016). With the help of the globalization, inflow of foreign investment is showing positive trend in various sectors, which further helps in enhancing the growth of the financial sector. Moreover, on the other hand, due to the help of the globalization, financial institutions of Australia are having the opportunities to penetrate in the foreign countries also, which enhance their market share and presence.

Due to having favorable climate and large area of agricultural land, Australia is having positive growth of the agriculture sector. Moreover, with the inflow of the foreign investment in this sector, domestic agricultural sector of Australia have also developed due to the reason that, with the inflow of the technologies in the market, domestic producers also get benefited. This helped them in enhancing their productivity in the global market.

Positive cases of globalization in Australia

Apart from the positive implication of globalization, various sectors in Australia and some other countries are facing the negative impacts also. The following sections will discuss about the negative impact of globalization on different sectors.

• One of the most prominent negative impacts is being seen by the developing countries. Due to the initiation of the globalization, developed and superior countries dump their obsolete technologies in the developing and less developed countries. This caused negative impact on the domestic industries. For instance, according to reports, the electronic device market of India is being flooded with the low cost Chinese products, which is creating barriers for the other manufacturers in the market to operate (Iitrade.ac.in 2017). Thus, the domestic sectors of India including electronic, rubber, steel and aluminum are being affected from the initiation of globalization.

• Another negative impact of globalization is witnessing by the food and beverage industry. Due to the initiation of the globalization, the domestic food habit and culture of Australia is depreciating due to which, more westernized food culture are invading. Westerns food brands such as McDonalds and Subway are increasing their market share in the Australian market, which further depreciating the business opportunities for the domestic companies (Lawson 2013). Thus, due to the initiation of the globalization, more global food brands are invading in the market along with creating cultural colonialism in the market of Australia.
• Auto industry of Australia has also been affected from the initiation of the globalization. According to reports, due to the initiation of the globalization, more global organizations have entered in the market of Australia (Thomas 2016). However, Australia is having less population, which limited the growth of the industry and less economies of scale. Recently, Holden and Ford announce that they will cease the production of their cars in Australia due to less demand. However, according to the reports, in the last decade the scenario was good due to the restrictions on the foreign investments on the automobile sector. Domestic manufacturers catered well to the market (Wood 2017). Thus, with the initiation of the globalization and inflow of the foreign investors in the market, the Australian automobile market became saturated quickly.

There are various theories of globalization being stated by different authors. There are various approaches of globalization being stated by the authors. Some are considered as globalists. According to them, globalization is having various beneficial impacts on the world economy. On the other hand, internationalists argued that, the flow of capital in the global economy remained same as it was before the initiation of the globalization. Another theory being stated by the theorists is regarding the negative impact of the globalization. According to them, globalization helps the developed and superior countries to dominate the global economy for their personal interest. These authors are known as negative globalists.

According to Milanovic (2016), globalization is causing increasing in the inequality among the countries. This is due to the reason that, initiation of the globalization is helping the large business house to exploit the resources of the under developed countries. Though, the under developed are also enhancing their economy by exporting their resources but this concept is just making the developed countries more powerful and the under developed countries deprived of resources. Thus, according to the author, initiation of the globalization is increasing the inequality among the countries rather than offering equality.

However, on the other hand, there are various different approaches given by some authors. One of the theories being given by Syed, Dadwal, Rutter, Storr, Hightower, Gooden, Carlet, Kelley, Donaldson and Pittet (2012), regarding the benefits of the globalization on both the developed and developing countries. According to them, developed countries are the one who have being benefited for the most from the initiation of the globalization. However, developing countries are also benefiting from the globalization due to the investment by the corporations from the developed countries. Thus, according to the authors, with the initiation of the globalization, developing countries are attracting more foreign investment from the developed countries. It is helping them to enhance their economy along with attracting updated technologies and other resources.

Some authors have related the concept of globalization with the peace process among the countries. According to Schneider (2014), initiation of globalization will help in enhancing the global peace process. This is due to the reason that, globalization is creating economic dependency among the countries and majority of the countries are depending on one another for resources. Thus, it will be difficult for any conflict to get emerged due to the economic dependency. Countries cannot opt for confrontation due to the liability of the global business. Thus, according to the author, initiation of the globalization will help to enhance the global peace process.

Financial sector

According to Claessens and Van Horen (2015), one of the key demerits of globalization is the economic crisis. According to the authors, due to the initiation of the globalization, all the countries are becoming inter-dependent on one another. Thus, the financial crisis being faced by one country will have implications for other countries also. The global economic crisis being emerged in 2008 in United States caused huge economic crisis on the major economies around the world. Thus, due to the initiation of the globalization, the economic condition of one country will get determined by another. According to the authors, this is one type of attack on the sovereignty of the countries.

Conclusion 

Thus, from the above discussion of the advantages and disadvantages of the globalization, it can be concluded that, globalization possess both merits and demerits for the countries and industries. In this report, various advantages of globalization are being discussed and it is being identified that, developed, developing and under developed countries are all benefiting from the initiation of the globalization. It is being identified in this report that, initiation of the globalization is helping the developed countries to meet their growing demand by sourcing around the world. Moreover, globalization also helps the developing countries to gain more foreign investment from developed countries by offering cheap and effective resources. Under developed countries are benefiting from the initiation of globalization by gaining more opportunities for tapping their huge reserve of natural resources. However, apart from the advantages, there are various disadvantages also being identified in this report. One of the key disadvantages is the inequality among the countries. Various specific industries are also being identified, which are already facing the negative impact of the globalization. Thus, it is important for the countries to protect their domestic industries first and then opt for foreign investment. It will help them to overcome the threats of globalization and to have favorable business scenario in the global economy. Moreover, it is important for the developing and under developed countries to protect their domestic industries rather than entirely depending on the global organizations.

Reference 

Barry, A. and Osborne, T. eds., 2013. Foucault and Political Reason: liberalism, neo-liberalism and the rationalities of government. Routledge.

Claessens, S. and Van Horen, N., 2015. The impact of the global financial crisis on banking globalization. IMF Economic Review, 63(4), pp.868-918.

Coleman, W.D., 2016. Financial services, globalization and domestic policy change. Springer.

Cuthbertson, D. (2017). Culture industry contributes $86 billion a year to Australian GDP. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/entertainment/culture-industry-contributes-86-billion-a-year-to-australian-gdp-20140212-32i92.html [Accessed 6 Dec. 2017].

Gupta, S.D. ed., 2012. Dynamics of Globalization and Development (Vol. 59). Springer Science & Business Media.

Hawken, P., Lovins, A.B. and Lovins, L.H., 2013. Natural capitalism: The next industrial revolution. Routledge.

Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.

Iitrade.ac.in. (2017). India faces Chinese dumping threat. [online] Available at: https://www.iitrade.ac.in/kmarticle.php?topic=India%20faces%20Chinese%20dumping%20threat [Accessed 8 Dec. 2017].

Jaumotte, F., Lall, S. and Papageorgiou, C., 2013. Rising income inequality: technology, or trade and financial globalization?. IMF Economic Review, 61(2), pp.271-309.

Kale, S.H. and De, S., 2013. The impact of globalization on individual customers: implications for marketing. International Journal of Management, 30(4), p.286.

Khan, T. (2017). Chinese imports hitting Indian small manufacturers hard. [online] Businesstoday.in. Available at: https://www.businesstoday.in/magazine/cover-story/chinese-imports-hitting-india-msme-sector/story/203041.html [Accessed 8 Dec. 2017].

Kunnanatt, J.T., 2013. Globalization and developing countries: A global participation model. Economics, Management and Financial Markets, 8(4), p.42.

Lawson, S., 2013. Europe and the Asia-Pacific: culture, identity and representations of region. Routledge.

McMichael, A.J., 2013. Globalization, climate change, and human health. New England Journal of Medicine, 368(14), pp.1335-1343.

Milanovic, B., 2016. Global inequality: A new approach for the age of globalization. PANOECONOMICUS, 63(4), pp.493-501.

Narula, R., 2012. Do we need different frameworks to explain infant MNEs from developing countries?. Global Strategy Journal, 2(3), pp.188-204.

Schneider, G., 2014. Peace through globalization and capitalism? Prospects of two liberal propositions. Journal of Peace Research, 51(2), pp.173-183.

Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing and insourcing in an international context.

Statisticstimes.com. (2017). Sector-wise contribution of GDP of India – StatisticsTimes.com. [online] Available at: https://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php [Accessed 6 Dec. 2017].

Syed, S.B., Dadwal, V., Rutter, P., Storr, J., Hightower, J.D., Gooden, R., Carlet, J., Kelley, E.T., Donaldson, L. and Pittet, D., 2012. Developed-developing country partnerships: benefits to developed countries?. Globalization and health, 8, pp.17-17.

Thomas, K.P., 2016. Capital beyond borders: States and firms in the auto industry, 1960–94. Springer.

Tverberg, G. (2017). 12 Negative Aspects of Globalization | OilPrice.com. [online] OilPrice.com. Available at: https://oilprice.com/Finance/the-Economy/12-Negative-Aspects-of-Globalization.html [Accessed 6 Dec. 2017].

Vivarelli, M., 2014. Innovation, employment and skills in advanced and developing countries: A survey of economic literature. Journal of Economic Issues, 48(1), pp.123-154.

Wood, B. (2017). How globalization destroyed Australia’s auto industry. [online] MarketWatch. Available at: https://www.marketwatch.com/story/how-globalization-destroyed-australias-auto-industry-2014-12-16 [Accessed 8 Dec. 2017].