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Globalization

Globalization is a widely used term that can be defined in a number of different ways. It refers to the reduction and removal of barriers between nations for purchasing goods, capital, services and labors. A few years back, most businessmen focused on making their business across the country. Slowly, things changed. They started to think on bigger approach. And that s how, this Globalization issue came. Globalization can be defined as an integration of economy, finance, trade and communications from a worldwide perspective, in order to establish a successful economy on global basis. Globalization is a process which embodies a transformation in the spatial organization of social relations and transactions, expressed in transcontinental flows and networks of activity, interaction and power.

Definition:

--David Held and Anthony


The compression of the world and the intensification of consciousness of the world as a whole concrete global interdependence and consciousness of the global whole in the twentieth century. Globalization is the concentration of capital and the exclusive concentration of communication systems which affects not only the lives of indigenous people, but also affects the lives of poor people of the world. !hen we speak of free trade, we are not talking about the small and middle commercial sectors of the world, but rather we are speaking of the great monopolies.

-- R. Robertson

--Rigoberta Menchu Importance of Globalization:Globalization has been a big boon for all countries. !ut there are a few who say that it has been a curse. So take a look at both these aspects of Globalization....... Advantages: Advantages of globalization are"""" 1. Provides Wide Choices: Globalization is responsible for the wide range of choices that are available in the market today. "# years ago, foreign goods were a rarity or extremely expensive. Today, the scene has completely changed. !e see varieties of goods

from groceries to beauty products and they have $ust made a home for themselves into our lives. %o what this does is that it gives us a wide choice to make for ourselves. 2. Increase in GDP: &f the statistics are any indication, G'( of the developing countries have increased twice as much as before because of globalization. 3. Per Capital Income Increase: The wealth has had a trickling effect on the poor. The average income has increased to thrice as much because of globalization. . Increasin! "orei!n C#rrenc$: Globalization has brought about a huge investment in poor countries in terms of labor and capitalization. !ith this we can see global development of countries together. The standard of living improves for many, and poverty removes considerably. )very country will gain something or the other from another country and thus, it becomes important that currencies are not hiked to an extent that they remain out of maximum purchasing capacity. There is more stability in global financial relations. %. Improves &#alit$: *nother important advantage of globalization is that because there is so much choice in the market, the competition increases. %o to be in the running, producers and manufacturers of goods have to keep only the best +uality products to survive. !hich in turn ensures that the consumers get only the best +uality products. '. (oosts )conom$: Globalization makes possible not only export and import goods, but it also allows for outsourcing services and $obs. ,obs in the &T sector are especially outsourced as an important section of globalization. -any foreign companies set up branches in our country because the labor is relatively cheap here as compared to their country. %o, that results in a direct increase in their net profit. *nd as for our country, we get a sudden burst of $obs which again is nothing but helpful for our country. *. +nemplo$ment is ,ed#ced: 'ue to good effect of globalization, unemployment is reduced rapidly. The Government #epublic of !angladesh is better example for this fact. -. .preads /no0led!e: .efore globalization, it would not have been possible to know about other countries and the cultures. .ut due to important tools of globalization like the

internet, it is possible today to know what is happening in &ndia, to know their culture and food habits as well. *ll this is possible only due to globalization. 1. Improvement in 2#man ,i!hts: &ncreased media coverage draws the attention of the world to human right violations. This leads to improvement in human rights. 13. Competition on )ven Platform: The companies all around the world are competing on a single global platform. This allows better options to consumers. 11. ,ise in 4echnolo!$: *nother great globalization benefit is the rise in knowledge levels of countries. *s newer cultures and technologies are opened to a particular country, their knowledge expands simultaneously. *s a result, they are better able to handle their primary and secondary industries, and this ultimately affects their tertiary sector in a positive manner as well. 12. ,ise in 5pport#nities: !ith a large number of industries and resources available, the opportunities for people increase by a large amount. There are many more $obs available to people, and more and more people are also exposed to the lucrative benefits of moving abroad. This increases immigration rates as well, thus giving people the chance to grow economically and socially. 13. ,ise in Investments 6evels: /ne of the biggest globalization benefits is the rise in the level of foreign investment in a country. 0oreign direct investment 1 "DI2 helps industries and native cities grow at a rapid pace, and this is something that every nation should be open to since it is a highly beneficial venture for them. There is so much that they can gain in the process as well. 1 . ,ise in 4olerance: 0or far too long, countries of the world have lived amidst tension and fear of one another. /ne of the biggest globalization benefits is the eradication of this fear and tension, and the sowing of seeds of cordiality between trading nations. This also inadvertently leads to a rise in education levels and the spread of culture from one part of the world to another. 1%. Promotes Pro!ressive 4hin7in!: Globalization is not merely limited to exchanging food, recipes and the likes, but runs deeper in the way of bringing about a chance in the attitudes and thoughts of people. &t makes people tolerant of varied views from different parts of the world and thereby promotes progressive thinking and to bring about social reforms in society. &t also helps in the political field by making different governments aware of the varied ways in which governments are run.

Disadvantages: 'isadvantages of globalization are3333 1. +neven Distrib#tion of Wealth: !ealth is still concentrated in the hands of a few individuals and a common man in a developing country is yet to see any ma$or benefits of globalization. That4s why in developing country there occurs uneven distribution of wealth. 2. +nfair Pa$ments: /ne of the most common camplaint against globalization in business is that it leads to unfair payment of wages and salaries. %killed labor is paid differently in different countries by the same company. Thus, the rich company goes on becoming more rich while the labor4s skills are yet not appreciated with $ustice. This leads to strikes, less employee retention and problems with the unions. 3. Income Gap: !ealth of developed countries continues to grow twice as much as the developing countries. %o, there is a income gap between developed countries and developing countries because of globalization. . ,eversal of Globalization: &n future, factors such as war may demand the reversal of the globalization. i.e inter world war years. current process of globalization may $ust be impossible to reverse. %. Promotes Commercialism 4raits: &f we look at the teens of today, we4ll find that most of them will be in the same type of apparel. *ll this is the result of globalization and there is nothing local anymore. !hen an idea runs like 5 *ddidas brands are the best brands, everyone buys them because they can. &t does not leave any room for local products. '. 8ffects 6ocal 9ar7ets: !hen foreign goods flood the market and people begin to buy them, it is done at the cost of the local goods, especially in developing countries, like .angladesh. 0or example, small time businessmen who do not have the resources to export their goods and only depend on the locals to buy them, go through varied degrees of losses because their goods are not sold. %o if we ask a small time businessman is globalization good or bad for developing countries, he4ll probably answer in the negative. *. Wasta!e of ,eso#rces: To import and export products, a country makes use of it4s precious resources even when the product is manufactured in it4s own country. &nstead, if that same money was utilized in improving the product we could promote business for our own country and save on resources.

-. )ffects on )nvironment: Globalization issues in business also include the effects on environment due to their expansion. The governments give permission for more -67s to be set up, as this increases the investment in the country. &n this process, forests and agricultural lands are destroyed. &t increase in the pollution levels in the environment.

1. Destro$s )thnic C#lt#re: !ith so much emphasis on being global, people are forgetting what is local. They are disregarding their culture, ethnicity and local traits in preference for foreign practices. &t won4t be long before countries lose out on their cultures and heritage. 13. (ad 8ffects of "orei!n C#lt#re: Through globalization we are not trading only goods and services. !e are also trading cultures from different countries. *s we know culture has two sides. Positive and ne!ative. *nd the negative affects of foreign culture in spreading. 11. :ob Insec#rit$: )arlier people has stable, permanent $obs. 6ow people live in constant dread of losing their $obs to competition. &ncreased $ob competition has led to reduction in wages and conse+uently lower standards of living. 12. 9is#se of 4echnolo!$: Terrorists have access to sophisticated weapons enhancing their ability to inflict damage. Terrorists use the internet for communicating among themselves. *nd it4s totally misuse of technology. 13. Deadl$ Diseases .preadin!: %ome serious and deadly diseases are spreading by travelers to the remotest corners of the globe because of globalization. %uch as 8&9:*&'%, %wine 0lu, *nthrax etc.

);port:
The term export is drive from to conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an exporter. &n international trade exports refers to selling goods and services produced in home country to other markets. )xports of commercial +uantity of goods normally re+uires involvement of the customs authorities in both the countries of export and import.

The advent of small trades over the internet such as through *mazon and e3bay have largely by passed the involvement of customs in many countries because of the low individual values of these trades.

Import:
The term import is drive from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an importer. &t is a good that is brought in from another country for sale. &mport goods or services are provided to domestic consumers by foreign producers. &mport goods normally re+uires involvement of the customs authorities in both the countries of export and import. *nd it could be different by import +uotas, tariffs and trade agreements. &mport also means the economic value of all goods and services that are imported.

(alance of 4rade<
The balance of trade is identical to the difference between a country4s output and it4s domestic demand. The difference between what goods a country produces and how many goods it buys from abroad. This does not include money re3spent on foreign stock. &t could be a favorable surplus =e;ports e;ceed imports> or an unfavorable deficit =imports e;ceed e;ports>.

"actors that can affect the balance of trade: The cost of production The cost and availability of raw materials, intermediate goods and other inputs. )xchange rate movement. -ultilateral, bilateral and unilateral taxes or restrictions on trade. 6on3tariff barriers such as environmental, health or safety standards.

(alance of pa$ments:
The difference between the inflows of money into a country and the outflows of money from that country. &ncome from services i.e tourism, foreign aid and invest income are inflows. The money to pay for imports, money spent by .' citizen etc are outflows. *lthough the totals of payments and receipts are necessarily e+ual, there will be ine+ualities3excesses of payments or receipts, called deficits or s#rpl#sesin particular kinds of transactions.

4he 0a$ of participatin! in Global (#siness:


A firm that decides to enter international trade must select an approach /way. It can be done in a number of ways$ some re%uire low levels of commitment, while others re%uire much higher levels. They are&&&&&& 1. );portin!: The simplest way to enter international business is e'porting, selling domestic goods to a foreign country. &t re+uires the lowest level of resources and commitment. %ometimes a firm can locate an exporting firm that can provide assistance in selling products to foreign countries. .angladesh4s exporting goods are jute, leather, tea, prone, garments ear, labor etc. 2. 6icensin!: (icensing is an agreement in which one firm allows another firm to sell its product and use it4s brand name in return for a commission or royalty. 0or example; a broast chicken company, like <07 might enter into a licensing agreement with a firm in .'. The .' firm would have the right to sell <07 food products in .' and would pay <07 a specified percentage of the income from sales of the product. =icensing offers advantages for both licensor and licensee. 3. :oint ?ent#res: 0irms may also conduct international business through a )oint venture, it means a partnership between a domestic firm and a firm in a foreign country. .ecause of government restrictions on foreign ownership of corporations, )oint ventures are often the only way a firm can purchase facilities in another country. /ne ma$or drawback to international $oint ventures is that organizations may lose control of their operations. . 4radin! Companies: *nother approach@way to international use or form a trading company to provide a link between buyers and sellers in different countries. Trading company is a firm that buys products in one country and sells in another without being involved in manufacturing. Trading companies take title to products and move them from one country to another. Trading companies can simplify entrance into foreign markets because they are usually favored by the foreign governments. %. Co#nter 4radin!: *ounter trading is bartering agreements between two or more counties. *nd bartering refers to the exchange of merchandise between countries. *ounter trading allows a nation with limited cash to participate in international trade. The country wishing to trade re+uires the exporting country to purchase products from

it before allowing it4s products to be sold there. 0or example; >%* gives clothes and we in return gives them sewed cloths.

'. Direct 50nership: * much more involved approach@way to international business is direct ownership. The purchase of one or more business operations in a foreign country. +irect ownership re+uires a large investment in production facilities, research, personnel and marketing activities. Through direct ownership, a firm has greater control over a foreign subsidiary. 8owever, owning facilities in another country can be extremely risky? governments sometimes decide to take over certain industries or facilities. *. 9#ltinational Corporations: %ome corporations operate as if the world were a !lobal mar7etA the entire world viewed as a large market. This approach@way represents a total commitment to international business, and used by multinational corporations. * firm that operates on a global basis, committing assets to operations or subsidiaries in foreign countries is multinational corporation. (roducts most suitable for this approach are airlines i.e .ritish *irways, automobiles i.e Toyota and 7orolla, computers i.e -icrosoft and 'ell, soft drinks i.e 7oca37ola and (epsi, cosmetics i.e 0air @ =ovely etc. -ultinational company s ob$ective is to have Bone si!htA

one sell aro#nd the 0orld.C Global Infl#ence: Government Involvement:*ll governments want to increase the wealth, stability and standard of living of their societies. To achieve this goal, they often implement policies that affect international trade. %ome of these policies areAAAAA 1. 4ariffs and other other 4rade (arriers: &n the simplest terms, a tariff is a tax. &t adds to the cost of imported goods and is one of several trade policies that a country can enact. Tariffs are often created to protect infant industries and developing economies, but are also used by more advanced economies with developed industries. The top # reasons of tariffs used are33 ". (rotecting domestic employment, B. (rotecting consumers, C. &nfant industries, D. 6ational security, #. Eetaliation. There are several types of tariffs and barriers that a govt. can employ F specific tariffs, F licenses, F import +uotas, F voluntary export restraints, F local content re+uirements. 2. "ree 4rade and "ree 4rade 8reas: ,ree trade is a situation where there are no government3imposed barriers to trade. *nd a geographic are where free trade is permitted among the participating countries but imports from non3participating countries are limited.

%ince !orld !ar &&, the >nited %tates has been the leader of a movement to reduce tariffs, +uotas and non tariff barriers. The long3run goal is to create a world system of free trade. 3. Government .#pport of (#siness: The level of government support of business varies from country to country. &n command economies, the government owned virtually all the businesses and dictated how much production would occur and what prices would be charged. *nd other countries take a laisser fair- approach and give businesses much more freedom.

Impact of Globalization on )nvironment:


&mpact of globalization on environment is not +uite good. %uch as ". &ncreasing (ollution =evels B. 7ausing Greenhouse )ffect C. 'amaging )cosystem D. 'amaging (lants #. )ncroaching =ands G. Eeleasing Toxic (ollutants

Is Globalization Good or (ad:


&t4s a matter of fact that is globalization good or bad. &t has advantage and disadvantage also. (ros and cons also. Globalization issues in businesses also include the effects on environment due to their expansion. The government gives permission for more -67s to be set up, as this increases the investment in the country. &n this process, forests and agricultural lands are destroyed. Globalization, if done in the right way, is most profitable for any kind of business. Though all these globalization issues in business will continue to exist, will proper planning, the negative effects can be curbed to some extent.

In 4he )nd:
Globalization is potentially positive, but needs better management; well designed rules. &mportant to position e3trade in a broader context of economic development, socio3economic culture in the country and engineering growth. The immediate international environment also plays a role 1in terms of partnerships23 conse+uently, look for the right partnerships from a distance too.