Abstract
The shift towards globalization was induced by social, economic, political and technological realities of a changing world. As such, this paper discusses the main drivers of globalization and what specific factors determined the shift towards a global economy. The paper investigates how the economy became global and what are the implications of a global economy for domestic industries, for consumers and for companies activating in various countries and competing with very diverse rivals. The paper shows that while globalization has its challenges and also its negative effects of maintaining less developed countries or third world countries in poverty, there are also advantages that can count as business opportunities for enhancing companies’ performances and global competition, such as the global talent pool or the global technological advancements. Outsourcing, on the other hand, is another advantage of globalization, being the other side of the coin that sets the developed countries as the rulers of the third world countries maintaining them in poverty through the sweatshops like activities, because outsourcing allows the less developed countries to develop their economy and to achieve know-how, making them more competitive on the global market. The paper focuses on Brazil and United States for discussing their emergence towards globalization and it also proposes recommendations that the managers should follow for effectively optimizing their business in the global economy.
- Globalization and the drivers of globalization
Globalization represents the orientation of the domestic industries and businesses towards cross-border markets, placing their products on new markets, while coordinating the cross-border manufacturing and marketing strategies (“Globalization: Trends and Prospects”). Bernhardt (2012) sees the globalization as a highly complex process, which expands opportunities, while deepens insecurities, as it is based on the interaction between countries, and on the economic, industrial or human resources flow and exchange across international borders.
The shift towards globalization implies various causes and drivers. Kelly (2000) discusses about the influx of the global capital, coming from foreign direct investment in industries orientated in export and this contributes to the restructuring of the world economy. Bernhardt (2012) focuses on more factors that influence the globalization process: the changes that redefined the economic paradigm, moving from demand management to neoliberalism; the extension of international governance and regulation; the financial and capital diffusion; the evolution of information and communication technology; the social and cultural aspects.
In general, the dedicated literature identifies four major drivers of globalization, which are related to the ones mentioned above. These are: market, government, competitive and cost drivers (Globalization: Trends and Prospects). Each of these drivers possesses specific aspects and factors that contribute to the settlement of globalization, independently or in interdependency with other factors.
Market globalization drivers refer to markets’ specificity in terms of demand and consumption, as defined by customers, who accelerate the globalization if they demand similar products, which generate a convergence in demand (Ungson & Wong, 2008). The market globalization driver is sustained by its specific aspects, which act as factors of globalization. As such, high product development cost imposes for the identification of new markets for cushioning the high costs through the placement of the production on other markets, while the rapid evolution of technology allows and requires the spread of products on global markets (Ungson & Wong, 2008).
The market globalization drivers therefore is sustained through common demand from various customers, across international borders, is enhanced by the existent of global market channels that allow the transfer of resources from a country to another and is supported by the transferable marketing, which combined deliver market adaptation for the globalized resources, as compared with market customization strategies, used for the local market (Evans, Stonehouse & Campbell, 2012). The difference between market adaptation or standardization and market customization allows for a more facile entrance on new markets, maintaining similar strategies, in accordance with the customers’ similar demands.
The cost globalization driver refers to the advantages that various factors or events create for the cost related activities in the global market and include structural, organizational and activity cost drivers (Siriner & Nenicka, 2011). Companies activating outside the domestic market are oriented towards finding the most cost-efficient solutions and suppliers in terms of employment, supply, design and so on, therefore one fundamental factor of the cost globalization driver is the emergence of newly industrialized countries that provide low cost services (Ungson & Wong, 2008). The development of transportation and the rapid technological advancement also represent significant aspects that define the cost globalization driver (“Globalization: Trends and Prospects”).
The competitive globalization drivers refer to the rivalry existent among countries due to the exporting of their activities, which determine companies to shift from the domestic to international focus, which pumps up the competition among countries activating on the global market (“Globalization: Trends and Prospects”).
This globalization driver is fired up by interdependence of countries, which allows for subsidiaries of the same company but settled in different countries to work together to push back competitors, but also by the high level of competitiveness from different continents, which imposes the increasing of this phenomenon (Ungson & Wong, 2008).
The government globalization driver refers to states’ capacity of absorbing business from other countries, by proposing favorable governmental policies (Siriner & Nenicka, 2011).therefore, favorable trade policies, defining common marketing regulations, or setting compatible standards are governmental factors that contribute to the development of globalization (Ungson & Wong, 2008).
- The changing nature of global economy
In the economic context, globalization is defined as the source for major increases in the international trade and exchanges that occur in an integrated and borderless worldwide economy, influencing the classical international trade for goods and services, but also the currency exchanges, technology transfer or international mobility for employment purpose (Intriligator, 2003).
Analyzing the major changes that global economy generates, Ungson and Wong (2008) consider that the openness and availability of foreign exchange market, which is a product of global economy, might have led to the global recession, because significant funds were transmitted through transactions around the worlds, which impacted the economies of the less developed countries.
Moreover, economic globalization is considered to be also the root of the increase in the worldwide famine level, because through organizations such as International Monetary Funds and World Bank there were imposed structural policies such as the liberalization of the imports, privatization and contractionary politics or the decrease of salaries and of other expenditures in the developing countries at the expense of developed and third world countries (Siriner & Nenicka, 2011).
Nevertheless, global economy generates changes in the technological innovation, which impedes for rapid adaptation of the technological evolution of countries around the world, for sustaining their presence in the global market place. As such, Intriligator (2003) notes that keeping up with the technological advancements represent a competitive must.
Global economy enhances migrant labor and this translates through a global opportunity of improving people’s lives. Nevertheless, global economy also means outsourcing of the business activities of companies originating in developed countries to developing and third world countries and although this induces improved life conditions for the residents of the host countries (Siriner & Nenicka, 2011), it maintains other countries in poverty, through the sweatshops activities, which imply very low payments, contributing like this to the world poverty.
- Compare and contrast the political and economic difference of at least two countries( e.g. Brazil and the United States)
Looking at the past political and economic evolution of Brazil and United States of America, there can be observed many similarities between these countries. As such, both were colonies and independent states and achieved their development by exploiting the weaker neighboring countries; both are known for their plantation agriculture and export of crops to Europe, as well as for their productivity because U.S. was the leader of the cotton production following its independence and Brazil is still known as number 1 the coffee exporter (DeWitt, 2002).
Nevertheless, the changes brought by the social transformation and recent globalization determined the distinct evolution of these two countries. Brazil represents an emerging developing country, part of the BRIC (Brazil, Russia, India, China) assembly of the countries that recognize a flourishing economy, while United States is the single super power, in terms of both political and economic profile (William, Prahalad, Brunneer & Gawhney, 2013). Nevertheless, while Brazil is becoming a global actor in terms of both politics and economy, after a long period of poverty and destabilization (Kappel, 2011; DeWitt, 2002), US recognizes a regression, caused by the severe financial crisis, the stagnation of the technological progress and the industrial productivity of US is not growing enough to maintain a competitive leading position (Kappel, 2011).
- Discuss what managers can do to successfully work with the opportunities and challenges present in this global economy
For properly managing the opportunities and challenges specific to global economy, managers are encouraged to strengthen their international institution for being prepared to action on a market where actors from other continents enter, so that they still remain competitive in such conditions (Intriligator, 2003). Another recommendation for properly dealing with the challenges and opportunities of globalization is to develop new unions, new institutions, such as the European Union, for enhancing the global cooperation through formal actions (Intriligator, 2003).
While doing business in a global world, companies are likely to face the challenge of cultural diversity. It imposes serious challenges on businesses, as it implies changing the local perceptions into global approach. Global economy provides the opportunity of identifying international talents which can energize and increase companies’ productivity, due to their cultural diversity and fresh views, and managers should seize these opportunities (Kelly, 2000). Likewise, transferring know-how from developed to less develop countries can enhance the global competition and increase the proficiency level and in the same time can generate increased benefits for the companies that apply such strategies, visible in their return of investment.
References
Bernhardt, C. (2012) Critically assess the main drivers of the globalization process. Grin Verlag.
DeWitt, J. (2002) Early globalization and the economic development of the United States and Brazil. Westport: Praeger Publishers.
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Intriligator, M.D. (2003) Globalization of the world economy. Potential benefits and costs and a net assessment. Los Angeles. Milken Institute.
Kelly, P.K. (2000) Landscapes of globalization. New York: Routledge.
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William, d.L.M, Prahalad, D., Brunner, R. Gawhney, R., Cagan, J & Vogel, C. (2013) Business innovation insights. New Jersey: Pearson Education.
