Effects of Globalization on Countries Free-Sample-Myassignment

Question: Write a Report which will Analyse how Globalization is affecting the Countries and Companies in their Pursuit of Market Expansion or Market Share or Profitability. Answer: Globalization For decades, the human society across the globe has established progressively closer contacts. Today, the world has become a global village. The speed of global cohesion has substantially increased. There are unprecedented changes in communication, computer technology and transportation (Pettinger, 2012). These progressions have made nations to become more interdependent. Primarily, globalization refers to the process of integration and interaction among businesses, people and governments of different countries (Brahm, 2005). More precisely, it is the action of interconnectedness between nations arising from the exchange of ideas, world views, commodities, and others elements of culture (Pettinger, 2012). It is also the inclination of businesses and investment funds to move beyond the national and domestic firms to other countries across the world. Primarily, it is driven by investments and international trade. Notably, the process of globalization has affected companies and nations both positively and negatively. Markedly, globalization has various implications for the participating businesses and nations. At first glance, globalization is a fantastic development. However, a critical look at the aspects of the process reveals that it has a set of advantages that accrue to some nations, while its adverse effects accrue to other countries (Global Policy Forum, n.d.). Particularly, globalization is affecting countries and businesses in their pursuit of profitability, market share and market power (Goldin, 2012). Often, the Western countries benefit from international trade at the expense of the least developed economies of the world (Collins, 2015). More precisely, it has disproportionately helped corporations in the developed countries and damaged the economies and cultures of the poor nations of the world (Jones, 2016). Imperatively, the existence of this fact makes globalization a controversial issue in international trade (Global Policy Forum, n.d.). For this reason, critics of globalization advocate for strengthening domestic economies in place of global free trade. Countries and Industries affected by Globalization Today, globalization is a complex and controversial issue in the international trade arena. Mainly, this is because it pertains to the continued integration and interrelation of national economies. Additionally, it involves a larger scale of free trade, increased capital flows, movement of labor, growth, and expansion of multinational corporations. It also pertains to enhanced integration of the global trade cycle, and developed transport and communication that efficiently removes barriers between states. Notably, the effects of globalization have various aspects which affect the world in different dynamics, among them financial, industrial, economic, ecological, informational and cultural elements. Primarily, the rich and wealthy nations from the West gain more from trade than the poor and least developed countries of the world. Mainly, one can attribute this to the fact that globalization functions mostly for the benefit of the wealthy nations that dominate the global trade. Markedly, this is detrimental to the welfare of the developing countries. The role of weak economies in the world market has been reduced mostly to providing the West and North with ample raw materials and cheap labor. In this regard, the benefits accruing to the developing nations is minimal compared to the costs they incur in involving in international trade (BBC, n.d.). Characteristically, global finance is exclusively dominated by transnational corporations that aim at maximizing their profits without considering the growth and development needs of the local people and their host nations. One may also argue that the globalization phenomenon has brought unprecedented economic, social and political chang es that create significant challenges to businesses and countries in their pursuit of profitability and market power in the global market. Positive Cases It is imperative to note that globalization plays a significant role in international trade and is associated with numerous benefits and positive cases. Principally, globalization can lead to the creation of new ideas, new opportunities, and open markets that entrepreneurs and states may not have had. In turn, this brings about a number of positives associated with the phenomenon. Essentially, the positive cases of globalization pertain to increased free trade, improved economies of scale, enhanced competition, free movement of labor, and greater investment opportunities, among others (Pettinger, 2012). Increased free trade It is noteworthy that free trade removes the restrictions that prevent businesses and nations trading liberally. Instead, it allows organizations from different countries to exchange goods and resources without facing significant barriers. For this reason, it enables nations to specialize in the production of goods and services in which they have a comparative and competitive advantage. In turn, this lowers the opportunity cost of production and increases the profitability. Certainly, when economies specialize their production, there are several gains such as lower consumer prices, bigger export markets for local producers, greater competition and hence efficiency, and greater choices for consumers. Today, the North American Free Trade Agreement and the European Union are perfect examples of trade agreements that allow member countries to exchange services and products without major export and import barriers. Indeed, free trade leads to significant advantages for trading nations. Free movement of labor Economies also benefit from increased labor migration. Mainly, this benefits the recipient countries as well as the workers. Particularly, this aspect is useful when a country is experiencing a high level of unemployment. In this case, the workers have greater opportunities to search for employment in other countries that have high employment opportunities (Globalization, 2002). In the same view, it helps countries that experience labor shortages to import labor from other countries for the production of goods and services within its economy. Notably, this aspect of labor migration was witnessed when the UK employed nurses from India to fill shortages in its heath sector that were initially vacant due to lack of skilled personnel in its local labor force (Stief, 2013). In the same way, companies can also outsource non-core activities to other nations to reduce costs and enhance efficiency. In this regard, the movement of labor is beneficial for economies. Increased competition Globalization implies that businesses from all over the world compete for markets both locally and globally. For this reason, the level of competition increases for companies, thereby leading to efficiency of firms as they try to remain profitable by producing goods and services at optimal levels. In addition, domestic monopolies which are often protected by their governments face competition since they are no longer the sole producer of a particular product. For this reason, globalization is an important tool in increasing the level of competition from foreign firms within a country. Increased investments The process of globalization has led to an increase in the level of investments between countries. As such, the level of foreign direct investments between countries has grown over the years (Pettinger, 2012). Mainly, this is because it is now simpler and less hectic for nations to attract both short and long term investments from other countries. Notably, investments by multinational corporations play a vital role in enhancing growth and development of the host country, especially in the case of developing countries (Rosenberg, 2002). Primarily, the host nation benefits from such investments as they result in the creation of job opportunities for the locals, improvement of infrastructure and availability of goods and services from the MNCs. Economies of scale Globalization necessitates that economies specialize in the production of commodities that the economy has a rich endowment of resources for their production. Thus, specialization enables a country to produce a significant amount of the product to trade in the international market (Kuepper, 2017). Besides, there is increased demand for the nations products from all over the world. In turn, this greater specialization allows for economies of scale thereby leading to lower average costs and reduced prices for local consumers. Additionally, it permits the production of quality goods and services. Larger export markets Due to globalization, firms in states with free-trade agreements can also profit from global trade. Primarily, they can take advantage of a larger export market for their services and goods (Friedberg, 2013). Thus, instead of restricting their exports to just a few nations, firms can now sell their products to consumers and wholesalers in many countries. In turn, this increases their profitability. Moreover, this enables the company to attain a greater market share and market power (Rao, 2013). Hence, globalization results in the growth and expansion of exporting businesses and their countries in general. Increased consumer choice It is imperative to note that globalization has led to increased consumer choice. Primarily, this is because companies from different economies do not face any barriers to trade their products (Gibson, 2014). Therefore, they avail their goods and services to the local market, thus increase the variety of services and goods for consumers to choose from (Gibson, 2014). In this regard, consumers from both developed and developing nations also benefit from the process of globalization. Cultural integration By a large extent, globalization has led to the shrinking of the world and has allowed individuals throughout the world to explore new cultures (Watson, 2013). Mainly, this is achieved through travel and exposure to international music, religion, and art. Subsequently, this has led to the exchange of cultural experiences and perspective between nations of the world. Negative Cases Despite the vast benefits of globalization, various adverse effects arise from the process. Characteristically, globalization is associated with a myriad of negative implications to the developing economies of the world (BBC, n.d.). As such, this process often works to the benefit of the rich economies of the world at the expense of the progress and growth of the weak economies (BBC, n.d.). Thus, critics argue against the process of globalization since it only favors the developed countries. For this reason, the process of globalization is a controversial issue in contemporary economics. Child labour Several schools of thought opine that the process of globalization has brought about an increase in exploitation. Predominantly, it has resulted in an upsurge of activities labour malpractices especially in the least developed economies. Imperatively, the pressure of globalization has brought about child labor, trafficking and forced labor (Negative Effects, n.d.). Often, this occurs in countries with little or no accountability where corporations are employing children in their operation work without interference by bribing the officials. In turn, corruption among the MNCs and local officials has increased child labor. Today, the most affected economies that experience the adversity of child labor include Ivory Coast, Ghana, and Mali (Yale, n.d.). Mainly, international cocoa and chocolate MNCs use cheap child labor in their cocoa firms, under unsafe and unfair conditions. In this regard, it can be noted that globalization has been harmful to the developing economies while advancing the profitability and market power of the Western economies. Exploitation of labor It should also be noted that apart from child labor, globalization has led to the exploitation of workers in poor economies. Predominantly, this exploitation is manifested in the form of unfair and poor working conditions and low wages. Often, this arises due to the fact that most LDCs have high rates of unemployment which has substantially increased the poverty rates in the country. As a result, the locals endure these poor working conditions and wages in order to survive. Thus, globalization results in the increased profitability of rich economies at the expense of the poor people in developing nations. Exploitation of developing countries resources As noted earlier, globalization is mostly inclined towards the welfares of the rich economies which continue to influence and control world trade at the cost of the LDCs. Essentially, MNCs set up their operations in developing nations in order to exploit the natural resources of these economies without fair contribution to the growth of their economies (Tverberg, 2013). Today, globalization activities have increased the exploitation of non-renewable resources. Eventually, this may result in the depletion of the non-renewable resources in least developing countries (Gibson, 2014). One has to note that these foreign companies leave their resources back at home to exploit and finish those in foreign countries while saving their own for the future. For instance, US MNCs are active in the exploitation of oil and gold fields in other countries while sparing their reserves for future use ("The US, 2013). Indeed, globalization has led to exploitation of poor economies while benefiting rich e conomies. Labor Drain Markedly, labor drain is one of the biggest costs of globalization. Typically, globalization allows for the free movement of labor between nations. Thus, it permits employees to move effortlessly from one state to another in search of better job opportunities. As a result, developing countries which often have limited employment opportunities find it challenging to convince skilled individuals to continue working in their homeland. In addition, western economies often offer high wages and better working conditions than LDCs. As a result, the educated and skilled workforce are enticed to move to developed economies in search of greener pastures. Consequently, this results in brain drain in the poor nations. A continued departure of the skilled workers results in backwardness and underdevelopment of developing countries, while the countries where they migrate to benefit significantly from their expertise (Gibson, 2014). With this in mind, it is imperative to note that globalization has led to the backwardness of most developing economies, while developed economies benefit. Tax Avoidance and Tax Competition Over the years, it has been noted that transnational corporations adopt tax avoidance techniques, thereby denying their host countries their due tax revenue. As such, companies such as Google and Amazon set up their offices in states that charge low corporate taxes such as Luxembourg (Pettinger, 2012). They then channel their profits through their branches in other countries. Consequently, this implies that they pay reduced taxes in nations where they undertake most of their activities and hence earn more profit (Pettinger, 2012). Therefore, the local governments are forced to increase income taxes and VAT to achieve their targeted revenue. Additionally, this creates unfair competition for local firms which do not utilize the same tax evasion techniques. At times, local governments are also forced to set low corporation tax to foreign companies in order to attract foreign direct investment (Collins, 2015). While this strategy encourages lower corporation tax, it results in the raising of other forms of taxes. Consequently, this creates a burden on the residents of the host country in order to accommodate foreign firms. In this view, globalization is beneficial to the transnational corporations. However, it is highly detrimental to the welfare of developing economies. Collapse of local enterprises One major characteristic of globalization is that it leads to an increase in the level of competition. As a result, weak economies struggle to compete with the strong economies in the global market. Mainly, this is because developed countries produce their goods and services at efficient levels and are thus able to exploit economies of scale. In turn, they have low operational and production costs which allow them to sell their products at low prices. Unfortunately, most LDCs are unable to produce these products at a low cost. For this reason, domestic and local consumers shift their consumption to cheaper imports. In turn, this leads to the collapse of industries in the developing nations. A perfect example of this effect of globalization is the collapse of the textile industry in Kenya following the influx of cheap second-hand clothes from the West (Ibrahim, 2013). Characteristically, the availability of cheap alternatives from developed markets leads to the collapse of industries in LDCs (Mohr, 2015). In this regard, globalization is a significant factor in the failure and loss of profitability of many domestic sectors in developing nations. Environmental Costs Typically, globalization is characterized by an increase in industrial manufacturing and production activities. Often, these factories result in air, water and noise pollution. It has been noted that firms in the West often outsource their production operations to developing countries where the environmental standards and policies are less strict (McCubbrey, n.d.). As a result, they engage in environmental pollution of weak economies. Indeed, it is rational to opine that globalization is largely disadvantageous for developing nations. Erosion of cultural diversity The increased cultural integration brought about by globalization has substantially eroded cultural diversity in many developing economies. More specifically, it has led to increased cultural domination (Pettinger, 2013). Many developing nations have increasingly adopted Western cultures especially in terms of dressing. In turn, this has led to the deterioration of significant cultural aspects of the developing nations. Essentially, one may argue that globalization has led to the wearying of local cultures among developing countries in favor of superior cultural hegemony (Pettinger, 2012). Arguably, globalization has been increasingly working towards the achievement of the interests of wealthy countries to the detriment of the weak economies of the world. Conclusion All in all, all factors considered, globalization is an important part of the contemporary economy. The past few decades has seen the transformation of the world into a global village. Economies all over the world are increasingly engaging in trade. Even so, the concept of globalization has become an issue of controversy. Essentially, it is a double-edged sword. While various schools of thought are of the opinion that globalization is beneficial, others portend that the process has many disadvantages. Predominantly, the rich western economies benefit more from international trade and globalization than the poor developing economies. It is vital to note that globalization has various benefits for economies of the world. First, it is associated with greater free trade, increased competition and improved efficiency, and growth of multinational corporations. In addition, it facilitates greater movement of labor, increased capital flows, and increased investments. What is more, there is increased integration between countries, improved transport and communication systems and economies of scale. Further, the process results in an increase in consumer choice, reduction in prices of commodities and expansions in export markets for manufacturing companies. Indeed, globalization is beneficial. Even so, it is imperative to note that globalization is associated with various adverse implications for developing countries. Mostly, the globalization operates primarily in the interests of the rich economies at the expense of developing nations. For this reason, it is associated with ills such as labor exploitation, child labor, and environmental costs. 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