What do you mean by globalization? Ignou

 

What do you mean by globalization? Describe major forces of globalization with suitable examples.

Course Code : IBO – 01 (M.com) IGNOU  2020-21

Course Title : International Business Environment Assignment Code :

Q-2) What do you mean by globalization? Describe major forces of globalization with suitable examples. 

Answer - Globalization is the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade.

On one hand, globalization has created new jobs and economic growth through the cross-border flow of goods, capital, and labor. On the other hand, this growth and job creation is not distributed evenly across industries or countries. Specific industries in certain countries, such as textile manufacturing in the U.S. or corn farming in Mexico, have suffered severe disruption or outright collapse as a result of increased international competition.

Globalization motives are idealistic, as well as opportunistic, but the development of a global free market has benefited large corporations based in the Western world. Its impact remains mixed for workers, cultures, and small businesses around the globe, in both developed and emerging nations.

some of the important forces of globalization are -

International Trade and Globalization 

International trade has grown substantially over the years. The growth experienced is in the range of 4-10 per cent per annum. In fact, international trade has grown faster than the world economy in recent years. For developing countries, trade is the primary vehicle for realizing the benefits of globalization. Growing trade has contributed to the ongoing shift of some manufacturing and service activities from industrial to developing countries, which further accelerates the process of globalization. The creation of World Trade Organization in 1995 is another step toward creating an environment conducive to the exchange of goods and services. Another significant and more important indicator of globalization is the rate of growth of Gross Domestic Product (GDP) of the world. The world merchandise trade and the world GDP have been steadily growing since 1990. The rate of growth in merchandise exports is faster than the rate of growth in the world GDP. Look at Table 5.1 which shows that world merchandise exports and world GDP have been. Steadily growing till the year 1997. The world merchandise trade has been also growing faster than the world merchandise production... Of course, world merchandise trade, world merchandise production and world GDP have decelerated sharply in the year 1998 due to oil crisis, fall in prices of international trade of goods and services and several other factors.

Trade expansion does not confine to merchandise trade alone. Even international trade in services has grown tremendously. Trade in commercial services continued to be stronger than the merchandise trade throughout the entire 19904 998 period. .

The world merchandise exports, world merchandise. Production, world GDP and international trade in services have Witness substantial growth as a result of the globalization.

International Capital Flows 

Apart from expansion of international trade, the massive capital flows among countries has further strengthened globalization of capital by a large number of countries. The catalyst for globalization in the late eighties and nineties is not international trade, but cross border international finance flows. World inflow and outflow of FDI have been growing significantly. The inflow of FDI has increased from 359 billion dollar in the year 1996 to 644 billion dollars in the year 1998. Likewise the outflow of FDI has also increased from 380 billion dollar to 649 billion dollar. These levels were reached despite the unfavorable conditions in the world economy. FDI flows grew in 1998 by 39% in case of inflows and 37% in case of outflows. This is the highest growth rate attained in FDI since 1987.

On an average, virtually all of the increase in FDI in the year 1998 was concentrated in, developed countries, FDI inflows to and outflows from developed countries reached new heights of 460 billion dollar and 595 billion dollar. In case of developing countries, FDI inflows decreased slightly from 173 billion dollar in 1997 to 166 billion dollar in the year 1998. Most of the FDI is located in the developed world. Although the share of developing countries had been growing steadily until the year 1997, when it reached to 37%. It subsequently declined to 28% in the year 1998 due to the strong performance of the developed countries. The flows to the economies in transition of Central and Eastern Europe remained almost stable. The continuous growth in FDI will further accelerate the process of globalization. Look at Table 5.2 which shows the world FDI inflows and outflows.

Globalization and Technology 

Technological revolutions in transport and communications over the last three centuries, have integrated the world economy. The advances of technology in transport and communication have also brought peoples of the world nearer,

The revolution of technology that has taken place in transport, communication and information is of qualitative difference during the last ten years from that of previous-generation of technology. It is not only integrating but also bringing into existence a common culture, common political system est. It has also led experts like Shame think that there is not concept of national consumer. Consumer preference can be global and regional.

Technological revolution has been rapidly transforming all productive systems and facilitating the process of globalization. Technology has become one of the most important elements of the competitiveness. In modern production activities, competitiveness entails new, more rapid product innovation, flexible response, greater networking and closely integrated production systems across firms and regions. The leaders of technological change are evolving new strategies in response. Apart from investing heavily in innovation they are moving their technological assets around the world to match them to immobile factors, entering new alliances and reorganizing production relations. This has further facilitated the process of globalization.

At the corporate level also technology is getting globalized. This is at two levels. First technology is being sold in the world market. Although the market of technology is governed by slightly different rules such as relative importance of information, a few sellers and large number of buyers leading to oligopolistic market structure, the market for technology is vibrant. Consequently many countries derive benefits from this. For instance, the US earns substantially from technology trade. The mechanisms of technology sale are outright purchases and technology collaboration agreements. There has been substantial increase in technology collaboration over the last two decades. Second, the globalization of technology is also taking place in establishment of R & D centers. A large number of TNCs are establishing their R & D in various countries thus globalizing their R & D operations.