GLOBALIZATION

Globalization

Globalization

Introduction

Globalization is the most significant change taking place in today's work environment. It connotes the economic interdependence among countries that develops through cross-national flows of goods and services, capital, know-how, and people. This entry covers mainly the organizational and human aspects of globalization.

Globalization has come into common use since the 1980s, reflecting technological advances and electronic communication that have made it easier to create economic interdependence across countries. Globalization is not just a recent phenomenon. But today commerce and financial services are far more developed and deeply integrated than they were in the past. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication.

Background and History of Globalization

Twenty-five years ago no one talked of world economy; the prevalent term was international trade, consisting of international trade and foreign investment. But today it has taken the form of a global economy, consisting of flows of information, technology, money, and people, and conducted via government organizations such as NAFTA (the North American Free Trade Agreement) and the European Community; global organizations, such as the International Standard Bureau (ISO) and the International Monetary Fund (IMF); and business corporations, such as multinational companies (MNCs) and cross-border alliances, mergers, and acquisitions. These interrelationships have enhanced participation in the world economy and have become the key to domestic economic growth and prosperity.

Myths About Globalization

Global connotes a holistic, integrative strategy. There are some myths about globalization that need to be avoided:

Globalization is simply a presence in other countries, without any connection between the activities across countries.

Global strategy means doing things the same way everywhere.

Globalizing means becoming a stateless organization with no national or community ties.

Globalization requires abandoning country values.

There is no need for integration when acquiring or merging with foreign companies.

A global strategy must involve sales or operations in another country.

In fact, globalization is not about the preceding list. Rather, it is about global integration, and not about internalization.

Discussion on Globalization and its Impact

Globalization also increases material progress. When consumers are able to choose alternatives, domestic businesses are exposed to competition from the world's most efficient alternatives, which forces them to look for ways to make their products and services better and cheaper. It also means that each business and nation is in a position to specialize in producing what it does best, importing other goods from countries where they are more cheaply produced, thus increasing total world production. The corollaries to this material progress are that ideas and technologies are easily transferred across borders and capital is free to move to the places with the most promising ideas and innovations.

Globalization is particularly important for poor countries. In an open world, they can employ technical and business solutions that took richer countries generations and billions of dollars to develop, they can attract investment from richer nations, and they can sell goods in wealthier markets. This ability to leapfrog entire stages of industrial development explains why countries with open economies governed by the rule of law have grown faster as ...