Today business world is very used to
with the word “Globalization” in every aspects. Globalization is roughly
defined as the process of exchanging experiences, activities, goods and
services, and ideas which makes more accessible to connect to the people around
the world. According to Thomas L. Friedman, one of America’s leading world
affairs interpreters, globalization can be defined as “Globalization
involves the inexorable integration of markets, nation-states and
technologies…in a way that is enabling individuals, corporations and
nation-states to reach around the world farther, faster, deeper, and cheaper
than ever before, and in a way that is also producing a powerful backlash from
those brutalized or left behind by this new system” (Friedman, 1999)1.
Globalization is expressed by many
scholars and many business organization in different ways. OECD defined
globalization in its publication as “an increasing internationalization of
markets for goods and services, the means of production, financial systems,
competition, corporations, technology and industries” (OECD, 2002)2.
Globalization is the adoption of economic activities and innovations among
countries and it is required to adjust the political and social activities that
follow it. Because of globalization, the activities around the world becomes integrated.
Thomas L. Friedman describes the
“flattening” of the world economy through globalized trade,
outsourcing, supply-chaining and political liberalization (Friedman, 1999)1. Globalization encourages
the free trade among the countries. Globalization process is “the
global search for selective optimization of each stage of the value added
chain, from research and development to distribution” (Hiru,
Globalization process can be split into two aspects. First aspect is the
elements such as trade, investment, technology, cross border production systems,
and flows of information and the other one is the elements such as polices and
institutions. Globalization has greater effect on the national economy, multinational
corporations and the Foreign Direct Investment, and production and consumption
The world economies have been
increasingly integrated through the internet and mobile phones. Outsourcing of
work to different countries, especially having cheap labor is another problem
face by individuals belonging to the developed nations (Wade, 2003).
Several organizations not only business organizations but also institutions have
actively participated in the process of globalization. Globalization leads
people around the world to see what is happening in another place and there is
no gap between countries for the availability of products and services.
2.1 Major Elements and contemporary causes of Globalization
Globalization has been led by the
elements such as trade agreement, migration patterns and, strategic
imperatives, information transfer and spread of technology.
Some trade agreements reduce the
barriers and some trade agreements eliminates the trade barriers on trading
commodities among the countries. So, countries exchange the products or
services which they cannot produce because of the resources availability and it
leads to globalization.
Inflow and outflow of labor force in
the labor market among countries due to the skills required and costs of
producing also leads to globalization.
Firms are seeking for the strategic imperatives such
as leveraging its competencies, acquiring resources at low cost, expanding into
new markets and competing with industry rivals which leads to globalization.
Information transfer and spread of
Communication technology becomes
efficient so information is available in timely manner and new technology of
production or doing businesses can be transferred around the world within a
short period of time.
2.2 Types of Globalization
Globalization is a process and it is
divided into three distinct type such as economic globalization, social
globalization and political globalization.
Economic globalization is the
activities such as interconnection of economies through exchange of commodities
and resources. There is no economy of a country which is running in isolate.
National economies influence each other. International trading is a major form
of economic globalization. Due to the economic globalization, standard of
living is getting improved in countries.
Some scholars divided the culture
globalization into different section but here it is explained under the section
of social globalization. Social globalization means the sharing of ideas,
cultures and information among countries. It makes to increase the awareness of
the other’s culture and social standard. In this era, the technology
improvement is rapidly growing and because of the technology countries are
connected through technology such as television shows, films and social media. K-Wave
which means Korean Pop Songs, Korean Drama Series and Korean Food become
popular not only in Asia but also in other countries from the America or Europe
is the distinct example of the social globalization.
Political globalization is the
political cooperation among countries with the objectives to prevent conflicts
and to be safer than without of that. After World War 1, some of the
organizations are established for the political cooperation objectives. Then,
global organizations such as United Nations (UN), are also established to
promote the political cooperation among countries.
Critical Issues on Globalization
As it is known that globalization can
bring many benefits such improve in the standard of living and generating
wealth. But it has many critical issues and some scholars has pointed out these
issues. Ireland and Hitt (1999) claim
that indications of the incredible breadth and depth of the effects of the
global economy lead them to predict that nation states will lose their
sovereignty in the twenty-first century. ( Michael A Hitt & R Duane Ireland, 1999)4.
Globalization is the ongoing process
which cannot be slow and which cannot be reversed due to the technology
advancement. People around the world are now relying on technology more and
more to communicate globally instead of physical present and getting to places
that are far away. Places that used to seem worlds away are now within reach by
the click of a button. The world becomes village and virtually narrower due to
the technology. Therefore, “The challenge in this era of globalization –
for countries and individuals – is to find a healthy balance between preserving
a sense of identity, home and community and doing what it takes to survive within
the globalization system” (Friedman, 1999)1.
Globalization is at its crossroads.
One of the significant issues in globalization is that the impact of the
financial crisis in U.S subprime market affected economies of other countries
around the world in 2007. Jenkins mentioned that “The most immediate challenge
facing the global economy is the marked slowdown in the U.S. economy. This slowdown
involves several interconnected elements, and, given our close trade links to
the United States, has very direct consequences for Canada (Jenkins, 2008)5.
Globalization has many benefits as
mentioned above but the issue is the benefits such as increased in trade,
investment, and technological innovation are not fairly distributed among
countries. As free trade and global competition expand, the distribution gaps
becomes wider and wider. The gap between rich and poor is also becoming wider
due the unfair distribution. Issue of brain drain cannot be omitted as educated
and talented individuals move from a nation to the foreign countries for a
better opportunity. It makes the nation lose the local talents for the required
jobs and the nation needs to hire the workforce with lower skill level or the
higher skill from the other country.
There is also an environmental issue
that if the nation has lower cost on the resources required for production,
plants and factory from other nations would operate in the cheaper country. If
the cheaper country has no exact and strict law on the environment reservation
and environment pollution control, it affects the host country’s environment. Depending
on the superior countries by the small nations are also an issue as if that
superior nation encounters the economic crisis, the whole economy of the world
is down. Culture erosion of nations is also happened during the age of
globalization which leads to the disappearance of the uniqueness and the value
becomes mixed among countries.
According to economist Dani Rodrik,
three core sources of issues are explained that “globalization makes the demand
for services of individuals in the unskilled and semiskilled labor forces more
elastic – their services can be easily substituted across national boundaries,
globalization engenders conflicts within and between nations over domestic
norms and the social institutions that embody them and globalization creates
opportunities for trade between countries of different levels of development
with different workplace practices, legal rules, and social safety nets (Rodrik, 1997).
In fact, it must be aware that
globalization is the process which cannot be turned away from ongoing. There is
physical boarders between nations but because of the globalization, the
national border is only a boarder but it cannot prevent the flow of
commodities, goods and services, capital, resources and information due to the
free trade agreements and cheaper communication technology.
Globalization cannot be completely
inevitable. But nowadays, even some super countries like United States would
try to manage the effect of globalization on the country. Donald Trump, a
President of United States started from 2017, is popular for his slogans during
the election period. His slogan “America First” shows that everything of
America would be given a first priority than that of the other nations in
LDCs (Least Developing Countries)
have encountered more negative effects of globalization than the developed
countries. Thus, firms in nations find ways to reduce the negative effect of
globalization. Governments of nations must manage the challenges of globalization
with setting a sound microeconomic and macroeconomic policies to react the
global level playing field.
The word “globalization” was more
popular than the “glocalization” in the previous days. Nowadays, the words
‘”Think global, act local” becomes popular. Difference between globalization
and glocalization is explained in the next section.
2.4 Difference between Globalization and Glocalization
In the globalization aspects,
products are standardized and they are marketed all over the world with a
standardized marketing mix. Globalization makes things fit in the norm of the
country to increase their power, influence and profits. As in Nokia mobile
phone and Apple product, they made as a global standard.
Glocalization which is combined by
the words “globalization” and “localization”. In the glocalization concept, a product or
service is developed and distributed globally, but is also adjusted to suit
with the user or consumer in a local market. Global localization which is also
mentioned as “glocalization” is defined as “mixing standardization and
customization in a way that minimizes costs while maximizing satisfaction,
essence of segmentation, think globally, act locally” (Hirmukhe,
Key players in the glocalization concept are multinational companies and
multinational businesses such as Toyota Automobile, Volks Wagon Automobile, Nestle’,
Mac Donald, Kentucky Fried Chicken Chains (KFC), Hard Rock Café, Starbucks Café,
Coco-cola, and so on.
Glocalization has its own benefits on
firms such as attracting customers by offering local taste products, saving companies
ethical issues and consumer loyalty increases. Nations would get the benefits
of reducing culture erosion and employment opportunity for the workforce and
technology of these business can be learned through the local work force.
Many large companies adopt this
concept of glocalization as found in Toyota, making the brand LEXUS for US
market and Toyota cars in the Asia region and Japan. Another example is that when
export soya bean meals is exported, the target for Japan will be the highest
standard with expensive price and the target for India will be a lower standard
with cheap price.
The similarities and differences
between globalization and glocalization is mentioned in the table (2.1).
Table (2.1) Similarities and
differences between globalization and glocalization
between Globalization and Glocalization
between Globalization and Glocalization
Focus on the interest of the individual and the uniqueness of a group
To compliment the nations culture with the rest of the world.
focuses on a group or organization for them to grow economically or in other
focuses on the individual nation and see it as an important asset. The
individual’s uniqueness is the driving agent of glocalization.
In conclusion, globalization is a
serious issue that affects the nations especially to the developing countries
and least developing countries. It is an inevitable process which has benefits as
well as the negative effects. Increase in GDP growth, employment rate, products
and services options and other benefits can be attained by nations through globalization
but the benefits are not fairly distributed among nations. However, many
scholars and researchers stated that negative effects are more than the
benefits to the poor countries. It is important to note that globalization
cannot be stopped and reversed. Thus, it is essential for all nations to form
the globalization concept in a way for the economically, environmentally,
politically and socially beneficial. Sound government policies, partnership among
nations and deepening regional economic integration, can result into the
reducing or overcoming of the negative effects of the globalization. Thus, this paper can be concluded by saying
that globalization has both benefits and challenges and nations must consider
overcome the challenges and to make it beneficial.