1. IntroductionToday business world is very used towith the word “Globalization” in every aspects.
Globalization is roughlydefined as the process of exchanging experiences, activities, goods andservices, and ideas which makes more accessible to connect to the people aroundthe world. According to Thomas L. Friedman, one of America’s leading worldaffairs interpreters, globalization can be defined as “Globalizationinvolves the inexorable integration of markets, nation-states andtechnologies…in a way that is enabling individuals, corporations andnation-states to reach around the world farther, faster, deeper, and cheaperthan ever before, and in a way that is also producing a powerful backlash fromthose brutalized or left behind by this new system” (Friedman, 1999)1. Globalization is expressed by manyscholars and many business organization in different ways.
OECD definedglobalization in its publication as “an increasing internationalization ofmarkets 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 amongcountries and it is required to adjust the political and social activities thatfollow it. Because of globalization, the activities around the world becomes integrated.
2. Literature ReviewThomas L. Friedman describes the”flattening” of the world economy through globalized trade,outsourcing, supply-chaining and political liberalization (Friedman, 1999)1. Globalization encouragesthe free trade among the countries.
Globalization process is “theglobal search for selective optimization of each stage of the value addedchain, from research and development to distribution” (Hiru, 1994)3.Globalization process can be split into two aspects. First aspect is theelements such as trade, investment, technology, cross border production systems,and flows of information and the other one is the elements such as polices andinstitutions. Globalization has greater effect on the national economy, multinationalcorporations and the Foreign Direct Investment, and production and consumptionaspects.The world economies have beenincreasingly integrated through the internet and mobile phones.
Outsourcing ofwork to different countries, especially having cheap labor is another problemface by individuals belonging to the developed nations (Wade, 2003).Several organizations not only business organizations but also institutions haveactively participated in the process of globalization. Globalization leadspeople around the world to see what is happening in another place and there isno gap between countries for the availability of products and services. 2.1 Major Elements and contemporary causes of GlobalizationGlobalization has been led by theelements such as trade agreement, migration patterns and, strategicimperatives, information transfer and spread of technology. 1) Trade Agreement Some trade agreements reduce thebarriers and some trade agreements eliminates the trade barriers on tradingcommodities among the countries. So, countries exchange the products orservices which they cannot produce because of the resources availability and itleads to globalization.
2) Migration PatternsInflow and outflow of labor force inthe labor market among countries due to the skills required and costs ofproducing also leads to globalization.3) Strategic ImperativesFirms are seeking for the strategic imperatives suchas leveraging its competencies, acquiring resources at low cost, expanding intonew markets and competing with industry rivals which leads to globalization. 4) Information transfer and spread oftechnologyCommunication technology becomesefficient so information is available in timely manner and new technology ofproduction or doing businesses can be transferred around the world within ashort period of time. 2.2 Types of GlobalizationGlobalization is a process and it isdivided into three distinct type such as economic globalization, socialglobalization and political globalization. 1) Economic GlobalizationEconomic globalization is theactivities such as interconnection of economies through exchange of commoditiesand resources.
There is no economy of a country which is running in isolate.National economies influence each other. International trading is a major formof economic globalization. Due to the economic globalization, standard ofliving is getting improved in countries. 2) Social GlobalizationSome scholars divided the cultureglobalization into different section but here it is explained under the sectionof social globalization.
Social globalization means the sharing of ideas,cultures and information among countries. It makes to increase the awareness ofthe other’s culture and social standard. In this era, the technologyimprovement is rapidly growing and because of the technology countries areconnected through technology such as television shows, films and social media.
K-Wavewhich means Korean Pop Songs, Korean Drama Series and Korean Food becomepopular not only in Asia but also in other countries from the America or Europeis the distinct example of the social globalization. 3) Political GlobalizationPolitical globalization is thepolitical cooperation among countries with the objectives to prevent conflictsand to be safer than without of that. After World War 1, some of theorganizations are established for the political cooperation objectives.
Then,global organizations such as United Nations (UN), are also established topromote the political cooperation among countries. 2.3 Critical Issues on GlobalizationAs it is known that globalization canbring many benefits such improve in the standard of living and generatingwealth. But it has many critical issues and some scholars has pointed out theseissues. Ireland and Hitt (1999) claimthat indications of the incredible breadth and depth of the effects of theglobal economy lead them to predict that nation states will lose theirsovereignty in the twenty-first century.
( Michael A Hitt & R Duane Ireland, 1999)4.Globalization is the ongoing processwhich cannot be slow and which cannot be reversed due to the technologyadvancement. People around the world are now relying on technology more andmore to communicate globally instead of physical present and getting to placesthat are far away. Places that used to seem worlds away are now within reach bythe click of a button. The world becomes village and virtually narrower due tothe technology.
Therefore, “The challenge in this era of globalization -for countries and individuals – is to find a healthy balance between preservinga sense of identity, home and community and doing what it takes to survive withinthe globalization system” (Friedman, 1999)1.Globalization is at its crossroads.One of the significant issues in globalization is that the impact of thefinancial crisis in U.S subprime market affected economies of other countriesaround the world in 2007. Jenkins mentioned that “The most immediate challengefacing the global economy is the marked slowdown in the U.S. economy. This slowdowninvolves several interconnected elements, and, given our close trade links tothe United States, has very direct consequences for Canada (Jenkins, 2008)5.
Globalization has many benefits asmentioned above but the issue is the benefits such as increased in trade,investment, and technological innovation are not fairly distributed amongcountries. As free trade and global competition expand, the distribution gapsbecomes wider and wider. The gap between rich and poor is also becoming widerdue the unfair distribution. Issue of brain drain cannot be omitted as educatedand talented individuals move from a nation to the foreign countries for abetter opportunity. It makes the nation lose the local talents for the requiredjobs and the nation needs to hire the workforce with lower skill level or thehigher skill from the other country.There is also an environmental issuethat if the nation has lower cost on the resources required for production,plants and factory from other nations would operate in the cheaper country. Ifthe cheaper country has no exact and strict law on the environment reservationand environment pollution control, it affects the host country’s environment. Dependingon the superior countries by the small nations are also an issue as if thatsuperior nation encounters the economic crisis, the whole economy of the worldis down.
Culture erosion of nations is also happened during the age ofglobalization which leads to the disappearance of the uniqueness and the valuebecomes mixed among countries. According to economist Dani Rodrik,three core sources of issues are explained that “globalization makes the demandfor services of individuals in the unskilled and semiskilled labor forces moreelastic – their services can be easily substituted across national boundaries,globalization engenders conflicts within and between nations over domesticnorms and the social institutions that embody them and globalization createsopportunities for trade between countries of different levels of developmentwith different workplace practices, legal rules, and social safety nets (Rodrik, 1997).In fact, it must be aware thatglobalization is the process which cannot be turned away from ongoing. There isphysical boarders between nations but because of the globalization, thenational border is only a boarder but it cannot prevent the flow ofcommodities, goods and services, capital, resources and information due to thefree trade agreements and cheaper communication technology. Globalization cannot be completelyinevitable. But nowadays, even some super countries like United States wouldtry to manage the effect of globalization on the country.
Donald Trump, aPresident of United States started from 2017, is popular for his slogans duringthe election period. His slogan “America First” shows that everything ofAmerica would be given a first priority than that of the other nations inAmerica. LDCs (Least Developing Countries)have encountered more negative effects of globalization than the developedcountries. Thus, firms in nations find ways to reduce the negative effect ofglobalization.
Governments of nations must manage the challenges of globalizationwith setting a sound microeconomic and macroeconomic policies to react theglobal level playing field. The word “globalization” was morepopular than the “glocalization” in the previous days. Nowadays, the words'”Think global, act local” becomes popular.
Difference between globalizationand glocalization is explained in the next section. 2.4 Difference between Globalization and GlocalizationIn the globalization aspects,products are standardized and they are marketed all over the world with astandardized marketing mix.
Globalization makes things fit in the norm of thecountry to increase their power, influence and profits. As in Nokia mobilephone and Apple product, they made as a global standard. Glocalization which is combined bythe words “globalization” and “localization”. In the glocalization concept, a product orservice is developed and distributed globally, but is also adjusted to suitwith the user or consumer in a local market. Global localization which is alsomentioned as “glocalization” is defined as “mixing standardization andcustomization in a way that minimizes costs while maximizing satisfaction,essence of segmentation, think globally, act locally” (Hirmukhe, 2014).
Key players in the glocalization concept are multinational companies andmultinational 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 onfirms such as attracting customers by offering local taste products, saving companiesethical issues and consumer loyalty increases. Nations would get the benefitsof reducing culture erosion and employment opportunity for the workforce andtechnology of these business can be learned through the local work force. Many large companies adopt thisconcept of glocalization as found in Toyota, making the brand LEXUS for USmarket and Toyota cars in the Asia region and Japan. Another example is that whenexport soya bean meals is exported, the target for Japan will be the higheststandard with expensive price and the target for India will be a lower standardwith cheap price. The similarities and differencesbetween globalization and glocalization is mentioned in the table (2.1).
Table (2.1) Similarities anddifferences between globalization and glocalization Similarities between Globalization and Glocalization Differences between Globalization and Glocalization · Focus on the interest of the individual and the uniqueness of a group or individual. · To compliment the nations culture with the rest of the world.
Globalization focuses on a group or organization for them to grow economically or in other aspects. Glocalization focuses on the individual nation and see it as an important asset. The individual’s uniqueness is the driving agent of glocalization. 3.
ConclusionIn conclusion, globalization is aserious issue that affects the nations especially to the developing countriesand least developing countries. It is an inevitable process which has benefits aswell as the negative effects. Increase in GDP growth, employment rate, productsand services options and other benefits can be attained by nations through globalizationbut the benefits are not fairly distributed among nations.
However, manyscholars and researchers stated that negative effects are more than thebenefits to the poor countries. It is important to note that globalizationcannot be stopped and reversed. Thus, it is essential for all nations to formthe globalization concept in a way for the economically, environmentally,politically and socially beneficial. Sound government policies, partnership amongnations and deepening regional economic integration, can result into thereducing or overcoming of the negative effects of the globalization.
Thus, this paper can be concluded by sayingthat globalization has both benefits and challenges and nations must considerovercome the challenges and to make it beneficial.