Impact of Globalization Term Paper

Pages: 8 (2363 words)  ·  Bibliography Sources: ≈ 3  ·  File: .docx  ·  Topic: Economics

Globalization is a phenomenon that has enjoyed increasing publicity with the rise in technological development and particularly electronic communication. With the development of electronic and digital products, not only communication, but export itself has become much simpler than the case was only decades ago. Developed countries, having the equipment and products available for expansion, made use of the globalization phenomenon to increase their income. In this way, developed countries rapidly increased their per capita income and economic growth. From this perspective, globalization is seen as the answer to many an economic problem, both for individual businesses and for countries as a whole.

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Others, however, take the view that globalization is a negative phenomenon that influences the economy of undeveloped countries detrimentally. And indeed, there does appear to be an increasing gap between the rich and the poor not only in terms of developed and undeveloped countries, but also between rich and poor businesses and individuals within countries themselves. And indeed, this seems to be the case, especially during the 1970s and 1980s, when undeveloped countries such as those in Latin America and Africa tended to be inward oriented in their financial development policies. These tended to stagnate economies, increase poverty, as well as inflation. By therefore isolating themselves from the globalizing effect, these countries create economic hardship for themselves. Ironically then, the very effect of globalization causes these economies to suffer, as the country's products, services, and indeed currency has little or no value outside of the country itself.

TOPIC: Term Paper on Impact of Globalization Assignment

Another view is that globalization does not only destroy economies, but also social development within countries. By integrating foreign businesses with local culture, the opponents of globalization hold that the effect is that cultures also integrate. This in turn creates a mixed culture, which is no longer either the one or the other, but something new altogether. In this way, the native culture is destroyed. However, proponents of the phenomenon hold that globalization rather has a preserving function in terms of culture. Indeed, before expanding, companies have to take into account the native culture of the target country to ensure success in advertising and providing appealing products and services.

The effect of globalization on countries whose policies were oriented internally also demonstrates the fact that it is possible even for these countries to benefit from the phenomenon. Indeed, countries who do expand globally and who allow imports from other countries, create opportunities for their citizens and a reduction in poverty, and ultimately create a stronger economy for themselves.

For emerging markets, there are however also risks involved. The inherent problem with poorer countries is that the initial economy is not strong. In the sense of globalization, they are therefore dependent upon favorable market trends in order to secure returns upon their investments. There is not a great capital basis for the mitigation of financial risks in terms of globalization. Volatile capital movements could then prove devastating to such countries.

In order to optimally use globalization for economic growth, developing countries should be assisted to develop their local structures. These include not only financial factors, but also institutions and structures that integrate with economic stability. Factors such as political stability, social well-being, and environmental sustainability are all affected by poverty. Poverty tends to degrade all aspects of life for a country's citizens. By upgrading these aspects, a country can be uplifted to join the globalization effort for its continued growth.

Globalization can be a tremendously positive force for both developed and developing countries. It is however necessary to consider all the factors integrating to create the economic growth resulting from the phenomenon.

2. Expansion to Foreign Markets

Currently, the United States enjoys a status as the greatest economic force in the world. It is however a mistake to believe that its nationality automatically makes it easy for a company to expand to foreign markets. There are a variety of factors that need to be taken into account when considering expansion. This is particularly true if the target country is of a non-Western culture. It should be recognized that various risks are associated with expanding to foreign markets. These relate to cultural, economic and political factors. Such risks can be mitigated by thoroughly researching the various aspects associated with expansion. The first important factor to consider is culture.

Different cultures have different tastes. A particular product or service that appeals to the American market, for example, would not similarly appeal to the Chinese market. The target culture should therefore be thoroughly researched. Such research will then reveal how existing products and services can be modified to appeal to the target culture. Marketing is another very important factor in foreign expansion, because it relies on communication. In addition to taste, communication is another element that differs from culture to culture. The way in which a particular culture communicates should then be taken into account when marketing new products and services to the target country.

To further mitigate the risks associated with cultural differences and communication difficulties, partnerships can be considered when expanding to foreign countries. Existing companies can for example be recruited for the purpose. It is also a good idea to recruit employees from the target country. This will create a favorable impression of the company, as well as provide the citizens with opportunities to earn a living. Partnerships such as these will help the communication effort, and also help with marketing.

Economic factors that need to be taken into account include the exchange rate, local pricing for the products and services offered, and how these compare with U.S. pricing, as well as competition from existing companies. There should be a favorable balance between local pricing and the exchange rate in order to ensure that a profit is possible for the expanding company. The cost of expansion should also be measured against the projected income from products and services. In this, partnering with existing companies can be helpful in reducing initial costs, as well as in communicating with the customer base. The company should also ensure that it can provide reasonable quality for a competitive price to the citizens of the target country.

Political factors include a variety of elements. One of these is rules and regulations for entering the specific market. Governments sometimes restrict entry into their countries. Some of these governments believe that foreign companies take opportunities away from local business people, and therefore impose restrictions. These restrictions should be investigated to ensure that expansion will remain profitable regardless. Another political factor is possible instability within a country. Where political instability exists, it is likely difficult to market new products and services. Citizens in war-torn countries for example are not likely to have extra funds available for products that are not perceived as necessary. The political paradigm within a country should also be investigated. Citizens under an autocratic government may for example have as much buying power as citizens in a democracy.

Some of the above-mentioned elements are very subtle, and should therefore be examined very carefully before expanding into a foreign market. Some companies prefer to employ experts such as trading companies, who specialize in foreign relations and expansion. These companies act on behalf of the expanding organization and provide information that will help with expansion decision making.

3. World Trade Organization

The World Trade Organization (WTO) in its present form was established during 1995. The concepts promoted by the WTO is however well over 50 years old, with the General Agreement on Tariffs and Trade (GATT), having been established after the Second World War. The WTO is simply an evolved version of the GATT. Originally, GATT was established as an organized system to facilitate globalization and trade among countries. With the basis created by GATT, merchandise exports grew by an average of 6% annually.

After the post-WWII establishment of GATT, the system evolved by means of trade negotiations, or rounds. Issues covered during these rounds generally include tariff reductions, anti-dumping, and non-tariff measures. The 1986-94 round, known as the Uruguay Round, resulted in the transformation of GATT to the WTO.

The function of the WTO is mainly to facilitate the flow of trade to create a smooth, free, fair, and predictable platform from which countries can conduct their negotiations with each other. Specifically, some of the functions the WTO performs to this end include administering trade agreements, settling trade disputes, and reviewing national trade policies.

The WTO consists of nearly 150 members, with 30 others negotiating membership. Decisions occur by consensus of the entire membership. The highest decision-making body is the Ministerial Conference, meeting once every two years or more if necessary. The General Council is on the level below the Ministerial Conference, and mainly consists of ambassadors and heads of delegation in Geneva. This Council meets several times in the course of a year, sometimes in its capacity as Trade Policy Review Body and Dispute Settlement Body.

Below the level of General Council are the Goods Council, Services Council and Intellectual Property Council (TRIPS). Individual agreements and issues… [END OF PREVIEW] . . . READ MORE

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