Globalization can be defined as the development of the goods/services and technology across the borders for growth and expansion of business. It provides the opportunity to companies to establish their business across the boundaries and share resources, culture or even acquire resources and talents from the host countries such as- acquisition of the updated technology from the neighbor or host countries for smooth functioning as well as hiring talent to operate respective technology. Globalization comprises several factors such as political, technological, growth strategies and economic on the basis of which it is driven. It introduces several positive aspects in the world economy and its growth which covers the development of IT, communication and transport, rise of new electronic payment systems, development of complex financial products.
Globalization refers to the spread of technology, information and products on international level. It serves the objective to raise the living standards of poor and less developed nations by providing the modernization, job opportunities and access of improved goods and services. It is a phenomenon which covers the social, cultural, political and legal aspects. The report represents the significant features of globalization which has their immense impact on the world’s economy and overall growth. It also includes the details of functioning of globalization, through which the companies get the benefits of increased revenues and high growth rate. Further it describes the characteristics and functions of globalization with the relevant examples.
It refers to the combination of markets in the international economy which leads the increased interconnections of national economy. It is particularly significant in the financial markets which cover the money and credit market, capital market, commodity market, insurance market, gold and product market, motor vehicles market and consumer market. Now it has also emerged in the field of sport and entertainment. The pace of globalization has enhanced due to several reasons which enables the companies to work at global platform (Eriksen, 2018). The development in the IT and communication channels made the global communication more easy and simple at very low cost. Through the increasing use of social media platforms, the organizations can attract the international buyers for their products and services. The rise of electronic payment modes and systems also facilitate the global trade. Apple, Google, Microsoft and McDonalds are well-known examples to the emergence of globalisation.
Characteristics of Globalization
In the current circumstances of financial crisis and global recession, the global integration has supreme importance. The below given characteristics of globalisation defines there is a paramount requirements of global integration in the current global economic circumstances.
Globalisation facilitates the businessmen and industrialists to explore their business activities, trade or commerce in abroad. It allows the countries to exchange capital goods, technologies, services and professionals (Rajput, and Hasan, 2019). The liberalization also reduces the restrictions of government from the private business and trade. The liberalization of gas and electricity market by the European Union is an important example of liberalization.
Globalisation provides the opportunities of free trade to companies between different states or countries. It mitigates the overburden of government and authorities regulations and restrictions over the trade (Alexander, 2018).
Globalization of Economic activities:
It establishes coordination between the economy of world and domestic economy. Through the globalisation, the contribution of domestic economy of every country has also increases in the overall economy of world (Cvijanović, and Mihailović, 2016).
Removal of Time and space constraints:
It enhanced the global transport network through which the time and space between the places is also reduced. Also the transmission of information is not limited by the space or time as it can be done by 24*7.
Due to the globalisation, the local business communities could spread their connectivity beyond the national boundaries. It supports to establish the connectivity between the societies of one to another country for transmission of technology, ideas, cultures and knowledge (Tu, Suweis, and D’Odorico, 2019).
The flow of goods, resources and capital across the national boundaries enables the people to work or live in the other countries. Globalisation increases the mobility by breaking the national barriers.
A Composite Process:
It is a composite process with the help of which combination of nation-states could be established by common commercial, economic, political and cultural arrangements (Kollias, and Paleologou, 2017). This process leads to the creation of a new economic environment with no national boundaries.
It is a multi-dimensional process as it involves the opening of new national markets and exchanges of capital, labour and technologies between the nations. Through this process, more political, economic and cultural integration occurred between the countries (He, Du, Tong, Pan, Mao, and Chen, 2017). The exchange of cultural values between the nations also helps to promote the liberalism and capitalism.
Functions in Globalization
In the globalization, countries perform different kind of functions. Global integration between two different nations can be done by performing any of these functions. These functions include sales, production and finance function through which the companies and industrialists enter into the global relationship with another country.
Over the last few years, global businesses have introduced their back office and branch office operations as development programs. It has been done by the standardization of branch of back office in the different geography by the companies. This process has brought paramount economic advantages to the global corporations. In this process the corporations of different nations comes under the geography of another countries for exploring the sale of their products and sales. Many of the corporation extents benefits of globalization by harmonizing their sales units or processes in the geography of another country. They offer improved access of modern product and services to the consumers of global market which eventually affects the profits of company. McDonalds and Starbucks adopted the same function of globalisation in which they have explored their product chain in several countries for gaining overall performance development (Novikov, and Novikova, 2018). They have introduced their stores in different countries with the purpose to give the taste of their product to consumers at global level. Today both the Starbucks as well as McDonalds earn their major proportion of turnover from their global sales. The sales function in globalisation can be performed by analyzing the routes to market or by distributor management and sales.
In the production and innovation function of globalisation, the companies offer the technology for production or manufacturing of their products with their global partners. This function is mainly done by the corporations to reduce their production or manufacturing cost. The profitability of this function is ascertained by analyzing the link between innovation input and innovation output. For instance, Nike is an American footwear brand which outsourced its production in several other countries such as Brazil, Bulgaria, Argentina and Bosnia. This is an example of production function in globalisation where the corporation allows the domestic companies of another country to use their technology for the manufacturing of product (Welfens, 2016). In this arrangement, the company provides the right to production to other companies with their standard technology and keeps the right of brand with itself. For standardize the production unit in another countries, an effective R&D is required about the available skilled labor and manpower in the targeted country.
Financial globalisation or integration is a concept which refers to increasing global connections established through cross-border financial flows. Over the years, the volume of international capital flows has increased and even great volume has risen of flows among the industrial countries. Financial globalisation promotes the growth in developing countries by providing the adequate flow of capital for the business and trade. These financial flows can be made by adopting any of the investing option such as foreign direct investment, foreign portfolio investment, official flows and commercial loans. The official flows are generally provided by the developed nations to developing nations for availing the growing economic opportunities. FDI is an option of global investment where the international investor obtains an interest in the business in another country (Fernandes, and Sridhar, 2017). It could be done by establishing a factory or buying an enterprise in a foreign country. Also by acquiring a property, plant or equipment in a foreign enterprise, the corporation can make global investment.
The summary of entire report concludes that globalisation has a paramount role in the growth of world’s economy. The characteristics of globalisation process witnessed the importance of it in several aspects such as rise of mobility, connectivity, removal of space and time. All these factors of globalisation facilitate the economic growth of multinational companies and industries. The globalisation functions of sales, production and finance provides an equivalent opportunity to the developing countries in order to improve their economic condition.
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