Globalization is the interconnection that has been experienced in the world through the improvement of communication, trade, and transportation. It also entails the incorporation of national and international economies through foreign investments, capital flows, and migration. This has increased connectivity and interdependence of world markets and businesses. The following paragraphs explain the concept of globalization and its impacts on organizations and communities.
The Concept of Globalization
According to Manfred (2002), the traditional international trade theories that support globalization are: Ricardian model, Heckscher Ohlin Model, and Specific Factor Model. Ricardian model is created in a way that the only difference among different countries is their production technologies. All other features are seen as the same and hence it states that the reason for the trade is the difference in production. The Heckscher Ohlin Model expands on the number of features of production.
It presumes that the workforce and capital, which refers to machines and buildings, are used in production of finished goods. Lastly, the Specific Factor Model is considered as an alternative to Ricardian model. It presumes that one factor of production is precise to a particular industry. This specific factor is considered to be stuck between industries and cannot be moved due to changes in the market.
The Drivers of Globalization
There drivers of globalization include market, government, cost, customer, and infrastructure and the Internet. First, market drivers enable the customers to connect with international trade by use of global marketing channels.
Market drivers include customer demand, industry trends, and neighboring markets. Second, government drivers include the trade policies, technical standards, and government regulations. Third, cost drivers include the site of strategic resources, the differing costs in many countries, and the possibility of economies of scale.
Flat experience curves slow up globalization and big companies like aircraft industry show more economies of scale than those which expenses come from rent and labor. Fourth, Customer drivers contains common customer needs which determines the customer tastes and culture, The number of global customers also determines whether a company should participate in the global trade and transferable marketing where the company may develop a world brand.
Lastly, infrastructure and the Internet are important drivers. The two have improved and increased opportunities and competitions. With infrastructure, roads for transportation of goods and commercial jet aircrafts are improved. The improvement of Internet with big microprocessors and telecommunications has enabled communication at a low cost. This communication connectivity includes the Local Area Networks being connected to the Wide Area Networks, which connects the whole world.
Effects of Globalization
The effects of globalization in an organization are that organizations are exposed to the global demand, supply, and global market competition. This enables the organization to produce more goods according to international demand without forgetting the international market competition.
It also makes the organization to be able to survive with no struggle because global opportunities and strategies strengthen the organization hence they are able to deal with threats. Communities benefit by getting outsourced jobs, but some have negative effects of job security and pay. Globalization changes cultures because it promotes cultural exchanges from different people across the globe (Reinsdorf & Slaughter, 2009).
Conclusion
Many barriers of international trade have been removed and companies should pursue global markets to gain a competitive advantage. Some firms that are trading in international markets have benefited from globalization, especially the countries that have had comparative advantage over other industries in different countries.
Warwick (2006) concurs that to be successful in the global market, managers should understand the environments of global industries and the changing of international markets so as to know the types of goods and brands to produce the methods of production and the marketing strategies to undertake in the global market.
References
Manfred, S. (2002). Globalism: the New Market Ideology. Lanham, Maryland: Rowman and Littlefield Publishers.
Reinsdorf, M. B. & Slaughter, M. J. (2009). International Trade in Services and Intangibles in the Era of Globalization. Chicago: The University of Chicago Press.
Warwick, M. E. (2006). Geographies of Globalization. New York: Routledge.