Cross-cultural exchanges of ideas, food, music, media, and language are just as valuable. Individuals who travel around the world for business or leisure and try different foods, listen to different music, read different books, gain exposure to different media outlets, and learn to express themselves, even poorly, in another language gain a broader perspective on the world.
Their new knowledge helps develop stronger empathy and appreciation for people of other cultures. Arguably one of the top advantages of globalization has been the rapid spread of technology worldwide. Google, Dell, and Microsoft, for example, all have offices on many continents. Developing countries often appeal to investors because of the huge potential for growth. The resulting advancements lead to results like the spread of motorized farm machinery in Southeast Asia, for instance, where there had previously only been manual labor.
NGOs also compile and spread knowledge. They shared these materials worldwide to help hospitals deal with the illness. For developing countries, especially, being able to skip the long technological development processes of industrialized countries brings rapid progress.
The rapid adoption of mobile technology has spurred entrepreneurism in countries like Kenya. Where it is dangerous or difficult to travel, small business owners simply use their mobile phones to reach clients and contractors.
They can also use their phones to track the prices of crops and find out which markets will bring in more money. Rapid technological advances have benefits other than economic ones. Pregnant women without access to traditional medical care can use their phones to keep in touch with midwives. The midwives, in turn, use their phones to connect to a system that doctors monitor at all hours. The infant mortality rate in Kenya, especially in its slums, is one of the top 65 in the world , but globalization has provided tools to help address some of the difficulty with pre- and postnatal care.
The European Centre for International Political Economy reports that globalization has helped reduce high inflation rates in western economies, so each dollar of consumer spending goes further.
This development also has the effect of increasing real wages by lowering the cost of living. Additionally, competition on the global market means the prices of many items have declined, so purchases that were once unaffordable luxuries, such as laptops, cars, and washing machines, are now affordable for many people. Foreigners come to seem completely unfamiliar under such conditions. But if people have networked with others from elsewhere over the world, spoken with them about common problems, and partaken of their food and culture, they are better able to perceive their common humanity and treat these others as equals.
Here are just a few. American companies have been known to use cheap foreign sweatshop labor to make cheap American goods. Wealthy, industrialized countries have shipped their trash to China and Malaysia. Exploiting cheap markets and lax regulations in developing nations has caused pollution and suffering in those countries, even as profits soar abroad. At mines in the Democratic Republic of Congo , where metals needed for electronics abound — gold and tungsten, tin and tantalum — armed militia groups, often using child soldiers, have taken over, keeping power with violence and trading minerals for guns.
Though the world gold price quadrupled over 10 years and electronics have become ever cheaper, globalization has not alleviated the poverty and violence in the country. The outsourcing of labor also leaves a dearth of jobs in industrialized countries, where labor is more expensive. When the United States outsources manufacturing to cheaper competitors in foreign markets, domestic manufacturing laborers lose their jobs.
Higher unemployment leads to discontent, strain on the social safety net, and lower tax revenue from income. Laborers whose skills are less relevant in a global marketplace will have a hard time adjusting to a world dominated by globalization.
If a company treats the world as one or two distinctive product markets, it can serve the world more economically than if it treats it as three, four, or five product markets. One argument that opposes globalization says that flexible factory automation will enable plants of massive size to change products and product features quickly, without stopping the manufacturing process.
These factories of the future could thus produce broad lines of customized products without sacrificing the scale economies that come from long production runs of standardized items. Economies of scale will not dominate, but rather economies of scope—the ability of either large or small plants to produce great varieties of relatively customized products at remarkably low costs. If that happens, the customers will have no need to abandon special preferences. I will not deny the power of these possibilities.
But possibilities do not make probabilities. There is no conceivable way in which flexible factory automation can achieve the scale economies of a modernized plant dedicated to mass production of standardized lines. The new digitized equipment and process technologies are available to all. Manufacturers with minimal customization and narrow product-line breadth will have costs far below those with more customization and wider lines.
Different cultural preferences, national tastes and standards, and business institutions are vestiges of the past. Some inheritances die gradually; others prosper and expand into mainstream global preferences. So-called ethnic markets are a good example. Chinese food, pita bread, country and western music, pizza, and jazz are everywhere. They are market segments that exist in world-wide proportions. They believe preferences are fixed, not because they are but because of rigid habits of thinking about what actually is.
Most executives in multinational corporations are thoughtlessly accommodating. They falsely presume that marketing means giving customers what they say they want rather than trying to understand exactly what they would like.
So the corporations persist with high-cost, customized multinational products and practices instead of pressing hard and pressing properly for global standardization. I do not advocate the systematic disregard of local or national differences. There are, for example, enormous differences among Middle Eastern countries. Some are socialist, some monarchies, some republics.
Some take their legal heritage from the Napoleonic Code, some from the Ottoman Empire, and some from British common law; except for Israel, all are influenced by Islam. Doing business means personalizing the business relationship in an obsessively intimate fashion. A company must almost certainly have a local partner; a local lawyer is required as, say, in New York , and irrevocable letters of credit are essential.
Islam is compatible with science and modern times. Barriers to globalization are not confined to the Middle East. The free transfer of technology and data across the boundaries of the European Common Market countries are hampered by legal and financial impediments.
But the past is a good guide to the future. With persistence and appropriate means, barriers against superior technologies and economics have always fallen.
There is no recorded exception where reasonable effort has been made to overcome them. It is very much a matter of time and effort.
Many companies have tried to standardize world practice by exporting domestic products and processes without accommodation or change—and have failed miserably. Their deficiencies have been seized on as evidence of bovine stupidity in the face of abject impossibility. Advocates of global standardization see them as examples of failures in execution. In fact, poor execution is often an important cause.
More important, however, is failure of nerve—failure of imagination. Consider the case for the introduction of fully automatic home laundry equipment in Western Europe at a time when few homes had even semiautomatic machines. Hoover, Ltd. Due to insufficient demand in the home market and low exports to the European continent, the large washing machine plant in England operated far below capacity. The company needed to sell more of its semiautomatic or automatic machines.
The results showed feature preferences clearly enough among several countries see Exhibit 2. The incremental unit variable costs in pounds sterling of customizing to meet just a few of the national preferences were:.
The lowest retail prices in pounds sterling of leading locally produced brands in the various countries were approximately:. Product customization in each country would have put Hoover in a poor competitive position on the basis of price, mostly due to the higher manufacturing costs incurred by short production runs for separate features.
Because Common Market tariff reduction programs were then incomplete, Hoover also paid tariff duties in each continental country. In the Hoover case, an imaginative analysis of automatic washing machine sales in each country would have revealed that. Italian automatics, small in capacity and size, low-powered, without built-in heaters, with porcelain enamel tubs, were priced aggressively low and were gaining large market shares in all countries, including West Germany.
The best-selling automatics in West Germany were heavily advertised three times more than the next most promoted brand , were ideally suited to national tastes, and were also by far the highest-priced machines available in that country. Italy, with the lowest penetration of washing machines of any kind manual, semiautomatic, or automatic , was rapidly going directly to automatics, skipping the pattern of first buying hand-wringer, manually assisted machines and then semiautomatics.
Detergent manufacturers were just beginning to promote the technique of cold-water and tepid-water laundering then used in the United States. The growing success of small, low-powered, low-speed, low-capacity, low-priced Italian machines, even against the preferred but highly priced and highly promoted brand in West Germany, was significant.
It contained a powerful message that was lost on managers confidently wedded to a distorted version of the marketing concept according to which you give customers what they say they want. In this case, it was obvious that, under prevailing conditions, people preferred a low-priced automatic over any kind of manual or semiautomatic machine and certainly over higher-priced automatics, even though the low-priced automatics failed to fulfill all their expressed preferences.
The supposedly meticulous and demanding German consumers violated all expectations by buying the simple, low-priced Italian machines. It was equally clear that people were profoundly influenced by promotions of automatic washers; in West Germany, the most heavily promoted ideal machine also had the largest market share despite its high price. Two things clearly influenced customers to buy: low price regardless of feature preferences, and heavy promotion regardless of price. Both factors helped customers get what they most wanted—the superior benefits bestowed by fully automatic machines.
The promotion should also have targeted the husband to give him, preferably in the presence of his wife, a sense of obligation to provide an automatic washer for her even before he bought an automobile for himself. An aggressively low price, combined with heavy promotion of this kind, would have overcome previously expressed preferences for particular features.
The Hoover case illustrates how the perverse practice of the marketing concept and the absence of any kind of marketing imagination let multinational attitudes survive when customers actually want the benefits of global standardization. The whole project got off on the wrong foot. It asked people what features they wanted in a washing machine rather than what they wanted out of life. Selling a line of products individually tailored to each nation is thoughtless. Managers who took pride in practicing the marketing concept to the fullest did not, in fact, practice it at all.
Hoover asked the wrong questions, then applied neither thought nor imagination to the answers. Such companies are like the ethnocentricists in the Middle Ages who saw with everyday clarity the sun revolving around the earth and offered it as Truth. With no additional data but a more searching mind, Copernicus, like the hedgehog, interpreted a more compelling and accurate reality. The key question is who reaps the benefits and who carries the burden of the system adopted by a given country.
This module may be more important than you think. The topic is international trade and includes aspects of globalization and finance, but the theory explains every transaction we conduct.
Why do people work for pay instead of growing their own food, building their own house and making their own clothes? Most people are capable of painting their own homes, yet professional painters continue to make a good living. How is international trade different from domestic trade?
And yet we often treat foreign and domestic trade as fundamentally different. A grocery chain from a nearby state has recently opened some stores in your neighborhood. How would you feel if the local government prohibited you from shopping at those new stores? In this module, you will learn that just as buying from the local grocery store is better for most people than growing your own food, so international trade can add to your convenience and quality of life.
International trade and finance are often confused as being synonymous with globalization. Globalisation has also led to the growth in the supporting services such as banks, transport companies etc.
One of the major advantages of globalisation is perhaps its ability to promote international co-operation. Policies are being created and nurtured which support the development of trade and in the long run benefit all countries, such as the creation of the World Trade Organisation WTO to ensure that trade flows smoothly. Since the consumer today is as much aware of their requirements as the means of getting it, it is the obligation of the businesses to fulfil those consumer requirements.
The competition thus is pretty tough, and the liberalisation of policies and opening up of markets has helped gain access to a plethora of international opportunities. Businesses are driven by the profit motive.
Businesses have responsibilities towards their shareholders as well as other stakeholders to obtain a proper return on investment and also earn a profit. There are a few important aspects to this —. Resources would include both raw materials as well as finished goods.
The acquisition of resources that will benefit the company and also help it to do better than its competitor is an objective for any business. Advanced technology with better components can help a business beat their competition. The products that are available in India, China or the United States, are also now easily available in Britain as well. This is because markets have opened up and are now completely dependent on the continuous flow of goods from one end of the world to the other.
This is good news from the point of view of business. The production of goods and services is dependent on demand, and the larger the market the greater the demand. The sales and profit of any product undergoes the cycle of demand and supply.
If a business is limited to just one country, then the periodic shift in demand may affect its profitability, and it could be vulnerable during a slump. To negate this, it is essential that the risk be spread over as wide an area as possible.
Thus international markets can help a business to stay afloat as while one market may be depressed another could be booming at any one time. There are various ways through which the world of international business operates. It is quite important to note that all these ways have something in common, and that is the urge for global outreach.
Merchandise means tangible goods that are brought in from a foreign country or that are sent over to a foreign country for sale. Services are intangible or non-merchandise products. They include transportation and tourism. For example, a British citizen travelling to India using Air India and staying in an Indian hotel represents service export income for India and service import expenses for Britain.
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