Globalization
Brief Description of Globalization:
Globalization is the interaction between countries and people in which it happens through diversity, international trade, communication through technology, etc. This allows countries to team up as one economy.
Its Positive Impact:
Believe it or not, Globalization has had its share of positive impact on the world at large. Those positive impacts include...
Creating Competition Leads to Customer Satisfaction (Outsourcing):
Competition in the economy accumulates to better quality of the product or service, which satisfies the consumer. As a business would want to venture off to other countries, it will lead to that business being on top in the marketplace. With that being said, competitors need to survive in the marketplace and fight for their share by improving the quality of their products/services and possibility decrease prices which is what every customer likes. As more companies enter and compete in the marketplace to gain the share, customers will also have more options as people love variety. Overall, to put into simpler terms it can be put into a formula:
Competitors joining the global market = Better quality = Customer satisfaction
Example:
Since the 90’s when Internet Explorer and Netscape have been going against each other, there has been immense competition between browsers on which one is the best. Opera is a modern web-browser that has been released in 1995 and as of now, has not been in the top of the competition compared to Google Chrome and Internet Explorer. Like many company startups, there was uncertainty on whether or not the web browser software would be successful. With that being said, Telenor, the Norwegian telecommunications company that launched Opera has branched out the development of the software to people who will be able to develop it in more than 25 locations in order to enhance the software.
Promotes Multiculturalism:
Globalization has promoted cross-cultural interactions and perception. Once trading and exploration came about, the globalization society has brought cultures together as one and allowed people to be exposed to cultures and values. Before this exposure, there was no interaction and those countries stayed in their own world. This exposure is important as it can bring peace, unity and strengthen the force between countries. Also, self-representation is promoted as ones country is finally brought about and they can finally portray an identity that they want to show to the world rather than people's perception of it which can be negative at times.
Example:
Kpop was not much of a popular topic before 2015, but now has become a global phenomenon. Globalization has allowed cultures to be shared which led to the pop culture in South Korea to become prominent in the Western world with tv shows, skincare, makeup and most importantly and most effect, Kpop. The ties between countries and South Korea has allowed Kpop to become this never ending popular trend which led to this music genre to be as frequently streamed and listened to just like hip/hop, pop, country, R&B, etc. This culture has become adopted by the Western world and has brought recognition to South Korea.
Tax Havens/Removal of Taxes Created Due to Globalization:
When a business looks to expand overseas due to making better quality products that are at low costs, they look for countries where it has very limited tax laws/regulations so they do not pay a huge margin of tax to the country. This term is referred to as "tax haven" and has allowed an advantage for businesses to pay a low tax rate or sometimes nothing. Globalization has lead to tax havens and it will continue to grow due to the benefit of very low tax rate. With that being said, Globalization has a positive impact on taxation as countries would want businesses that are successful and developed to expand their territory in their country to improve the economy. With the expansion of globalization and its benefits towards the economy, businesses have taxes or tax havens taken away from them which brings businesses more income, higher salaries and money for other requirements.
Example:
Apple uses tax haven to an advantage for when they go offshore, especially towards Ireland. Ireland is rated #1 in globalization due to the low tax haven which makes it a country commonly used for globalization. Apple has a huge sum of $246 billion of offshore cash, which is larger than any other company in the market. Apple only owes the U.S $76.7 billion in taxes which is a huge amount compared to Ireland, where its known for its tax haven and only needs to pay the country $14.5 billion. As Apple globalized in Europe, their main focus was in Ireland as shown by the European Commission where they used the tax haven in the country as an advantage to pay a small rate in profits.
Its Negative Impact:
On the other hand, Globalization does encounter a few barriers that can negatively affect many factors such as...
Outsourcing Leads to Job Insecurity:
Globalization has caused job insecurity due to it outsourcing to developing countries with low cost labour rates. Globalization can create job opportunities, but because they are created in countries where the labour costs are cheap, this might cause exploitation. Transferring the business to where labour costs are cheap is due to staying competitive in the marketplace. Outsourcing to developing countries like India allows a competitive advantage for the business as there is low labour costs, but better quality products and cheaper prices which is what consumers want. But in the end, this causes damages to the laborer which will lead to job insecurity.
Example:
As seen by this graph, Bangladesh is one of the few Asian countries that has very low minimum wage rates. This is a huge factor when it comes to companies outsourcing/globalizing because Bangladesh is one of the most common countries known for production. With the minimum wage being at its lowest, companies take this as an opportunity to outsource their company and pay very low labour costs which leads to Bangladesh being one of the top countries with high exploitation rates.
Environmental Damages:
As businesses are globalizing, there is an increase in production in order for it to keep its place in the market share. However, the increased production leads to an increase of natural resources being used up. These natural resources are being used up before they have time to regenerate which will impact the environment negatively. Companies are seen opening up plants and factories in the developing countries as there are no regulations/laws on environmental protection. This means that the companies are taking advantage of the limited environmental protection to manufacture their goods.
Example:
According to the graph shown above, the coal consumption in 2016 comes mainly from China. This means that the mass plant fields and factories in China from companies outsourcing are consuming a large sum of an important natural resource causing there to not be much left. Also with the large coal consumption comes the pollution made from the factories making the air in China unbreathable. This piece of information is accurate as many citizens of China wear medical masks because of the polluted air.
Prices Fluctuating:
With many businesses globalizing to mark their territory in the market share, this can lead to an increase in competition. The increase of competition is due to the businesses finding the best price point for their goods and whichever company has the best price, will win with the consumers. As there is competition in the market share, prices now constantly fluctuate in order to win the buyers which can be detrimental to one business than the other. If a business from a developing country brings products that are the same as the country that is developed, than the country that is developed has to lower their prices to meet the competition. This could be bad on their end since they lose profit and their workers will not be paid fairly compared to the developing country where their productions costs are very low.
Example:
As seen from the graph above, Buick has had higher sale rates in China compared to the U.S from 2004-2014. As a result, General Motors has agreed to a contract that they will increase U.S labour costs and to sell cars made in China in the U.S. Due to Buick's overgrown popularity in China, they have decided to lower labour prices in China which can heavily affect the employees whereas they will increase it in the U.S. Moving the manufacturing to China was planned because of production costs being low in China and where the car is popular compared to in the U.S where making the car would mean to pay a high labour wage, which is what Buick wanted to avoid. Since it will be manufactured in China, the costs of the car will decrease which can be an advantage in the marketplace since decreasing the price would lead to higher sales in the U.S.