Globalization of Market
Globalization of market is one of the most fascinating developments of our time. Its impact on economic transactions, processes, institutions and players is dramatic and wide-ranging. It challenges established norms and behaviours, and requires different mindsets. It involves the growing interdependency among the economies of the world; the multinational nature of sourcing, manufacturing, trading, and investment activities; increasing frequency of cross-border transactions and financing; and heightened intensity of competition among a larger number of players.
During the past few years, the term “globalization” has acquired considerable attention worldwide. Some societal segments view it as an inevitable and irreversible process that is beneficial for all and is a key to future world economic development. On the other hand, many people regard it with hostility, even fear, believing that it increases inequality within and between the nations, threatens employment and living standards and halts social development.
‘Global market’ is a very comprehensive term for the emergence of a global society in which economic, political, environmental and cultural events happening in one part of the world quickly come to have significance for people in other parts of the world.
Globalization is the result of advances in communication, transportation and information technologies. It describes growing economic, political, technological and cultural linkages that connect individuals, communities, businesses and governments around the world. Globalization of market is a very welcome development in modern times, where globalization is playing a pivotal role in shaping world affairs.
A Historical View
Globalization is not a new phenomenon.
Since the start of civilization, people have trade links with their neighbours. As cultures advanced, they were able to travel farther afield to trade their goods for desirable products found elsewhere. The Silk Road, an ancient network of trade routes used between Europe, North Africa, East Africa, Central Asia, South Asia and the Far East, is an example of early globalization. For more than 1,500 years, Europeans traded glass and manufactured goods for Chinese silk and spices, contributing to a global economy in which both Europe and Asia became accustomed to goods from far away. Following the European exploration of the New World, globalization occurred on a grand scale; the widespread transfer of plants, animals, foods, cultures and ideas became known as the Columbian Exchange. The triangular trade network in which ships carried manufactured goods from Europe to Africa, enslaved Africans to the Americas, and raw materials back to Europe is another example of globalization. The resulting spread of slavery demonstrates that globalization can hurt people just as easily as it can connect them. The rate of globalization has increased in recent years; as a result of rapid advancements in communication and transportation. Advances in communication enable businesses to identify opportunities for investment. At the same time, innovations in information technology enable immediate communication and rapid transfer of financial assets across national borders. Improved fiscal policies within countries and international trade agreements between them also facilitate globalization. Political and economic stability facilitates globalization as well.
Globalization of market is at hand
Practically speaking, globalization of markets is at hand. With that, the multinational commercial world nears its end, and so does the multinational corporation. New product introduction in today’s technology-driven markets carries significant risk. New product failure rates can be as low as one out of every three products or as high as 90 percent of new grocery products which are withdrawn within a year of their introduction. New technology, improved communications, increased profit demands and shorter product life cycles have added to the inherent risk. Timely and responsive new product development has become even more critical in the highly competitive global environment. The need to respond quickly to these dynamic global market forces requires the firm to integrate rapidly the perspectives and needs of both product developers and potential consumers. The globalization of markets hints at moving away from an economic system in which national markets are distinct entries, isolated by trade barriers and barriers of distance, time and culture, and toward a system in which national markets are merging into one global market. Prototypical examples of this trend are consumer products such as Coca-Cola, Levi’s jeans, Sony Walkmans, and McDonald’s burgers. These are not just examples of this trend, but they are also instrumental in facilitating it.
Globalization of products
The globalization of products is a trend by individual firms to disperse parts of their production processes to different locations around the globe to take advantage of differences in cost and quality of factors of production. A good example will be Boeing Company. The company’s commercial jet airliner, the 777, contains 132,500 major parts that are produced around the world by 545 suppliers. Eight Japanese suppliers make parts for the fuselage, doors and wings; a supplier in Singapore makes the doors for the nose landing gear; three suppliers in Italy manufacture wing flaps; and so on. Part of Boeing’s rationale for outsourcing is that these suppliers are the best in the world at performing their particular activity. The result of having a global web of suppliers is a better final product, which enhances the chances of Boeing winning a greater share of total orders for aircraft than its global rival, Airbus. Boeing also outsources some production to foreign countries to increase the chance that it will win significant orders from airliners based in that country.
A case study of Coca-Cola
The concept of globalization has been very vital for the Coca-Cola Company as it has enabled the expansion of their business in various countries around the world. Currently, as a result of globalization, the company operates in over 200 countries around the globe serving millions of customers. A stakeholder is defined as a person, a group or an organization with a direct or indirect interest in a company and that can be affected by the company’s decisions or policies. The major stakeholders of Coca-Cola include customers, employees, suppliers, and the community – which are all impacted by globalization in both negative and positive ways. Customers are the most important stakeholders not only for the Coca-Cola Company but also in any modern corporation. It is essential that the company must emphasize the customers as they are the foundation upon which company operation revolves and without them, the firm stands a high chance of failing. The company must, therefore, ensure that customers’ expectation is met and their needs and wants are satisfied. Globalization has played a significant role among the customers of Coca-Cola by ensuring that the company’s products are always available at the right time and at the most convenient places. As a result of globalization the company has been able to open several branches around the world to ensure that their customers get access to their favourite company products irrespective of their physical location.
A summary of the globalization of market
In summary, lack of consensus is the rule regarding the notion of globalization, with existing approaches focusing on local or global marketing. However, there is a broad consensus on the determinants of marketing globalization. Research consistently identifies several explanatory factors for this globalization. Synthesizing, they can be grouped into four classes related to:
• The market: homogeneous consumer needs, global channels, transferability of marketing.
• Costs: economies of scale, learning, labour costs, new product development.
•Competition: interdependence between countries or between global competitors.
• Public authorities: trade policy, regulations, compatibility of technical standards.
Globalization of market provides businesses with a competitive advantage by allowing them to source raw materials where they are inexpensive. Globalization also gives organizations the opportunity to take advantage of lower labour costs in developing countries, while leveraging the technical expertise and experience of more developed economies. With globalization, different parts of a product may be made in different regions of the world. Globalization has long been used by the automotive industry, for instance, where different parts of a car may be manufactured in different countries. Businesses in several different countries may be involved in producing even seemingly simple products such as cotton T-shirts. Globalization affects services too. Many businesses located in the United States have outsourced their call centres or information technology services to companies in India. As part of the North American Free Trade Agreement (NAFTA), U.S. automobile companies relocated their operations to Mexico, where labour costs are lower. The result is more jobs in countries where jobs are needed, which can have a positive effect on the national economy and result in a higher standard of living. China is a prime example of a country that has benefited immensely from globalization. Another example is Vietnam, where globalization has contributed to an increase in the prices of rice, lifting many poor rice farmers out of poverty. As the standard of living increased, more children of poor families left work and attended school. Consumers benefit too. In general, globalization decreases the cost of manufacturing. This means that companies can offer goods at a lower price to consumers. The average cost of goods is a key aspect that contributes to increases in the standard of living. Consumers also have access to a wider variety of goods. In some cases, this may contribute to improved health by enabling a more varied and healthier diet; in others, it is blamed for increases in unhealthy food consumption and diabetes.
As a rose is accompanied by thorns, hence, is globalization. Not everything about globalization is beneficial. Any change has winners and losers, and the people living in communities that had been dependent on jobs outsourced elsewhere often suffer. This, effectively, means that workers in the developed world must compete with lower-cost markets for jobs; unions and workers may be unable to defend against the threat of corporations that offer the alternative between lower pay and losing jobs to a supplier in a less expensive labour market. The situation is more complex in the developing world, where economies are undergoing rapid change. Indeed, the working conditions of people at some points in the supply chain are deplorable. The garment industry in Bangladesh, for instance, employs an estimated four million people, but the average worker earns less in a month than a worker in the United States earns in a day. In 2013, a textile factory building collapsed, killing more than 1,100 workers. Critics also suggest that employment opportunities for children in poor countries may increase the negative impacts of child labour and lure children of poor families away from school. In general, critics blame the pressures of globalization for encouraging an environment that exploits workers in countries that do not offer sufficient protections. Studies also suggest that globalization may contribute to income disparity and inequality between the more educated and less educated members of a society. This means that unskilled workers may be affected by declining wages, which are under constant pressure from globalization. Such downs are witnessed in this phenomenon.
Globalization of market is the new normal of the world. It has revolutionized the market and has shown the world a new path to tread on. This phenomenon shall bring multiple benefits to mankind. Though it has multiple positives and negatives, its pros supersede its cons. In a nutshell, we can say that globalization of market is by no means a negative thing but a positive development. It ought to be appreciated by all means and angles.
The writer is an inspector in Excise Taxation and Narcotics, and holds degree in LLB. He can be reached at Qasimalibhatti00@gmail.com.