Investopedia hosts articles from other investing and financial information publishers across the industry. While we do not have editorial control over their content, we do vet their articles to make sure they are suitable for our visitors. Pologeorgis Updated March 6, — 2: The phenomenon of globalization began in a primitive form when humans first settled into different areas of the world; however, it has shown a rather steady and rapid progress in recent times and has become an international dynamic which, due to technological advancements, has increased in speed and scale, so that countries in all five continents have been affected and engaged.
Globalization is defined as a process which, based on international strategies, aims to expand business operations on a worldwide level and was precipitated by the facilitation of global communications due to technological advancements, and socioeconomic, political and environmental developments.
The goal of globalization is to provide organizations a superior competitive position with lower operating costs, to gain greater numbers of products, services and consumers. This approach to competition is gained via diversification of resources, the creation and development of new investment opportunities by opening up additional markets, and accessing new raw materials and resources.
Diversification of resources is a business strategy that increases the variety of business products and services within various organizations. Diversification strengthens institutions by lowering organizational risk factors, spreading interests in different areas, taking advantage of market opportunities and acquiring companies both horizontal and vertical in nature.
Using these definitions, some industrialized countries in were: The GDP is the market value of all finished goods and services produced within a country's borders in a year and serves as a measure of a country's overall economic output.
Industrialization is a process which, driven by technological innovation, effectuates social change and economic development by transforming a country into a modernized industrial, or developed, nation.
The Human Development Index comprises three components. Specifically, a country's a population's life expectancy, b knowledge and education measured by the adult literacy and c income. The degree to which an organization is globalized and diversified has bearing on the strategies that it uses to pursue greater development and investment opportunities.
The Economic Impact on Developed Nations Globalization compels businesses to adapt to different strategies based on new ideological trends that try to balance rights and interests of both the individual and the community as a whole. This change enables businesses to compete worldwide and also signifies a dramatic change for business leaders, labor and management by legitimately accepting the participation of workers and government in developing and implementing company policies and strategies.
Risk reduction via diversification Developed country and globalization be accomplished through company involvement with international financial institutions and partnering with both local and multinational businesses.
Globalization brings reorganization at the international, national and sub-national levels. Specifically, it brings the reorganization of production, international trade and the integration of financial markets, thus affecting capitalist economic and social relations via multilateralism and microeconomic phenomena, such as business competitiveness, at the global level.
The transformation of the production systems affects the class structure, the labor process, the application of technology and the structure and organization of capital. Globalization is now seen as marginalizing the less educated and low-skilled workers.
Business expansion will no longer automatically imply increased employment.
Additionally, it can cause high remuneration of capital due to its higher mobility compared to labor. The phenomenon seems to be driven by three major forces: Globalization of product and financial markets refers to an increased economic integration in specialization and economies of scale, which will result in greater trade in financial services through both capital flows and cross-border entry activity.
The technology factor, specifically telecommunication and information availability, have facilitated remote delivery and provided new access and distribution channels while revamping industrial structures for financial services by allowing entry of non-bank entities such as telecoms and utilities.
Deregulation pertains to the liberalization of capital account and financial services in products, markets and geographic locations.
It integrated banks by offering a broad array of services, allowed entry of new providers and increased multinational presence in many markets and more cross-border activities. In a global economy, power is the ability of a company to command both tangible and intangible assets that create customer loyalty, regardless of location.
Independent of size or geographic location, a company can meet global standards and tap into global networks, thrive and act as a world class thinker, maker and trader, by using its greatest assets: Beneficial Effects Some economists have a positive outlook regarding the net effects of globalization on economic growth.
These effects have been analyzed over the years by several studies attempting to measure the impact of globalization on various nations' economies using variables such as trade, capital flows and their openness, GDP per capita, foreign direct investment FDI and more. These studies examined the effects of several components of globalization on growth using time series cross sectional data on trade, FDI and portfolio investment.
Although they provide an analysis of individual components of globalization on economic growth, some of the results are inconclusive or even contradictory. However, overall, the findings of those studies seem to be supportive of the economists' positive position instead of the one held by the public and non-economist view.
Trade among nations via the use of comparative advantage promotes growth, which is attributed to a strong correlation between the openness to trade flows and the affect on economic growth and economic performance. Additionally there is a strong positive relation between capital flows and their impact on economic growth.
Foreign Direct Investment's impact on economic growth has had a positive growth effect in wealthy countries and an increase in trade and FDI resulted in higher growth rates. Empirical research examining the effects of several components of globalization on growth using time series and cross sectional data on trade, FDI and portfolio investment found that a country tends to have a lower degree of globalization if it generates higher revenues from trade taxes.
Further evidence indicates that there is a positive growth-effect in countries which are sufficiently rich as are most of the developed nations.
The World Bank reports that integration with global capital markets can lead to disastrous effects without sound domestic financial systems in place. Furthermore globalized countries have lower increases in government outlays, as well as taxes, and lower levels of corruption in their governments.
One of the potential benefits of globalization is to provide opportunities for reducing macroeconomic volatility on output and consumption via diversification of risk. Harmful Effects Non-economists and the wide public expect the costs associated with globalization to outweigh the benefits, especially in the short-run.
Less wealthy countries from those among the industrialized nations may not have the same highly-accentuated beneficial effect from globalization as more wealthy countries measured by GDP per capita etc. Free trade, although increases opportunities for international trade, it also increases the risk of failure for smaller companies that cannot compete globally.Figure 2 shows, in the top half, the world's population plotted against the log of PPP$ income, taking account of both between-country and within-country income distribution; and the breakdown by region.
The bottom half shows the world's income plotted against income level, hence the share of income accruing to people at different income levels and in different regions.
1 GLOBALIZATION AND THE LEAST DEVELOPED COUNTRIES1 1. Introduction This paper analyses how the Least Developed Countries (LDCs)2 are affected by the current process of globalization, and considers what policies LDCs and the international community can implement to .
The Divide Between Developed and Developing Countries One of the reasons that the process of development garners so much attention is the stark divide between rich (developed) and poor (developing) countries.
I write about globalization, business, technology and immigration. FULL BIO. I am the executive director of the National Foundation for American Policy, a non-partisan public. Feb 25, · The good news is that around the world, we are living longer. The bad news is that around the world, we are living longer.
Yes, you read that . Globalization can create a lower class that will suffer in a developed country if education is not accessible easily and at a low cost for the entire population.