Year: 2020

International corporations have several categories depending on the business structure, investment and product/ service offerings. Transnational companies (TNC) and multinational companies (MNC) are two of a these categories. Both MNC and TNC are enterprises that manage production or delivers services in more than one country. They are characterized as business entities that have their management headquarters in one country, known as the home country, and operate in several other countries, known as host countries. Industries like manufacturing, oil mining, agriculture, consulting, accounting, construction, legal, advertising, entertainment, banking, telecommunications and lodging are often run through TNC’s and MNC’s. The said corporations maintain various bases all over the world. Many of them are owned by a mixture of domestic and foreign stock holders. Most TNC’s and MNC’s are massive with budgets that outweigh smaller nations’ GDPs. Thus, TNC and MNC alike are highly influential to globalization, economic and environmental lobbying in most countries. Because of their influence, countries and regional political districts at times tender incentives to MNC and TNC in form of tax breaks, pledges of governmental assistance or improved infrastructure, political favors and lenient environmental and labor standards enforcement in order to be at an advantage from their competitors. Also due to their size, they can have a significant impact on government policy, primarily through the threat of market withdrawal. They are powerful enough to initiate lobbying that is directed at a variety of business concerns such as tariff structures, aiming to restrict competition of foreign industries. Some of the top TNC’s and MNC’s are General Electric, Toyota Motor, Total, Royal Dutch Shell, ExxonMobil and Vodafone Group.

A transnational is just another name for a multi-national. The fashion term transnational still does not remove the requirement for a country to report to a parent company somewhere; there will always be an ultimate parent. In a structure, any amount of subsidiaries will roll up through the group structure to a head office.

A transnational is just another name for a multi-national.

There can be many regional head offices in a structure. Companies are residents through the structure to the ultimate ownership of the company and where the parent files its tax returns.

There are many differences between TNC and MNC. Though they are both abbreviations, they both stand for two different things. TNC stands for transnational companies. MNC stands for multinational companies. Both of them operate in different countries. TNC’s does business in a variety of different companies.

Their companies are richer than many less developed countries. Some of these companies include BP, Amoco, and Nestle. Multinational companies operate in two or more countries that are different than their own. Examples of those companies include Acer and Adidas. TNCs offer foreign operations. MNCs will invest in other countries, but they do not offer or coordinate products.

In order to understand these two, it is important to know what they both mean. When you say TNC, this means transnational company. When you say MNC, this means multinational companies. A lot of people assume that TNC and MNC are the same, probably because they have a lot of similarities.

There are some differences, as well. For example, TNC is known to be some sort of enterprise or a large corporation that will have the ability to control its company even if the company is placed in a different country. MNC will also have some stores in other countries, but they will have no say if in case there are some differences with the items that are being offered.

TNC and MNC are often compared to each other because most people assume that they are one and the same. It should be remembered that MNC stands for the multinational company while TNC stands for transnational companies. Take note that both of these enterprises are known to offer their products and services outside their usual country.

For the multinational company, this comes with a home company plus the different available subsidiaries. A transnational company will not have subsidiaries but will probably have different companies that can be spread out in different locations. Multinational companies also follow a centralized management system, while a transnational company will not follow a centralized system.

TNC stands for Trans-National Corporation while MNC stands for Multi-National Corporation both have many similarities. Both corporations usually have their headquarters in one country, and they do business and operate in many other countries. The headquarter nation is known as the home country, and other affiliates are known as host countries.

The significant difference between these two corporations is that MNC usually has an investment in other countries but do not coordinate product offering. TNC has operations in foreign investments. It gives each foreign market its marketing power.

Organizational transformation is the process of transforming and changing the existing corporate culture to achieve a competitive advantage or address a significant challenge. It can be an exciting time for any organization. It is visible action taken by organizational leaders to move from the present to the future in order to achieve a specific outcome or benefit. It typically involves many, if not all, of the people in the organization and has the potential to refocus and reenergize the entire workforce.

The challenge for many organizations though is knowing their is a need for organizational transformation, but not being certain of what the corporate culture needs to be transformed to. For example, you may have formal mission statement and company values defined, but when it comes to having organizational leaders articulate the organizational culture in a clear, succinct way, they struggle.

Yet this is the first and most important step to achieving organizational transformation: understanding your existing culture. Here, we’ve broken down the difference between mission, values, and culture to help you get started. Once you can distinguish between these terms and clearly define your organization’s current culture, you will be able to move forward with confidence.

Mission

First, the mission or vision – two words that can be used interchangeably without problem. A mission is fairly straightforward: it is your organization’s reason for existing and the charter under which leadership operates. In other words, what purpose does it serve?

Values

Values are the principles by which the organization abides. For example, if the values include “empowerment” and “integrity”, then it’s likely that employees demonstrate respect for each other in their daily interactions, assume responsibility for mistakes, and hold themselves accountable for results. If values include “excellent customer service,” then a focus on the customer (internal and/or external) influences everything an employee does in his or her workday. While values are important for formally defining culture and influencing, remember that organizational culture is more complex than a few broad, sweeping words.

Culture

You can think of culture as your organization’s personality, as defined by the sum total of all behaviors of the individuals within that organization. The key to thinking about organizational culture is looking at how things are done. Those working in a culture may or may not be able to articulate exactly what the culture is, but they will convey it through statements like “Everyone here works long hours” or “We just seem to rely a lot on one another.”

Keep in mind that an organization’s written values may be aspirational and not an honest representation of its current culture. Closing the gap between an organization’s professed values and its actual culture is often the point of cultural transformation.

Defining Your Culture

If you want a complete, honest picture of your culture as it is now, it’s important to talk to employees at all levels of the organization. You’re looking for their honest opinions about what it’s like to work there, how they feel about the culture, the leadership, their own teams and divisions, and so forth. You may want to bring in outside consultants for this process, as they can offer not only expertise, but an unbiased perspective as well.

Here are a few different approaches you can take to gather feedback from employees about the existing company culture:

• Engagement Surveys: measure the mental and emotional connection employees feel with their jobs and their organization.
• Focus groups: this approach allows organizations to capture feedback on how individuals feel about their own department in relation to the culture, allowing the organization to pinpoint problems or areas of improvement.
• Meetings with high-potential employees: these employees typically represent key influencers in the organization and their feedback tends to be reasoned, well-balanced, and represents the best interests of the company. Their feedback is crucial to defining the current culture.
• Meetings with executives: an organization’s culture is a result of these executive’s leadership skills which makes their feedback vital in the definition process.

As you might imagine, having actual conversations with employees yields the best insights to your organizational culture. This process may unearth areas of dysfunction or other issues, but the more concrete information and examples you have, the better equipped you are to undergo a culture transformation that is successful.

Businesses face challenges every day what would make a business owner, executive, or manager think organizational transformation is necessary?

There are many symptoms. One symptom could be performance-related. If you see lags in quarterly or yearly reports, you may have a more significant problem on your hands. Another indicator could be culture-related. Is there an undeniably high turnover rate? Or maybe there are leadership-related indicators like a lack of employee training or poor communication. There are many tell-tale signs; these are just a few. Knowing what to look for and keeping a keen eye on those areas will provide insight into whether or not transformative change is required.

With the smaller, everyday problems that are relatively easy to attack, taking a page from Amazon, and implementing their “two-way door” approach could work. That technique provides freedom to try something out and, if it doesn’t work, you simply step back through the door, reset, and choose another way to tackle the problem. It’s a straightforward tactical implementation that will need evaluation to decide if the course pursued is working or if a reset is necessary.

The “one-way door” approach is far more complicated. This methodology requires a lot of planning, data, thoughtfulness, full attention from the whole team, and all-hands-on-deck collaboration. And, once you’ve stepped through the door, there’s no way back. There’s no reset button. This approach requires contingencies, technical work, and thorough data analysis. A good plan is vital, and everyone involved has to be onboard for it to work. This method requires restructuring, regular and transparent communication, high-risk investment, and laser-focused implementation.

It is not an easy task to give a comprehensive and complete definition of international marketing information system (IMIS), which would be easily understood at the same time.

Defining difficulties arise from the complexity of the aforementioned system, interwoven elements that make up the IMIS, their entanglement and complementarity with other activities in the enterprise, as well as understanding the role and importance of the IMIS. In order to understand properly the meaning of the IMIS it is recommended to start with the etymological analysis of the IMIS concept. The compound ʺinternational marketing information systemʺ will be briefly analyzed word by word ʺsystemʺ, “informationalʺ “marketingʺ while the adjective “internationalʺ is in brief content analyzed through the entire text.

It is important to understand correctly the meaning of the word ʺsystemʺ because it is the basis for not only a IMIS, but also any other form of organization. According to Efraim Turban, Ephraim McLean, and James Wetherbe (1999, pg. 40, 41) a system is a collection of elements, such as: people, resources, concepts and procedures, intended to perform an identifiable function or serve a goal. A system is separate from its environment by a boundary. The system is inside the boundary, whereas the environment lies outside. In short, the system is determined by elements, its tasks and purpose, as well as the limits that can be very abstract. Especially interesting are the systems that collect and process various kind of information. Information system (IS) of enterprise is defined as a set of human and technical means that, with a certain organization and methodology, perform the collection, storage, processing and disseminating to the use of data and information (Lazo Roljić, 1997, pg. 23). IS can be represented graphically by the diagram as follows:

International Marketing Information System refers to the system designed for regular collection of required data related to international markets and analysis. According to Samuel V. Smith, “marketing information system is an interacting, continuing future-oriented structure of people, equipment and procedures. It is designed to generate and process an information flow to aid decision-making in a company’s marketing programme.” The marketing information system is, thus, much broader than marketing research. Marketing research, in fact forms a part of marketing information system.

The functioning of the international marketing information system

For successful operation of a IMIS is necessary to exist three sub‐systems shown in the second figure. In the following text will be briefly analyzed each of the subsystems and connections between them.

Information components: Source of the required data is the basis of the work of any of information system. All data sources, from the point of origin can be divided into external, internal and other sources.

External data are: macroeconomic indicators, data on infrastructure, as well as data on market size. Data about macro‐economic situation in individual countries, regions or globally, could be only the secondary. The most complete such information can be found in the database of: UN, World Bank, OECD Economic Indicators, Eurostat and the like, as well as on the websites of other institutions that monitor such indicators. Data on market infrastructure can also be geographically structured.

A complete picture about same market could be obtained only by visiting that market, observing it and talking with customers and business partners, looking at shopping habits and the type of retail outlets, monitoring advertisements on electronic and print media, looking at weather conditions, geographical terrain, quality of transport infrastructure and the like.

Issues in the Data Aggregation Process: IMIS could not function ideally just on the basis of data collected. There are also some technical problems, for example: quality of data collected, data entry, constantly update the content of the data collected and the like. The quality of data collected depends on the possibility to make comparisons with data collected in other countries. This problem is usually related to the existence of different data collection procedures, as well as different accounting practices between countries and regions of the world. Data are presented in units of measure that can be quantitative, qualitative and monetary indicators (e.g. goodwill). Quantitative measures generally are not a problem.

However, monetary measures are subject to strong and rapid changes due to: changes in exchange rates, price fluctuation on stock exchanges or other markets, changes in fiscal policy of the observed countries, or due to changes in the ways of their calculation. Entering data procedures define the degree of similarity and type of data to be collected to be useful for the system. There have to be defined by whom and how to enter data within the enterprise, in order to make collection procedures more successful. Also, it have to be defined how to change data presentation to make them comparable. This is particularly important for data coming from external sources. Data issued by the UN or World Bank generally do not have mentioned problems because those data usually cover the entire world, and their parameters are either global or highly standardized for certain regions or countries. The problem is with a regional or national data. These problems are reflected in different ways of: collecting, sampling, systematization, generalization of data and the like, to the language of presentation. It is necessary to ensure that the system continuously collects new data and to processes them. The processed data are synthesized, in other words those processed data are the basis for drawing conclusions. New information should be compared with previous ones and, in the case of difference, investigate the difference and inform management. The system should be constantly maintained and serviced.

Application (tasks) of IMIS:

IMIS is used in performing the following four tasks: scanning the global environment to monitor trends and pinpoint those with specific implications for the geographical areas and product markets in which the company is involved, assessing how to reallocate resources and efforts across different countries, products markets and target segments so as to achieve desired rates of growth and profitability, monitoring performance in different countries and product markets through the world, and transferring ideas and experience from different

countries and areas of the world throughout the organization.

Feedback: Even if it is not shown in the previous figure, the importance of feedback should be particularly emphasized. Through the previous analysis of IMIS it is mentioned the importance of re‐entry of data into the system. The information flow in IMIS is continuous. This is a fundamental feature of the marketing information system that ensures the quality of marketing decisions. Based on the information collected and create through the IMIS, the company affects its environment. The environment reaction creates a new situation. New data from changed environment represents a new entrance into the system. In that way a company gets a feeling about the success of implemented decisions, and the effectiveness of an IMIS, which in turn should be constantly creating new, more favorable business conditions for the company.

The relationship between international marketing research and IMIS has to be understood as a relationship of complementarity rather than equality or competition.

Although they have the same goals and similar tasks, ways of achieving these goals and tasks are based on different grounds. This reflects theirs complementarity. International marketing research project usually occurs when a company finds the problem that often needs to be urgently solved. That leads to an emphasis on data collection and analysis rather than on the development of the formal and regular collection of information. Therefore, the main difference between the research project and the system is in time and speed of execution. The research project appears in times of crisis, so from time to time and as rarely as possible. On the other hand, the data collection process is ongoing, or the keyword in the definition of marketing information system is ʺregularʺ, since the emphasis in marketing information system is the establishment of systems that produces information needed for decision making on a recurring basis. However, the project must be completed as soon as possible due to the fact that the duration of the crisis only exacerbates the situation of the entity which drives the research project. The system of data collection, since it is a continuous process, has enough time to conduct quality research and make the necessary analysis.

Another important difference relates to the scope of research. Considering that the study (project) of research is conducted in a relatively short period of time, it is very often that so called preliminary (investigative or orientation) research is neglected. Preliminary research is a way to get an information that is not strictly formalized, as is the case with detailed research based on the plan drawn up in advance, and therefore this type of study is called investigative. The ultimate goal of investigative research is obtaining the necessary prior knowledge of the specific problem in a rational manner. It is a preceding survey and it is based only on secondary data. In preliminary studies are commonly used four methods shown in the following figures:

The figure shows a structured review of methods of preliminary research. The first and basic method of search is to use available literature: books, magazines, newspapers, databases accessible through the Internet, libraries, statistical publications, regular information services for marketing research and the like. Also, the use of othersʹ experiences much simplifies and cheapens investigation. Therefore, it is necessary to collect other experiences: field vendors, consultants, engineers and specialists, consumers and customers, competitors and so on. The third method is based on learning through case studies. It is a realistic analysis of some past or current problems and opportunities facing a company. The last method of preliminary research is a pilot study. These are informal methods of communication with customers through which could be know the motives and opinions of consumers. Preliminary research is especially important to a large international marketing research project. Many of the facts, opinions and attitudes, which are already well known in the domestic market, we have to find out when we come to another market. Therefore, the phase of preliminary research is almost obligatory in these cases and requires the collection and analysis of numerous and diverse data.

The third difference between the market research in general, and therefore the international marketing research and IMIS is contained in the following assertion: The task of marketing research is to provide information, while the marketing information system focuses on the routing of information flow in the direction to those who make marketing decisions. This distinction is important because the information is completely worthless unless it is relevant and is effectively communicat. Previous thesis is based on the Kotler`s model of marketing information system, where marketing research is treated as a subsystem of marketing information system. In this system, marketing research is conducted on behalf of marketing information system. All obtained information is analysed and compared with information gathered from internal sources of the company, as well as scanning the environment. Thus, the final information has high value and reliability because it has been checked and confirmed many times. From the prior discussion could be seen how the international marketing research methodology would be quite poor and the less reliable if it is not combined with IMIS. Their combination is a superior way of gathering reliable information. This is a sure path to successful decision‐making and management in international marketing.

Compatibility of international marketing information system with international marketing research

Compatibility analysis

According to Jovićević (2001, pg. 129)29 compatibility could be determined as a situation in which two or more objects (procedures, methods, goals, programs, ideas, etc.) can coexist within one, as a part of the same system, so that the existence of one does not preclude the other. Some studies have shown that managers do not know what information to request for researchers and analysts. They know only what is available. Experience from local and international business practice show that many companies do not have established market research systems or the systems are reduced only to routine predictions based on empirical cognitions or to analyzing of historical data (Hasan Hanić and Čivić Beriz, 2009, pg. 43). This problem could be overcome by efficient functioning of IMIS. It provides, among other things, the survey of the international environment and general information in form of intelligence.

On the basis of such general information, managers can identify important threats and opportunities in the environment, and how it fits into the strategy and other plans of the company. Thus they are able to know exactly what information they need, and such, in this case, detailed information should be required of analysts and researchers of international marketing. Such detailed information could be provided by comprehensive international marketing research. Above mentioned is most easily represented graphically as follows:

All of these on the relationship between IMIS and international marketing research could be circled by the following Heinzelbercker`s (1977) statement: In the last two or three decades market research is developed in three complementary directions which represent paths from traditional marketing research till marketing information system. They are characterized by:

• Orientation to the method,
• Orientation to the decision‐making,
• Orientation to the system.

Globalization is defined as the integration of countries into world economy or the global market. Such integration involves removal of all trade barriers between countries. It is the process of internationalization of products, markets, technologies, capital, human resources, information and cultures. Globalization refers to the free flow of goods and services, capital, technology and labour among different countries.

The main features of Globalization

1. Globalization involves expansion of business operations throughout the world.
2. It leads to integration of individual countries of the world into one global market thereby erasing differences between domestic markets and foreign markets.
3. It creates interdependency between nations.
4. Buying and selling of goods and services takes place from to/any country in the world.
5. Manufacturing and marketing facilities are set up anywhere in the world n the basis of their feasibility and viability rather than on national considerations.
6. Products are planned and developed for the world market.
7. Factors of production like raw materials, labour, finance, technology and managerial skills are sourced from the entire globe.
8. Corporate strategies, organizational structures, managerial practices have a global orientation. The entire globe is viewed as a single market.
9. Globalization does not take place overnight. It proceeds gradually through several stages of internationalization.

Essential Conditions for Globalization

In order to smoothen the process of globalization, the following are necessary:

1. Removal of quotas and tariffs.
2. Liberalization of Government rules and regulations.
3. Freedom to business and industry.
4. Removal of bureaucratic formalities and procedures.
5. Adequate infrastructure.
6. Competition on the basis of quality, price, delivery, and customer service.
7. Autonomy to public sector undertakings.
8. Incentives for research and development.
9. Administrative and Government support to industry.
10. Development of money markets and capital markets.

Benefits of Globalism for Business

Those in favor of globalization theorize that a wider array of products, services, technologies, medicines, and knowledge will become available, and that these developments will have the potential to reach significantly larger customer bases. This means larger volumes of sales and exchange, larger growth rates in GDP, and more empowerment of individuals and political systems through the acquisition of additional resources and capital. These benefits of globalization are viewed as utilitarian, providing the best possible benefits for the largest number of people.

For global companies, often referred to as multinational corporations (MNCs), common benefits of expanding into developing markets include unsaturated demand for new products, lower labor costs, less expensive natural resources, and other inputs to products. Technological developments have made doing business internationally much more convenient than in the past. MNCs seek to benefit from globalism by selling goods in multiple countries, as well as sourcing production in areas that can produce goods more profitably. In other words, organizations choose to operate internationally either because they can achieve higher levels of revenue or because they can achieve a lower cost structure within their operations.

MNCs look for opportunities to realize economies of scale by mass-producing goods in markets that have substantially cheaper costs for labor or other inputs. Or they may look for economies of scope, through horizontal expansion into new geographic markets. If successful, both of these strategies lead to business growth, with stronger margins and/or larger revenues. There is particularly strong opportunity for business growth in markets where strong economic growth is also projected. In these areas, incomes are rising. In many cases, local populations can now afford goods and services that were previously out-of-reach, including many good produced in industrialized countries. Global companies stand to capture stronger growth and profitability if they can make headway into these markets.

At the same time, international operations contain innate risk in developing new opportunities in foreign countries.

Challenges of Globalism for Business

Along with arguments supporting the benefits of a more globally connected economy, critics question the ethics and long-term feasibility of profits captured through global expansion. Some argue that the expansion of global trade creates unfair exchanges between larger and smaller economies. They argue that MNCs and industrialized economies capture significantly more value because they have more financial leverage and can dictate advantageous terms of exchange, which end up victimizing developing nations. Critics also raise concerns about damage to the environment, decreased food safety, unethical labor practices in sweatshops, increased consumerism, and the weakening of traditional cultural values.

As MNCs do business in new global markets, they may encounter several significant challenges:

1. Ethical Business Practices

Arguably the most substantial of the challenges faced by MNCs, ethical business practices in areas such as labor, product safety, environmental stewardship, corruption, and regulatory compliance have historically played a dramatic role in the success or failure of global players. For example, Nike’s brand image was hugely damaged by reports that it utilized sweatshops and low-wage workers in developing countries. In some nations, particularly those without a strong rule of law, bribing public officials (e.g., paying them off with gifts or money) is relatively common by those seeking favorable business terms. Although national and international laws exist to crack down on bribery and corruption, some businesspeople and organizations are pressured to go along with locally accepted practices. Maintaining the highest ethical standards while operating in any nation is an important consideration for all MNCs.

2. Organizational Structure

Another significant hurdle is the ability to efficiently and effectively incorporate new regions within the value chain and corporate structure. International expansion requires enormous capital investments in many cases, along with the development of a specific strategic business unit (SBU) in order to manage these accounts and operations. Finding a way to capture value despite this fixed organizational investment is an important initiative for global corporations.

3. Public Relations

Public image and branding are critical components of most businesses. Building this public relations potential in a new geographic region is an enormous challenge, both in effectively localizing the message and in the capital expenditures necessary to create momentum.

4. Leadership

It can be difficult for businesses to find effective organizational leadership with the appropriate knowledge and skills to approach a given geographic market successfully. For every geography worldwide, unique sets of strategies and approaches apply to language, culture, business networks, management style, and so forth. Attracting talented managers with high intercultural competence is a critical step in developing an effective global strategy.

5. Legal and Regulatory Structure

Every nation has unique laws and regulations governing business. MNCs need access to legal expertise to help them understand in-country laws and comply with applicable regulations. It is important for businesses to understand the legal and regulatory climate for their industry and type of organization before entering a new market, so that this information can be factored into the business case and strategic decisions about where and how to expand globally, as well as strategic and operational planning to ensure profitability.

A one-land country road riddled with potholes.

For organizations operating in developing and less-developed countries, additional challenges can arise, particularly in the following areas:

• Infrastructure: Infrastructure includes the basic physical and organizational structures needed for a society to operate and for an economy to function. It can be generally defined as the set of interconnected structural elements that provide a framework supporting an entire structure of development, such as roads, bridges, water supply, sewers, electrical grids, telecommunications, and so forth. It also includes organizational structures such as a stable government, property rights, judicial system, banking and financial systems, and basic social services such as schools and hospitals. A country’s infrastructure will help determine the ease of doing business within that nation. For example, a country with poor road conditions and intense traffic may not be the best place to conduct business that requires goods to be transported from city to city by land. Poor infrastructure makes it difficult for businesses to operate effectively because they have to shoulder additional cost and risk to make up for what the country’s society does not provide.
• Technology: The level of technological development of a nation affects the attractiveness of doing business there, as well as the type of operations that are possible. Companies may encounter a variety of technological challenges doing business in foreign countries, such as training workers on unfamiliar equipment; poor transportation systems that increase production and distribution costs; poor communication facilities and infrastructure; challenges with technology literacy; lack of reliable access to broad-band Internet and related technologies that facilitate business planning, implementation, and control.

Advantages of Globalization

1. Wider Markets

Globalization offers larger markets to domestic producers. Domestic firms can export their surplus output. They can understand the nature of foreign markets through direct and indirect marketing channels. Domestic firms can realize higher prices from foreign markets. Global operations help to improve public image which is helpful in attracting better talent.

2. Rapid Industrialization

Globalization helps in the free flow of capital and technology between countries. Global firms can acquire finance at lower cost of capital. Free flows of capital and technology from advanced countries help the developing countries to boost up their industrialization. Industrialization of developing countries leads to balanced development of all the countries.

3. Greater Specialization

Globalization enables the domestic firms to specialize in areas where they enjoy competitive or comparative advantage. By focusing on the functions or products of their core competence domestic firms can compete successfully in the international markets. Specialization also helps to save resources and promote exports of the country.

4. Competitive Gains

Globalization increase competition for domestic firms through imports and multinational corporations. Domestic firms learn about new products, new technologies and new management systems. They are under pressure to increase efficiency, introduce innovations and reduce costs. The domestic entrepreneurs who fail to learn from their foreign rivals suffer in the long run.

5. Higher Production

Globalization leads to spread up o manufacturing facilities in different countries. Firms with worldwide contacts can outsource funds, technology, distribution and other functions from anywhere in the world. They can negotiate subcontracting to remain focused on areas of their core competence. International outsourcing and subcontracting help to improve operational efficiency and o reduce costs.

6. Price Stabilization

Globalization can reduce price differences between countries. Free trade and international competition help to equalize price levels in international markets. Countries with a high degree of globalization can attract greater foreign investment which supplements domestic funds, brings in foreign and improves balance of payments.

7. Increase in Employment and Income

Globalization creates job opportunities in developing countries and the incomes of people increases due to increased industrialization.

8. Higher Standards of Living

Lower prices, better quality and higher incomes help to enhance consumption and living standards of people particularly in developing countries. Moreover, increased economic development enables the governments of these countries to provide better welfare facilities like education, health, sanitation, etc. There is all round increase in welfare and prosperity of public.

9. International Economic Cooperation

Globalization improves economic cooperation between nations in the form of trade agreements, international treaties, standardization of commercial procedures, avoidance of double taxation, intellectual property protection and so on. International cooperation also helps countries to harmonize their macroeconomic policies for their mutual benefit.

10. World Peace

Globalization promotes cultural exchange and mutual understanding among different nations. International cooperation and brotherhood contribute to peace and prosperity in the world.

Disadvantages of Globalization

1. Interdependence

Globalization increases interdependence between nations of the world. As a result, economic sovereignty and control over the domestic economy are reduced. There is a danger of foreign economic dominance over the developing economies.

2. Threat to Domestic Industry

Globalization leads to the establishment of manufacturing and marketing facilities by multinationals n developing countries. The domestic firms in these countries fail to face the onslaught of multinationals. As a result they sell out to foreign firms. Cheap imports from china and other countries also kill domestic business particularly in the small sector. Availability of high quality foreign products reduces the demand for domestic products and domestic production is eroded.

3. Unemployment

Globalization leads to restructuring of industry. Technology upgradation and focus on areas of comparative advantage create unemployment and underemployment among low skilled workers. As a result income inequality, poverty and social unrest may increase.

4. Drain of Basic Resources

Globalization results in exploitation of natural resources and basic raw materials in developing countries. These countries are often the sellers of agricultural and other inputs and buyers of finished products. Talented human resources are also transferred to developed nations which offer better remuneration and career prospects. Economic underdevelopment of poor countries is the result of exploitative character of international trade.

5. Technological Dependence

Globalization offers readymade foreign technology which scuttles domestic research and development. Foreign technologies are available at a high cost and often are not adaptable to local conditions. Developing countries become technologically dependent on developed countries.

6. Alien Culture

Globalization promotes consumption patterns and lifestyles which are inconsistent with the local culture and values. It may lead to shift in the industrialization pattern contrary to the national priorities.

Now after looking at Globalization from both supportive and contradicting point of view; we can now take a stand on whether the claims against globalization are sustainable or not.

Based on the above points, we can firmly say that globalization is not responsible fully for the global economic situations alone. It might have played a part in the crisis, but it did not start the fire.

The one reason which can be held responsible for the mishap is the repeal of Glass Steagall Act. The claims that globalization is the culprit are true but only to little extent. The sub prime mortgage crisis spread around the globe because of globalization and as a result, led to a sharp surge in the inflation rates.

Investment globalization is defined, in principle, as the proportion of all invested capital in the world that is owned by non-nationals (Chase-Dunn, 2000). The growth of investment within the world economy is simply one facet of the modern world-system, part of the triumvirate of trade, economic, and investment globalization, which combine to contribute toward transnational economic integration. Thus, investment globalization is part of the growing trend toward globalization in all sectors. This trend is due to the constant striving on the part of capitalists to accumulate more capital. As the economy goes through periods of stagnation and/or decline (as it inevitably must), the incentive for exploitation becomes ever stronger. With every new period of economic decline, capitalists find new ways of intensifying exploitation in order to retrieve their lost profits, leading to an overall increase in the amount of exploitation. According to Immanuel Wallerstein, this increase has manifested itself in two forms; “broadening,” and “deepening.”

Globalization has resulted in greater inter-connectedness among markets around the world and increased communication and awareness of business opportunities in the far corners of the globe. More investors can access new investment opportunities and study new markets at a greater distance than before. Potential risks and profit opportunities are within easier reach thanks to improved communications technology.

Countries with positive relations between them are able to increasingly unify their economies through increased investment and trade. Products and services previously available within one country are made more readily available to new markets, resulting directly in improved economic opportunities for workers in those economies and leading to improved household incomes.

For investors, these opportunities present a wider range of investment options and new ways to profit. Investment in global markets is possible for the investing public through stock purchasing, as most brokerage firms are able to access international stock markets and provide their clients with the opportunity to purchase shares in companies around the world.

•  Globalization refers to the way businesses and organizations develop an international presence or start operating in a variety of countries.
• The rise of globalization has led to more connections among financial markets and businesses around the world, as well as increased opportunities.
• Globalization has influenced international investing, making it easier than ever before, historically, for market participants to invest in companies, industries, or other financial instruments abroad.
• Market participants can buy stocks, mutual funds, exchange-traded funds (ETFs) or American Depositary Receipts (ADRs) to gain access to the shares of internationally-based companies.

Broadening

Broadening refers to the encroachment of capitalist exploitative practices into new parts of the world. The world-system as it first existed started out occupying only a portion of the world’s geography. By use of broadening, it gradually expanded to encompass the entire globe by the end of the nineteenth century. Broadening took place by means of incorporation, a three-step process. Firstly, a sector of a peripheral economy emerged which produced goods that were in demand elsewhere in the world-system. Secondly, workers in this peripheral sector lost control over their labor power, which passed into the hands of those who accumulated the surplus generated by the workers’ labor. Thirdly, this surplus ended up in the possession of capitalists in core states. Political mechanisms such as colonization were used to further incorporation.

Deepening

The second form of exploitation, deepening, refers to the increased application of capitalist economic relationships to more facets of life within societies already in the world-system. Five methods of this application can be identified (Hopkins, Wallerstein, et al., 1982:104-106). The first, commodification, is the process of making more goods available to be bought, sold, and owned as property. According to Wallerstein, the two most important forms of commodification have been the commodification of land and labor because both increase the economic factors of production available for capitalist exploitation. The second method of deepening, mechanization, is the practice of using machinery to maximize worker output, increasing the value of technological innovation. The third form of deepening, contractualization, refers to the increasingly legalistic nature of economic and social relations. The fourth form of deepening, interdependence, involves the growth of a highly specialized division of labor, which must exchange goods, leading to less and less self-sufficiency. The fifth form of deepening consists of the polarization of levels of wealth and political organization between core and periphery states; as the world-system expands, more and more core workers become full proletarians (whose wages are sufficient to reproduce their labor), and, conversely, more peripheral workers become super-exploited semi-proletarians. Wallerstein argues that this transition within the periphery has in fact resulted in lower living standards than existed previously.

Economic Cycles

These exploitative processes of broadening and deepening have not developed at a constant rate; instead they have followed the pattern of economic cycles. Most world-systems theorists believe that the world economy has gone (and is still going) through times of growth alternating with periods of stagnation. In addition to relatively brief cycles of prosperity followed by recession (business cycles), Wallerstein and his associates argue that there have been two main kinds of economic cycles in the history of the world-system: “Kondratieff (or long) waves,” and “logistics” (Shannon, 1996:131).

Kondratieff Waves

Kondratieff waves consist of a period of economic growth followed by a period of stagnation. The typical Kondratieff wave lasts between forty to sixty years. Wallerstein calls the growth period “phase A” and the stagnation period “phase B” (Wallerstein, 1984). Wallerstein argues that Kondratieff waves are necessary to the process of capitalist development, as periods of economic expansion and high profits provide a setup for periods of economic stagnation and declining profits. In his view, this is because economic expansions are based on the creation of new economic activities and/or production techniques. The very newness of these techniques guarantees high prices for them. The growth in this new sector then provides a boost for the rest of the economy, and phase A of the Kondratieff wave is set in motion. This sudden prosperity attracts new firms to the sector. However, the demand for the sector cannot continue unlimited, and so as more and more firms enter the market, it becomes saturated. An overcrowded market leads to intense competition, which in turn leads to declining prices and, therefore, profits. The resulting lack of forward impetus from the new market produces the beginning of economic stagnation, setting off phase B of the Kondratieff wave. The conditions of this phase B create incentive to capitalists to increase exploitation through broadening and deepening, creating new surpluses with which to begin the next phase A.

Kondratieff waves are associated with many different national and world events. Joshua Goldstein (1988) has found a relationship between Kondratieff phase A and the severity of wars between core states. He finds that 90% of major wars between core states have occurred close to or at the end of a phase A, leading him to theorize that core states are more likely to wage war following a period of economic growth that allows them the resources to mobilize. Investment globalization, as part of the overall trend toward globalization, is also affected by Kondratieffs. Chase-Dunn (1989: 164), argues that the peak period for a core war is one in which the end of a phase A has begun to reduce the opportunity for productive investments and capitalist investors face declining rates of return, moving the capitalist class to turn to the state to protect and/or expand market share and investment opportunities.

Data Splicing

The second problem faced when dealing with the measurement of investment globalization, lack of complete data, requires a careful approach. Data for investment flows are not available in a complete form until the year 1949, when the International Monetary Fund started compiling data on most major investing countries. Investment data becomes more and more complete and accurate as it nears the present day; data are available from the IMF now for over 250 investing countries, as compared to just 10 from the League of Nations in 1921.

Before the Second World War, data exist in various forms and measures; the available data reflect loans made from one government to another and some investments made by a select few firms. Because of this inconsistency of data series, any long-term measurement of investment globalization would do well to include these inconsistent measures along with more complete measure as more complete measures become available. This prevents some of the biases and inaccuracies inevitable to the measurement process, and provides a more comprehensive picture of investment globalization.

Globalization Technology

Technological progress is a key driver of improvements in incomes and standards of living. But new knowledge and technologies do not necessarily develop everywhere and at the same time. Therefore, the way technology spreads across countries is central to how global growth is generated and shared across countries.

Indeed, during 1995–2014, the United States, Japan, Germany, France, and the United Kingdom (the G5) produced three-fourths of all patented innovations globally. Other large countries notably China and Korea have started to make significant contributions to the global stock of knowledge in recent years, joining the top five leaders in a number of sectors. While this suggests that in the future, they too will be important sources of new technology, during the period under study, the G5 constituted the bulk of the technology frontier.

Globalization boosts technological development

The increasing intensity of global knowledge flows points to important benefits of globalization. While globalization has been much criticized for its possible negative side effects, our study shows that globalization has amplified the spread of technology across borders in two ways. First, globalization allows countries to gain easier access to foreign knowledge. Second, it enhances international competition including as a result of the rise of emerging market firms and this strengthens firms’ incentives to innovate and adopt foreign technologies.

The positive impact has been especially large for emerging market economies, which have made increasing use of the available foreign knowledge and technology to boost their innovation capacity and labor productivity growth. For instance, over 2004–14, knowledge flows from the technology leaders may have generated, for an average country-sector, about 0.7 percentage point of labor productivity growth per year. This amounts to about 40 percent of the observed average productivity growth over 2004–14. We find that one important factor behind the build-up of innovation capacity in emerging market economies has been their growing participation in global supply chains with multinational companies, though not all firms have benefitted as multinationals sometimes reallocate some innovation activity to other parts of the global value chain.