Characteristics of Globalization
Globalization is the means of connecting all countries into a forum. There are various characteristics of globalization that can define what is globalization and how it works.
Globalization is turning the world into a “global village”. Some of the main characteristics/features of globalization are mentioned below:
Integration of National Economy
One of the main features of globalization is that it integrates the national economy with the world economy. Financial markets, trades, and economies of countries are connected to each other.
And this connection and integration were never before like this. This helps to achieve increased financial markets, specialization, economies of scale, and economic progress in integrated countries.
Free Market Economy
Globalization operates in a free-market economy. The economy in which economy operates without government interventions.
The production, importing, exporting, selling, purchasing, pricing, and distributions are handover to the market. Prices of products are set based on demand and supply not by the government’s rules. Globalization is a purely free market, here, government plays an important role of regulator and facilitator.
Globalization believes in economic interdependence. It assumes a single country has no such power, capital, resources, and other factors so that it can produce all products that can meet all of the country’s requirements.
A company should export its sufficient products to the country required and import products required by itself. Countries are dependent on others in terms of products, services, technology, and so forth.
Free Movement of Products
The free movement of products and services is the result of globalization. Globalization promotes free trade. Governments reduce different tariffs costs, subsidies, and different factors that restrict people move products across countries.
This means that consumers will have different types of quality products at lower costs available in the markets. It also creates employment opportunities for people thus increasing standards of living.
Free Flow of Factors of Production
Globalization also means the free flow of factors of production like capital, labor, technology, management, and entrepreneurship across the national borders. Factors of production which are inputs for the production process are supposed to move freely from one nation to another as a result of globalization.
This is the reason foreign employment has emerged. People (labor) are now free to move to a foreign nation with some requirements such as Visa, Passports, and other requirements documents.
As globalization makes technology transfer easy, companies across the world have to adopt globally accepted standardized technologies. The windows based computer technology is the best example, as it has virtually eliminated differences in personal computer applications through a standard one.
In addition, due to globalization companies are forced to build technologies that fit the global market and its movements are also made easier.
Globalization is also especially characterized by global competition. Today competition is not regional, national, or company to company, the competition is global.
Global competition has brought both positive and negative impacts – positively it provides quality products at a low price, international cooperation, customers supremacy, global job opportunities, etc. And negatively it threatens the domestic businesses and also the environment, culture, and values.
In this global age, now businesses have to think globally and make strategies that confront global competition.
Global Corporations and Global Image
Global corporations i.e. multinational companies (MNCs) are the main promoting forces of globalization and globalization lets them do business globally.
MNCs such as Coca-Cola, Pepsi, Unilever, Toyota, Sony, Honda, etc. the increasing trend of globalization means also the rise in such MNCs across the world.
When they operate globally the global image and brand are created. Think of Apple Company, what do we think about it, maybe it’s quality and global image.
Facilitated by Global Organizations
WTO, IMF, UN, WB, etc. are the main facilitators of globalization. Because of such organizations free trade, free economy, market, free flow of goods, capital, resources, etc. across countries are introduced and promoted.
Expansion in World Trade Volume
Due to globalization, more commodities, materials, and products are traded in the global market. Communication and transportation are shortening delivery time and enabling more and more countries to participate in world trade.
More and more companies are increasing their involvement and dependence on the global market. Similar products are available in different countries and the world is moving towards the small village. All these factors are leading to the rapid growth of international trade.
Merger and Acquisitions
Globalization has been boosting mergers and acquisitions. Due to globalization, many domestic industries are bought by, or forced to merge with international firms and multinational companies. This is mainly due to increased competition and the need to address the local demands.
Cut-throat competition in the global market demands the companies to increase their size and volume of operation which further encourages mergers and acquisitions between the companies.