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What is globalization?

by Dan Power

Globalization in the context of business strategy has a number of meanings. Globalization is sometimes used to refer to the strategy of providing standard, homogeneous products to all markets on "the globe". Globalization is also used to refer to the phenomenon of large multinational companies that are developing or have developed a cosmopolitan, global culture and that use global sourcing to provide standard products to a vast array of global markets. In general, globalization refers to development of a global market economy and the proliferation of media technologies like the World Wide Web that is creating a global culture. According to the globalization glossary, the term is also used to refer to the "expansion of global linkages, organization of social life on a global scale, and growth of global consciousness, hence consolidation of world society."

According to Wikipedia, "globalisation or globalization is an umbrella term for a complex series of economic, social, technological, cultural and political changes seen as increasing interdependence, integration and interaction between people and companies in disparate locations." The term was used as early as 1944 but economists began applying it around 1981. Theodore Levitt is usually credited with first using the term in an article he wrote in 1983 for the Harvard Business Review entitled "Globalization of Markets".

The International Monetary Fund views economic "globalization" as a historical process that is the result of human innovation and technological progress. The term "refers to the increasing integration of economies around the world, particularly through trade and financial flows." The term sometimes also refers to the movement of people and knowledge (especially technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization.

The term globalization came into common usage in the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions—both trade and financial flows. "It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity—village markets, urban industries, or financial centers."

Markets promote efficiency through competition and the division of labor—the specialization that allows people and economies to focus on what they do best. Global markets offer opportunities for people and firms to participate in more and in larger markets. This change in market access means that firms can obtain lower cost capital, better technology, cheaper imports, and larger export markets.

Globalization is occurring because of increased inter-connectedness of people due to information and communication technology and faster transportation systems, greater cross-cultural interactions among people, and greater interdependency among national economies. Evidence suggests globalization leads to greater economic integration among nations and lower priced goods and services.


from Globalization: Threat or Opportunity?

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