What is Globalisation?
Globalisation enables the coming together of individuals, corporations and resources from different countries. The unique characteristics of globalisation have allowed people with diverse backgrounds to interact freely. It is the vehicle that has helped global trade scale new heights in the last few decades.
Characteristics of Globalisation
This concept has enabled economies of scale for companies in production and distribution. It has also encouraged outsourcing and technology transfer among companies and countries, thus increasing their interdependence on each other. The main characteristics of globalisation are listed below:
- Free Trade – Globalisation has helped improve trade volumes between nations with minimal interference. The reason is that governments are not micromanaging every minute aspect of business transactions. The Gross Domestic Product (GDP) of countries that have accepted globalisation has also increased significantly, thus bringing in greater prosperity. It has also resulted in better cooperation between governments that leads to further improvement in trade.
- Liberalization – One of the main characteristics of globalisation is the improvement in the business climate for corporations. It has helped entrepreneurs to set up businesses and transact both within and outside the country. The rules and regulations for companies are relaxed significantly to allow for more trade between nations due to globalisation. Flexibility in trade regulations pushes governments to make further concessions to industries. Both Liberalization and Globalisation are dependent on each other.
- Increase in Employment – Every industry is responsible for generating both direct and indirect jobs. And when production increases, it has a positive effect on employment. Globalisation helps companies increase their production capacity and set up operations in different parts of the world. It also helps boost work opportunities in countries where these corporations have set up operations.
- Increased connectivity between nations – Globalisation has helped countries improve trade relations with each other. It has increased interaction between people and businesses. Better connectivity also boosts a country’s economy and enhances the standard of living for its citizens.
- Interdependence – With the advent of globalisation, countries have become more reliant on each other. Businesses get the opportunity to import cheaper raw materials to produce their commodities. They are also being allowed to export to countries that have more demand for their finished goods. It has helped reduce trading barriers and build overall economic prosperity.
- Cultural Exchange – Improvement in people to people contacts have encouraged the intermingling of cultural practices and customs. It has allowed people to exchange ideas, behaviours and values with other countries. Communities are less isolated as a result of globalisation. For example, several American eateries have penetrated different parts of the world. Similarly, cuisine from far off countries is now readily available in the United States.
- Urbanization – One of the consequences of globalisation is the increase in urban centres. When many foreign/local companies set up businesses in a particular area, it becomes a hotbed of economic activity. The people who work in those companies need infrastructure near their workplace in terms of housing, transport, shops and other establishments. Globalisation leads to the building of urban centres in and around industrial areas.
- Standard of Living – With increased economic activity and opportunities for employment, people have more money in their pockets. They also have more options to choose from because of improved job opportunities. It is one of the main reasons why globalisation allows more and more people to improve their standard of living.
- Production Cost – In a globalized world, companies are free to establish their operations in areas where the cost of production is low. The cheap availability of land, labour and raw materials has become very important. So it makes sense for companies to go where these resources are present in abundant quantities and at discounted rates. It helps them gain over their rivals by lowering costs and improving profit margins.
- Outsourcing – One of the characteristics of globalisation is that it allows companies to bring in third parties from outside the country to manage specific processes. They take this step to reduce internal costs, improve the quality of services or both. Outsourcing is a boon for several human resource-rich countries that are looking to generate employment. Countries like India and the Philippines have benefitted immensely as a result of this practice.
Globalisation has helped nations integrate their economy with the rest of the world, and it has reduced barriers to trade and increased economic activity manifold. It has also led to cultural, social and technological exchanges that have helped governments tackle internal and external challenges with greater efficiency.