In this unit we are going to speak about globalization. 1
Globalization is the process of international integration that arises from the interchange of world views, products, ideas and other aspects of culture. Advances in transport, such as modern trains and trucks, jet engines or container ships, as well as in information technology infrastructure such as television and the Internet, have been major factors in globalization, generating interdependence of economic and cultural activities. With respect to the economy, globalization can be defined as the international trading and investment between different nations to conduct business. It comprises the globalization of production, markets, competition, technology, and corporations and industries. 2
The expansion of networking and the Internet have made data communication easier and faster, thus facilitating the globalization movement. Fiber optic cables and satellites connect different parts of the world in such a way that the transfer of huge amounts of information takes mere seconds. This enhances the dissemination of knowledge and allows processes and transactions that were impossible before. 3
The most important international telecommunication link nowadays is submarine fiber optic cables. In 2006, for example, overseas satellite links accounted for only 1% of international traffic, while the remainder was carried by undersea cables. The reliability of submarine cables is high and their total information carrying capacity is in the terabits per second range, while satellites typically offer less capacity and higher latency. As a result of these cables' cost and usefulness, they are highly valued not only by the corporations building and operating them for profit, but also by national governments. For instance, the Australian Government considers its submarine cable systems to be "vital to the national economy". 4
In the past century, most companies business operations were limited to one country. While multinational companies existed, cooperation between national branches was limited and slow. However, the growth of new markets such as the socalled BRIC countries (Brazil, Russia, India and China), Eastern Europe, Latin America and other emerging countries, and improvements in transport and information technologies led to a change in the global economy in which operations between different countries became increasingly more dependent in order to achieve greater efficiency and the benefits of economies of scale. In turn, this led to social and political changes, and the regulations that overprotected national industries and forbade investments from foreign corporations started to be substituted by free trade agreements between countries. In addition, public companies were privatized and multinational companies began to merge in order to achieve better economies of scale. 5
Globalization, for better or for worse, is reshaping the world. It affects a lot of aspects of how we do business, and these effects can be positive or negative depending on where we live in the world. In the next few slides we ll have a closer look at some of these effects. 6
Creation of a global market Globalization has created a global economy, both for goods and for financial markets. In this global economy, the economies of the nations of the world have become more interdependent. For example, a slow down of the Chinese economy affects the economies of USA and Europe. 7
Manufacturing and Services Globalization has created worldwide manufacturing industries that locate their factories wherever it is most convenient for them. In many cases this has meant that they have moved them to developing countries where labor costs are lower. Two examples are mobile phones and sports shoes; both are mostly manufactured in Asia. This has been bad for some developed countries that have lost jobs and businesses and good for developing countries that have seen their economies grow. 8
Living Standards With globalization, goods are flowing more freely between nations in a global common market. This generates global wealth and contributes to its geographical distribution among countries. The transference of production to developing nations has benefited them and raised their standards of living. On the other hand, this has created competition from developing countries which is forcing workers in developed nations to accept lower salaries in order for the companies they work for to stay competitive. One result of this is lower living standards in developed countries. Critics of globalization say that this increment in global wealth is not benefiting everybody, as it is making rich people richer and poor people poorer, while supporters say that hundreds of millions of people in the developing world have escaped poverty thanks to globalization. In other words, while globalization has caused increased inequality in developed countries, inequality globally has reduced as developing countries have experienced rapid growth. 9
Environment One of the biggest problems of globalization is that the economic growth it is has brought to developing countries is not sustainable. This rapid growth, coupled with less strict environmental regulations in these countries, has led to a substantial increase in world pollution. However, the developed nations cannot ask developing countries not to reach the same level of development because it is harmful for the environment, especially while they continue to maintain their resource intensive way of life, so a solution involving everybody must be found. There have been several international summits trying to address the most important environmental problems, the most recent, concerning global warming, was held in Paris. 10
he global market has brought increased competition for many different kinds of products and services. This is good for the consumer, as to enhance competiveness companies must improve the quality of their products and lower prices. 11
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