Drivers and Consequences of Globalization
The purpose of this paper is to analyze three drivers of globalization and how these drivers impact organizations, describe the risks associated with global investing and explain the importance of cultural sensitivity and ethics in global finance. Global Finance Environment
Globalization is the increasing interconnectedness of economies, markets, and people
across nations. Increasing globalization creates additional competition from around the world,
which then affects both local jobs and company profits. Globalization also has the potential to
raise standard of living by allowing greater access to a wider range of products and
services at more competitive prices (Crum, Brigham, Houston, 2005). One driver of globalization is globalization of markets. It refers to the merging of
national markets into one huge global marketplace. Now selling internationally is easier due to
falling barriers to cross-border trade. A company doesn’t have to be the size of these
giants to facilitate and benefit from the globalization of markets. It is important to offer a
standard product worldwide. But very significant differences still exist between national
markets like consumer tastes, preferences, legal regulations, cultural systems. These differences
require marketing strategies in order to match the conditions in a country. To illustrate,
Wal-Mart may still need to vary their product from country depending on local tastes and
preferences.
Another driver of globalization is globalization of production. It refers to the sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production. The idea is to compete more effectively offering a
product with good quality and low cost. For example, Nike is considerated one of the leading
marketers of athletic shoes and apparel on the world. The company has some overseas factories
Globalization is the increasing interconnectedness of economies, markets, and people
across nations. Increasing globalization creates additional competition from around the world,
which then affects both local jobs and company profits. Globalization also has the potential to
raise standard of living by allowing greater access to a wider range of products and
services at more competitive prices (Crum, Brigham, Houston, 2005). One driver of globalization is globalization of markets. It refers to the merging of
national markets into one huge global marketplace. Now selling internationally is easier due to
falling barriers to cross-border trade. A company doesn’t have to be the size of these
giants to facilitate and benefit from the globalization of markets. It is important to offer a
standard product worldwide. But very significant differences still exist between national
markets like consumer tastes, preferences, legal regulations, cultural systems. These differences
require marketing strategies in order to match the conditions in a country. To illustrate,
Wal-Mart may still need to vary their product from country depending on local tastes and
preferences.
Another driver of globalization is globalization of production. It refers to the sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production. The idea is to compete more effectively offering a
product with good quality and low cost. For example, Nike is considerated one of the leading
marketers of athletic shoes and apparel on the world. The company has some overseas factories
References: Investopedia. (2011).Global Risk . Retrieved from http://www.investopedia.com/globalrisk Crum, R., Brigham, E., Houston, J. (2005). Fundamentals of International Finance. Mason, OH: Thomson .