economic environment, simply defined, Globalization is "a phenomena by which economic agents in any given part of the world are much more affected by events elsewhere in the world." (Wolf, 2004) Globalization also "refers to the process of increasing social and cultural inter-connectedness, political interdependence, and economic, financial and market integrations. Globalization makes alliances an integral part of a firm's strategy to better satisfy customers and to achieve sustainable competitive advantage." (Thoumrungroje and Tansuhaj, 2004) Technology has changed the way we work and live. The role of national governments in shaping domestic policies still matter. But multinational organizations play a significant and often very critical role in influencing many of the decisions made by the government of countries all over the world. Liberalization policies implemented by governments have the ability to change the way business interactions take place. Markets and operations, these days, have been crossing geographical boundaries. Government can influence the direction and the type of growth that it thinks a nation should pursue. In today's world, the government and big corporations are involved in a complex game of accumulation of wealth and riches. This wealth trickles down to the citizens of the country and the employees of organizations. This wealth, trickled down or otherwise obtained, translates into higher purchasing capacity, higher standards of living and better choices for customers based on demand.
Supporters of globalization are quick to identify that global trade, capital, migration of population and the forward and backward integration of markets has significantly improved the economical prosperity of local populations. The opening of the Chinese and the Indian markets, for example, has helped introduce more segments of people in this population to middle class status. It is also becoming increasingly clear that any single ideology for governments and markets is insufficient. (Marques, 2005) A mix of different concepts from different ideologies is often important to ensure that prosperity of the region is maintained for extended periods of time and that the needs of the population are met. Critics to globalization offer examples of lopsided economic growth and the increasing inequality between rich and poor. It is important to note however that the rapid economic growth among individuals is on the rise. This can be seen in the increase of personal incomes of citizens of China and India who within a span of two decades have been able to raise their earning potentials significantly. Globalization therefore, has encouraged partial convergence, where "the incomes of poor developing countries, with more than half the world's population, grew substantially faster than those of the world's richest countries." (Wolf, 2004) Numerous studies by economists and researchers have indicated that nations relatively open to free trade grow faster and achieve higher incomes levels for their citizens than those nations that follow a relatively closed trade policy.
Many experts in the field of globalization are however of the opinion that globalization as it exists right now is not the most ideal or the most appropriate for prosperity to all regions of the world. It is increasingly becoming clear that a few powerful and rich countries have the ability to dominate and dictate their strategies through the multinational corporations that operate from their shores. (Yin and Choi, 2005) For example, the U.S., European Union and Japan by virtue of having many multinational corporations are able to dictate policies to countries where they have operations by virtue of these companies offering lesser-developed region options for production and manufacturing.
Critics of globalization also identify that the poverty levels of many poorer countries is on the rise. It is important to note however, that defining poverty levels globally has been a challenge. Trends signify that globalization has helped decline the number of people in extreme poverty in regions that have embraced concepts of open and free markets. Education and an improved standard of living is also more effectively addressing the issues of population growth and infant morality in many regions around the world. Trends in fertility rates indicate that exposure to new information and the accesses to better healthcare has helped the female population around the world and more particularly in Asia reduce the fertility rates.
Recent studies in the field of globalization also indicate that all multinational companies are not equally successfully in their effort to become more global. The ability of a company to differentiate its brand and the product in the market it wishes to penetrate is more important than simply entering new markets. (Millar, Choi and Chen, 2005) Many countries, as a result of the open markets, come under intense pressure as a result of the talent, technology, capital, and institutions brought into a regional or small market by large-scale multi-national enterprises from developed nations. Trade between nations that are not at the same level of expertise can introduce an imbalance in the economic field of the less developed nations.
External environmental factors such as economics of the region, technology, social influences, political influences and globalizations have increased the pressure on companies. True integration of any nation into the global economy requires that the relationship between the public and private sector of that nation be transparent and open to constructive criticism from the citizens of the country. Working with different cultures and collaborating in a global environment is very challenging. There are often comments that the Americanization of the world is occurring as a result of many U.S. based multinational corporations 'encouraging' their collaborators in the global environment to adopt and use the policies that work best for the parent company. The multinational corporations offer little concern or thought to the impact of the culture of the region and the change that they are often imposing on the society. National governments are also cajoled into modifying and redefining their policies to accommodate the operations of the multinational companies.
As almost three quarters of all multinational corporations are from North America, Europe and Japan, there is an increasing trend of these companies using poorer nations for operations that might carry higher risks. The growth of multinational organization and the transference of risks of hazardous nature from developed countries to less-developed countries where regulations are less restrictive and government agencies ineffective are also increasingly being observed. Currently, the liabilities and the legal ramifications towards multination corporations are almost negligible. Multinational corporations swear no allegiance to any country rather they are driven by the need to generate profits for the company and their shareholders.
With transportation and logistical channel becoming established, reliable companies are choosing to move their operations to regions that can provide them the best competitive advantage. At the same time, harnessing the raw materials and the unique advantage of different expertise is also considered expedient. The downside to the rise in the establishment of multinational corporations is the uncertainty of the legal ramifications for the mistakes that might be committed in a region that is far from the home office. Development also comes with its own hurdles and problems. Often, governments lease or rent areas to multinational organizations who might clear the region and rebuild the area to their specification. In the Amazon, for example, large sections of the forest were cleared for logging; however, the indigenous population of the region depended on these forests for their livelihood. Public awareness globally is however encouraging organizations to identify sustainable forms of development in regions that drive the ecosystem.
Many countries are introducing some form of legislature to ensure that the environment is offered protection and extensive misuse of the natural resources does not occur. Finding innovative methods for handling toxic and household waste, encouraging technological and social growth, while at the same time preventing large-scale disruption of the environment is being encouraged globally. The world's citizenry is realizing that unchecked and uncontrolled growth is not possible if the environment is contaminated beyond repair. "The Trail Smelter arbitration was the first to recognize the principle that international liability may arise from trans-boundary activity that causes serious environmental harm." (McCallion and Sharma, 2000)
Developing countries are generally very critical of the developing countries with respect to the environmental pollution as a result of sub-standard manufacturing and production facilities and the quality of life that citizens of the region lead. In reality, however, developed countries generate more pollutants than the developing countries. This is due to their excessive use of motor vehicles, electric power and chemicals. In a global environment, this inherent distrust creates resentments. Global organizations such as the World Trade Organization (WTO), The International Monetary fund (IMF) and the United Nations has also not inspired confidence in the poorer nations of the world. During the South American and the Southeast Asia economic meltdown in the early 90s, these global organizations could do nothing to reduce the impact felt by the local population in the region.
With many regional markets collapsing, the formation of the European Union, the North America Free Trade Agreement (NAFTA) and the most recent proposal of the Free Trade Area of the Americas (FTAA) has created an environment when…