Financial Effects of Globalization

Globalization

Financial effects of globalization

Globalization has fostered the rise of powerful international organizations that exercise unprecedented dominance over the world. Brands such as Coke, Levis, McDonald's and other once-iconic American brands are now common cultural symbols internationally. Additionally, many of these brands are now manufactured in other nations, and the supply chains have become global rather than local in nature. The revived fortunes of GM are largely due to an upsurge in demand abroad, rather than due to demand for the famous American carmaker domestically. Globalization has enabled large companies to think even larger in scale and to have, in the eyes of some, an even more frighteningly dominant influence over the fortunes of other. As seen in the wake of the 2008 credit crisis, the failure of one organization or sector can result in a chain reaction that can nearly bring down the world economy.

Globalization has had positive effects, however, for smaller organizations as well. Thanks to the global reach of the Internet, a smaller organization can sell its wares internationally, rather than through a storefront to a limited range of consumers. Consumers can price-shop for goods and services internationally as well, creating more competitive scope to bargain for lower prices and access a more diverse range of goods and services. Globalization also opens up greater resources for financing and funding new start-ups beyond localized sources of revenue.

Some economists have contended that the scope of globalization has been overstated, and point to the development of regional organizations such as NAFTA and the EU as evidence that globalization has unfurled more as a way of creating partnerships between neighbors than the widespread adoption of multi-national enterprises. Of 82 MNEs, 68 had transactions in excess of 50% with their home region (O'Neil 2004: 18). This suggests that MNEs still possess more knowledge of local rather than national markets. Canada, after all, remains the largest export market for the United States (O'Neil 2004: 24).Some economists also believe that the degree of outsourcing and other common practices demonized as a negative influence of globalization has been overstated, given the limits of being able to outsource critical work functions (O'Neil 2004: 24).

However, while it may be true that as a whole not all organizations are fully globalized in their operations, the cultural and economic influence of some MNEs and their potential role in changing the way that the world does business and lives cannot be denied. Starbucks, for example, has changed the way in which people view coffee as a daily beverage of choice through its expansion into the Far East. It has also pursued a strategy of creating local partnerships with organizations in the nation into which it is expanding, to tailor its operations to local needs. Starbucks does not change its image and its core set of values (it would not permit smoking in its Japanese branches, because that would interfere with the classic Starbucks 'smell' of coffee in-house), while it still adapts to local needs by learning from the businesses with which it partners. "The peak time in China is not 7 to 10 in the morning, it is 4 to 6 in the afternoon. And there are also food preferences we had to adapt to. There is the holiday Yorkshire pudding that is big in the UK but does not work in New York" (Yunker 2006).