globalization impact

Economic technological progress has resulted in the migration of people around the world. Both have been facilitated by increased transportation means, as well as improved methods of moving people and goods. Technology has since increased connectivity, allowing people all over the world to communicate more effectively and affordably. Many of these advancements have been made possible by the extensive studies that people are doing in order to come up with innovative solutions to life's problems. Creativity and innovation have played a major role in the massive improvements. The world has been made like a village where people can move around and communicate with each other quickly and at reasonable prices. Technology advancement has resulted in globalization which is the increased interaction of people, states which are driven by international trade and investment. Therefore, this paper will look at the impacts of globalization which is the broader development challenge (macro) and look at two development issues (micro). The micro is high competition by firms to the domestic companies and natural resource exploitation.

Impacts of Globalization in World Economies

Globalization has had both positive and negative effects on the world economies. The merits include; enhancing foreign direct investment among countries globally. It has led to increasing technological innovation because of facilitating competition thus through this it has helped a great deal champion for international development through technological development. Additionally, it has brought economies of scale where large companies get discounts as a result of their bulk purchasing of their raw materials.

According to Kuepper (2017), the demerits of globalization include; interdependence of nations which makes them not rely on themselves adequately to meet their needs. These can be a risky situation in case of conflicts between the countries which depend on each other. Inequality in the distribution of benefits between the developed and the least developed nation may occur with the rich countries taking advantage of the developing nations. These can lead to conflicts of interests both nationally and internationally. Globalization leads to opening of countries for foreigners, and this can be a threat to the country's national sovereignty

Globalization has merits, but it is not possible to neglect the demerits as they may lead to failure of nations. Most significant benefits are that its opens boundaries form trade among countries. These bring exchange of culture among the people who exchange ideas thus enhance their creativity and innovation.

Foreign Direct Investment (FDI)

Globalization has facilitated international development and it has made countries be ranked as either developed, developing or least developed countries. The ranking mainly is done mainly by the company economic growth which defines the living standards of the people. Therefore, FDI and globalization are directly correlated as FDI has led to interactions of people globally as well globalization has made people know new areas they can start their firms. Foreign direct investment by companies has been as a result of trying gain competition for looking new markets. Business uses the blue ocean strategy to be able to get areas of fewer competitions and be able to make huge profits. To be able to get a competitive advantage, firms move into foreign markets to look for ‘Blue Ocean' to be able to maximize their profits. However, the new markets pose great risks of failure for the firms, and they need to carry out intensive research before they start operations (Mebert, Andreas, and Stephanie Lowe, 2017). Risks that firms may face in foreign markets include; high competition from the domestic companies as a result of their ability to know the market better. Wage rates in the new country may be a great challenge if they are high as this means that the company will incur more costs when paying the employees. Availability of labor both skilled and non-skilled is critical as employees are the backbone of any firm. All employees with or without skills are equally important to the firms, and their absence can lead to job stoppage. Firm when going internationally must be aware of the nature of labor skills available in the new market. Taxes are significant for any firm as they reduce the profit margin. Foreign countries have different taxation policies, and all firms must be aware of the amount of taxes to pay in the foreign country to check whether the investment will be viable. The firm should also check the infrastructure of the in the market at it determines the speed of the production process. It should have better transport and communication services. The potential market for the company should be accessed to enable the firm approximate the number of profits it can make. If the market is small, the market venture is not necessary as a firm should engage in areas with high potential buyers of the firm's goods and services hence assurance of high profits. Finally, the firm should check the political stability of the country. It is advisable to carry business in a stable political country as the environment supports business. Unstable nation politically is prone to wars and riots hence this is not a conducive environment for business. Firms' operating in such environment hardly make any profits.

The merits of engagement in the foreign market depend on the firm in question, and they include high numbers of customers in the market which can increase the firm's profits. A company must look for a market which has a gap to be able to come and fill it hence making a substantial amount of money. The new market may also have fewer competitors making it has the monopoly in the market thus getting high-profit margin. Foreign nations may have cheap labor for the firm hence reducing its cost on employees' wages and salaries. Raw materials are important for firms' activities, and a foreign market may be merit to an international firm if it has all the required raw materials and at cheap costs. Lower taxation in the market can be very useful as it would reduce the company expense and increase its profits.

However, globalization leads to foreign direct investment which has a severe impact on the domestic companies and the country in general. The two areas of concern about globalization are competition and nations natural resources.

High Competition by Foreign Firms

FDI opens up opportunities for foreign companies to enter new markets which they view not congested and have fewer competitions. New firms in a country disrupt the business as they bring stiff competition to the domestic companies which they cannot persevere. The high competition may lead to failure or collapse of local organizations as a result of low sales. However, some governments have put stringent measures to ensure they blur foreign firms doing business in their countries. Some of the action that can be used include; use of tariffs which is an increase in taxation on imported goods. The government through tariffs intends to increase exportation by domestic firms. The government may use Quotas which is a total restriction of importation of a total quantity of a good or service. Antidumping policies can be set to make foreign companies not bring illegal or harmful substances to the host nation in the form of disposing at a cost.



Natural Resource Exploitation

Foreign nations tend to exploit the natural resources' of the host country without taking precaution. The natural resources' can be forests, mines, forests, farms, etc. these are because the company's goal is to get profits at the expense of the other nations without caring. The environment helps the human being to survive and it extinction can lead to the end of humanity. Foreign company's clearance of bushes and forests to do farming can lead to the areas becoming desert afterward. Paper industries use trees to carry out their businesses hence cutting down the tree that attracts rains. Destruction of the natural resources leads to global warming which increases the earth's temperatures. Winoto (2014), notes that developing countries have resource though they are exploited by the wealthy nations who benefit from the proceeds. An example is Indonesia which has high levels of salt and oil yet a large number of citizens live in poverty. He views the natural resources for the people despite sources of money. Secondly, in Africa minerals and forests as the foreign companies extract the value and leave the remnants beggars with no share of the cake (Rinat, Zafrir, 2013).

Finally, globalization is good, but countries must put up measures to caution themselves form the intense competitions and exploitations by foreign nations. Companies that wish to engage in international trade must carry out intensive research to ensure they do not make losses in the new market which may aid to successfully execution of business when required. However, the wealthy nations must not mistreat the developing nations because of globalization for their benefits. The government should be alert to protect entrepreneurs from illegal and unethical operations which the competitors execute. They are the backbone of the economy, and they are the ones who determine the development of the nation. Globalization has led life easy for people and communication easy for people (Baylis, John, Patricia Owens, and Steve Smith, 2017).

References

Amadeo, Kimberly. “Advantages and Disadvantages of Foreign Direct Investment.” The Balance, 24 June 2017, www.thebalance.com/foreign-direct-investment-fdi-pros-cons-and-importance-3306283.

Mebert, Andreas, and Stephanie Lowe. Blue Ocean Strategy. CRC Press, 2017.

Pettinger, Tejvan. “Factors That Affect Foreign Direct Investment (FDI).” Economics Help, 26 June 2017, www.economicshelp.org/blog/15736/economics/factors-that-affect-foreign-direct-investment-fdi/.

Rinat, Zafrir. “Food for Thought: How Rich Countries Exploit the Resources of Poorer Ones - and Get Away with It.” Haaretz.com, 12 Sept. 2013, www.haaretz.com/world-news/1.546450.

Winoto, Harjo. “Natural Resources: The Curse of Developing Countries?” Rappler, 5 Aug. 2014, www.rappler.com/move-ph/ispeak/65261-natural-resources-curse-developing-countries.

Baylis, John, Patricia Owens, and Steve Smith, eds. The globalization of world politics: An introduction to international relations. Oxford University Press, 2017.