Historically people have always sought to interact and trade with their counterparts, even if they were thousands of miles away. As transport systems improved, companies too started looking into global trade. From this mindset was born the concept of globalization.
Here’s a quick preview of what will be covered in this article:
- Globalization Defined
- Globalization Examples
- Globalization Pros and Cons
- Globalization Benefits
- Globalization and its Discontents
- Is Globalization Good or Bad?
- Is Africa The Next Continent to Face Globalization
In one sentence, the definition of globalization is “the process of interaction and integration among people, companies and governments” across the globe. The main motives behind globalization are international trade and investment. It is often seen as a form of capitalist expansion, which can directly impact a country’s economy and culture.
The meaning of globalization from an economic perspective is the integration of goods, services, funds, technology and data across the globe. From this point of view, globalization is an international industrial and financial business structure. This structure involves mainly three actors – consumers, businesses and investors.
Often, trade barriers and cultural differences have resulted in conflicts due to globalization. Diplomacy has played a significant role in the history of globalization. However, over time, more and more alliances were formed across the world. This led to the expansion of global markets, whereby economic activities were liberalized, such as the exchange of foods, services and funds.
Back in the 1980s, there were only a handful of examples of globalization. Rare were the brands that managed to make a global impact. As technology progressed, the barriers to enter new markets began to go down. With the emergence of the internet as a key infrastructure, more and more companies were able to gain a global influence.
In today’s world, successful global companies compete with each other on a daily basis. Here’s a video showing examples of globalization on top brands, over the past decade.
More Examples of Globalization
When it was first launched, many saw Airbnb as a gamble; it was not easy to convince people from around the globe that renting and staying at a complete stranger’s place is not scary or weird. 10 years later, Airbnb has changed the way millions of people travel – focusing on local storytelling proved a winner. The company’s brand represents a sense of belonging to anyone, anywhere across the globe.
With over 20,000 stores in 63 countries, it is impossible to talk about examples of globalization without mentioning Starbucks. The company has emphasized the importance of making every store fee like a local coffee house. This strategy has proved wildly successful – Starbucks has made its mark even in countries where drinking tea is of cultural importance. With its personalization perks and ability to adapt to different cultures, Starbucks never feels like an impersonal corporate giant.
Making use of universally appealing brand attributes, Ikea is another example of globalization done right. Functionality, affordability and quality are the elements that propelled the company’s success. Added to this is a touch of personalization that has done wonders to Ikea’s image – depending on where in the world it is located, the stores are often adapted to suit the local tradition, such as using traditional Japanese floor covering in Japan. To step up their game even further, the Swedish furniture giant has recently announced its expansion to South American countries.
Globalization Pros and Cons
Like everything in the world, even globalization has its pros and cons. While the idea of a fully integrated world, whereby all countries cooperate with each other on matters of politics, trade, knowledge, technology and culture may seem appealing, it is nonetheless a sensible debate. Listed below are the main advantages of globalization and its discontents.
- Enhancing the Global Economy
As mentioned earlier, in an ideal world, every country would positively collaborate with each other. International trade and businesses will potentially expand rapidly, which will breach opportunity gaps between many countries. All this expansion will require a significant workforce – which will reduce unemployment rate on a global scale. Ultimately, globalization should increase the purchase power of consumers worldwide.
- Reduced Racism
Let’s face it; mankind has a bad record of racism throughout different parts of the world. However, one positive effect of globalization could be an increased level of tolerance towards other cultures. People from across the globe can now communicate with each other and learn other cultures. From a cultural perspective, this is a definite advantage of globalization and can strongly contribute to a better world.
- Global Decisions
If all governments and political powers joined forces, this would ultimately lead to the betterment of everyone. This would promote global benefits instead of national ones. While the European Union may seem a good example of this mode, there is still a lot to improve. Sadly, current world politics strongly needs to be improved. Still, globalization contributed to a more healthy world environment, such as The Paris Agreement, which encourages a global effort to fight climate change.
Globalization and its discontents
- The Rich Gets Richer
One of the main disadvantages of globalization is that it primarily benefits business owners and investors, while possibly being detrimental to workers. While globalization increases competitiveness, it also encourages big brands to find alternative solutions to be even more profitable. According to the International Labour Organisation, around 170 million are engaged in child labor, with many in the textile industry to serve brands in Europe and the U.S.
- Reduced Employment In Developed Countries
One of the globalization challenges in developed countries is the loss of jobs to lower cost countries. The Economic Policy Institute estimates that the growing trade deficit with China has led to a loss of 3.4 million US jobs over the past 10 years. This competition with lower wage countries has reduced bargaining power for millions of workers in developed countries and is responsible for driving down salaries, especially in the U.S.
- Tax Evasion Opportunities
Huge multi-national companies can exploit tax havens and dodge tax payments. Globalization creates opportunities for tax avoidance as different countries strive to attract international investments. Recently, major top companies have been repeatedly slapped by multiple allegations. Amazon for instance, has been in the limelight for getting away with $0 federal taxes, all while being a $793 billion company.
Is Globalization Good or Bad?
Our perception of the world has been irrevocably been altered due to the core values of globalization. While the concept in itself has multiple positive benefits, mankind has (as always) found a way around to twist it in his favor. All major players are aware of the shortcomings of globalization and yet, to date not much has been done to resolve the pressing issues.
Globalization can be compared to a snowball rolling down a hill – nothing can be done to stop its progression. Technology advances will only accelerate the process. A few measures could however be taken to ensure the benefits of globalization outweighs its disadvantages. These include signing common trade agreements, enforcing the rules and planning for a balanced trade, whereby trade deficit would be minimized for everyone.
Is Africa The Next Continent To Face Globalization?
Currently, many African countries are reporting high current account deficits. From this point of view, it can be argued that most African countries are yet to face globalization. While a few countries have emerged as top players, such as Ethiopia, Africa as a continent has consistently seen an increasing gap in terms of per capita and the rest of the world.
However, more and more global brands and companies are investing in Africa. Major organizations, such as Facebook, Google and Microsoft are investing on infrastructure, skills and startup ecosystems. The world sees the African continent as the next growth opportunity. Expanding in Africa is often considered as smart move, since opportunities seem limitless on a continent with so many resources, manpower and development opportunities.
Last year has seen super powers like China and the U.S. invest significantly in multiple countries in Africa. Over the next decade, the face of the continent will definitely change due to globalization. Many opportunities in Africa are still accessible at the moment, but as time goes by, competition for a position on the African continent will definitely stiffen.
Are You Expanding in Africa?
Expanding on the African continent can be tricky – the laws and regulations drastically vary from country to country on the continent. However, you can get started the easy way by using the services of a Professional Employer Organization.
Africa HR Solutions can get you up and running in over 48 countries in Africa in a fast, simple and reliable way. Whether you have a registered entity or not, we can assist you with an array of services to facilitate your incorporation almost anywhere on the continent.
As always, we ensure 100% compliance for your business across Africa.