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Business in Context – Globalisation

Explain briefly the term “Globalisation” and show why some writers believe it is not a new phenomenon. Discuss the major factors which are said to have caused the globalisation of world trade since 1970. Wherever possible use examples of a particular country or particular firms. Globalisation is very important in the world of business and the processes associated with it are essential for healthy and successful business development. The majority of the economies’ success is due to different countries interlinking and trading amongst others which is what globalisation is all about.

Globalisation is based on the concepts of freedom and openness within the economy and inter-dependence on a global scale. The term has accumulated many meanings and interpretations over the years and no simple explanation can be given that would be able to cover the whole concept. Globalisation generally refers to the process of transforming local phenomena into a world-wide one. Trade and the growth of trade is a key element that lies at the heart of globalisation.

Economic globalisation is all about national economies coming together and integrating into the international economy through the use of trade, foreign investment, the ever increasing spread of technology and things alike. It is also

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about the removal of barriers between national borders in order to enable the flow of capital, labour and goods. Globalisation has more than one dimension and is concerned with various issues relating to trade, capital flow, markets and things alike. Globalisation is also a combination of economic, technological, and political factors. Four indicators of globalisation were identified by Griffiths and Wall.

The four identified where; New markets, new actors (institutions), new communications, new rules and norms. Many stress the idea that globalisation is not a new thing and so therefore it can be looked upon as a continuous development process in which changes takes place. Needle (2009) says “Globalisation is a process in which the world appears to be converging economically, politically and culturally. It is seen by many as a fundamental change where national borders become irrelevant, a process accelerated by developments in information and communications technology”.

Putting it into a more simplistic definition he says; “Globalisation is about the increased interlinking of the world’s societies and their economies”. There are many definitions of globalisation, which one to use largely depends on the context in which globalisation is being discussed. Many writers perceive globalisation as an old phenomenon because they believe it has been around from the onset of the 14th century. Also economists have been using the term since the 1980’s. It was only until the late 1990’s that the concept became well known.

Charles Taze Russels, – an American Christian minister and entrepreneur, was responsible for the earliest written theoretical concepts of globalisation. It is argued that early forms of globalisation originated from historic empires such as that of the Roman, Parthia and the Han Dynasty. Portugal is an example of a particular country which embraced globalisation from an early stage. The 16th century brought about a wide scale link between economies and cultures through Portugal’s global explorations. The colonisation of the Americas by Portugal and Spain brought about a lot of European trade during the 16th and 17th century.

Global integration was on the increase. Globalisation is believed to not be a new phenomenon because it is evident that it has been around from the late 19th century. It may not have been widely acknowledged because the increase of globalisation became slower after the first World-War. Many believe that the slowdown was brought about by countries introducing various barriers to entry in an attempt to anxiously protect their own personal industries. Globalisation increased at a faster rate towards the period of the late 2oth century.

An American journalist (writer) Thomas Friedman argues that globalisation has brought about a permanent change to the world and the changes have had both positive and negative implications. International trade, investment and international finance have been the result of progressive international integration since the 1950’s. People came to work in mines and plantations after the abolition of the slave trade so there was an increase in labour migration. During the early 1970’s there was a decrease in labour migration as people stopped coming from developing countries to industrialised communities.

Even now there are many laws that have been enforced to prevent any random individual from entering international boundaries. Since then globalisation has found substantial replacements for the mobility of labour. The solution was found in the form of investment and trade flows. This is ideal because of the fact that industrialised countries import goods that are produced by the use of scarce labour and they export the finance that is used to pay the individuals providing the labour in other countries.

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