Globalization: Components, Factors, and Impact
The Various Components of Globalization
Economic globalization is the best-known aspect of globalization. Large companies operate in all regions of the world, while smaller ones must adapt their business strategies to survive the increased competition.
- There’s a growing globalization of culture and consumption habits of the population. Large companies favor the standardization of culture, fashions, tastes, and even the landscape of the places where we shop.
- There is also a globalization of information. Media groups increasingly control the press, radio, or television in a global village. We live in a time where we get more information, although it does not necessarily mean increasing our knowledge.
- Finally, we are experiencing a globalization of environmental problems. The abusive exploitation of natural resources or urban and industrial pollution are global problems that affect all humanity and influence the livelihood of future generations.
A World of Economic Flows
The first international flow is represented by trade, which is the exchange of products between countries. Exports are goods that firms located in one country sell beyond its borders. Imports are purchases from other countries. Countries seek to gain a positive or balanced trade balance.
A second stream is made up of capital investment. Foreign direct investment is when businesses in one country set up branches or buy existing companies in another country. Investment in the stock market is trading company shares or bonds. This is not direct investment in the territory, but it exceeds a trillion dollars every day, which is equivalent to more than 40 times the value of international trade.
Factors Driving Globalization
- Technological improvements in transport, and especially in telecommunications, reduce the obstacle of distance.
- International economic institutions favor the release and opening of markets.
- Regional economic unions accelerate the disappearance of borders for capital, goods, and information.
- For large companies, globalization is good business because it allows them to expand the number of buyers for their products and move their operations to countries where labor is cheaper.
Location of Multinational Enterprises
If you look at the location of the headquarters of multinational firms, the dominance of developed countries is still evident. If you consider the distribution of the subsidiaries, the division is less unbalanced. Most of them are located in other developed nations of the European Union and the United States. Latin American countries have lost attractiveness for investment, except for Mexico, where there are many maquiladoras (assembly plants) that manufacture at very low cost and sell all their production to the U.S.
The Transport of Goods
Long-range transport is increasingly important. Products from Japan, China, and Taiwan are sold in U.S. and European markets at competitive prices because the cost of transport is increasingly low. The exchange of goods is carried out by ship. To make the full journey from where a product is made to the target markets requires a transport chain. The joint use of cargo ships and containers has given more weight to larger ports.
Passenger Transport
Globalization also entails a large increase in passenger flows over long distances. Air transport is currently the most widely used. It uses large aircraft for longer routes in order to reduce the price of tickets. This requires concentrating passengers on routes through supply and dispersal systems.
Internet: The Network of Networks
Since the 1980s, the union of information technologies and telecommunications generated enormous potential for the transmission of information in real-time. Initially, the Internet was used for purely military purposes. Later, it began to be used for education and research. These are some of the consequences of the Internet:
- It enables the transmission of text, data, images, and other information between computers.
- The Internet has also revolutionized the way companies and institutions involved in very different activities work.
- Finally, the role the Internet has played in the economic globalization process has been key in allowing many companies to acquire a global dimension.