Understanding Globalization
As plengdut.com alluded to earlier, globalization is the process of focusing resources (people, money, and physical assets) as well as the goals of an organization to seize opportunities and respond to global market threats (Rusdin, 2002). Globalization has changed the way the world does business. Even though it's still in its early stages, it can't be stopped. The challenges facing businesses and individuals are learning how to live with them, managing them, and taking the benefits they offer.
The International Monetary Fund (IMF) defines globalization as the growing interdependence of the economies of the world countries through increasing the volume and diversity of cross-border transactions in the flow of goods, services, and international capital and also through the spread of technology faster and more globally.
In the current era of globalization, the world sees the impetus of global business to resemble the situation before World War I. However, the restraints of technology and communication severely limit the scope of globalization at that time. After the end of World War II, it began with the resounding power of Western countries that supported "free" trade and investment policies in the world. Unfortunately, this idea was not responded quickly.
Over time, the number of companies dealing across borders has mushroomed, as has the volume of international trade. The International Chamber of Commerce (CICC) cites statistics showing international trade in goods and services worth more than US $ 6 billion. The flow of global capital has exploded. Foreign Direct Investment, which is involved in cross-border business or property control, is highest in US dollar volumes.
The accumulation of foreign direct investment shares was more than US $ 735 billion 10 years ago. The sale and purchase of cross-border stock and equity by American investors increased from the equivalent of nine percent of gross domestic product in 1980 to 170 percent in the mid-1990s. Daily foreign exchange turnover increased from US $ 5 billion in 1973 to US $ 1.5 trillion in 1995. The volume of cross-border currency transactions in London, Tokyo and New York alone reached US $ 1.5 trillion per day in 1997, more than twice the volume of the previous five years (Sadono, 2003).
Market Globalization
Market globalization refers to the fact that some industries are basically interconnected and some forces in national markets are integrated into the influence of global markets. This shows that every global product must also be accepted by consumers in the destination country according to the specific characteristics and purchasing behavior in the country.
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| Some examples of global companies with products that have been accepted by consumers are Citicorp credit cards, Coca-Cola, and Levis's Jeans or music sung by Madona or Nirvana, MTV, Sony Walkmans, and McDonald's hamburgers who have shown symptoms of successful global products. accepted by the world's average consumer (Rusdin, 2002). In globalization, companies that do business on an international scale will eventually become more efficient because they benefit from large economies of scale. |
Productivity will be boosted and living standards everywhere have the potential to increase as the world becomes richer and more prosperous due to globalization. There is plenty of evidence to support this profit argument. According to the United Nations Development Program (UNDP), total global wealth is growing faster than the population.
UNDP estimates that in the 1990s, around 500 to 600 million people in the developing world had reached income levels above the poverty line. Then, over the next 30 years, two billion more people will follow. Meanwhile, between 1965 and the early 1990s, the number of jobs in manufacturing and service industries, both in the developing world and in the industrial world, more than doubled to 1.3 billion.
Everything is improving because China, with a population of 1.2 billion or one in five world population, is opening up to the global market economy. The collapse of the Soviet bloc and economic liberalization in India have brought an additional 1.5 billion population to the global consumer market (Sadono, 2003).
Globalization of Production
Globalization of production refers to the tendency among several companies to provide goods and services from different locations around the global market to benefit from the differences in each country, especially the cost advantages and quality factors of production (labor, land, and capital). On the other hand, the company also expects lower costs and improved quality and function of their products that can encourage them to compete effectively.
In this case, look at how the Boeing 777 type consisting of 132,500 important components produced at 545 parts manufacturing locations in different regions. Likewise, with eight Japanese suppliers providing spare parts for doors and wings, so also suppliers from Singapore made doors to open tires during landing aircraft.
Some of Boeing's parts are produced by foreign suppliers with different activities and achievements. As a result, a global supplier was created to provide a final product that gave Boeing the opportunity to win the competition so that it could control the largest market share for aircraft followed by its competitor, namely Airbus.