How Globalization Affects Developed Countries
The phenomenon of globalization began in a primitive form when humans first settled into different areas of the world; however, it has shown a rather steady and rapid progress in the recent times and has become an international dynamic which, due to technological advancements, has increased in speed and scale, so that countries in all five continents have been affected and engaged.
What Is Globalization?
Globalization is defined as a process which, based on international strategies, aims to expand business operations on a worldwide level and was precipitated by the facilitation of global communications due to technological advancements, and socioeconomic, political and environmental developments. The goal of globalization is to provide organizations a superior competitive position with lower operating costs, to gain greater numbers of products, services and consumers. This approach to competition is gained via diversification of resources, the creation and development of new investment opportunities by opening up additional markets, and accessing new raw materials and resources. Diversification of resources is a business strategy that increases the variety of business products and services within various organizations. Diversification strengthens institutions by lowering organizational risk factors, spreading interests in different areas, taking advantage of market opportunities and acquiring companies both horizontal and vertical in nature. Industrialized or developed nations are specific countries with a high level of economic development and meet certain socioeconomic criteria based on economic theory such as gross domestic product (GDP), industrialization and human development index (HDI) as defined by the International Monetary Fund (IMF), the United Nations (UN) and the World Trade Organization (WTO). Using these definitions, some industrialized countries in 2010 were: Austria, United Kingdom, Belgium, Denmark, Finland, France, Germany, Japan, Luxembourg, Norway, Sweden, Switzerland, and the United States. (The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it? Read What Is The World Trade Organization?) Components of Globalization
The components of globalization include GDP, industrialization and the Human Development Index (HDI). The GDP is the market value of all finished goods and services produced within a country's borders in a year and serves as a measure of a country's overall economic output. Industrialization is a process which, driven by technological innovation, effectuates social change and economic development by transforming a country into a modernized industrial, or developed, nation. The Human Development Index comprises three components. Specifically, a country's (a) population's life expectancy, (b) knowledge and education measured by the adult literacy and (c) income. The degree to which an organization is globalized and diversified has bearing on the strategies that it uses to pursue greater development and investment opportunities. The Economic Impact on Developed Nations
Globalization compels businesses to adapt to different strategies based on new ideological trends that try to balance rights and interests of both the individual and the community as a whole. This change enables businesses to compete worldwide and also signifies a dramatic change for business leaders, labor and management by legitimately accepting the participation of workers and government in developing and implementing company policies and strategies. Risk reduction via diversification can be accomplished through company involvement with international financial institutions and partnering with both local and multinational businesses. (Investing overseas begins with a determination of the risk of the country's investment climate, read Evaluating Country Risk For International Investing.) Globalization brings reorganization at the...
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