Using an extended example critically discuss the view that a ‘sector matrix’ gives a better strategic understanding of product markets than the concepts of ‘product’ or ‘commodity’ chains.

Economic Globalization an obstacle or an opportunity for Global Sustainable Development
MN2165K THE GLOBAL ECONOMY

Swathi Mohan
100805696

Topic: To what extent is Economic Globalization an obstacle or an opportunity for Global Sustainable Development? Introduction: Globalisation refers to the growing link between nations resulting from an increase in trade people and ideas in one global market place. Globalisation is a concept that has its roots dating back to the ages of Karl Marx, Peter Dicken (2011). Globalisation has become a platform for many developed an developing nation to engage in trade and investment related activities. Cross border investments and international trades are the key elements of Globalisation. Globalisation was introduced in the global economy in mid 1980’s . Introduction of globalisation has resulted the companies to lower the costs especially in terms of transportation, communication and moreover to analyze the economic feasibility of the firms to setup different phases of their productions around the globe based on their economic feasibility.

Globalisation has been focus area of research for academic scholars from mid 1980’s , Globalisation has been termed differently by different scholars. For some of the research scholars Globalization creates a positive technological, political or economic progress. For some of the scholars it creates a dominance of the developed nations over the developing nations. For some globalisation has changed the global business scenario in which the power of the state is defined by the power of firms.
Globalisation has different types of features like economic, social, cultural, political and environmental features. Due to globalisation tremendous changes taken place in global trade and exchanges, and boundary less international integration which includes the international migration, currency exchange, transfer of technology and flow of ideas and information internationally. Globalisation also initiates the change of industrial structures which help to increase the power, productivity, capacity and profitability of that firm. As a result of globalisation the internationalised enterprises depend on subsidiaries and strategic alliances which lead to the comparative and competitive advantage. The cultural taste and priorities also influenced by globalisation through global communication like email and internet. Taking the positive and negative side, challenges and opportunities, could say that globalisation has changed the world system and the trends which is more likely to be continued in future as well. This will result the higher flow of the goods, capital, culture, people, technology, invention and services. One of the benefits of globalisation is increase in production and efficiency. Due to competition among the markets may lead to improved division of labour. Competition among the markets also increase the production, output, higher wage level and better living standards. When considering the problems of equity and distribution it could be a burden to poor and developing countries that has to pay the burden of exclusion and marginalisation sharing the benefits of globalisation. So there is an essential of making market favour to the poor as well by decreasing the social barriers and help the poor countries to get along with the risks and shocks. Globalization has created a new potential for the development and wealth creations for the firms which can be analyzed based on different views mainly based on political, business and economist view.

Political View:
According to Ohmae 1995 and Scholte 2000 the idea about globalisation is bringing about the demise of sovereign national state as global forces undermine the ability of governments to control their own economies and societies.
In the world of Politics Globalization is termed as the widening deepening and ease of access of the world interconnectedness and the issues or the outcomes of these issues is in the study of world politics.

Business View: On a business perspective globalization refers to a wide range of business activities undertaken across national borders. Globalization has favoured lot of business activities and drawn attentions of many business executives. According to Al-Rodhan 2006, Globalization is a process that encompasses the causes, course, and consequences of transnational and transcultural integration of human and non-human activities for business across national boundaries. Globalisation helps in declining in restrictions for the business to selling their products in other countries other than the home country. There by helping business to sell their products internationally and lower prices according to consumer affordability.

Economist view:
An economist view globalisation is defined as an economic interdependence of geographically distinct people. According to Heron (2008) explains that
Globalisation is about movement of goods, resources and enterprises across national boundaries seeking cheaper resources to maximize profit and efficiency”
The economic view of globalisation is closely linked to the political view. Political aspect of a country helps to facilitate the changes in the economic process of the country.

Pons and cons of economic globalisation:

Globalization can create conflicts at different levels, especially when the counties that benefit from globalization have been richer countries of OECD. There has been a wide range of economic disparities especially in case of income. Mainly with many of the Asian developing nations joining the club of richer countries and poorer countries of Africa and Latin American and some of the European nations going poorer. The problem of distribution of income remains the main challenge of Globalization. There are also many challenges that rooted because of the interdependence of the economies. The local economic crises and fluctuations of one country started affecting the economies of the other countries. One of the main examples being the financial crisis of Asia started in Thailand in 1998 and spread to other south east Asian nations and international financial systems. This was one of the biggest examples of financial vulnerability in the financial systems due to globalization. Recent subprime mortgage crisis and subsequent economic recessions was one of the main examples of the inter connectedness of countries due to globalisation. These have also led to economic warfare and even military actions in some cases. However on analyzing the recession of 2009 event though there has been a wide hit in the growth of GDP in many countries the economies of china and India showed a strong positive sign and maintained a sturdy GDP growth which was a big blow to all the critics of globalisations.
Globalisation has been rise since the end of cold war. Developed economies as seen a wide jump in there GDP during these periods. But off late the scenario has changed the there has been a wide jump in the GDP of developing nations like India and China. Increase in Foreign Investments can be used as one measure of growing economic globalization. There has been a huge inflow of FDI into the developing economies of Asian countries.
The specialisation of companies and people in creating goods and services in a globalized economy through global trade contribute to the highest prosperity but can lead to monotony because Globalisation creates monotony in production allocating production levels to the most suited regions. For example production of rice in a region would cause the soil to become in fertile and creates an ecological imbalance.

Another impact of globalization is the impact on sovereign countries, they have lost control over their economies and the power has moved to the developed nations, multinationals and international financial institutions. This highlights the fact that national sovereignty has been systematically undermined by the effects of globalisation. This impact had a greater effect on the poorer and developing countries, Leading to an increasing cynicism among political elites and their citizenries. This has led for an increase in national sentiments, populism and protectionism among the citizens which in turn led to political movements against globalisation. The impact of globalisation can also become a scapegoat especially in case of failure of national policies like causing high unemployment and undermining social welfare during different phases of development. Globalisation has also created a great source of regional disparities which in turn has led to initiation of many warfare and destabilisation in many regions. For example they have created ethinic irredentism, violence and regional conflicts like wars from Iraq to Afghanistan to horn of Africa. The interconnectedness of globalisation has also led to evolution of terrorism , environmental impacts like global warming etc.

How globalization impacts sustainable development?

Globalisation is featured by both endogenous factors and exogenous factors i.e. Its is influenced by factors like the rise in technology as well as the decision making of the governments like the foreign trade liberalisation. According to Pearce and Barbier (2000) sustainable development contains three main components environment social and economic development. Globalization has impacted this entire factor. The recently published framework by OECD for sustainable development contains four main factors.

Wider use of Markets:
They suggest increasing the scope of expanded use of market based approach to provide signals to internalise markets and social externalities in an efficient manner. On the environment side this is likely to involve more use of environmental taxes and subsidies.
Strengthen decision Making Process:
Sustainable development can be achieved at all levels by coordinating and improving the effectiveness and efficiency of policy interventions. In other words this also states that the governments should integrate environmental and social policy needs into sectors and bring in transparency in policy design implementation
Harness Science and Technology:
Scientific advancements and technology are one of the major forces underlying in increasing productivity and living conditions of people. This imply that there is a need for the governments to spend more on the researches and technology enhancements.
Manage Links to the Global economy:
The developing countries should be more a major player in the global economic activities and international trade and investment flows are major concerns of sustainable development. Trade and Investment flow need to be as compatible as possible with society’s environmental and social policy objectives.

The increasing interconnectedness both on the selling as well as on the market with the introduction of globalization has led to a sharp increase in the division of labour and a focus on the competencies of every individual at all the levels. Multinational companies restrict to good and services offered at high quality at lower prices. The global trading of goods and services has led to a worldwide increase in production. According to world bank production of goods and services increase by 45% during the past decade due to the introduction of globalisation, The growth data mainly indicates from the developing economies like China, Brazil, India, Russia and South Africa. Especially in case of china with its huge population in manufacturing sector has met the majority of demand from the western world. Developing countries like India which was once a British colony mainly exporting Tea and cotton has become a global player in the international markets. The economic power revelations are drifting away from strong holds of developed countries like US and EU states to developing nations like China Inda Brazil etc.
Globalization has helped to reduce poverty World Bank estimates reveal that number of people who lived on less than one dollar a day decreased from 2.5 billion in 2004 to 260 million in 2007. This was mainly due to the poverty reduction in countries like India and China. At the same time we could see that there is wide increase in income difference

The anti-globalisation and the debate

One of the main challenges faced by globalisation is that it requires grater participation efforts among the developed countries and the poorer countries and the developing nations. Joint efforts are required for creating new political structure and restructuring existing structure in order to bring a sustainable economic globalisation. This is not an easy effort for the governments as it require a better clarity and transparency in our economic systems, appropriate accountability and above all a vast reserve of political will. The main challenges remain with distribution of income and equally distributing the gains of globalisation, In short the governments can choose two side approach to bring in a sustainable economic development Firstly by developing or improving the policies for domestic policy making among developed nations and secondly by improving the systematic use and advancement in technology. This approach would especially help the economies of developing countries because they are more susceptible to global capital volatility. This would help them to rely less on foreign inflow of capital and generate wealth within the economy. According to Dani Rodrik (2009). has emphasised the centrality of locally financed investment for the success of small, open developing economies, and hence there is a need for them to increase private and public savings. Public spending among developing countries can, therefore, play a socially and economically efficient

Conclusion:

Globalisation posses a deep reaching roots and also a force that helps to influence the direction of the nation. The aim of the globalisation is to remove all the difficulties and privatize all the resources and services. There are few factors that influenced the globalisation that includes the sophisticated communications, transportation technologies and services, migration and immigration and people started moving from places to places, a level of economic activity that helps to grow the market by combining the industrial markets and these international agreements helps to reduce the cost of doing business in foreign countries. Through this process of globalisation the world economy has integrated and increased. This integration helps to advance the trading of goods and services, the capital flow and made it easy for the migration of people across the world there by bringing in a sustainable economic development.. In 1980’s this word have been used when the internet and technology helped to increase, and faster the business across the world. For sure the globalisation has positives effect universally but there were protest against the WTO regarding the hazards of globalization. There were many anti globalisation movements like the consumer boycotts on the goods produced by multinational companies. In Short it can be concluded that market liberalisation by itself does not solve all the problems, it has caused severe damages to poor nations.
Globalisation is the key the factor in today’s business world. The new era of Globalisation brings in new challenges and opportunities. I believe sustainable economic development can be achieved only by more active participation from all the levels of the economy. It is advisable to consider all the factors like environmental factors, Employment factors when taking business decision regarding globalisation in an economy. Scientific use of technology and bringing a clear transparency in government governance would help the economy to bring in a sustainable economic development.

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