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What is globalization?

For our purposes, we’re going to adopt the definition of globalization attributed to Sir Richard Branson, chief executive of the Virgin Group: “Globalization is the process by which geographic constraints on economic, social and cultural arrangements recede, thus increasing our global interdependence.”

Branson R. (2007) Globalisation Laid Bare, p 39, Gibson Square, London

The key words here are “increasing our global interdependence.” But are we becoming more interdependent than in the past? Some people have pointed out that the world was highly interdependent at the end of the nineteenth century: trade barriers were low and international goods flowed freely around the world. But others have responded to point out that twenty-first century interdependence is of a completely different magnitude. Multinational companies, the worldwide web, satellite communications simply did not exist 100 years ago. This has increased the scope for companies and individuals to interact with each other in ways that were previously impossible.

Global interdependence in the fashion industryFor example, silk ties and scarves may be designed in Paris, the silk sourced from China, woven and printed in Italy and sold in the USA: all these business activities are interlinked across the world.

But let’s be clear. There are many other answers to the question of ‘What is globalization?’ This website is primarily focused on a business perspective – hence the choice of the above definition. This does not mean that other views are invalid or have little meaning. Rather that there is not the space to explore all these perspectives on this website.

So what do we mean by interdependence?

To understand globalization better, it is worth exploring interdependence further. This has been explained by Held and McGraw:

“[Globalization] suggests a growing magnitude or intensity of global flows such that states and societies become increasingly enmeshed in worldwide systems and networks of interaction. As a consequence, distant occurrences and developments can come to have serious domestic impacts while local happenings can engender significant global repercussions. In other words, globalization represents a significant shift in the spatial reach of social relations and organization towards the interregional and intercontinental scale.”

Held, D and McGraw, A (2003) The Global Transformations Reader, 2nd Ed, Polity Press, Cambridge, UK – incidentally useful reading for those who want to delve into other aspects of the topic.

Singapore High Rise‘Interdependence’ means more than flows of trade, financial movements between the world’s financial centres and travelling to new locations. It means that actions in one part of the world have reactions in another part of the world. For example, shoppers in the Raffles City Shopping Mall in Singapore will celebrate Christmas – hence the decorated tree outside the mall – alongside people in other parts of the world. Globalization helps to link people in different countries around the world by common interests, values and events.

Interdependence means that there is increased global interaction: networks, cultural awareness, organisational issues and the use of web-based network messaging sites such as Facebook and QQ (in China). Our exchange means that we come to interact more with each other than in the past. For example, this website is now viewed every month by people in over 60 (and rising) countries: this would have been incredible ten years ago.

How is interdependence supported? Evidently by transport and communications. In addition, it is also supported by global customer demand, by the exchange of knowledge, by MultiNational Enterprises and by global actions and organisations like the Olympics, the United Nations, the World Trade Organisation and the meetings of world leaders – the G7 and the G20.

Some myths and realities of globalization

It’s a myth to regard globalization as being the only consideration. It is important to be clear that national and regional issues and decisions are still important. For example, national country considerations still apply with regard to the law, defence and cultural values. Equally, regional organisations and agreements, like membership of the European Union and ASEAN, can still have a profound influence on every aspect of our lives, including those relating to business.

But does this mean that globalization is nothing more than a mere claim as some commentators have suggested? Is the concept so vague as to be incapable of rational analysis and therefore largely useless?

In defence of this viewpoint, there is no meaningful global culture and no clear geographical boundary for global activity. Moreover, the world economy still relies on individual powerful nations – like the USA, China and Germany – to provide the basis of world growth and increased wealth. Such commentators have argued that globalization is little more than international activity redefined on a grander scale.

This website understands this perspective and recognises that some business and other activities are essentially international in scope, not global. That is why we make the distinction used in the opening sections of the website: the difference between international, multinational and global.

But the reality is that globalization is a meaningful concept for some companies, some nations and some strategic situations: this website presents evidence for this where necessary.

Is globalization just a way to reinforce the power of some nations and companies?

There can be no denying that globalization has helped some nations to become and remain powerful: the USA and its possession of the ubiquitous dollar currency remains a major strength of that country. Equally, the dominance of some companies, like Microsoft in PC software and Nestle in some food products, also makes them a powerful influence in the world.

Some commentators, particularly Socialist writers, have argued that this means that globalization is essentially concerned with the justifying the concept of free market competition. They say that such competition allows the already powerful multinational companies – mainly from Western nations – to maintain their market dominance and keep out new companies from developing countries. They suggest that globalization perpetuates the power of Western multinational enterprises. According to such commentators, globalization at a more general level is a way for western countries to perpetuate Western Imperialism.

The problem with this argument is that it does not fit the facts.

Globalization SamsungCompanies from Korea, like LG and Samsung, have become powerful in consumer electronics despite not being located in the Western hemisphere. Equally, countries like China in manufactured goods and India in computer services have become powerful in those areas without being located in the West.

Essentially, the evidence shows that national power has shifted towards China, India, Russia and Brazil over the last five years. It is continuing to move towards such countries, perhaps to be joined by at least one African or Middle Eastern country over time – South Africa? Nigeria? Egypt? Iran?

What does this mean for globalization? It means that power is continuing to shift around the world, as it has done for many centuries. Globalization adds another dimension to such power shifts but is not exclusively related to one group of countries.

Conclusions

Globalization is multidimensional: there are political, economic, social, technological and financial aspects to the concept. It is sometimes used inaccurately and misleadingly. It is an important aspect of international business strategy. But remains only one aspect of a much broader approach to strategy development.

The next section of this website explores the relationship of globalization to business strategy.

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