Impact of Globalization on International Trade and Industries

This report discusses the impact of globalization on different countries and industries, positive and negative impacts on developed and developing countries, and recommended steps to regulate unfavorable implications of globalization.

Running head: INTERNATIONAL TRADE AND GLOBALIZATION
International trade and globalization
Name of the student
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Executive summary
The aim of this report is to discuss about the impact of globalization in different countries and
industries. In doing so, a few particular countries are being identified that are highly affected due
to globalization such as the United States and India and China. This denotes that both the
developing as well as developed countries are having the impacts of globalization. In addition,
this report also discussed about the positive and negative impacts of globalization on the
developed and developing countries. It is concluded that each of these groups of countries are
facing both positive as well as negative impacts with the major impacts are on the domestic
industry. Based on these limitations identified, a few recommended steps are discussed that can
help the countries to regulate the unfavorable implications of globalization.

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Table of Contents
Introduction......................................................................................................................................3
Countries affected by the globalization...........................................................................................3
Industries affected by the globalization...........................................................................................5
Positive impacts of globalization.....................................................................................................5
Impact on the developed countries..............................................................................................6
Impact on the developing countries.................................................................................................7
Recommendations............................................................................................................................8
Conclusion.......................................................................................................................................8
Reference.........................................................................................................................................9

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Introduction
The current business scenario is highly influenced by the concept of globalization with
majority of the countries across the world got involved in the process. Globalization refers to the
process of internationalizing the country and business affairs and getting depended on each other
based on their competitiveness in different sectors. Thus, with the initiation of the concept of
globalization, social, economical and political factors are getting uniform and standardized with
global trends taking over the respective and indigenous trends in different countries. On the other
hand, initiation of the globalization is creating huge opportunities as well as challenges for the
contemporary business organizations in their business operations (Jaumotte, Lall and
Papageorgiou 2013). It is due to the reason that contemporary business entities will have to now
measure the global factors rather than just determining the national factors. In the recent time,
there are number of criticisms for emerged against the concept and utility of globalization and
these that there are number of negative impacts getting emerged for globalization. There are
certain views that the developed countries are getting more benefited from the globalization
while some other views states that it is the developing economies, which are getting advantages.
This report will discuss about the major countries and industries that are getting affected
due to the initiation of globalization. This analysis will help to have the understanding about how
the concept of globalization is affecting different sectors. In addition, the negative as well as
positive impact of globalization will also be discussed from different perspectives. On the basis
of the identified factors, a few recommended steps will be discussed.
Countries affected by the globalization
One of the major of beneficiaries of globalization is the United States as they are the flag
bearer of the capitalistic and open market economy in the world. Globalization is the major
contributor in the economic development of the United States. This is due to the reason that
American economy has not faced the shortage of scare resources because of globalization. There
are number of resources such as coal, which are not in abundance in the country but they are
externally sourced from other countries. This is made possible by the concept of globalization.
On the other hand, the acceptances of the American dollar as the preferred currency for global
transactions also helped the corporations of the United States to have the higher bargaining
power in the international trade (Carmody and Taylor 2016). The current monopoly of the
American multinationals across the world is due to the emergence of globalization, which
enabled them to tap the potential countries across the world. Hence, due to the initiation of
globalization, markets for the American goods got increased. This is causing positive
implications on the American economy.

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Figure: 1
Inward and outward flow foreign investments in the American economy
Source: (piie.com 2019)
The above figure shows that both the trend of inward and outward flow foreign
investments is gradually increasing for the United States from 1970 till 2015. Globalization is the
major contributor in this case because of the fact that it paved the way for easier international
trade and transactions between the countries. Hence, with the growth of the outward flow of
foreign investments from the country, American corporations are tapping and operating in the
global markets, which is further increasing the potentiality for the American brands. On the other
hand, increase in the inward flow of globalization, the cash flow in the economy of the United
States is increasing. Thus, from the above figure, this can be concluded that the United States is
one of the major benefiting countries due to globalization.
Apart from the United States, India and China are two other countries among the
developing economies, which are also getting benefited from the emergence of globalization.
Globalization has affected the Indian and Chinese economy by means if inflow of the foreign
investments. This is due to the reason that initiation of the globalization reduced the barriers for
the developing countries to seek investments from other countries and trading with them. In the
current business scenario, India and China are the leading countries in terms of inflow of the
foreign investments. Both these countries are also benefitting in terms of the optimal utilization
of the national resources. This is due to the reason that with the opening of the international
opportunities due to globalization, resources abundance in these countries is getting properly
utilized (Meyfroidt et al. 2013). The foreign investments coming in the country also utilizing the
national resources and this is enabling in getting the maximum outcome from the available

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resources. For instance, human resources in both India and China are available in abundance and
thus the foreign investments are coming in the country to tap. Currently, all the leading
multinationals from different countries such as IBM, Apple and Toyota are having their
operations in these countries to tap the abundance of skilled human resources.
Industries affected by the globalization
Apart from the countries, it is the industries that are having influence of globalization in
their operations. However, the impact of the globalization is different in different sectors. One of
the major sectors being affected by globalization is the automobile sector. This is due to the
reason that automobile industry requires higher sets of investments and thus they need larger
market areas for favorable return. With the help of the globalization, automobile industry is
being able to tap the global market with having larger opportunities. For example, Toyota is
based in Japan and is having their operations across the world. They are also competing for the
market leadership status in the world. Without the initiation of concept of globalization, Toyota
would have to operate within the national boundaries of Japan with having limited market areas
(Lansbury et al. 2013). However, they are currently having their manufacturing units and
operations in different countries, which is helping them to sale more cars. Hence, it can be
concluded that globalization is increasing the long term viability for the automobile market. It is
also helping the automobile industry from the developing and smaller economies to gain the
viability in their business operations. Smaller economies are not having the favorable business
opportunities for the large scale investments such as automobile and thus tapping the global
market is posing better opportunities for them. With the help of globalization, they are facing
lower level and intensity of issues in entering in the foreign markets. It is reported that initiation
of globalization is also changing the trends of the automobile industry due to the reason that
entities are getting the access to latest technologies and trends along with increase in the
competition in the market (Gurgul and Lach 2014).
Apart from the automobile industry, globalization is also having higher impact on the
retail sector. This sector is witnessing huge change in the recent years in terms of the trends and
business approaches. However, the impact of the globalization for the retail industry is different
to that of the automobile industry as the former is witnessing the social globalization while the
later is having economic globalizations. This is due to the reason that automobile industry is
witnessing the influence of globalization in operating in the foreign markets while retail industry
is witnessing the rapid change in the taste and preference pattern of the customers due to
globalization (Lee and Lin 2016). Indigenous people are getting more influenced by the global
trends and this is also causing the retail industries in different countries to cope up with these
changes in staying relevant. However, on the other hand, retail industry is also tapping the
advantage of economic globalization also due to the reason that foreign market opportunities are
also getting tapped by them. For example, Walmart is operating across the world with having
their presence in different countries. This is made possible due to the globalization as they are
facing lower issues and barriers in operating in foreign countries.
Positive impacts of globalization
There are number of positive impacts of globalization are evident in the current scenario.
However, the extent of these impacts is different in different perspectives. Mainly different
counties are witnessing different level of impacts of globalization. The following sections will

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discuss about the positive impacts of globalization being faced by the different groups of
countries.
Impact on the developed countries
Majority of the developed countries are having smaller market size in terms of population
and thus having limited market opportunities. Thus, with the help of globalization, corporations
from the developed countries are expanding their business in the foreign markets, which is
further causing the enhancement of the economy. Developed countries are having abundance of
resources but not having the suitable market opportunities to utilize these resources. Thus,
globalization is enabling these countries to tap the foreign markets and increase the market areas
for their available resources. It is also identified that with the help of globalization, developed
countries are also getting benefited by having competitive market conditions. This is due to the
reason that companies are outsourcing their manufacturing process to different countries to have
the manufacturing process in lower opportunity cost (Simas et al. 2014). Thus, the customers
from the developed economies are getting the advantages of low cost of products. It should also
be noted that developed countries are also gaining the benefits of political leadership due to the
help of globalization. This is due to the fact that the more will be the foreign investment of a
develop country; the more will be their influencing power in the host country. In this case, the
United States is the leading example. They are the superpower in the current global scenario
mainly due to their presence in the form of investment in different countries. Thus, it can be
concluded that the concept of globalization is getting utilized as the political tool as well by the
developed economies and this can be considered as their advantages (Beeson 2014).
According to Tvaronaviciene, Grybaite and Tuncikiene (2013), it is the developed
countries, which are getting benefited from the initiation of globalization and not the developing
and underdeveloped countries. This is due to the reason that developed countries are accused for
exploiting the resources of the underdeveloped countries in their interest. Moreover, it is also
being stated by the authors that major flow of the fund and capital is evident towards the
developed countries from the developing and underdeveloped countries as the major
multinationals are from the developed countries. These corporations are investing in different
countries by leveraging on the concept of globalization and earning profits. Thus, developed
countries are getting economically stable and undeveloped countries are getting exploited.
However, on the other hand, there are number of negative impacts of globalization also evident
in the case of developed countries. These negative factors prove that developed countries are not
only having the benefits from globalization. One of the major negative impacts for the developed
countries is the impact on the employment. Globalization leads to the emergence of the
outsourcing process, which is taking the toll over the employment scenario of the developed
countries. For example, IBM of the United States is outsourcing their customer services to the
third party vendors in India in order to have more cost effectiveness in terms lower cost of
operation. However, due to the outsourcing of the jobs, rate of unemployment is on the rise in the
developed countries. In addition, it is stated by Gurtu, Searcy and Jaber (2016) major developed
countries including the United States are the victim of outsourcing and off shoring process. It is
also being stated by the authors that not only the corporations from the developed countries are
tapping the global market but also the corporations from the developing and underdeveloped
countries. For example, the smartphone brands from China are ruling the global market and
leveraging the opportunities posed by globalization.

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Entry of the affordable alternatives in the country is affecting the viability of the domestic
industry due to the reason that the average cost of production of the domestic industry of the
developed countries is more to that in the developing countries. Thus, the imported goods are
affecting the domestic industry. As per the reports, this situation is also causing issues between
the countries. For example, the recent trade war between the United States and China is the
prime example of the negative impacts of the globalization. This is due to the reason that United
States’s domestic steel is heavily affected by the cheaper imports from China, which caused
imposition of tariffs on the imports (Ezcurra and Rodriguez-Pose 2013). Hence, it can be
concluded that apart from the advantages gained by the developed countries from the emergence
of globalization, there are number of disadvantages also being faced by them. Developed
countries are also facing the issues of getting depended on the resources of the undeveloped and
developing countries, which is in turn reducing their bargaining power.
Impact on the developing countries
Developing countries are also having implications from the initiation of globalization
similar to the developed countries. One of the major positive impacts of globalization for the
developing countries is employment opportunities. This is due to the reason that reduction in the
employment opportunities in the developed countries is having positive impacts. Due to the
outsourcing and off shoring process, employment potentiality is gaining in the developing
countries. For example, India was previously an agriculture based country, which after the
initiation of globalization became service based economy. Thus, it can be concluded that
globalization is having direct impact on the economic development of the developing economies.
Moreover, it is also identified that globalization is helping the developing countries in optimally
utilizing their available resources. Corporations from the developing countries are not having
expertise and capability similar to the corporations from the developed countries in tapping the
national resources (Vivarelli 2014). Thus, globalization is enabling them to attract foreign
investments in different sectors and utilize the available resources, which is further developing
their economy. The recent growth of economies of the developing countries especially the BRIC
countries is due to their access to the global market. With the help of the globalization,
developing countries are also getting competent enough in posing challenges to the developed
countries. It is already evident in the forms of India and China becoming the topmost countries in
terms of economical growth.
However, on the other hand, there are number of negative impacts also being faced by the
developing countries due to the globalization. The major challenge for the developing countries
is reducing the wealth drain. This is due to the fact that foreign investments coming in the
countries are ultimately draining the profits to the home country and thus causing capital outflow
in the long term. In addition, globalization is also causing exploitation of the available resources
by the foreign investors. The more will be the exploitation of the available resources in the
country; the lower will be their long term competitiveness (Shahbaz et al. 2016). There are
number of recent incidents being noticed where the foreign investors are accused for resource
exploitation and environmental degradation in operating in the developing countries. Income
equality between the developing and developed countries can also get emerged because long
term drain of the wealth from the developing to the developed countries will increase the gap
between the economies. Moreover, with the entry of the foreign investments in the developing
countries, it will become more difficult for their domestic industry to compete. Foreign industries

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from the developed countries are more technologically advanced, which cannot get matched by
the domestic industries of the developing countries. Hence, the more will be the entry of the
foreign investments, the more challenges will be faced by the domestic industries and their long
term viability will be at stake. Cultural imperialism can also be initiated with the help of
globalization due to the fact that global trends will take over the indigenous trends in the
developing countries. For example, popularity of the global food trends such as Dominos and
McDonalds are taking over the indigenous food habits in different countries. Hence, diversity of
the society will be affected due to globalization and will increase the monopoly for the
corporations of the developed countries.
Recommendations
 It is recommended that global authorities and councils should have the responsibility of
managing the equality between the developed, developing and underdeveloped countries
in the international trade. Already the global councils such as the World Trade
Organization are working. However, they should also look after the exploitation of the
developing and underdeveloped countries due to globalization. This will ensure that all
the countries across the world are getting the same level of benefits from the initiation of
globalization.
 It is also recommended that developing countries should not initiate the concept of
globalization in the strategic sector. This is due to the reason that globalizing the strategic
sector will reduce their competitiveness in the long term. Thus, the concept of
globalization should only be initiated in the areas of scare resources.
 Restrictions should be there in certain areas in order to regulate the intensity of
globalization. Even though the restrictions will be detrimental towards globalization but it
will also safeguard the national interests of the countries.
Conclusion
This report concludes that globalization is the major trend in the current business and
social scenario and it is inevitable to avoid. The major countries and the industries, which are
affected by the concept of globalization are identified and analyzed in this report. It is identified
that both the developed and developing countries are positively and negatively affected by means
of globalization. In addition, it is also identified that both the developed and developing countries
are facing positive impacts of globalization along with vulnerable towards the negative impacts
as well. In both the cases, the domestic industries will be affected due to the emergence of
globalization. Based on these threats of globalization for the countries, this report discussed a
few recommended steps that will help in regulating the impact of globalization. It should be
noted that the impact of globalization cannot be prevented in the current state of affairs. Thus, it
should be noted that implications should be regulated to a certain extent in order to have the
maximum favorable outcome.

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