E127 - Globalization: Impact on International Businesses & Consumers

This report examines the impact of globalization on international businesses and consumers, focusing on the disparities between developed and emerging economies. It discusses theories such as the World-System Theory and the Network Society to understand the underlying dynamics of globalization. The report highlights how globalization has facilitated resource acquisition, expanded consumer bases, and enhanced risk management for international businesses in developed nations. Conversely, it explores the challenges faced by businesses in developing countries, including increased unemployment, market dumping, and heightened competition. The report also analyzes the effects of globalization on consumer behavior, noting its widespread acceptance and relatively equitable impact across different economies. Ultimately, the report provides a comprehensive overview of the complex and multifaceted consequences of globalization on both businesses and consumers worldwide.

Impact of globalization on international
businesses and consumers from developed
and emerging economics

Table of contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Conclusion.......................................................................................................................................9
Reference List................................................................................................................................11

Introduction
In the present scenario, globalization is not seen as a necessary evil anymore. Initially, when the
“trend” started, experts had highly criticized it because it was considered to be just another way
for large organizations to display their superiority on a global scale. However, as time has gone
by, its impacts on the economy of various developing nations has been able to downsize some of
the critiques. Although highly debated, one could just not say that its useless. Its impacts are
widespread and most probably will continue to grow in stature.
Having made its way into the Oxford dictionary in 1930, the term “globalization” currently
refers to the processes employed by businesses and other such organizations to make functioning
on a global scale possible. However, the minds that have worked on how to make globalization
possible for various companies, had to figure out something even more important: its need.
Doing so, meant assessing various theories on not just expansion, but on consumer behavior as
well. This report will try to assess and evaluate some of those theories. At the same time, its
impact on the international businesses and consumers will also be discussed.
Discussion
There had come a time in the past when the gap between the fifth richest and fifth poorest had
almost become 30. That meant the fifth richest, generally belonging to the developed countries,
earned almost 30 times the income of the fifth poorest, belonging to the developing or weaker
economies. In the present scenario the same ratio is 82:1 (Dabla-Norris et al., 2015). Instead of
having helped weaker economies grow, it ate away at them. Many people from the developed
nations as well, do not have entire faith on the process. In a survey conducted in France, only
22% of the people thought globalization to be a “good thing”.
In order to understand the impacts of Globalization on international businesses and consumers,
one must know the needs behind it’s sudden increase in importance. Experts believe that
globalization, in reality, began in the nineteenth century when there was a sudden drop in
transport costs. This allowed the convergence of European and Asian commodities, which kick
started the process into our lives.
One of the most important reasons Globalization started was because the boom in technological
advancements. It allowed international products to capture the eyes of other parts of the world.

At the same time, companies could offer services via the internet as well. This meant, a person in
India could use a premium service such as Netflix, originated in the US. The only thing required
is internet. Another major factor that helped globalization was the formation of trade groups on
an international scale. Groups like EU not only meant a farther reach but a larger consumer base
as well. Then came the establishment of a global trade cycle as well as global financial system.
This forced the stronger economies to basically push the weaker economies into accepting
globalization. The most immediate factors that have helped put globalization on the top of the
food chain are the willingness of people to move from one place to another and the ease with
which money can be transferred internationally (Hirst et al., 2015).
Before beginning to understand and evaluate the impacts of globalization, it would be very
helpful to assess some theories that are correlated or have had a say in the integration of the
process. The very first theory is the World-System Theory. Having arrived 15 years before whole
process began, experts view this theory as a predecessor of Globalization. This theory is
predominantly abhorrent to capitalism and has faced much critique for its idea of supporting
colonialism at the time. The most important correlation can be seen in the very structure this
theory proposes. It divides the entire world into three categories- core, semi-periphery and
periphery. The core comprises of the strongest nations, and power decreases outwards
(Milanovic, 2016). In the current scenario, this structure has completely pushed many weak
nations into darkness. Globalization, although not as malicious as the World-Systems Theory,
has had a similar impact in the world.
The Network Society, the underlying notion of the groundbreaking trilogy, “The Rise of the
Network Society”, has proposed a more technological perspective to globalization. Manuel
Castell, the author, in this theory approached globalization from a completely new domain,
technology. In doing so, he could develop two separate parts to this theory. The first part talks
about advances in the IT sectors so that they can store and process more information. The second
part refers to this information as the “new economy”. It states that information capitalists can
then hold a greater position than other underdeveloped countries (Appadurai et al., 2015). The
two theories that have been mentioned above, have real-time similarities with globalization.
Having been born of notions and ideas like these, it is quite evident that globalization’s failure

was imminent. However, it would be false to say that Globalization has failed, as of such. Many
experts believe, that globalization will be a tough process, but it will bear fruits in the long run.
The impacts of Globalization have come in three categories. Initially, there are those have gained
the most from this “pro-equality” process, and then, hierarchy follows that structure. Namely, in
a top-down structure, developed nations, transitional nations and then developed nations.
Developed nations are those where people have high incomes and are very strong in an industrial
sense. Another important sector of a developed nation is its service sector. In developed
countries, the service sector provides more wealth than the industrial sectors, meaning, they have
a post-industrial economy system. The USA, Australia and many other European countries are
examples of the same.
Developing countries, contrary to the name, are not developing much in the true sense. Their
industrial base is completely underdeveloped and people are not even subject to the basics of
sustaining life. Many African and Asian countries are examples of developing nations.
Since the developed nations have a strong industrial base, the impact of globalization on their
businesses were more positive than negative. It helped them in almost all sectors possible,
irrespective of the fact that whether it was products or services they were offering.
There are a few basics of international business without which wouldn’t be possible. The first
and most important is the import and export of merchandise. Merchandise in this sense means
the products, that are sold internationally. Apart from products, international businesses also
offer services across borders. These services might be anything, ranging from transportation,
tourism etc. to buying property as well. International businesses have also helped organizations
invest in shares overseas (Christensen and Kowalczyk, 2017). They may be investments of FDI-
type or plain and simple portfolio shares. By doing so, the businesses try to not only expand into
other countries but grow considerably in sales.
The most astonishing fact however, is the complete synchronization between the basics of
international businesses and the impacts of globalization. One could say that they are almost
complementary, i.e. as and when a need arose, globalization was used to fulfill it. Three ways in

which globalization impacted the international businesses of developed nations have been
discussed below.
Firstly, globalization made it increasingly easy for developed nations to acquire resources from
overseas, most of the times with consent of the nation they were “borrowing” it from. And since
resources mean a wide range of things, these developed nations were able to get access to raw
materials as well as finished goods. The underlying objectives of any international business are
acquisition of resources that shall benefit the company and competitive advantage (Picciotto and
Mayne, 2016). Globalization has made it entirely possible for international businesses to achieve
in objectives in very short periods of time. However, sometimes, it may also take longer,
depending on the amount of resources.
Secondly, globalization has made it possible for international businesses to increase their
consumer base by many folds. They are now able to offer their products or services to the entire
world without having to have stores present in that part of the globe. There is a continuous flow
of goods from one part of the world to the other, helping international businesses focus more on
their sustainability. International businesses have globalization to thank for the increase in
demand as well. By enabling businesses to cater to a larger crowd, globalization has helped them
maintain sales growth.
Last but not the least; globalization has helped international businesses reduce the risk factor of
running out of business. Had large businesses been limited to just one country, supply would
surely overtake demand and the organization would be bankrupt very soon. Globalization has
enabled them to invest in multiple countries so that if demand in one falls, the supply could be
shipped to a country where demand is high (Dunning, 2014). Risk management has surely been
enhanced due to the introduction of globalization.
Most large international businesses originate from European or North American countries. If the
world could be divide on the basis of positive and negative impacts of globalization, many
experts would place the developed nations on the positive side and the rest of the world on the
other. Instead of having helped weaker economies get stronger, globalization made it possible for
stronger countries to manipulate the weak on the false promise of power reallocation. Some
impacts of globalization on businesses in developing countries have been discussed below.

The most significant impact has been seen in the unemployment rates of these emerging
economies. With technological advancements every day, organizations became less and less
dependent on manual labor to get their work done (Hamilton and Webster, 2015). Not only were
the robots and the AI technologies, more efficient; they never complained or called for strikes if
their needs were not met. The people who were retained were paid very little although profit
margins increased significantly. Globalization made shifting countries for jobs, a trend. With
many people following the trend, domestic businesses lost man-power and many companies had
to shut down because of lack of skilled workforce.
One of the most negative effect on businesses which is actually a positive for consumers is the
“dumping” that takes place in the markets of developing countries. Multinational organizations
from the developed countries produce in bulk and when they exceed demands, they just use these
weaker economies as dumping grounds of their products, selling them at very cheap prices
(Falkner, 2017). The domestic businesses are not able to provide such products at so low costs.
This creates a very negative vibe amongst the consumers. It is not completely unheard of, that
medium scale organizations have shut down in developing countries because of losses in market
share.
The other major problem that globalization is posing for businesses in the emerging economies,
is the amount of competition that it has brought with itself. The field is the same for everyone,
and larger organizations tend to dominate; both in terms of market share as well as sales growth.
Large multinational companies hire celebrities to do their endorsements where as small
businesses suffer at that very cost. Due to this rat race, the rich in the developed countries as well
as the developing countries, are getting richer; with no betterment of the poor whatsoever. One
could almost see the difference on visiting a developed and an emerging economy consecutively.
As has been mentioned earlier, globalization has not only affected businesses, it has played a
crucial role in shaping consumer behavior as well as preferences. Unlike, the impact on
businesses, globalization has been very easily accepted, if we view it from a consumer’s
perspectives. Both the developed as well as emerging economies have gained something and
there have been some negative impacts as well. What makes it so different from the impacts on
businesses, is the fact that these impacts are not discriminative. Everyone has been affected
equally.

The first and foremost impact is visible in the number of products and services that are available
to the consumers for use. Distance is no longer the feasibility factor and people in one part of the
world can order their desired commodity from the opposite side of the world. At the same time,
diversity in another factor that has increased because of globalization. An individual is no longer
limited to buy from only a particular range and can choose from almost infinite choices. The
phrase “American way of life” has become more and more evident due to the onset of
globalization.
The second impact is the freedom from monopoly. Although developed nations had access to
multiple organizations to choose from, the weaker economies were subject to monopolizing
organizations who could choose how much to sell, at what prices and even to whom to sell.
Globalization has almost ended monopoly and given the consumers power to choose from
various multinational organizations (Davvetas et al., 2015). So much so, that people are ready to
pay for a foreign product although their local businesses deal in the same products and services.
However, globalization is not all rainbows for the consumers as well. There are drawbacks,
which are considered by many experts to be irreversible. Multinational organizations dominate
the global stage by providing people all over the world with quality and fair-priced products.
What they do not tell the consumers is that by doing so, they are making the nation’s economy
grow weaker by the day. So, when people from emerging economies invest in bulk for the
products and services of foreign organizations, they are actually taking a step-back in the journey
of development. Fluctuating economies and weakness in the currency are two direct outcomes of
heavy foreign investing (Liu et al., 2014). This impact however, is more severe for the
consumers of developing nations. Consumers of developed nations are seldom affected by this.
It is a little distressing to know the long-term outcomes of globalization, which does not seem to
be making any real contribution to the growth and development of the emerging nations. As
experts have said in the past, globalization helps large companies become larger while killing the
income of the average man. However, many experts are also of the view that globalization is by
far the largest leap humanity has taken towards distribution of knowledge, wealth and labor.
Although highly debated, one could not say that globalization has not made life easier. More so,
in the technological aspects. Connectivity has increased, and now people all over the world are
more interested in other cultures and customs. Although the financial standpoint of emerging

economies has not looked sharper, they have been a global platform to at least express their woes
and hope that stronger, more developed nations come to their aid.
It has been kept in mind that Globalization does not only mean a country’s expansion into a
global scale market and then assessing whether or not the country could perform. Anthony
Giddens, a British sociologist, stated that globalization meant the mixing of worldwide
relationships where the connectivity would be so great that even small international events could
shape a local happening. Somewhere as time went by, globalization just became about sucking
weak and financially instable nation, dry of their resources. Wars, Terrorism and many other
social disturbances have been a direct result of globalization. What needs to be understood, that
all countries, irrespective of their financial state, wish to maintain a sovereign identity. They
understand the need to have international relationships and also value the same, but it never
means that they can be forced to enter trade agreements only because their guns are smaller.
In terms od the developed nations of the world, globalization has worked wonders. It has helped
them achieve financial stability through sales of products and services, and at the same time
given them a global image. These nations try and make use of this image into influencing people
to but from them. Many a times, because of the preferences of the citizens, political parties tend
to enter trade agreements so that prices can be lowered in exchange of their services. It is untrue
to say that globalization is not a necessity. However, done in the wrong way it starts acting as
just an outlet for larger and stronger economies to display their authority and control funds and
profits as and how they wish.
From the perspectives of emerging economies, globalization has helped them achieved stability
in certain cases and in some cases just acted as a source of greater inconvenience. Whatever be
the case, one could not deny that globalization has failed to impact weaker and emerging
economies. Consumers are subjected to great deals, they get a taste of how foreign products feel
and how efficient their services are (Jubas, 2016). On the other hand, their economy tends to do
well when in trade agreements with the other giants of the process. Even if globalization has
negative impacts, as of now, experts are of the view that it shall stay on for a longer time and is
not going to fade away soon.

Conclusion
The impacts of globalization are many; some positive while some of them are negative.
However, the similarity in their impact can only be seen from a consumer’s point of view. Their
impact on international businesses tend to support developed economies where as they exploit
the emerging countries. Many people say that the failure of globalization was imminent mainly
because it was born of capitalist ideas and tried to make the stronger economies masters of the
world. It is however, not true completely. Although it might have boosted sales for international
businesses of the developed nations, it has also helped local businesses compete with them.
While most the local businesses fail to do so, some, from time to time, gain great profit margins
because consumers tend to show loyalty towards them. Irrespective of its positive and negative
impacts, it is safe to say that globalization has had an impact on almost all individuals in the
present era.

Reference List
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Dabla-Norris, M.E., Kochhar, M.K., Suphaphiphat, M.N., Ricka, M.F. and Tsounta, E.,
2015. Causes and consequences of income inequality: a global perspective. International
Monetary Fund.
Davvetas, V., Sichtmann, C. and Diamantopoulos, A., 2015. The impact of perceived brand
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