Globalization

For every organization, its goal or objective is to maximize profits. Over the years, the increase in competition causes organization to either disintegrate or rise on top of other competitors. Therefore, the best tactic for any organization is to construct innovative ways in conducting a business. To be more specific, globalization provides a key to an organizational success.

Globalization and International Trade Theories

Globalization is the “shift toward a more integrated and interdependent world economy.” (Hill, 2004, P6) In simpler terms, globalization is a business expansion in one or all 4 of the continental areas. Wal-Mart is an example of a business’s global expansion. Furthermore, Wal-Mart has successfully expanded its businesses in 4 different areas such as Europe, Canada, South America, and Asia.

International trade theories play a major role in globalization. Free trade is an example of the international trade theory. Mercantilism is the root cause to free trade. Free trade is “where a government does not attempt to influence through quotas or duties what its citizens can buy from another country, or what they can produce and sell to another country.” (Hill, 2004, P144) In simpler terms, free trade is Adam Smith’s theory of laissez-faire. In later stage, David Ricardo develops a comparative advantage theory. Lastly, the theory is redefined through the works of Eli Heckcher and Bertil Ohlin and is called Heckscher-Ohlin theory. (Hill, 2004, P144)

Drivers of Globalization

According to Hill, the two major factors for greater globalization are “the decline in barriers to the free flows of goods, services, and capital that has occurred since the end of World War II” and “technological change particularly the dramatic developments in recent years in communication, information processing, and transportation technologies.” (Hill, 2004, P12) Moreover, another important factor for globalization is the internet.

An example is the barriers to international trade and foreign direct investment occurred in the 1920s and 1930s. (Hill, 2004, P12) An example of a technological change is the development of the microprocessor chipset from Intel and AMD. Another example of a technological change is telecommunication such as phone systems, security systems and internet access based systems. Lastly, an example of a technological change is transportation such as jet aircrafts, cars, trucks, and trains.

Effects of Globalization

Globalization affects an individual, organization or country’s culture and custom. Moreover, globalization affects the environment, individual’s labor, and the monetary trading system. For instance, when Wal-Mart first introduced its business in Mexico, the people in Mexico did not have the money to buy and were not accustomed to U.S’s products. As a result, Wal-Mart