What is Globalization and Why is it Important in Business Today?

This short writing will be barely enough to discuss either the definition of globalization or its importance to business, but I'll give it a shot. I view globalization in relation to ease of communication and interaction between people and groups worldwide. By communication and interaction I mean the flow of people (such as in the EU or use of the Visa Waiver), information (such as new technologies), ideas (such as clothing styles), philosophies (like democracy), culture (mainly Western versus all the rest), etcetera.

From one perspective, globalization means integration and increased productivity. For example, the laptop I recently bought was assembled in China using parts that were made all over the world (mostly in Asia). HP’s globalized supply chain made it possible to optimize production, thereby lowering the final cost to me, the consumer. Companies such as McDonald’s and Coca-Cola have become icons of globalization. Think of the Big Mac Index (inspired by the McDonald’s Big Mac), which uses the price of the sandwich to compare exchange rates and measure purchasing power parity in various countries.

From another perspective, globalization is akin to Western dominance and the spreading of American culture, which is, to some, desecrating the foundations of old-world traditions of other peoples (mostly non-Westerners). To some, this McDonaldization of the world means death to their own ways of life, on which many nations have based their identities. To this extent, some lash out against globalization.

Globalization used to be an opportunity for businesses; today, even for national companies, it is a requirement. In business, part of globalization is the ability to transfer (or, outsource) technologies (such as production or other business processes) to low-cost locations (off-shoring). This enables a business, and its competitors, to both target new markets and maximize cost savings.

Globalization can create many new jobs in a foreign country while eliminating “low-skilled” jobs in a company’s home country. On one hand, this causes turmoil with blue-collar employees and their families. On the other hand, one can argue that this causes future generations to seek higher education and more skilled, value-added positions. While not all agree on the ethics of globalization, all agree that it is a requisite to succeed in business (and politics) today.