ABSTRACT
In line with the diversity of opinion, globalization has been defined in numerous ways. In this book, we define globalization as the acceleration and extension of the interdependence of economic and business activities across national boundaries. Simply put, this means that a development on one side of the globe will have consequences on another. It is easy to see the impact within a particular industry, for instance, the automotive industry. US-based makers of auto parts such as Delphi and Visteon have been pushed to restructure by pressure from low-cost producers in Asia, Mexico, and Eastern Europe, who can make the same automotive components for less. Volkswagen has demanded concessions from its German workforce as a condition for keeping production locally. Closer to home, the price you pay at the pump is partially determined by energy demand in other countries, with soaring consumption in China and India accounting for much of the doubling of oil prices between 2004 and 2006. This interdependence will not go away. So, both the ongoing
process and outcome of globalization have profound implications for not only the economic policies of governments, but also for the strategies of firms around the world. The US National Intelligence Council notes in its 2020 Project Report that “certain aspects of globalization, such as the growing global connectedness, are not likely to go away,” and that this will have far reaching consequences for the expansion of international business:
Interdependence has widened the reach of multinational business, enabling smaller firms as well as large multinationals to market across borders and bringing heretofore non-traded services into the international arena. 1
To the consumer, globalization means more choices, generally lower prices (but not always, as the example of gas prices shows), and an increasingly blurred national identity for products and services. Send a package from New York to London via DHL, and you have contributed to the revenue of the German Postal Service. Buy a Swedish Volvo, and you have increased the revenue of its Chinese owner, Geely Automobile Holdings Limited. Buy a Jaguar, and you have contributed to the bottom line of its Indian owner, Tata Motors. Buy a Dodge, and you have purchased a product of Italian-based Fiat. Buy a foreign brand, and you may find out that it is manufactured in the United States: Honda Civics in Ohio, Mercedes M class in Alabama, Nissan pickup trucks in Tennessee. If you prefer to buy Canadian, you can choose between a GM or a Ford vehicle manufactured in Canada; or you can settle for the Mercedes M class, made in the United States, but advertised in Canada as “made by a Canadian”—alluding to the manager of a US plant. If you are an Australian consumer who wants to buy a locally produced vehicle, you can select between three locally produced foreign brands: Holden (a GM brand whose design is influenced by its German subsidiary Opel), a Ford, or a Toyota. These Australian operations also export to other countries while facing more competition from imports as local tariffs are reduced.
