Types of Globalisation
Globalisation is the process by which businesses around the world become more open in terms of expansion. It is the method used by businesses to start operating at an international level. It also refers to the process of integration and interaction of people, organisations and even nations with the help of business strategies and improvised technologies so that there is efficient production and trade and development are initiated among different countries (Bretos & Marcuello, 2017). Globalisation of firms and internationalisation of opportunities has increased with the increase in the amount of transportation linkages and communication. Globalisation as a theory and part of corporate governance has evolved over years (Schymik 2018). It has served as the reply to much performance compensation problems at the international levels. The aim of the essay is to focus on the issue of globalization in the age of Trump and to critically analyse and evaluate the various perspectives of the issue. This essay tries to portray and describe the various factors by which internationalisation can still take place even when the geopolitical environment tries to hamper this.
There are primarily three types of globalisation which are political globalisation, technological globalisation and economic globalisation. In this particular article all of these concepts are taken account of. It is reported in the article that with the advent of the era of Donald Trump, the common perception of the general mass is to think that globalisation as a phenomenon is being reversed especially in the United States and it is being substituted with localisation. However, this notion is not completely true as globalisation might reduce and not completely stop. According to Intriligator (2017), it is very crucial to understand that there is a huge difference between a phenomenon being reversed and stopped. In this case, globalisation does not effectively need to be reversed. There are various strategies and techniques that firm owners and managers can still use to expand their businesses and provide services at the global level. Globalisation has evolved to the extent that it cannot be completely reversed by any country or political power whatsoever.
Globalisation as a term has always been controversial. For most individuals it refers to the process by which several aspects like economic, political, technological, social and cultural get interconnected such that one impacts the other to a large extent on account of being interconnected (Cerny & Prichard, 2017). In the political context, globalization has usually been perceived to be a temporary phase wherein globalization is simply viewed as a part of global capitalisation. This article reflects that if the notion of globalisation is approached in a pragmatic manner, it is not as large in its impact as it apparently seems. Stiglitz (2017), asserts that the intensity of globalisation is overestimated in reality because the factors of differences in countries are generally taken into consideration. Further, in the context of public policy, the harmful effects of globalisation are in fact underestimated. It is very important that the net positive effect is substantially reduced by the factors like differences in geography, climate, location, culture, distance and even language in some cases. It is also equally important to understand that even in the face of pressures against globalisation in different countries, there are a lot of factors that help to hold up the total level of globalisation. Langan (2018), states that the most important source of continued trade between two countries is the presence of ties. This is one of the most powerful ways of maintaining trade relations between countries. Data shows that colonial ties between two countries trading and even a common language helps in increasing the intensity of trade up to about five times as compared to countries who are not a part of such colonial ties.
Globalisation and Trump
The concept of globalisation has actually evolved from the earlier phenomenon of trade relations in between countries. Data shows that in the 1930s the amount of trade dropped to a large extent but did not completely dry up because of the presence of colonial ties and the use of small advantages like a common language. This helps in proving up to some extent that in today’s world, the total amount of globalisation might reduce up to some extent because of the political influences and changes in the business environment imposed by the principles of Trump. However, according to Solarz (2017), the total intensity of globalisation or trade will not completely be eliminated. In fact, it is being estimated that the reduction in today’s world will be way lesser than it was in the 1930s due to several reasons. The two largest economies providing the maximum intensity of globalisation to the United States are China and Mexico. If the trade relations with these two nations are completely eliminated it will only lead the United States to losing $ 85 billion worth of exports which is about 4% of the total amount of exports from the United States only.
Thus, it can essentially be asserted and stated that globalization in the era of Trump is not completely going to get eliminated. There will not be advent of a situation wherein, the concept of globalisation will completely be replaced by localisation. This is because increasingly efforts are being taken up by firms to formulate strategies that will help to build and maintain bilateral and colonial trade relations with the countries where the firms are intending to expand. The two most important ways in which this can be done are by expanding strategically by choosing the most viable regions and centralizing at the back end while localising and interacting with customers at the front end. With the use of these strategies no amount of political changes will impact the globalisation intensity of a firm operating at the international level.
Choosing to trade with countries having similar culture and geography helps in easily carrying out operations. It also helps to implement the same structure and systems as in the home country. Further, the use of proper organisational structures along with the use of smart devices helps to bolster the effect of globalization by easing up the process (Malmberg & Maskell, 2018). The use of devices for maintaining strong communication and connectivity helps in keeping the intensity of globalisation intact even in the face of opposing political forces. Reports suggest that as a matter of fact, the benefits of trading within locations at close proximity has been greatly replaced by the benefits yielded by the use of effective communicative technology. This is revealed by the presence of a large number of clusters which are operating effectively and efficiently in today’s world. The other features that in today’s world contribute to a large amount of globalization is the presence of a proper corporate culture that is flexible and adaptable according to the expansion activities being undertaken by the firm. Further, the features of mobility and internal diversity also greatly help firms in establishing a strong basis of globalisation.
Factors Affecting Globalisation
It can also be argued that the amount and intensity of globalisation is also negatively affected when firms have a weak performance basis (Aristovnik et al., 2018). For example, even though the economy of Singapore is strong in spite of it being a small country, it has faced continuous issues related to growth and so it should gradually either improve the strategies or gradually move away from globalisation. The European Union is another example wherein it has faced potential threats and challenges in the context of globalisation. The weakness of the European Union in this aspect is the lack of a well structured labour market and use of proper social policies. There are many models of efficiency and equity that were being combined by the European Union to increase the intensity of globalisation prevalent in the country (García-García, García-Canal & Guillén, 2017). Technically, due to lack of proper performance and implementation of strategies mentioned above in the essay, the European Union failed to gain accelerated growth in the context of globalisation of the firms. Without the presence of competent performance capabilities, most firms fail to maintain exponential profit growth. In the automation industry for example, Toyota has only been one of the few companies that has managed to accrue high amounts of revenue and profit generation in combination with expansion to countries like Japan, North America and Europe. The firm had strategically been expanding primarily in the emerging countries and economies in order to accrue profits along with increase of the global customer base. Papers also assert that the maximum amount of catch up effect was observed in the last two decades irrespective of the setbacks in the context of political globalisation or even economic globalisation. This was due to increasing implementation of flexible hierarchical structures by firms choosing to operate at the international level.
There are various processes by which companies operating in the private and public sectors of the United States and even the European Union can come out of the barriers posed to their global expansion. The barriers commonly observed for the United States and the European Union include the protectionist policies and the impact of the Brexit respectively (Lavery, Quaglia & Dannreuther, 2018). These countries can implement policies like the Regional Comprehensive Economic Partnership, a process that is rigorously followed and implemented in Asia. Moreover as is discussed in the article, the economies of United States and European Union being some of the developed economies of the world will most definitely try to exploit the differences in the currency of the lower developed economies to benefit in terms of profit generation through selling.
Strategies for Firms
In this context, it is also important to discuss the role of Foreign Direct Investment (Tridico & Paternesi Meloni, 2018). In this context, the difference in factor prices has really helped firms from developed economies to expand so that they can base their production units in lower developed economies (Hornok & Koren, 2016). Thus, if the firms are able to keep themselves aware about the alignment and realignment of the international ties of their home country and align their corporate ties in the same way, they will not be affected by any major setbacks that will affect other firms. In the long run, it shouldn’t be a problem for the large multinational firms to keep operating in the global market. However, as per Stiglitz (2017), the current situation demands of these firms to operate more strongly in the local and domestic markets in the front end operations at least.
The most important set of recommendations for all firms trying to globalise in this era includes implementation of the three strategies of adaptability, arbitrage and aggregation. This means that firms already operating at the international level need to expand globally or even regionally using the concept of economies of scale where they have to incur lesser costs with increase in the units produced. The firms should also increasingly exploit the differences in the labour and production costs in between different countries so that the expansion causes them to accrue larger profits (Gürhan-Canli, Sar?al-Abi, & Hayran, 2018). This will also help them to make use of the different tax regimes and structures. The quality of adaptation is the most important quality that firms need to work on as it will help them to cater to the changing demand trends and patterns of the consumers. This can be done with the implementation of disruptive business models and smart devices which will help in collecting, synthesising, evaluating and analysing data both about the changing demand patterns as well as the changing relations of the various emerging economies of the world (Markides, 2015).
Thus, it can be concluded that even though the amount of globalisation has been adversely affected by the implementation of localisation and protectionist policies. However, with the implementation and use of proper expansion and internationalisation strategies, the firms will not be affected and will continue to grow and expand at the normal levels. Although the total amount of trade might be reduced to some extent it will not be affected to a large extent because of a political issue. The problem solving capacities of the firms in the form of location choosing, connectivity enhancing, catering to demand patterns and economic cooperation with the countries of differing cultural backgrounds will help firms at large irrespective of political impositions.
References
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