Overview of Globalization
Globalization can be defined as the process through which local phenomena can be transformed into global ones. With the help of this process, people across the world are united into a single society, where they perform single function together. This process includes various forces such as economical, technological, political and socio-cultural (Vassileva and Nikolov 2016). Hence, this much-talked topic often refers as integrated economies across the world. Under globalization, money moves easily across the world with greater value and volume. For instance, firm of a country can produce its output by purchasing inputs from overseas and can sell those finished goods in other countries. In this way, the world has become homogeneous through making a single market (Edwards and Jenkins 2015). Moreover, this concept has omitted the perception of distinct national markets and this in turn can disappear some products as well. Through globalization, a company can increase its market base, reduce production related risk factors and can acquire resources.
This economic phenomenon can benefit a country from various aspects that involve free trade, free labor movements from one country to other, increasing economies of scale, increasing investment and large competition. On the contrary, cost of globalization can be generated as well. For instance, free trade can harm economic conditions of developing countries while developed countries can earn benefits from it (Heininen and Finger 2018). Some other costs that an economy could bear after globalization are environmental costs, drainage of skilled labors, lower diversity of cultures and tax competition along with tax avoidance. Some benefits and costs can be discussed over here from the perspective of Toyota that operates within the automobile industry. This Japan based company has its factories almost all over the world like Canada, South Africa and the United Kingdom and so on where it manufactures and assembles vehicles (Li 2018). Due to globalizations, Toyota faces strong competitions in international market and to sustain within them, the company has adopted various business strategies that have helped it to obtain the leading position in world market. Firstly, Toyota has adopted advanced technology, which has helped it to produce products with comparatively better quality and this further has increased the demand for this automotive company in market. As a result, the company has earned huge profit from other developed countries and developing countries as well. Secondly, economic conditions of China and India are growing rapidly and this in turn helps the concerned company to earn higher profit. Thirdly, due to huge competition in international automobile marker, the company has introduced environment friendly and cheaper vehicles. This further has helped this company to earn huge demand for its motor vehicles. Fourthly, for various promising markets, the company has designed new models that can be produced in local factories of a country with available factors of productions. Due to large amount of production in various countries with given factors of resources, economies of scale of Toyota has decreased significantly (Black 2017). Fourthly, Toyota has received skilled and efficient laborers in different countries and this further has helped the company to produce or innovate new vehicles with new technologies.
Benefits and Costs of Globalization
However, Toyota has also experienced costs due to globalization. Firstly, business of this company can be hampered due to higher rate of inflation of home country or foreign country, where it operates business. For instance, higher inflation rate in the U.S.A and U.K can reduce the domestic demand for Toyota vehicles (Kehr and Proctor 2017). Secondly, tough government regulations in other countries along with politically instable condition like Indonesia can negatively influence the demand and revenue of this company. Thirdly, strong global competition can reduce the amount of profit of Toyota. Ford is one of the strong competitors of this motor vehicle company. Through applying advanced technologies along with new technologies, Ford can capture more market share than Toyota.
Conclusion:
Thus, in conclusion it can be said that globalization is a controversial and complex concept of economics. Due to globalization, multinational companies can experience both benefits and costs in international market, where they experience strong competitions. In this context, benefits and costs of this economic phenomenon is discussed from the perspective of Toyota. This multinational automotive company has experienced various advantages for which the company has become the leading automobile company all over the world. However, due to political instability or other macroeconomic disturbances in other countries, where it has factories, the company has experienced huge losses. This impact of both costs and benefits is true for all other multinational companies as well. However, companies want to do business overseas because of lower production costs and higher economies of scale.
Brexit or “British exit” means the decision of U.K to leave the European Union (EU). In 2016, through a referendum, almost 51.9% participants of the U.K electorate voted for Brexit. The U.K alone has captured significant share in global markets with the help of its huge number of skilled labors along with business-friendly geographical position and rules of law (Gudgin, Coutts, Gibson and Buchanan 2018). These characteristics have represented comparative advantage of this country to trade goods and services with other countries of both EU and non-EU. Furthermore, these characteristics have influenced foreign direct investment (FDI) to flow into the U.K. This large flow of FDI influenced many non-EU businesses to enter into the EU through staring business in the U.K. However, the decision of Brexit has adversely affected the business environment of U.K and consequently many domestic and foreign companies have suffered significantly. Thus, it is essential to analyze critically the advantages or disadvantages of the U.K market, as a potential location to doing business for other non-EU business organizations like Toyota and others. Moreover, the impact regarding decision of the UK business sectors for leaving the EU needs to be discussed as well.
Toyota’s Experience with Globalization
The EU has made a single and large market across the world, where business organizations of member countries can freely transact products and services with each other without any restrictions. This feature has attracted many overseas business organizations to conduct their business activities within this union and in this context, the U.K is considered as the most attractive country for any non-EU organization. Foreign direct investment (FDI) increases national productivity of a country along with wages and output (Kurecic and Kokotovic 2018). The U.K has possessed huge amount of foreign direct investments that have come from the countries of both EU and non-EU. Moreover, the U.K has some other business-friendly opportunities that can influence industries of various sectors to start a business over there. Industries related to advanced manufacturing, asset management, communications, agro-tech, food, and drink manufacturing companies of other non-EU countries have found out opportunities to invest in the U.K. Moreover, corporate tax rate in the U.K has remained low compare to other member countries of G20. In addition to this, huge number of skilled labors, opportunities to research and development and favorable terms of trade can also help those industries to earn higher amount profit. Hence, the U.K has provided potential advantages for non-EU business to enter into this country during pre-Brexit period.
The economic impact of leaving the EU on the U.K will be based on various policies that the country will adopt after Brexit. After taking this decision, the business sector of the U.K has started to suffer adversely. However, according economists, Brexit has both advantages and disadvantages and the entire situation can be analyzed based on this situation (Dhingra et al. 2017). Under advantages, it can be said that Brexit may create opportunities of vibrant markets for business industries in the U.K. This decision can make the government of this country more liberal for dealing with other countries outside the EU for conducting free trade. Moreover, the EU is experiencing a stagnant and debt-ridden economic condition that can further adversely affect free trade relationship of the U.K with other countries of the EU Thus, the U.K can make a healthy trade relation with China and India as their economic conditions are increasing significantly across the world. On the contrary, Brexit has some disadvantages as well. For instance, strong burden related with cross-border administrative, uncertainty and cross-border costs can be taken under consideration. Moreover, economists have predicted that Brexit can reduce the flow of FDI to this country due to unpredictable consequences for doing business of various multinational companies (Hossain, Hassan, Shafiq and Basit 2018).
Disadvantages of Globalization
Conclusion:
In conclusion, it can be said that decisions of leaving the EU has affected the U.K business environments adversely. Many multinational business organizations of non-European countries have chosen the U.K as a potential area for doing business. Moreover, significant amount of FDI along with business-friendly opportunities like free-trade opportunities with member countries have attracted those companies to do business in the U.K. However, after Brexit, the business sector of this country can experience some positive and negative impacts. The business sectors have had trouble after the country has taken decision of Brexit. Moreover, the flow of FDI is starting to decline after 2016 and this influences the GDP growth of this country significantly.
References:
Black, A., 2017. Trade Liberalization, Technical change and firm level restructuring in the South African automotive component sector. Institutions and Economies, pp.173-202.
Dhingra, S., Huang, H., Ottaviano, G., Paulo Pessoa, J., Sampson, T. and Van Reenen, J., 2017. The costs and benefits of leaving the EU: trade effects. Economic Policy, 32(92), pp.651-705.
Edwards, L. and Jenkins, R., 2015. The impact of Chinese import penetration on the South African manufacturing sector. The Journal of Development Studies, 51(4), pp.447-463.
Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J., 2018. The macro-economic impact of Brexit: using the CBR macro-economic model of the UK economy (UKMOD). Journal of Self-Governance and Management Economics, 6(2), pp.7-49.
Heininen, L. and Finger, M., 2018. The “Global Arctic” as a New Geopolitical Context and Method. Journal of Borderlands Studies, 33(2), pp.199-202.
Hossain, M.T., Hassan, Z., Shafiq, S. and Basit, A., 2018. Ease of Doing Business and Its Impact on Inward FDI. Indonesian Journal of Management and Business Economics, 1(1), pp.52-65.
Kehr, T.W. and Proctor, M.D., 2017. People Pillars: Re?structuring the Toyota Production System (TPS) House Based on Inadequacies Revealed During the Automotive Recall Crisis. Quality and Reliability Engineering International, 33(4), pp.921-930.
Kurecic, P. and Kokotovic, F., 2018. WHAT REMAINS AFTER BREXIT? AN ANALYSIS OF IMPACT OF BREXIT AND POST-BREXIT EVENTS ON STOCK EXCHANGE INDEXES. The South East European Journal of Economics and Business, 13(1), pp.7-16.
Li, Z., 2018. Business Network Positioning Analysis of Toyota. American Journal of Industrial and Business Management, 8(07), p.1693.
Vassileva, B. and Nikolov, M., 2016. Market entry strategies to emerging markets: A conceptual model of turnkey project development. Serbian Journal of Management, 11(2), pp.291-310.
Bailey, D., Driffield, N. and Karoglou, M., 2017. With Brexit, inward investment will fall in the UK. LSE Business Review.
Bowen, H.P., Baker, H.K. and Powell, G.E., 2015. Globalization and diversification strategy: A managerial perspective. Scandinavian Journal of Management, 31(1), pp.25-39.
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