Financial Crisis On Banking Globalization Essay

Question:

Discuss about the Financial crisis on banking globalization.

Answer:

Introduction

This essay will focus over the globalisation and its impact over the countries across the globe. This term defines the interaction of the people, countries, and states in order to accomplish a particular task. This includes the sharing of ideas, foreign investments, etc. from one country in another with certain motives. It is included in the economic process which mostly consists of social and cultural aspects. Economic resources of capital, data, technology and goods and services are also included under the term globalisation. Developments in the infrastructure and telecommunication system showcase the advancement in the globalisation. Internet is one of the most determining factors which connect the two countries, people and business organizations from one country to another in an effective and in an easy manner. This essay will include several aspects of the globalisation, impact of the globalisation over business organizations, etc. The initial phase of the essay will include the countries across the globe and the industries which are affected by the globalisation whether in negative or in positive manner. Further, the essay will move towards the positive and negative scenarios of globalisation worldwide with relevance to analyse the impact of the globalisation.

Globalisation includes the trading relations and social relations and both of these are recommended as the vital element in terms of the growth of the nation. Economy of a country could be increased when other countries will show their interest of investing reviewing the growth opportunities. Along with this, companies could grow and expand its business in the worldwide market only through manufacturing satisfactory products and services. Issues are also involved within this process and to avoid social and ethical types of issues, organization is required to adopt certain strategies through which appropriate training and development sessions could be provided to its employees in order to match up with the cultural and traditional requirements of the particular country.

Introduction to Globalisation

Other definition of globalisation is that it is a process under which national economies interlinked, become more integrated and independent with each other. From past two decades, rate of globalisation has been raised at an unimaginable speed. With the help of globalisation, companies are trading across the globe and their products and the services are generating positive responses (Baylis, Owens & Smith, 2017).

Apart from the benefits involved in the globalisation process, it also included various ethical and social responsibility issues which could affect the performance of the organization. Thus, it is necessary for every company which is planning to expand its business operations at globalisation level to fulfil all types of corporate as well as social responsibilities of the host country before entering into the market. This helps them to attain its desired goals and the objectives. Along with the attainment of the organizational goals and the objectives, it also helps the organization successfully expand its business operations which will help them to gain adequate competitive advantage in the global market. Trading at global level may lead to several issues such as cultural and traditional differences but these could be managed with the help of appropriate and effective management skills (Busse, Aboneh & Tefera, 2014).

(Source: Shah, 2017).

Various means of transports, internet, smartphones, development in the infrastructure and in the telecommunication sector, etc. are part of the globalisation and they have also contributed towards interdependence of economic and cultural functionalities. International Monetary Fund (IMF) defines four crucial aspects of globalisation i.e. trade and transactions, capital and investment movements, dissemination of knowledge, and migration and movement of people. Environmental challenges are also linked with the globalisation and some of them are water, air pollution, global warming, over-fishing of the oceans, etc. Business organizations, economies, and socio-cultural resources affect the globalisation and its processes and these are also affected by the same (Claessens & Horen, 2014).

Globalisation is the process through which the globe has been converted into a small village and barriers between the countries have been removed which has enhances the social, economic and political interaction amongst the different countries. Globalisation’s impact over the developing and developed countries is huge and under this essay, both will be discussed adequately. The effect of globalisation has led to the development of technologies, economic processes, political influences, and natural and social environment factors. Apart from these benefits, globalisation has various benefits in every individual’s daily routine life. For developing countries, it has generated various opportunities such as approaching to the developed countries market, enhancement in the living standards and the productivity level with adequate equality has also been increased. Apart from these developments, globalisation has also lead to technological development through which the business organizations are reaching to the next level of success (Samimi & Jenatabadi, 2014).

Effect of globalisation are not only positive, there are certain negative factors too such as it has lead towards environmental issues, unfairness amongst the nations, and the instability in the financial as well as amongst the commercial markets (Claessens & Van Horen, 2015).

Impact of globalisation

Impact of globalisation on developing nations

Developing countries have acquired various opportunities in order to enhance their efficiencies in terms of moving towards the developed nations. They have acquired the adequate foreign investments, various job opportunities have also been increased for the local public, etc. Following are certain factors which conclude the impact of the globalisation over developing countries:

  • Economic and Trade Processes: Globalisation provides various opportunities to the developing countries in order to enhance their interaction across the globe for removing major issues from their country such as poverty, economic growth, etc. There were certain trade barriers due to which developing countries were not able to tap on the world economy and due to this, they were failed to match up with the growth rate of the developed countries. But with the effect of globalization, International Management and the World Bank have encouraged the developing countries to enhance their efficiencies (Shahbaz, et. al., 2016). For this, these institutes have arranged the huge borrowings schemes at lowest rates for increasing their standards as well as to match up with the standards of the developed countries. In this scenario, various nations have encouraged the foreign companies to invest and conduct trade practices in their country by reducing the tariff rates. Apart from this, it enhances growth opportunities for the country as it generates employment opportunities as well as it also leads the country to enhance their economic conditions (Cleveland, Laroche & Papadopoulos, 2015).
  • Education and Health System: Globalisation has increased the level of education especially in the developing countries. From last decades, demand for the education has been increased and this is because job opportunities generated due to globalisation. With the increase in the demand for the education, people have got the opportunities to increase their talents and skills in terms of matching up with the level of the jobs with acquiring the higher levels of education. Education system, health and economic growth are basic elements for every country in order to increase their efficiency in terms of attainment of the goals and the objectives. Thus, all these three objectives need to be recognised and fulfilled in terms of directing the developing countries towards developed nations. Increase in the education system, health and in economic growth has directed the developing countries towards the developed nations and it has also helped them to provide adequate health care services and sanitation to its public in order to increase their living standards (Coker, 2014).
  • Culture Effects: Globalisation has both positive as well as negative effects over the cultures of the developing countries. Many of the countries’ cultures have been changed with the effect of globalisation while, several countries have imitate others’ culture. European countries and America are one of the examples who have imitated each other’s culture. Before the effect of globalisation, it was hard to known about the other country’s culture, tradition and current activities while in present scenarios, these can be analysed easily with latest technology and devices such as television, radio and the most important is internet (Wright, 2016). Interaction amongst the neighbour countries has been increased and this has built strong trading relationships amongst the countries. Western countries’ culture is spreading its wings and it is influencing several countries across the globe. People of other Asian countries are following the western cultures and due to this, various multinationals have expanded its outlets in the Asia and in other parts of the globe. Teenagers of every nation is playing football, eating pizza from Domino’s, having burgers from McDonald’s and enjoying varieties of chicken from KFC (Dauth & Suedekum, 2015). All this is the effect of globalisation. Before globalisation and its impact, all these were unaware regarding the above mentioned companies and today all of them are performing their activities at international level.

Impact of globalisation over developed nations

Globalisation is the method which influences the usage of the international strategies in order to expand the businesses at international level. Along with this, enhancing the interaction and communication systems with adequate technological advancements has also leads to the development of economic, social as well as environmental (Dauth, Findeisen & Suedekum, 2016).

(Source: Carney, 2015).

Major components of globalisation are GDP, Human Development Index, and industrialisation. GDP includes the market value of the all the products and the services manufactured within the country in a certain period of time, commonly it is one year. Industrialisation includes the technological innovations, advancements in the social change, and economic developments by adopting advanced and trending techniques, etc. The last component i.e. human development index includes three factors such as education, life expectancy and the knowledge (De Lange, Gesthuizen & Wolbers, 2014).

Certain developing countries were at the edge of being developed nations and after globalisation; those countries were developed in very short period of time. USA, European countries, japan, etc. are counted under developed nations. In the developed countries, purchasing power of individuals increased and this lead to increase in the labour rates, raw materials rates as well as in the land rates. This factor influences them to expand their businesses at the international level in order to reduce their operations and production costs for reducing the prices of their finished products (Zhang, 2014). Due to this factor, organizations in the developed countries expand their operations at the international level and they set up their enterprises in the under developed and in developing nations. Performing this helps them to reduce their cost of the production through which the organization would become capable enough to attain its desired goals and the objectives. This also increases the revenues of the organizations and to gain adequate competitive advantage in the dynamic business environment, organizations are required to analyse certain set of opportunities for matching up with desired goals and the objectives (De Marchi, Lee & Gereffi, 2014).

Positive impacts of Globalisation

Following are certain positive effects of globalisation:

More efficient markets

Every economy strives for being an efficient market. In this scenario, buyers and the sellers both should be capable enough to match up. For instance, if seller is producing such costly and expensive goods, then those should be in demand in that particular economy and the buyers should have the capacity to buy the same i.e. buyers should have the buying capacity. Efficient markets also lead the organizations to adopt certain effective strategies through which the prices of the product could lower down for increasing the demand of the services and the products. This enhances the performance of the organization as well as this will lead the organization to attain its desired goals and the objectives (Ebenstein, et. al., 2014).

Increased Competition

With the effect of globalisation, number of producers has been increased for a particular product through which the quality of the goods and the services often goes up as the results. With the effect of globalisation, various businesses have converted themselves as the multination companies and this has increased the option for the consumers to choose from. Setting up the ventures in the international market promotes the new standards for the global marketplace. This also leads to increase in the choices for the consumers through which competition level increases amongst the companies. In order to gain competitive advantage in the international marketplace, organizations need to adopt effective strategies in order to enhance the quality of their products and the services. This helps the consumers to increase their satisfaction level and the bargaining power of consumers increases (Efrat, 2014).

Foreign Trade

At the global level, foreign trade have been increased with the effect from globalisation. This has increased the expansion of the markets across the globe and the things which used to be found in the developed countries only can now be found in the developing and under-developed countries also. Import and export activities have also gained its separate place in the development of a country’s economy. These activities can be done in an easy and in effective manner with the view to fulfil the consumers’ needs as well as chances of business expansion also rises (Goto & Endo, 2014).

(Source: KOF Swiss Economic Institute, 2017).

Foreign Investment

Foreign investments have been increased rapidly mainly in the India and in China by the developed countries. This has increased the foreign capital in both these markets and they are known as the most emerging markets across the globe. Most of the multination companies have expanded their business ventures in these two countries. Manufacturing in these places becomes much cheaper in comparison with the developed nations. This helps the organizations to reduce their cost of the production which helps them to acquire large part of the target market (Gurgul & Lach, 2014).

Competition

Due to worldwide competition, quality of the products and the services are being improved by the companies for acquiring the market share as well as to gain the competitive advantage in the global market. Apart from this, competition also leads to the adaptation of the advanced technologies and strategies for enhancing the impact of their products and the services over the target audience. With this, organization becomes capable enough to develop unique and satisfactory products and services with regards to the consumers’ needs and requirements. Consumers develop positive image for the organization through which distinctive and separate market share is being acquired by the company in the global market (Leit, 2014).

Negative impacts of Globalisation

As a coin has two sides, head and tales, in the same manner, globalisation has two sides, one positive and the other one is negative. Globalisation has enhances the growth, expansion opportunities for the business organization. It has connected the countries with each other. On the other hand, globalisation consists of various negative impacts over the countries especially over the developing countries. Following are some of them:

Limited economic growth: In globalisation, foreign investment and foreign tare practices has acquired the market share of the developing countries. Due to this, large part of the capital is moving in the foreign countries which are affecting the local economic growth. This reduces the chances for the country in relevance with being a developed nation (Meyfroidt, et. al., 2013).

Local Traders: Due to globalisation, interactions amongst the countries and the trading relations amongst the countries have been increased in past decades. This has increased the interference of the foreign companies in the host country’s economic conditions. Due to this, local traders of the host country are facing huge and aggressive competition from the multinationals. This is decreasing the demand of the products and the services of the local traders while multinationals are increasing their market shares as well as profit margins in the international markets (Mowforth & Munt, 2015).

Job Insecurity: In developed countries, people are losing their jobs because manufacturing is being outsourced by various foreign companies in the developing nations. This is leading towards the job insecurity. The most manufacturing units are set up by the foreign companies in the China and in India by reviewing the business environment’s condition. People are losing their jobs because multinationals are getting the same services at cheaper rates in India and in China in comparison with the developed countries (Narula, 2014).

(Source: Tverberg, 2013).

Fluctuation in the prices: With the effect of globalisation, fluctuation in the prices has been recognised. Due to the increased competition, multinational companies are forced to reduce their prices in order to maintain their position in the global market. In terms of setting up an effective position in the global market, they have compromised with the quality of the products and the services and reduced the prices of the same. For maintaining their effective image in the international market, foreign companies are bound to reduce their products and services’ prices for gaining certain amount of competitive advantage (Obstfeld, 2015).

Culture: Culture also gets affected with the increase in the competition and with the entry of the foreign companies in the developing countries’ marketplace. Foreign companies are affecting the culture of the host country which is creating a negative impact over the country’s population. International companies are producing various types of products and services and amongst them some are not ethical but still they are producing and promoting their features through advanced promotional strategies. This is creating a bad and the negative impact over the host countries’ audience and their culture is also affecting (Rupert & Smith, 2016).

(Source: Hangzhou, 2016).

Conclusion

From the aforesaid information, it can be concluded that globalisation is a powerful weapon which has increased the economic growth of various countries. With the effect of globalisation, same products and the services could be found in every country rather being developed or developing. In addition to this, globalisation has also lead to the increase in the foreign direct investments for the developing countries which has increased the job opportunities for the local residents. Ultimately, globalisation has generated various growth and expansion opportunities for the business organizations. Certain crucial innovations have also been noticed under the term globalisation. Invention of internet, advanced technological devices, machineries, etc. is crucial segment of the globalisation’s innovations.

In order to analyse the globalisation’s impact over the developing and developed countries, positive and negative impacts were discussed. Production industry and the developed nations are the major areas which are affected by the globalisation in negative manner. Developing countries have gained adequate competitive advantage in the international market with the effect of globalisation.

References

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