Globalization is a Main Impelling force in the Proliferation of Foreign Direct Investment, Technology & Economic Scale.

Globalization is a Main Impelling force in the Proliferation of Foreign Direct Investment, Technology & Economic Scale.

Importance of Globalization, History of globalization, Impact on Economic Growth, Foreign direct investment(FDI), Technology, the Economics of scale

"Globalization is a term used to describe how trade and technology have made the world into a more connected and interdependent place"

Globalization is the connection of different parts of the world which results in the expansion of international cultural, economic, political activities, the interconnection of international markets, and managing businesses in a global industry.

People can move from one country to another, trade restrictions are reducing, domestic markets are opening up for foreign investments, telecommunications are better established and the countries that are leading the innovations are passing on their technologies to other countries in need. globalization has been shown to increase the standard of living in developing countries, but some analysts warn that globalization can have a negative effect on local or emerging economies and individual workers.

Because of globalization, the economies of the world are being increasingly integrated, with the help of mobile phones and the internet. Work can be outsourced to any part of the world that has an internet connection and is able to reach one’s destination in a short time.

Globalization facilitated global activity in relation to money. For example, the American dollar, the Japanese yen, Euro, and other major national currencies circulate globally.

They are being used anywhere on earth and moving electronically via bankcards that can extract cash in local currency from the thousands of automated teller machines (ATMs) across the world. Also, credit cards like Visa, MasterCard, and American Express can be used for payments in almost every country on the globe.

History of Globalization :

Globalization was accelerated in the nineteenth century with the Industrial Revolution, as mechanical mills and factories became more common. Many companies used raw materials from distant lands.

Britain’s colony in India, for instance, supplied cotton to British merchants and traders, and from that, British factories made fabric and other finished goods and sell them all over the world- the United States, Brazil, Australia, even India.

Globalization skyrocketed dramatically in the twentieth century with the escalation of air travel, the expansion of free trade, and the dawn of the Information Age. Miles of fiber-optic cable now connect the continents, allowing people around the world to communicate instantly through the borderless World Wide Web.

With the Information Age, globalization went to overdrive at full speed has advancements in computer and communications technology launched a new global era and redefined what it meant to be “connected.”

For example, Modern communications satellites meant the 1964 Summer Olympics in Tokyo could be watched in the United States for the first time

The Impact of Globalization on Economic Growth:

Some of the benefits of Globalization include:

1.) Foreign Direct Investment (FDI):

A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country.

Macroeconomic Effects of Foreign Direct Investment:

Economic Growth:

Countries receiving foreign direct investment often experience higher economic growth by opening it up to new markets

Job Creation & Employment: By encouraging foreign direct investment, governments can create jobs and improve economic growth.

Technology Transfer:

Foreign direct investment often introduces world-class technologies and technical expertise in developing countries.

In 2017, for example, U.S.-based Apple announced a $507.1 million investment to boost its research and development work in China, Apple's third-largest market behind the Americas and Europe.

2.) Globalization in Technology:

We can conclude that technology is the main vehicle to drive globalization. Till now in 2020 also, there is no space in the world which are possessed by technology.

  • Internet is a major driver for driving various fields such as distance education from foreign countries, working remotely from any part of the world.
  • Worldwide news is reported almost instantly, if not via live broadcast, then through continual updates to online news outlets.
  • There are a multitude of platforms through which people can communicate too, including Facebook Messenger, WhatsApp, Instagram, and Snapchat
  • Travel and tourism allow for the globalization of many things, like the exchange of money, cultures, ideas, and knowledge.

3.) Economies of Scale:

Economies of scale are cost reductions that occur when companies increase production.

There are two main types of economies of scale:

Internal Economies of Scale:

Internal economies are controllable by management because they are internal to the company.

For example, large companies can buy in bulk. This economy lowers the cost per unit of the materials they need to make their products. They can use the savings to increase profits. Or they can pass the savings to consumers and compete on price.

External Economies of Scale:

External economies depend upon external factors. These factors include the industry, geographic location, or government.

For example, a state often reduces taxes to attract the companies that provide the most jobs. Big real estate developers convince cities to build roads to support their buildings.

Tariffs and Other Forms of Protectionism:

The 2008 economic crisis led many politicians to question the merits of globalization. According to a McKinsey Global Institute analysis of data from the International Monetary Fund, global cross-border capital flows shrank by 65% between 2007 and 2016. The decrease from $12.4 trillion to $4.3 trillion in those nine years includes declines in lending, FDI, and equity and bond purchases.

Having reminded many companies of the vulnerabilities of global supply chains, both the pandemic and the trade war between the U.S. and China could lead companies towards a more domestic approach to production and sourcing, which might result in a sustained reduction of global trade.