What is globalization and how can it affect business? The term globalization is a common word used in the business world. Globalization is the process that enhances the integration and interrelationship of local and foreign markets (Mourdoukoutas, 2011). There are many causes of globalization, such as improvement in the transportation, communication and global banking. It helps in the economic growth of a country. It has improved the life of the people by giving employment for many people. It has got various effects on business. Three possible effects of globalization on business could be rise in competition, outsourcing and international trade.
One of the effects of globalization on business is the increasing competition. In every nook and …show more content…
This is the most important effect of globalization on trade. As businesses can sell their products in different parts of the world, it increases the profit of the company. Global trade brings local companies greater incomes than the narrow domestic market (Lazar & Priyadarsanan, 2015). Before globalization, there was trade barriers between nations and firms were not allowed to sell or import goods to another nation. Now globalization has advanced the relationship between the countries and removed the barriers. Thus, local enterprise can enjoy the benefits of foreign investment. When an overseas company invests in a local company, they provide new technology, capital flow and many other opportunities for these companies. Thus, home-grown firms can use these technologies and opportunities to surge the profit. Also, global trade increases consumers of the companies which in turn raises the income of firms. Additionally, global trade results in advance payments. Companies will be able to buy their raw materials for manufacturing products with the money paid earlier to them. Purdy (2011) stated in his article that global trade makes foreign company to pay their amount in advance. When a company receives payments immediately from the foreign company, it reduces payment risk. For example, a local company sells some items to a foreign company and latter say that they will pay the money later. If they are not able to pay later then the company loses this money. So, international trade helps to reduce this risk of payment. Furthermore, when a firm receives money earlier, they can utilize it for meeting day to day activities. Hence, international trade increases profit and reduces payment
One of the effects of globalization on business is the increasing competition. In every nook and …show more content…
This is the most important effect of globalization on trade. As businesses can sell their products in different parts of the world, it increases the profit of the company. Global trade brings local companies greater incomes than the narrow domestic market (Lazar & Priyadarsanan, 2015). Before globalization, there was trade barriers between nations and firms were not allowed to sell or import goods to another nation. Now globalization has advanced the relationship between the countries and removed the barriers. Thus, local enterprise can enjoy the benefits of foreign investment. When an overseas company invests in a local company, they provide new technology, capital flow and many other opportunities for these companies. Thus, home-grown firms can use these technologies and opportunities to surge the profit. Also, global trade increases consumers of the companies which in turn raises the income of firms. Additionally, global trade results in advance payments. Companies will be able to buy their raw materials for manufacturing products with the money paid earlier to them. Purdy (2011) stated in his article that global trade makes foreign company to pay their amount in advance. When a company receives payments immediately from the foreign company, it reduces payment risk. For example, a local company sells some items to a foreign company and latter say that they will pay the money later. If they are not able to pay later then the company loses this money. So, international trade helps to reduce this risk of payment. Furthermore, when a firm receives money earlier, they can utilize it for meeting day to day activities. Hence, international trade increases profit and reduces payment