Globalization Essay Example | Topics and Well Written Essays - 2000 words - 5

Globalization - Essay Example This business expansion facilitates exchange of technology and expertise so that developing economies can build upon the existing knowledge base. The business expansion creates new business opportunities through economies of scale so that the prices are reduced. This means that economies have more resources to spare in investing in living standards. Critical evaluation Globalization has enabled economies like China and India to join the world economy. By joining the World Trade Organization (WTO), the Chinese government has been able to attract massive amounts of foreign direct investments in its economy. Such success would not have been possible without infrastructure development. Because China has improved infrastructure, companies from the developed economies have established operations in the country. Given China’s massive population, foreign companies can access a very large market which leads to economies of scale. Another advantage of operating in China is that the labo ur costs are low, so that companies can reduce production costs to a significant extent. This enables them to offer goods and services at significantly lower prices in all parts of the world. This is the international trade which has been facilitated through the process of globalization. The process of globalization has been aided by technological developments. The emergence of the Internet has enabled businesses to coordinate their international operations to a greater extent. The enhanced coordination has also led to cost streamlining. Therefore multinational organizations have been able to create new business opportunities and capitalize upon them to the fullest extent. By creating additional business opportunities, the companies have been able to reduce the competitive threats in their respective industries. According to Porter’s five forces analysis, the competitive threat in an industry is defined by the threat of new entrants, the threat of substitute products, bargain ing powers of customers and suppliers and finally, the threat of existing competition (Scholte, 2005). Globalization affects all five forces. The threat of new entrants has been reduced since companies no longer have to be limited to the domestic markets. The threat of substitute products has been reduced because globalization enables companies to offer products and services in markets which previously did not have them. The bargaining power of customers is less of a threat because companies can achieve economies of scale more quickly, so that loss of customers from high prices does not affect profitability. Bargaining power of suppliers is also reduced as multinational companies can offer a lot of business opportunities to the supply chain management companies so that they are willing to offer lower prices. The threat of existing competition is reduced because there are international markets which offer additional demand. This means that for multinational companies, the competition has decreased. However for domestic companies, globalization has increased competition. For example, the domestic companies in developing economies are facing increased competition as multinational companies are entering their markets through globalization. Therefore, while multinational companies are creating new business opportunities through globaliz