Written by me.
Found at my website.
A controversial economical and social phenomenon called the ‘globalization’ is rising and is globalizing as the word itself is indicating.
Globalization is, and I quote from an encyclopaedia: “is a social change, an increased connectivity among societies and their elements due to transculturation; the explosive evolution of transport and communication technologies to facilitate international cultural and economic exchangeâ€.
However this is a broad definition and I’m going to discuss the economical context of this phenomenon and specifically the effects of globalization on competition.
If I would summarize the economical globalization in a few words , I would come to the conclusion that economical globalization means ‘free trade and increasing relations among members of an industry in different parts of the world.
What exactly does that means for us?
According to the philosophy of free trade there should be less and eventually no costs when importing and exporting products and services. Countries, specifically developed ones, are protecting their economies against cheap providers of goods and services. Many have already protested against these policies held by developed countries and claiming that states as the Netherlands are preventing economical grow of underdeveloped countries such as in Africa. Globalization is calling for eliminating this kind of protection thus making markets more accessible.
There already certain groups who are already reducing custom tariffs and organizing economical zones thus answering the call of globalization. However in the opinion of those who are pro-globalization, we are everything but close concerning the true face of free trade. Technically, this is true but the world can’t be changed in a day and steady construction of the new world economy is advisable.
But what will happen if true free trade is a fact?
In terms of competition, companies which were protected by their government will have to adapt to these changes. The companies have three options when they are faced with increasing competition due to globalization:
- outsourcing to countries with cheaper possibilities with similar quality
- seeking cost effective means of competing on the world market
- going bankrupt
For example American and British companies are outsourcing their call centres to India. Why? Firstly, wages in India are very low comparing to those in the U.S. and the UK and secondly many people in India have mastered the English language quite well.
Another effect of economical globalization is that employees are actual competing with employees from other, cheaper, countries. Companies in developed states used to think the high wages would compromise with the quality of work that is delivered by the employees. However some states, mainly found Southeast-Asia, can provide the same services with equivalent or higher quality with relatively lower wages.
Thus competition does not only occur on a level where companies are competing with each other. Work forces are now also competing at an international level.
Eventually people will get sacked because their work is being outsourced to foreign states. Usually this kind of competition could only be found at an higher job place but it’s now shifting to an operational level. Meaning that jobs as network administrator or call centre employee will be filled by people from other countries through modern communication methods.