Globalization includes trade between countries, which creates capital markets (including developing countries). Tourism and migration also increased in some places with new technologies linking all areas of the world. Globalization consists of a key structure where there is an integration of economic activities.
Production is a result of multinational enterprises, who have well known brand names such as Coca Cola, they operate globally with franchise factories placed in different countries therefore the different stages of production are spread around the world using Coca Cola's resources as well as other businesses in the countries, for example Gabrielle produces Coca Cola on franchise in South Africa as well as having factories in 31 other countries. Communication can happen electronically (email and social media) with the aid of computers and the internet as the auxiliary power to achieve successful channels for communication.
Transport has improved immensely which has resulted in a higher trade growth. Owing to this, the rapid growth of trade has been higher than the production growth. In the long run this could have a negative affect on the secondary sector causing the raw materials to not reach the final stage of production before being sold to the consumers. Businesses strive for low cost production in whichever country they may be. This means that they are trans- or multinational businesses. A multinational business is a business that is present in many countries but has it's headquarters in one country.
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An example of this is Monads who started in AS and is now expanded internationally to England and Dubbed. This is also an example of outward-bound globalization. Inward-bound globalization is when an international brand comes to South Africa. An example of this is the I-J clothing brand Tops opening up in AS. This means that clothes are imported into the country from the international market. Networking is the functional integration of economical activities connecting genuineness enabling forward and backward linkages across the globe as well as improving access to foreign investors and global outsourcing for local businesses.
Rationalization is the process of amalgamating countries to create hypothetical regions, for example the EX. (European Union) that is an economic and political union of 27 independent member states located in and around Europe. They all share the same currency and have a direct effect of each other's economic strength. Free trade agreements are also signed between countries improving globalization. A recent example is the NONFAT agreement signed in 1994 between Canada, Mexico and the USA.
These countries in the agreements are all producing the opportunity for businesses to pursue multinational strategies. It is argued whether regional integration is a building block improving globalization or whether it is a stumbling block hindering globalization. It is still a young process that requires examination over a few more years which can determine its success. Causes of globalization: Many developments stemmed from the Industrial Revolution, which leads to globalization with the main of them being the increase of the importance of international trade.
The increase in industrialization of countries meant that a large mount of products were entering the market, which ultimately leads to mass production. Mass marketing then came about as a forward link of mass production. Mass marketing includes massive store developments and large advertising campaigns that can travel globally. Examples of this are companies such as Nikkei and Coca-Cola. The scarcity of resources is the reason world trade takes place as no country has everything that they need or produce all the products that the country requires.
This automatically brought about globalization as countries became dependent of each other's resources, which meant they are now integrated. Development of transport and communications is one of the key drivers of globalization as it has made it so much easier for the rest of the world to interact. The recent development of faster modes of transport has made it easier for airways releasing their new airplane which has full Wi-If will mean that transporting from one country to another will no longer keep you out of the loop for the duration of the trip.
Increasing the speed and capacity of container ships has meant that it is easier to trade products internationally as it gets to countries faster and it greater annuities which are then saving the company money as they do not have to make so many trips. Communication like transport is causing countries to be more connected. With communication developments such as computers, smart phones and the Internet provides businesses and the world to be in instant connection with each other via instant messaging, calling or even electronic financial transfers.
Communication has provided businesses with the opportunity to not be restricted to employ employees in only one city but to branch out to other countries, as it is possible to have file sharing via Dropped and meetings via Seep. Communication has eloped to eliminate restrictions and improve efficiency. Information is being made more accessible with the Internet via social media networks. Twitter is a great example of sharing worldwide issues and creating awareness via trending topics and hash tags, which provide hyperlinks.
It is a way of educating the world faster and preserving our natural resources. Television and radio broadcasters such as CNN and BBC who now broadcast all over the world change our view of the world by educating us on wars, injustice and economic unrest faced by other countries. Communication improvements also make a huge impact on the economy as the invention of the worldwide web in the early asses enabled people to make online electronic financial transfers. This caused a boom in the economy because it makes it easier for people to invest and trade with one another.
Consequences of Globalization: Globalization has brought about consequence as it has forced those who would like to keep up to improve their productivity and to co-operate with their global partners. Industries now have to always upgrade their technology and skill sets in order to survive in the competitive global market. The increase in interdependence between countries is a definite consequence of libations. Being independent means that countries are now reliant and affected by another countries economic standing, political stability and laws.
There is always a possibility of one country's problems being spread to that countries neighboring country, which can then cause an even bigger problem. This is seen in Africa where war in countries such as Rwanda or political unrest in countries such as Zanzibar can cause citizens of these countries to leave in order to seek work or a better life. These refugees then come to South Africa and enter our workforce and use our resources such as land space. This means that South African citizens now have to compete with these refugees for work.
The dependency that Botswana, Lesotho and Swaziland have on South Africa for their imports and experts is known as trade interdependency. This means that the actions of any of these dependent countries will directly affect South Africa and vice versa. Interdependent levels depend on the previously mentioned 3 are high then the two countries will be very dependent on one another, which therefore results in a high interdependency between one another. Countries often have to borrow from another country in order to invest in heir own developments such as infrastructure.
These two countries then become financially interdependent. This could also occur if one country decides to invest in the other country. Financial interdependency Just means that their is a flow of money between the countries. The table bellow shows how South Africa is the largest foreign investor in Southern Africa. This means that South Africa is financially interdependent with these Southern African countries.
The increase in competition in the global market has been very positive as it is forcing produces to improve the quality of their products and services in order to maintain their clients. Local businesses have to compete with foreign businesses so they have to improve their standards in order to maintain in the same league. This is seen in South Africa with the increase in the amount of international brands coming in.
These foreign brands include Ezra, Tops, Mango and now the Business Day as reported that H;M is coming to South Africa in 2015. This has forced our local brands such as Woolworth, Trustworthy and Mr. Price to up their standards in terms of quality and originality in their products that they are offering. Local brands can no longer Just make replicas of these foreign brands goods but have to now be innovative in order to attract customers and stay in business. Education and technology has been made accessible to all through globalization.
New inventions and methods can flow more easily between countries with the aid of globalization. People are no longer confined to studying in their country but have the option to attend international institutions. This is encouraged through scholarships and marketing of these institutions in other countries through TV such as movies, series and even the taping of Project Runway at the Parsons School of Design in New York City. This is creating awareness that there is an option to study abroad. Technological advances can also be shared with everyone in the world.
The new phone 5 launched and was not only confined to the United States of America but was multinational companies such as Deltoid allows employees the opportunity to travel and experience the world through their work. This exposure to new cultures, methods and technology will be vital for personal growth and for when they return back to their home country. A consequence of globalization is the fact that the planet is being damaged during the process. Renewable resources are being exploited at such a fast rate that there is a fear that they will not regenerate to serve our population.
The pace that these resources (fresh water, forests and animal species) are being used is way too fast and not being thought through for the future. Globalization has lead to global warming as the richer countries have been consuming far too much which has caused environmental destruction. These richer countries have not only affected their own land but have moved on to exploit poorer countries and are currently using their resources. An example of this is the USA who own shares in the sugar cane and cocoa been plantations in South America.
The USA has exploited the South Americans and has demanded an increase in production that has forced them to break down parts of the Amazon to create more land for crops. The impact of globalization on the economy: In South Africa apartheid had a long and lasting affect on the economy it resulted in inactions and left the country's industry in an inefficient structure, filled with an unproductive manufacturing sector with outdated technology, processes and organization delivery relying solely on domestic sales.
When South Africa began integrating itself in to the global economy, the country was undergoing a time of political instability; therefore trade, despite the state of the manufacturing sector, drove globalization. Globalization affects mainly three manufacturing industries. The Automotive and Component Industry, by becoming a significant exporter of icicles this encouraged multinational companies like Ford and Toyota to reinvest in South Africa, bringing the latest technologies and processes with them which in turn helped local firms develop.
The Textile and Clothing Industry was not as fortunate, globalization harmed the local manufacturers. Globalization allowed for low price imports, which flooded the market. This industry employed 20% more workers than the Automotive Industry resulting in more people loosing their Jobs and their livelihood being diminished drastically therefore increasing the poor community in South Africa.
However some of the larger firms were able to respond to the impact of globalization by inviting in foreign investors therefore they were able to update their machinery and processes that improved their efficiency and productivity. South Africans integration into the global market allowed the Furniture industry to focus on exports despite the outdated technology, the abundant supply of raw materials and cheap labor gave the South African market a competitive edge.
As a result exports increased and new contracts were formulated with numerous European trans- national companies for example 'KEA. Currently the Furniture industry in South Africa needs to be upgraded in order to remain in the current markets and to engage This limits the necessary foreign investments, which restricts all of South African industries from reaping the benefits of a globally-internet-connected future. Globalization has had a drastic impact on South Africans economy, by increasing the number of products exported and in the daily operations and processes of local businesses.
With the right policy's in place South Africans economy can benefit from globalization and avoid the challenges globalization may bring. However local genuineness need to make sure they become more competitive in order to hold their places in the global market because of the numerous developing countries becoming involved in the global economy. Advantages and disadvantages: There are two terms used to describe the advantages and disadvantages, they are Absolute and Comparative.
An absolute advantage is when a country, usually developed, has a greater ability to produce a good because it has the correct capital goods and techniques to be more efficient. A Comparative advantage is when a developing country is able to be more efficient because the cost of labor is lower in imprison to other developed countries. The absolute and comparative advantages of globalization: The employment rates have increased, as there is more and more foreign investment and higher skilled Jobs, therefore more people are required to fill these spots, although competition is getting much tougher.
This in turn raises the standard of living and the per capita income. By being connected to all the developed countries South Africa is able to learn all the latest medical treatments for diseases and can take part in global forums to work around solving issues. No country is left isolated. People can also get access to better forms of schooling and also increase their life expectancy. Globalization has opened the door to exports, this means that slowly the strict controls regarding imports and exports are diminishing.
By being able to export the country's resources one can begin to form more capital which improves South Africans economic growth. There has also been a large growth in the number of foreign investors investing in power plants, airports and factories. The Absolute and Comparative disadvantages: There has been a drastic increase in poverty. The rich, who have access to the internet and education are able to maximize the opportunities which globalization presents, however the poor are an able to even see these opportunities.
So the rich get richer and the poor have no way out. There is a huge divide between the Countries in Africa because some of the countries own vast amounts minerals and resources are able to take advantage of these factors, where as some countries have access to none. South African government is a very controversial topic and the investors all have different views on it. Unfortunately, some are not in favor of the government and choose to not invest in South Africa. This proves the growth recently obtained is not one hundred percent sustainable.
This creates a financial instability where people are forced to pay back their loans from foreign investors, which causes a major upset in the economy and there is nothing governments or the Reserve Bank owing to the diminishing price of gold, it is not making it easier for the entrepreneurs to repay their debts. Many people have become martingales because as the rest of the world is developing while the poorer countries try to keep up and lose track of their core roles in the economy allowing certain things, for example police control ND education, to go to waste resulting in an even more unsettled economy.
Conclusion: The key structure of globalization consists of production, communication and transport to achieve trade, the main function of globalization. Post 1994 South Africa traded their commodities to drive globalization within the country and build the economy by entering into contracts with foreign countries. The three main manufacturing industries that are affected by globalization are the automotive and component industry, the textile and clothing industry and the furniture industry.
Local businesses have to become more competitive in order to keep their place in the global market especially with established international brands branching out to South Africa. Globalization leaves no country isolated with the access of the worldwide web. This provides an unlimited source of information and easier financial trading with the invention of Electronic Financial Transfers (FEET). Globalization has a negative impact on the planet as renewable resources are being consumed at a much faster rate than they are able to regenerate meaning that the world will soon have to go without them.
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