Globalization Has Negative Impacts On Businesses As Well Economics Essay

Globalization has played a critical function in the development of international concern. No uncertainty, international concern has a long history, but the existent development of international concern was possible because of globalisation.

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Even after that it does n’t intend globalisation merely has positive effects ; it does hold negative effects on concern.

In this survey, secondary information has been used for analyzing the effects of globalisation and for analyzing the extent of globalisation on fiscal services industry. This survey discuss the undermentioned point ; ( I ) Globalization – Introduction, ( Ii ) Positive Effects of Globalization, ( Iii ) Negative Effects of Globalization, ( Iv ) Financial Services Industry – Introduction, ( V ) Globalization Drivers, and ( Vi ) Consequences of Globalization on the Major Stakeholders.


Globalization is a widely used term in different contexts. Globalization definition available in some general lexicons is non really clear. Some lexicons define globalisation as ‘the act of globalising ‘ or ‘to render planetary ‘ ( Waters, 2001 ) . Many people recognized globalisation as a obscure construct and do n’t seek to specify it exactly.

By this manner globalisation is a gimmick all, ductile construct which can be interpreted the manner user wants ( Scholte, J. , 2000 ) . Robertson ( 1992 ) says Globalization refers both the universe ‘s escalation and compaction of consciousness as a whole. Global compaction reminds the dependence and system theories ‘ statements. It points out the lifting degree of dependence between states in term of cultural, military confederation, trade, and domination.

International trade has benefited the most from the moving ridge of globalisation and has increased the dependence among states. The dependence of any state for other state can hold both type of consequence negative and positive. It depends on the states, how much and for what, they are dependent on one-another. International concern has increase significantly after Globalization. But, it is non ever good, it can be harmful besides. Before globalising economic system a state should understand it clearly that how it is traveling to take benefits out of globalisation and it should be ready with a eventuality program.

Positive Effectss of Globalization

It is believed that globalisation has increase economic chance and prosperity in the universe. Now the markets are unfastened for trade and resources are used expeditiously. Due to this, monetary values have come down, employment has increased, and life criterion has become better.

Globalization has helped to take poorness signifier the development states, in 1980 – 2001 people populating on $ 1 or less than that per twenty-four hours has come down 1.1 billion from 1.5 billion ( Burande, 2007 ) . It ‘s non the developing states who has benefited from globalisation, developed economic systems have besides enjoyed the fruits of globalisation. It ‘s really hard to explicate all the positive consequence of globalisation on civilization, human mentality, trade, employment, capital market and on the other Fieldss. Still, we have tried to sum up the positive consequence of globalisation. Some of the positive effects are following ;

Free Capital Market – With the debut of globalisation states opened their capital market. This helped companies to run easy in many states, as they could alter the currency as per their pick to acquire it out of the state. It besides helped to pull foreign investors to put in their capital market which provided financess for developing substructure ( Rugman, 2002 ) .

Common Market Regulations – In the epoch of globalisation when it became really hard to run in multiple states due to different demands of ordinance, so states felt demand of easing ordinances and agreed for common market ordinances ( Rugman, 2002 ) . Now, many states use same accounting and revenue enhancement criterions by which it become easy for companies to run. Subsequently on states formed groups harmonizing to their trade demands like OPEC, NAFTA, etc.

Wide Operation Field – Globalization widens the operation field of a state, the people of a planetary economic system can run in many states, therefore it opens door of chances to increase their market size and net income. Within the state an organisation would n’t acquire much range for increasing it operation but in a globalized economic system it can travel stat mi for increasing it operations ( Tanzi, 2004 ) .

Spread of Education – Education is the best positive consequence of globalisation. Today one can travel around the universe for best acquisition and preparation installations. If one is interested in the topic that is non available in the state, one can travel to the state for larning that autochthonal topic and spread the cognition in one ‘s place state. There are several illustrations where people learnt the topic from other states and earned name in their ain state ( Kulkarni, 2009 ) .

Boosts Export – Globalization helped in two ways to hike export ; first by free capital flow, and unfastened market for increasing operation. Some states set-up particular economic system zones for giving excess encouragement to export ( Rugman, 2002 ) . In these zones companies where given revenue enhancement stores and subsidised installations with the status to export the maximal production signifier these units.

Flexible Labor market – Globalization helped people to larn multiple accomplishments, while making different occupations. By this people moved from one occupation to another easy. It shows a more unfastened and flexible labor market with a regulated system to increase investing. When companies moved from one state to another, they besides shifted their people and trained people from that state to acquire their work done ( Carbaugh, 2008 ) .

Curb on Inflation – When companies moved from one state to other in hunt of market, they launched their merchandise on competitory rates. The handiness of inexpensive consumer goods helped those states to take down down rising prices, which was upseting their economic growing. Because of their increasing influence the domestic companies besides searched for advanced and better engineering for cut downing cost ( Carbaugh, 2008 ) .

Economies of Scale – Large companies may non be able to use full capacity of their fabrication units due to closed economic system and little market. Globalization provided mark to these big companies to run with full capacity, which helped them to cut down cost farther ( Rugman, 2002 ) . By globalisation non merely the companies were able to acquire economic systems of graduated table but besides the consumers.

Technological Improvement – Countries those adopt globalisation, opens doors for advanced engineering. When big companies start their operations in developing or under developed states, they use advanced engineering for operations. Govt. can besides entree new engineering by understanding with big groups after dialogue for their operations in their states. Technological betterment is besides possible by to running R & A ; D programme in coaction with large companies and by supplying preparation to its people ( Tanzi, 2004 ) .

Better Uses of Resources – Resources are scare but still the states were non able to use them expeditiously, in the deficiency of engineering. When they got entree on engineering, the proper usage of the resources was started. Companies started use capital intensive engineering on the topographic point of labour intensive engineering, which saved on cost and helped them to utilize the adult male force in other productive activities ( Carbaugh, 2008 ) .

Spread of Culture – Globalization has besides affected civilization! It is non that every civilisation has all good patterns. Today the civilization, in which we live, is the part of many civilizations. Worlds tend to pick new and right things from other civilizations and drop the defects in their civilization.

Societies welcome people from other civilizations and backgrounds to organize a new civilization. Languages, cookery manners, imposts, and dressing manners all have spread from globalisation. The other cultural signifiers like films, music and art are besides affected by globalisation. Now, films are launched worldwide, which leave an feeling on people and civilization ( Kulkarni, 2009 ) .

Negative effects of globalisation

Globalization has both positive and negative effects. But, for the hapless and developing states negative effects seems really big ( Future-econ, 2009 ) . Economic, political and societal fusion was expected from globalisation. But, strong and developed economic systems continue to work developing and developing states on the name of concern sharing. Power reallocation is happing in the signifier of technological and industrial competition ( Borade, 2009 ) . Most economic experts argue that the positive effects of globalisation are more than the negative effects ( Future-econ, 2009 ) . Whatever is the truth behind all these statements can be analysed by discoursing these points:

Dumping – Dumping has emerged as a large job in forepart of developing states. By dumping the developed states exploit the market in the development states by bear downing low monetary value for its merchandises, on which monetary value local manufacturer ca n’t sell its merchandise. In this manner, the developed and advanced states get a big portion of market for their merchandises ( Boudreaux, 2008 ) .

Unemployment – Globalization helped many states to develop engineering really fast. Due to utilize of advanced engineering the usage of labor cut down significantly. Because of that the unskilled employees lost their occupations. Use of capital intensive engineering besides helped to cut down production cost, but most of the benefits were retained as increased net income by the makers. One more ground, behind unemployment was switching of occupation location in hunt of skilled and inexpensive work force ( Carbaugh, 2008 ) .

Environment Disaster – Climate alteration has become a “ hot ” subject. Global heating is besides a portion of planetary economic systems. In hunt of progress and capital intensive engineering, states have established many industries ; those industries are increase pollution quickly ( Lane, 2006 ) . Traditional labour intensive engineerings were based on low power and machines, so the pollution was non an issue from those industries. Furthermore, the merchandises of mills are besides fouling the environment.

Limited Natural Resources – In the race of globalisation and development, every state is working its natural resources extensively, due to that in close hereafter these resources will be finished. Petroleum is a really of import beginning of energy in present but it will non last long if the alternate beginning of energy is non searched ( Lane, 2006 ) .

Competition – To globalise their economic system states opened their market for foreign companies, these companies were big and were utilizing high engineerings. Domestic companies were non able to bring forth goods on that cost, which put a inquiry grade on the sustainability of these companies. Competition increased with the entry of new companies in the market. Many place companies were non able to vie with these transnational companies, so they have to shut their concern. Dumping besides enhanced completion in these markets ( Lane, 2006 ) .

Spread of Diseases – Globalization helped first mobility, due to that unknowingly diseases are distributing really fast from one state to another ( ) . When people enters into a new environment he may faces several types of wellness jobs, because of alteration in environment. Recently H1N1 fluke was besides a consequence of fast and increased motion of people. Earlier when where no such wellness installations were available people used to devour homeopathic medical specialties but now on one side where the wellness installations have improved a batch the fright of fast spread of catching diseases have besides addition ( Lane, 2006 ) .

Inequality – Economic development is successful in world, when it is able to bring forth equal chances without any consideration. But globalisation has increased inequalities, now the spread between the hapless and the rich has increased. No, uncertainties there are betterment in the overall life manners but the manner it was expected to better that could n’t be achieved. Inequality has besides increased in footings of skilled occupations. Those who are skilled can acquire better occupations, but those who are non updated with new accomplishments find it hard to alter their occupations ( Sharma, and Starik, 2002 ) .

All these points clearly indicate the negative and positive effects of globalisation. Like any other thing globalisation besides has both facets which are bad and good for world. It the human being who has created this planetary phenomenon, so he can besides command it and utilize it for the improvement of the universe without any favoritism.

Fiscal services industry

Fiscal services industry provides services related to money, for money, with money. Financial services are utilization, use, direction, storage, and creative activity of money. There are many companies to function the market for fiscal services for different demands, but no individual company has the laterality in the fiscal services industry ( Globaledge, 2010a ) . Fiscal services industry is more unfastened than of all time before.

Decidedly globalisation is one of the grounds behind this growing. The member states of WTO opened their economic system for addition universe trade and free market. International trade demands currency minutess, which is non possible without planetary fiscal services. When we say planetary fiscal services, it means any one can entree the services in any state any clip after paying the applicable charges.

Information engineering is playing a important function in bringing these services. Plastic money has made dealing easy which transporting hard currency. It non merely helped to entree fiscal service round the clock but besides around the universe ( Dolan and Lindsey 1991 ) . This was possible because of globalisation of fiscal services and fiscal industry.

Globalization affect on fiscal services industry is non equal in all the states and parts. Where in some states it is intensively used, in some states fiscal services are still the in the infant phase. Globalization is non merely about the presence of any concern in many states around the universe.

A planetary company or an industry demand to fulfill some of import features for it. A planetary industry takes advantages of environment and satisfies clients ‘ demands and wants around the universe. The consequence of globalisation on the fiscal services, in this survey, is analysed through Yip ‘s model “ Drivers of Globalization ” ( Yip, 2003 ) .

Globalization Drivers

Yip ‘s model on globalisation driver is really utile for analyzing the degree of globalisation in an industry ( Yip, 2003 ) . It is besides helpful to understand markets ‘ or industries ‘ different facets. Before making on a decision, each globalisation driver should be analysed decently. Yip in his model explains the factors behind the globalisation of concern. Yip calls these factors, drivers of globalisation and split them into four classs. Figure 1 shows all these drivers of globalisation.

Figure 1: Divers of Globalization

Beginning: Johnson et Al ( 2008 )

Market Globalization

Market Globalization negotiations about the extent, that consequence globalisation in any of the industry. It considers the factors like the similar client demands, planetary clients, and movable selling ( Yip, 2003 ) .

Similar client demands – Similar client demands indicates that in a planetary industry the client from different states portion common demands. Their demands may change in term of frequence and quality, but have same sort of demands. Financial services ca n’t be possible without a proper dealing system around the universe, as different states have different currencies. But, foreign exchange made it possible and that is besides due to globalisation when states find it hard to make dealing in Gold. Similar demand of clients may include recognition cards, debit cards, sedimentation histories, banking minutess, online banking, loan, progresss, etc. clients in all the states requires all these services, wherever the banking and non-banking installations are available. There is no uncertainty that some states in the universe still do n’t hold intensive banking system. They are parts where people even do n’t aware about the proper banking system.

Global clients – By the consequence of globalisation, clients buy services and merchandises around the universe, from where they can outdo the best services.

Yip ( 2003 ) defines planetary clients in two ways.

Multinational planetary clients – These types of clients look for best available services in the universe. Even now companies are supplying the services on a universe criterion. Some fiscal pudding stones like Citi Bank, HSBC, are supplying same services to their clients.

National planetary clients – These types of clients besides look for best services around the universe but they remain in one state.

The large fiscal companies develops advanced services and engineering usage that in all the states where are the present. The noticeable difference here is the clip of services debut, in developed and their place states services are introduced as there are developed but it takes times for other states.

Movable selling – When due to globalization selling mix elements are used in many states without sing their local facets, it is named as movable selling ( Campell , 2004 ) . If one sees fiscal services industry in this context, one finds that in this industry most of the selling activities are designed for universe degree, while accepting the necessary facets like linguistic communication of that state, available media etc.

Cost Globalization

Cost is major concern for the companies to increase profitableness. By globalisation fiscal services industries have the possible to cut down cost. There are grounds on the universe degree to drive this industry towards globalisation ( Smith, 2002 ) :

Scale of economic systems – There are certain restraints for every industry to use market. In fiscal services industry the usage of engineering is really high, when this industry supply services at universe degree it can acquire maximal net income from its R & A ; D investing. That is besides a ground for globalising the fiscal services.

Sourcing efficiencies – Production factor efficiencies are non equal in every state. When fiscal series industry is runing on universe degree it can supply the services, where it gets highest beginning efficiencies. Business procedure outsourcing is good illustrations by which services are delivered form the location where the productiveness is maximal.

Country specific costs – Cost of fiscal services are near about similar around the universe. Most of the fiscal services are based on information engineering, so the costs of these services are similar in all the states where these are delivered. The usage of cyberspace and plastic money is the best illustration here.

High merchandise development costs – Financial services unlike merchandise fabrication does n’t required much outgo on production. But these services do need uninterrupted development of high terminal services, which cost a batch. To retrieve this cost industry tends to travel planetary, which was besides a ground behind the globalisation of fiscal services industry.

Globalization of competition

Competition besides forces industries to travel planetary In hunt of new markets for their merchandises. High will be the competition higher the companies or industries will travel for planetary concern. The factors which drive competition degree are the undermentioned ( Campell et al. , 2004 ) :

Interdependence – Every industry has some links in other states in one manner or other. When it goes on transnational degree it forces company of that industry to travel planetary, which works as a stimulation for globalisation ( Campell , 2004 ) . The same is happing in the field of fiscal services. Financial services have strong relation with other industries, so when those industries go planetary fiscal services industry besides has to planetary to supply the services.

Global Competitors – Global rivals have more power to vie with local companies as they can acquire net income from other states where the competition is non every bit high as in that state. Competition has put force per unit area on investing bank, Bankss and non-banking fiscal companies to make and supply sophisticated fiscal services to their clients. So, the planetary rivals besides compel fiscal services to globalise its presence.

High imports and exports – Import or export what the manner an industry is running concern, it is connected with other states. Financial services are really of import for every sort of concern. To function this purpose fiscal services industry has to follow globalisation, which strengths the competition drivers.

Globalization of authorities policies

After the 2nd universe war, when Governments of most of the states felt demand of trade with other states they opened there economic system and decreased trade barriers.

Trade policies – The trade barriers were removed after the formation of World Trade Organization ( WTO ) . The member states who signed on the trade understandings were forced to cut down trade barriers in phases. As the states reduced trade barriers the industries form those states start traveling planetary. Floating exchange rate was a great supporter for fiscal services industry ( Globaledge, 2010b ) . In the present clip else than some limitations on currency transportation fiscal services are freely available around the universe.

Technical criterions – With the spread of information engineering, states started utilizing the same proficient criterions. Information engineering is really important for the development of fiscal services, so this industry gets new door for globalisation ( Globaledge, 2010b ) . If one tries to happen the proficient criterions in today ‘s fiscal services industries, one finds that about all the states are utilizing same proficient criterions. The grounds behind are the development of the package and the invention of the new fiscal merchandise and services ( Campell , 2004 ) . There are few companies who have the recognition or debit card ownership. When the companies from the other states found it really cost effectual they licensed that engineering and now supplying these services to their client. It shows the deepness of globalisation in fiscal services industry.

Host authorities policies – The entry of foreign companies was restricted before but when states understood the value of foreign investing of substructure development, many states opened their economic systems for foreign investing. This was an chance for fiscal services industry, which it utilized and went on international degree with the aid of globalisation.

Consequences of globalisation on the major stakeholders

It is non ever that everything has positive consequence on all related things. In the same manner, globalisation has affected different things in different ways. Globalization has positive consequence on some stakeholders and negative consequence on some others. How it affects stakeholders of fiscal services industry are followerss ;

Firms – When it comes to supply services on the universe degree, the little and local houses of the industry are non capable for it. The grounds for this are limited resources and the substructure ; because of this these house are non able to pull more clients, which restrict houses ‘ growing prospective ( Hoekman , 2004 ) .

Suppliers – Suppliers have to supply fulfil their clients need if they want concern from them. Now with the globalisation of fiscal services, the providers of the industry besides need to supply the services on the universe degree, which has reduced their profitableness ( Johnson et. Al. 2008 ) . However, the providers of fiscal services industry are non every bit affected as the providers of the other fabrication industries.

Customers – The user of fiscal services are profiting from the competition in the fiscal services industry. As the figure of fiscal establishments is increasing and they are coming with new and advanced services, fiscal establishments have to supply qualitative services on sensible monetary values ( Smith, 2002 ) . Overall scenario of the fiscal services industry is indicating towards the benefits of clients, because of globalisation of the industry.

Governments – Govt. has played a important function in advancing globalisation, as it is the autonomous organic structure of any state. When a state opens its economic system for multi-nation companies, it considers negative and positive both facets. With the globalisation of fiscal services authorities has to pay more attending on the transportation of the currency. Most of the states have their ain regulations and ordinance for supervising the flow of money, out the state and investing in the state from abroad ( Tormenting, 2001 ) . Govt. has to present some limitation and define transportation manners to maintain cheque on flow of money.


Globalization has its affect on every industry ; the difference is in the extent of the affect and in the facets of its consequence, positive or negative. Where globalisation has some positive consequence, it does hold negative consequence. Because of globalisation states have opened their door for transnational companies ; market for concern is free and broad now. Globalization has besides increased the spread between rich persons and haves non. Fiscal services industry is non an exclusion in this globalized universe. Globalization has besides forced universe economic systems to free fiscal market. Most of the states are basking modern and advanced engineerings for fiscal minutess. Peoples of different states from the different parts of the universe have entree on similar fiscal service. Use of information engineering and plastic money has played a important function in the globalisation fiscal services industry. Financial services industry is globalized to some extent, but the limitations on the flow of money from one state to another bounds its globalisation.


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