Globalization is the concept used for the process of intercontinental social, political and economic integration. This integration is helping people to travel, communicate and invest in international markets. It also allows companies to acquire capital and human resources efficiently. With the help of globalization, companies can enjoy economies of scale and advanced technology. There are different dimensions and definition of globalization. According to one definition, globalization is the integration of cultural, political and economic activities of geographically separated people (Wells, Shuey, & Kiely, 2001, p. 38).
It is the process of interaction of different government and companies in different countries. With the help of globalization, companies are now able to expand their business in international countries. Globalization has not only affected the culture but also the political and environmental system of the countries. Globalization is not a new term, but from many years, companies are selling and buying products from distant places. Due to increased technology and innovation, now cross borders trade has increased. After the technological development, the world has entered into new developments. Another definition of globalization is the access of business beyond domestic markets.
Globalization has connected the world together. It is not difficult nowadays to communicate to another person sitting far away due to the globalization. It is also known as defining the international system based on market integration and nation-wise technologies. Globalization is a broad term, and it connected world together through an integration of resources. Outsourcing production is also another example of globalization. Now many companies like Coca-Cola, Google, Honda, McDonalds, Starbucks are working at international level.
Measurement of globalization
There are different ways to measure globalization. There has been a wide literature top measure the globalization. Globalization can be measured through some exports and imports within the country. To measure economic globalization, it is advisable to analyze the foreign direct investments, total trades, portfolio investments and their restrictions. On the other hand, social globalization is measured with the help of information flow and people interaction. Recent development in the measurement of globalization is using indices. Indices were introduced by the World Market Research Centre. Globalization index for foreign policy is another measurement tool for measuring the globalization.
With the help of this research, data from different countries can be used and combined in the last stage to identify the indices. WMRC and ATK are reviewed first for measuring the globalization. Another globalization measurement index has presented by KOF and it is known as MGI. The weight of this index includes exports and trades with service exports and international trade making up to 70% of this index. Measuring foreign direct investment is another indicator for measuring the globalization (Drehe, Gaston, & Martens, 2008, p. 27).
It is measured by the sum of outflows and inflows for measuring globalization recorded in the financial account of the balance of payment. It includes capital, equity investment, and earnings. This indicator for measuring is different from a traditional index of measuring FDI. Traditional measures of FDI only focus on inward investment. On the other hand, in globalization volume of flow is more important than its direction. This is the reason why this approach is not used in the globalization. Another measure of globalization is the gross private flow of capital (Drehe, Gaston, & Martens, 2008, p. 37).
It can be measured with the help of adding absolute values of a portfolio and other outflow and inflow of investments in the balance of payment subtracting changes in liabilities and balance sheet. Economic globalization can be measured with the help of measuring the intensity of trade. Trade intensity is the sum of import as well as exports as the percentage of the gross domestic product. The data is recorded for a long period to measure this index. The addition of trade in services in this approach has provided different measurement challenges for the economies. It is very difficult to value the data communication and data processing’s (Drehe, Gaston, & Martens, 2008, p. 36).
Tourism brought people together and increased their interaction and communication with each other. It is the source for exchanging of culture. This is the reason why this activity is also included in the measuring index of globalization. To measure political globalization, it is advisable by the ATK that some high commissions, embassies, and a number of multinational organizations have analyzed. Method is to scale each index on the scale to 0 to 10. Lower value donates lower globalization, and higher value donates higher globalization (Drehe, Gaston, & Martens, 2008, p. 45).
Globalization and businesses
Globalization has increased responsibilities of businesses. Businesses are now compelled to follow international standards and policies like government regulations, regulations related to labor, operations, and environmental laws. They should also follow ethical standards in international markets. As the corporate citizen, every business should respect the change in culture, and it should try to follow rules and regulations of the international country. Businesses should follow corporate structure and labor policies on international countries. It should carry its corporate and social responsibility.
In the end, it is concluded that globalization has connected this world together. With the help if globalization, new job opportunities have introduced for people. It is also concluded that globalization has measured with different ways like foreign direct investment, inflow, outflows, political connections, etc.
Drehe, A., Gaston, N., & Martens, P. (2008). Measuring Globalization: Gauging Its Consequences. Springer.
Wells, G. J., Shuey, R., & Kiely, R. (2001). Globalization. Nova Publishers.