Major Shifts Caused by Globalisation

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Companies are taking benefits from the modern communication technology mainly internet to outsource service related activities to low cost yielding countries to provide services to their customers. Some of the key services offered are call centres, software development and medical services. As stated by (Erturk, 2015) “One can claim that Globalisation could have not taken place without ICT (Information and communication technology)”. Time difference across the nation plays a huge role; by the time one country is done with the business hours the services can be offered by another country which is altogether on a different time zone. Thus outsourcing activities offshore can reduce time and lower the cost input to deliver services to the customer. This in turns help developing countries job market. International companies are the key runners who implement and benefit out of the globalisation.

With this cross country mutual business association, globalisation has bought a sizeable difference in the way global economy operates. We will see the major shifts in the world economy which changed the shape of it. In the early 1960s, United States was the supreme country in the terms of industrial capabilities. It contributed maximum to the global output. Since then there has been a decrease in the contribution by the industrial super power, United States. Still the country’s economy grew significantly. At the same time there were two prominent countries China and India whose economy grew. In the previous decade it was United States and the Western European countries who dominated the production and trade market. Since that China and India has each contributed significantly to global production than any one of the Western European countries. The rising economies of China, India, Russia and Brazil brought the further decline in United States share to world output. The decline in United States economy reflects significant growth in the developing countries economy, thus proving as a platform to support the growth of emerging economy. As stated by (Kunnanatt, 2013) “ Developing countries are bestowed with rich repertoires of natural resources and cost efficient human capital that can be deployed for better participation in the global economy and faster growth of their economies”.

In the 1960s, United States companies contributed to more than 60% of world’s foreign direct investment which was followed by British companies at 10%. Due to this, companies from both the above nations collected good amount of stocks related to production. As time passed and limitations on goods, services and investment were reduced, resulting in other countries started to grow and invest in global economy. The intent for the FDI by other countries was to spread their production activities to best or say favourable countries and to create their empire in important foreign market. This started shifting of the manufacturing unit from the developed countries to the developing countries where cheap and skilled labour was available. As stated by (Prempeh, 2013) “Globalisation is the development of an increasingly integrated global economy marked especially by free trade, free flow of capital and the tapping of cheaper foreign labour markets”. It is not that only a company owned by an individual was pumping the funds through foreign direct investment, this gave a birth to SWF – Sovereign wealth fund a government–controlled fund that manages and invests government’s savings. The goals, strategies adopted by SWF were completely different as compared to the ones of a privately owned multinational company. Earlier SWF would only invest in a developed country but lately a big chunk of the investment has been diverted towards developing countries. As time have passed United States share in FDI has consistently declined as the developing countries economy took over the large share.

The third shift would be the shift of US Dominance by US-based MNCs to the strong rise of Multinational Companies (Enterprise) from other developed and developing countries. According to (Costello & Costello, 2014) “Another interesting development regarding globalization is the increasing power and influence of multinational corporations”. A multinational company is any business that has productive activities in two or more countries. As we discussed earlier that during the 1960s the global business was ruled by large US multinational companies and their share in the FDI was significant. The decline in the US firms influence over the others is a result of the globalisation and free global economy which allowed other developed and developing countries to participate in the international markets. Even today if we check the size of a MNC the top positions are still taken by companies which are from US and other developed countries. Now is the time that companies from the developing countries are making their way in the international market and showing that they do exist. We can see the rise of Japan who has as any MNCs compared to that with the MNCs from a developed countries. Who is now followed by Hong Kong and Taiwan who are also making their presence felt in the global economy. Asia is still the home for the MNCs amongst the developing countries.

We have seen during 1989 – 1991 the communist party governments collapsed, in nation after nation throughout Eastern Europe and finally even in Soviet Union itself. The Soviet Union is now a history; it has been now replaced by 15 independent republics. Czechoslovakia has been divided into Slovakia and the Czech Republic, while Yugoslavia has been dissolved after a civil war into 5 states. Democratic politics and the global economy have attracted many former communist nations. If they remain committed the scope for world economy would be big. We cannot predict how this would go ahead as these nations were restricted to the western international businesses. There is still uncertainty, and high risk involved in doing business with such nations, but the chances of getting a high return cannot be ruled out.

Consumer has also been benefited due to Globalisation. As we have seen how companies have adapted the best technologies to get into the international market not only to compete with their competitors but also to provide the best products and services to the end customer. Since monopoly of a company is now a history a customer now has the option to choose a product or a service from the variety of options available in front of him. Due to outsourcing, new companies have been formed in developing countries due to which there has been a boom in the local job market and in turn have given a consumer the purchasing power. As stated by (Pangestu, 2012) “However, the benefits have not been spread equally within countries or between countries. Globalisation has