Globalization can be described as a process through which the economies, cultures of different countries have come closer to each other and have become integrated with each other. The term is used more specifically in case of economics as the integration of several economies to an international one thereby increasing trade, lowering down of trade barriers, increasing competition and generating multiple streams of revenues.
Globalization in respect to the international business takes into consideration the widening business horizons for the economies as they spread their wings to reach out to new international markets. The term means that companies now operate in multiple markets freely with lower legal and tax barriers and more opportunities to tap the market. This has also enhanced the scope of flow of goods and services from one country to another and have made the countries showcase their competitive advantage over others in the world market.
The exports have grown with the rise in globalization as countries reach out to other in the market to take advantage of the competitive advantage of each other. This has helped each country to develop its resource base and act as a supplier of goods and services to other countries in the world through the export market. For eg. China has become the manufacturing hub of the world because of the globalized economy. India offers quality services mainly in IT, medical and tourism to customers all around the world. Globalization in terms of international business also elates to more and more distribution of work among those in the market who can do that most efficiently and in a cost effective manner which has resulted in the growth of outsourcing sector in the past few years. The advent of globalization in the international business has also made the countries more dependent on each other as they become entangled with each other as they try to take advantage of each other’s competitive advantage in the market.
Companies now have multiple markets to reach out to which has increased their customer base many fold.
Competition is based on the free market theory and globalization has helped in making the international markets free from all barriers both political and legal thereby resulting in the increase in competition in a huge manner. Companies in any region now face stiff competition not only from the domestic companies but also from the international ones as they try to expand their market and offer their products and services to customers around the world (Bala, 1985). Globalization has given more power to the organizations to take advantage of there competitive advantage in the market and give competition to other players in the same industry by expanding its market to other nations. Taking example of the outsourcing industry, with globalization , American firms found it more economical and beneficial to manufacture in China and India to take advantage of cheap labor and raw materials than manufacturing in their own market.
This resulted in the flow of contracts out of the home country to the ones which could do the work more efficiently and cheaply Thus the American firms found the competition increased many folds as they were competing even with the developing world countries who could provide better products and services because of their competitive advantage. Globalization thus helped the players to leverage more on their strengths but in the process of expanding the market raising the bar of competitive force too in the market.
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