What are the driving forces behind globalisation?
This article aims to examine the driving forces behind globalisation. There is no doubt that the production of goods and services has increased around the world due to globalisation. Many companies have gone beyond their national borders to have operations, even in remote corners of the world. McDonald’s, Burger King, KFC, Subway, Kellogg’s, Wal-Mart, Unilever, Tesco, Nestle, Coca Cola, and Pepsi are some of the best examples in this regard.
As mentioned above, globalisation has increased the production of goods and services throughout the world. So, what are the factors that have contributed to globalisation? Well, a number of factors should be considered in this regard. Cultural exchange, improved transportation, low barriers to trade, technological changes, natural resources, and labour availability to name but a few.
The driving forces behind globalisation (Factors that have contributed to globalisation)
Cultural exchange has been one of the biggest drivers of globalisation. People travel to different countries and share their cultural beliefs and practices with each other. Through this process, a cultural understanding takes place which drives globalisation. Today, the same smart phones whether they are iPhone, Samsung, HTC, or Sonny Xperia, are liked and used by people around the world. No wonder why Indian/Bengali curries, and Chinese takeaways are so popular in the UK! Likewise, now wonder why people around the globe are crazy for American burgers, softwares, movies, and many more!
Among the factors that have contributed to globalisation, improved transportation system is a key one. The world is called a ‘global village’. People can move around it fairly quickly due to improved transportation systems. Airlines, ships, large vehicles, and others have improved the delivery time of products to and from abroad. A business man from London can go to Paris to do his ‘business’ and come back to London on the same day. Likewise, goods can be transported beyond the national borders on the same day. This happens in many parts of the world on a daily basis.
Low barriers to trade and investment
This also drives globalisation significantly. Many of the world trades are currently done through free trade, bilateral, and multilateral agreements. Interestingly, countries which were very hostile or unfriendly to foreign investment few years ago, are inviting other countries for inward foreign direct investment (FDI). China is a very good example in this regard.
The EU, the USA, and the UK have free trade agreements with many countries. The UK has come out of the European Union; however, has conducted consultations on potential future trade agreements with other countries. It has indeed completed some of the agreements so far. This shows that the importance of free movement of goods is well recognised by countries around the world.
Technology is one of the key driving forces behind globalisation. Advanced E-commerce system has made the emergence of companies such as Amazon.com, Alibaba.com, ebay.com, and many others possible and immensely successful. This technological revolution enables traders from remote parts of the world to sell their products/services to customers around the world on virtual platforms.
The global GDP in 2020 was around 84.54 trillion U.S. dollars (O’Neil, 2021). A massive number/amount of natural resources such as minerals, coal, oil, gas, water, etc. are required to keep the level of GDP this high or above. However, these resources are not concentrated in one place, rather scattered around the world. Therefore, the drive to have access to the resources encourage companies to go around the world, and in the process contributes to the development of globalisation.
In order to save costs, companies look for the countries that offer cheap labour costs. Often people ask a question: Where do Primark, Gap, Next and many others produce their products? The answer is: China, India, Bangladesh, Pakistan, and some other developing nations.
In a nutshell, there are a number of factors that have contributed to globalisation. Many companies are now multinational corporations with subsidiaries around the world. This gives managers more opportunities for growth and development.
However, globalisation is not without challenges. In fact, it has its own pitfalls. For instance, according to some analysists as cited in Saval (2017), local workers in some countries had endured a major fall in the real value of their wages, which dropped by more than 20% because of globalisation. For more and detailed information on the pros and cons of globalisation, please read Advantages and disadvantages of globalisation.
We hope the article has helped you explore some of the driving forces behind globalisation. You may also like reading PESTEL analysis of the USA. Other relevant articles for you are:
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Last update: 26 August 2021
Hill, C. (2012) International Business: Competing in the Global Marketplace, New York: Mc Graw-Hill
O’Neil, A. (2021) Global gross domestic product (GDP) 2026, available at: https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/ (accessed 25 August 2021)
Saval, N. (2017) Globalisation: the rise and fall of an idea that swept the world, available at: https://www.theguardian.com/world/2017/jul/14/globalisation-the-rise-and-fall-of-an-idea-that-swept-the-world (accessed 06 September 2019)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.