The Impact of Globalization on Developing, Transitional & Developed Countries

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  • 0:03 What Is Globalization?
  • 0:55 Types of Economies
  • 2:00 Impact of Globalization
  • 3:19 Effect of…
  • 5:09 Lesson Summary
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Lesson Transcript
Instructor: Claude Bourbonniere

Claude has worked as a Company Manager for Cirque du Soleil for the past 20 years and completed an MBA in Global Management at the University of Phoenix in 2014

Countries of the world are impacted at different levels by globalization. Learn about the different effects of globalization on developing, transitional, and developed countries and how all these economies are interconnected.

What Is Globalization?

How are you watching this lesson right now? Are you on your laptop, or maybe a tablet, or even your cell phone? When a company like Dell is building a computer, the computer may be assembled in India (a developing country), though certain complicated parts were built in China (a transitional country), while the research and development were done in the United States (as you probably know, a developed country). All this is possible due to globalization.

Travel, communication, and trade between countries are becoming easy and create the development of closer economic, cultural, and political relations among all the countries of the world. Globalization impacts countries differently depending on the stage where their economies are. In this lesson, we will explore the impact of globalization on developing, transitional, and developed countries.

Types of Economies

First, let's ensure that we understand the three types of economies we'll be discussing:

Developing countries are nations with an underdeveloped industrial base where people have lower life expectancy, less education, and less income. Examples of developing countries are most of the countries in Africa and certain countries in east Asia.

Transitional countries are those emerging from a different type of economy towards a market-based economy. Transitional economy refers to all countries that attempt to change their basic constitutional elements towards market-style fundamentals. The best examples of transitional countries are China and Russia.

Developed countries are countries with a lot of industrial activities and where people generally have high incomes. They have post-industrial economies, meaning the service sector provides more wealth than the industrial sector. The United States of America, Australia, and most of the European countries are examples of developed countries.

An economy can have sectors in both the developing and developed stages, but cannot be transitional at the same time.

Impact of Globalization

So now that we understand some characteristics of these economies, let's examine how globalization affects them.

Globalization creates greater opportunities for firms in less industrialized countries to tap into more and larger markets around the world. Thus, businesses located in developing countries have more access to capital flows, technology, human capital, cheaper imports, and larger export markets. Globalization allows businesses in less industrialized countries to become part of international production networks and supply chains that are the main conduits of trade.

Globalization gives access to the world market to transitional countries. They need to adapt their production capability, their prices, and their product quality to be competitive with the nations of the developed countries. Globalization changed and continues to change China. This country is becoming a major economic player in the global world.

Globalization allocates the production in the countries where it is the most efficient and less costly for the global world. Developed countries become more concentrated on services and research and development. The best example in the United States is Apple. Apple created and continues to develop iPhones in the US but outsources the mass production of iPhones in China where the costs are lower.

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