What is Globalization? - Definition, Effects & Examples

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  • 0:00 Definition of Globalization
  • 1:02 Effects of Globalization
  • 1:25 Individual Effects
  • 2:31 Corporate Effects
  • 3:49 Governmental Effects
  • 5:02 Lesson Summary
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Lesson Transcript
Trunnis Goggins
Expert Contributor
Joseph Shinn

Joe has a PhD in Economics from Temple University and has been teaching college-level courses for 10 years.

Globalization is an emerging trend in business. Here you will learn the definition of globalization, examine its positive and negative effects, and be presented with real examples of globalization in the twenty-first century.

Definition of Globalization

This morning you woke up and put on a polo shirt that read 'made in China' on the inside tag. You then went to your garage and got in a car that had parts that were manufactured in all parts of the world. You drove that car to the grocery store where you bought grapes that were grown in Chile, sugar from Jamaica, and curry from India. You did all of this because of globalization. In this lesson, you will learn the meaning of globalization, some of its positive and negative effects, and some real examples of globalization.

While flipping through your TV channels you may stop at the various business channels, and in your brief stop at that channel you may view a panel discussing globalization in the marketplace. Even in the news, there is always a story that discusses the economic ramifications of globalization. Globalization is defined in a variety of ways depending on the circumstances. In general it refers to the opening of local and nationalistic perspectives to a broader outlook of an interconnected and inter-dependent world with the free flow of capital, goods, and services across national frontiers. This can be interpreted as meaning the integration of world politics, economies and cultures from one country or countries upon another country or countries. This integration also includes and is not limited to countries' political, cultural, educational, and perhaps religious views. In practical terms it can also refer to the relinquishing of any trade barriers or tariffs that results in uninhibited economic development across all countries. Globalization in this context often refers to the idea that instead of having many different markets, all the world is one gigantic market.

Effects of Globalization

Globalization has both positive and negative effects. On an individual level, globalization affects both the standard of life and the quality of life. On a business level, globalization affects an organization's product life cycle and an organization's balance sheet. Globalization also affects how governments throughout the world create policies affecting areas such as monetary regulation and trade.

Individual Effects

On an individual level, globalization has affected the standard of life and quality of life of individuals and families throughout the world. Standard of living is the level wealth, comfort, material goods, and necessities available to a certain socioeconomic class in a certain geographic area. Quality of life is the degree to which a person enjoys the important possibilities of his or her life. In many instances, quality of life has improved for those who live in developing nations. For many developing nations, globalization has led to an improvement in standard of living through improved roads and transportation, improved health care, and improved education due to the global expansion of corporations. However, globalization has had a negative effect on individuals who live in developed nations. This is due to the fact that corporations now have the option of establishing manufacturing operations in nations where manufacturing and production costs are less expensive. As a result, many manufacturing jobs leave developed nations and move to developing nations.

Corporate Effects

On a corporate level, globalization has had an effect on organizations' product or service life cycle. Product life cycle is the period of time over which an item is developed, brought to market and eventually removed from the world market. One such example of globalization having a positive effect on a product's life cycle would be the Kinder Egg. Kinder Eggs are egged-shaped chocolate candies with tiny toys inside and are very popular with children. However, due to the fact that the tiny toys may be a choking hazard for children, the United States banned the sale of these candies. However, due to globalization, the Kinder Egg is still a popular candy sold in Canada and several countries throughout Europe.

However, globalization could have a negative effect on corporation's balance sheets. An example of globalization having a negative effect on a corporation's balance sheet can be found in the United States steel industry. For years, steel from Asian nations has come into the United States. This steel from Asian nations is cheaper than the steel manufactured in the United States. As a result, many corporations and organizations that need steel to manufacture their goods purchase the Asian steel over the US steel in order to decrease their own production cost. This is had an ongoing negative effect on the balance sheets of US steel companies.

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Additional Activities

Additional Questions:

  1. Do most countries throughout the world practice globalism in one way or another? In answering this question, be sure to define globalization and explain why you believe most countries do or don't practice globalism.
  2. Explain why developing countries, such as Mexico, benefit more from trading with the United States than developed countries, such as Canada do. Specifically, discuss how developing countries are about to achieve larger increases in standards of living and quality of life than developed countries as a result of international trade.
  3. One of the primary benefits that businesses receive from globalization is an increased product life cycle for the goods they produce. In addition to describing what a product life cycle is, explain why globalization extends a product's life cycle.
  4. Explain the impact of globalization on a country's monetary policy. In providing your answer, be sure to define and describe the monetary policy.
  5. Explain the balancing act that politicians need to play in developing a country's trade policy between what policy is best for the country and what policy is the most popular and will result in those politicians being re-elected. Your answer should describe the different aspects that make up a country's trade policy.

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