What Is Globalization of Business? - Definition, Impact & Effects

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  • 0:01 Globalization in Business
  • 0:23 Impact of Globalization
  • 1:58 Effects of Globalization
  • 3:27 Lesson Summary
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Lesson Transcript
Instructor: Carol Woods

Carol has taught college Finance, Accounting, Management and Business courses and has a MBA in Finance.

What is globalization of business? In this lesson we'll discuss what it is, its impact on the global marketplace, and the effects of globalization on businesses worldwide.

Globalization in Business

Globalization refers to the changes in the world where we are moving away from self-contained countries and toward a more integrated world. Globalization of business is the change in a business from a company associated with a single country to one that operates in multiple countries.

Impact of Globalization

Imagine for a moment that you run a business that produces digital cameras. How would globalization impact your company?

The impact of globalization on business can be placed into two broad categories: market globalization and production globalization.

Market globalization is the decline in barriers to selling in countries other than the home country. This change will make it easier for your company to begin selling products internationally, since lower tariffs keep consumer prices lower and fewer restrictions when crossing borders makes it easier for a company to enter a foreign market. It also means that companies must consider other cultures when developing their business strategies and potentially adjust the product and marketing messages if they aren't appropriate in the target country. This may not be an issue in the camera industry, but a hamburger company entering India would definitely need to revisit their product and strategies to be successful!

Production globalization is the sourcing of materials and services from other countries to gain advantage from price differences in different nations. For example, you might purchase materials and components for your cameras from multiple countries and then assemble the product in yet another international location to reduce your costs of production. This change should lead to lower prices for consumers since products cost less to produce. It also impacts jobs, since production may shift from one country to another, usually from more developed countries to less developed countries with lower average wage rates.

Effects of Globalization

The primary effects of globalization include:

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