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 Social Sciences Lesson Plans & Resources  /  Psychology Courses

What is Globalization? - Definition, Effects & Examples

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Globalization & Politics

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 the opening of local and nationalistic
perspectives to a broader outlook of an interconnected and inter-dependent world with free transfer of capital, goods,
and services across national frontiers.

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.
Government Effects
Globalization also affects how governments design their nation's monetary policies. Monetary policy are the actions
of a central bank, currency board, or other regulatory committee that determine the size and rate of growth of the
money supply, which in turn affects interest rates. An example is when interest rates are low, companies may find it
favorable for them to borrow money to expand operations. The ease in which companies can borrow money is
attractive to foreign companies as well. As a result of this attractiveness, foreign companies may invest in the country
that has lower interest rates.
Globalization also affects how governments determine their trade policies. Trade policies are standards, goals,
rules, and regulations that pertain to trade relations between countries. When designing such policies, governments
must find the right balance. For example, if they establish a trade policy that is understood by other nations to be
unfair to them, other nations may then design their own trade policies that would be retaliatory to the original nation's
trade policy. However, if a trade policy is understood by its own nation's laborers and companies to be a
disadvantage to them, the laborers and companies may react to their government in a negative fashion.