There's a good reason for that. Globalization, the increasing integration and interdependence of local and national markets, driven by the rise of trade protectionism, privatization and deregulation, have been a source of efficiency and opportunities for these large companies. You've probably heard of globalization in the context of outsourcing (moving jobs abroad), but globalization has a broader meaning. It's the process by which different economies around the world become more interdependent.
In the past, you may have seen wheat grown, converted into flour, baked into bread, and traded to a neighbor for cheese. In the modern world, it's more common to see wheat grown in one country, shipped to a mill in another country, sold as flour to another, and ultimately sold to someone who lives on another continent. This use of factors of production from around the world forms a much more connected economic system. The process of connecting is called globalization.
The first is transportation: the ability to move people and products around the world brings places closer together. In the modern era of air freight, seafood can arrive on the plate of a restaurant thousands of miles away on the same day it was caught. Products grown in the other hemisphere make seasonal fruits and vegetables available all year round. In addition, the containerization of maritime, rail and road transport systems connects communities in a way that allows products manufactured anywhere in the world to reach their local retailer.
In the modern free market economy, everything a company does tends to cross national boundaries. Customers can live anywhere in the world, place an order on the Internet and have their product thousands of kilometers away in just a few days. If your company manufactures a physical product, you can source materials from one continent, manufacture them in another, and sell it in another. All this from its headquarters on another continent.
Globalization has changed what it means to run a business. Information is much easier to find, increasing competition and driving down prices. Work can be done remotely, which changes the way we go to our jobs and allows us to export services and goods. Customers can find a business without having to enter a store.
And transportation systems link everything together in a networked global supply chain. While many factors have contributed to the increase in globalization, two main factors have led to a rapid increase in connectivity around the world. Similarly, the least globalized economy of the 20th century may have seemed safer to some people, but the globalization of the 21st century has opened up an enormous engine of economic progress and innovation, although not without risks. In this way, globalization has caused many jobs in the manufacturing industry to move to areas of the world with lower salaries.
The end result is that companies have been dramatically affected by the interconnection of economic systems in a global economy. Most of the innovation that drove globalization was invested in moving armies and designing weapons. Globalization creates a larger market for companies around the world, aligns countries' financial interests and often allows each country to specialize in what it does best. Apparently, the state of the global economy is very important for Wall Street, especially for large US companies that are included in the main indices.
However, the period of empire building and colonization during the 16th and 17th centuries was undoubtedly a step in the direction of globalization. Although the word “globalization” became popular in the 1970s, the process of integrating continental economies dates back to some key innovations that go back centuries. Globalization is the process in which separate economies from around the world are more intricately connected, creating and selling products across national borders. The economic globalization that has been seen since the end of the Cold War is coming to an end, and was largely based on the interconnection of national economies for the cross-border movement of goods, services, technology and capital.
Since the 1990s, globalization has advanced much more rapidly with the advancement of information technology, the growth of multinational corporations, and the increase in international trade agreements. The recognition of these negative aspects of globalization has meant that the pendulum once again tilts towards local supply. One of the effects of globalization is that many companies seek the lowest cost of production, regardless of where in the world you are located. .
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