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Forces Behind Globalization (With Diagram)

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Globalization is driven by various new development and gradual changes in the world economy.

Generally, organizations go global for expanding their markets and increasing their sales and profits. One of the major forces of globalization is the expansion of communication systems.

In the present era, it has become easy to distribute information to any part of the world through the Internet.

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Some of the important forces behind globalization are shown in Figure-1:

Glabalisation Force

The different forces (as shown in Figure-1) are explained as follows:

(a) Advancement of Technologies:

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Refers to one of the crucial factors of globalization. Since 1990s, enhancement in telecommunications and Information Technology (IT) has marked remarkable improvements in access of information and increase in economic activities. This advancement in technologies has led to the growth of various sectors of economies throughout the world.

Apart from this, the advancement in technology and improved communication network has facilitated the exchange of goods and services, resources, and ideas, irrespective of geographical location. In this way, advanced technologies have led to economic globalization.

(b) Reduction in Cross-trade Barriers:

Refer to one of the critical forces of globalization. Every- country restricts the movement of goods and services across its border. It imposes tariffs and quotas on the goods and services imported in its country. In addition, the random changes in the regulations create a chaos in global business environment.

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Such practices impose limits on international business activities. However, gradual relief in the cross-border trade restrictions by most governments induces free trade, which, in turn, increases the growth rate of an economy.

(c) Increase in Consumer Demand:

Acts as a main driver to facilitate globalization. Over the years, with increase in the level of income and standard of living, the demand of consumers for various products has also increased. Apart from this, nowadays, consumers are well aware about products and services available in other countries, which impel many organizations to work in association with foreign players for catering to the needs of the domestic market.

(d) High Competition:

Constitutes an important driver for bringing about globalization. An organization generally strives hard to grain competitive edge in the market. The frequent increase in competition in the domestic market compels organizations to go global. Thus, various organizations enter other countries (for selling goods and services) to expand their market share.

They export goods in foreign markets where the price of goods and services are relatively high. Many organizations have achieved larger global market shares through mergers and acquisitions, strategic alliances, and joint ventures. So, these are the major factors that have contributed a lot in globalization and the growth of global economy.

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