Globalization is that process which accelerates the flow and exchange of products and services, capital, technology, information, jobs etc. across the globe. It does not just encourage but also improves the interaction amidst different countries and audiences around the world. It has transformed the world economy into a more open and autonomous system.
Globalization is commonly contrasted with internationalization, but the two differs in their meaning, in the sense that internationalization is when a firm seeks to expand beyond the national market. This means that when the firm starts doing business on an international scale, it refers to internationalization.
Internationalization of the companies and globalization of business, has given rise to interdependency among firms and among countries. In this lesson, we will talk about all the important differences between internationalization and globalization.
Content: Internationalization Vs Globalization
|Basis for Comparison||Internationalization||Globalization|
|Meaning||Internationalization represents a process of developing products and services, to bring about expansion into the foreign market.||Globalization refers to the mutual dependence of the countries across the world, facilitated by free trade and remove of trade barriers.|
|Related to||Firm and it's business||Economy of the country and the world|
|Affected by||Taste, Preferences, Traditions, etc.||Infrastructure, Telecom network, logistics, etc.|
|Focus||Expansion of the business.||Free flow of goods and services, people, and capital.|
|Results||Increases the presence of the enterprise and pushes the world economy towards globalization.||Removal of trade barriers, the emergence of the open and free market, increased migration, etc.|
Definition of Internationalization
Internationalization refers to a process, to develop products in a manner which is capable of fulfilling the requirements of customers of different countries. In economics, internationalization implies a process in which an enterprise looks forward to making its presence in different countries by opening branches or subsidiaries, so as to cater to a wider area.
It includes all those activities which strengthen the bond between the company and the international market. So, we can say that
- Direct involvement of a domestic business enterprise in other countries and investment in new trade, typically different from the existing one is called internationalization.
- It includes activities such as export, import, relocation of the business to a different country, international transmission of know-how, foreign direct investment, etc.
It increases a firm’s trade and dealings at an international level. It is an expansion strategy used by the companies who look for horizontal integration. The strategy is used when a company has already tapped all the possible ideas to expand nationally, and now it takes steps to explore the opportunities beyond the country’s geographical borders.
Although, there a number of obstacles in the path, which the country might encounter, at the time of expansion, such as, it has to adhere to the strict international laws with respect to price, quality, time-bound delivery and so forth.
Definition of Globalization
Globalization can be defined as an interactive and integrative process i.e. economic, social, technological and cultural, which facilitates good relationship, among the individuals, firms and governments, around the world, fostered by international trade and investment, assisted by information and communication technology.
It explains the way in which trade and technology helped the world is becoming more connected and interdependent. Further, it also determines the economic and social changes which occur due to globalization. It has boosted the overall production and distribution of goods and services worldwide. In this way, it increases economic activities, across the geographical boundaries, without any barriers by the government of the countries.
Effects of Globalisation
- Rise in international trade.
- Increase in multinational companies, i.e. now many companies have subsidiaries in different countries.
- Free movement of goods and services, and capital.
- Higher dependence on the global economy.
- Access to the world market.
- Makes market homogenous by neutralizing the cultural differences in various societies.
The primary reasons to promote globalization is the improvement in transportation and communication, free trade, availability of labour at low cost, etc. It tends to influence the environment, culture, economic growth and development, political system, etc.
Key Differences Between Internationalization and Globalization
The difference between internationalization and globalization are discussed hereunder:
- Internationalization is the process of developing adaptable products so that the products can be viewed, distributed, purchased and consumed by a people belonging to different cultures, which facilitates expansion. On the other hand, Globalization implies the augmented geographical movements of the goods and services, money, knowledge, cultural values, etc across the boundaries of the country.
- Internationalization is all about the firm and its business because in this process the firm aims to enter the international market and become a part of other countries. Conversely, globalization has more to do with the world economy, as it tends to connect the economies of the world for free trade and sync the rules and regulations of various nations.
- Internationalization is highly affected by tastes, preferences, traditions, cultural and religious values, climatic conditions, etc. of the country. As against, globalization, telecommunication network, logistics, infrastructural development, availability of labour, etc. are the important factors which affect globalization.
- The primary aim of internationalization of business is expansion, whereas globalization aims at free movement of goods and services, people, and capital.
- Internationalization may result in increases in the presence of the enterprise and pushes the world economy towards globalization. In contrast, globalization may result in the removal of trade barriers, the emergence of the open and free market, increased migration, etc.
The term ‘globalization’ refers to the growing interconnectedness and interdependence between the world cultures and economies. On the other hand, when a firm sells its products cross border, imports products from foreign countries, set up business in a foreign country, then the firm is said to be in the process of internationalization.