Globalisation Essay Example | Topics and Well Written Essays - 1500 words

Globalisation - Essay Example The opportunity hidden in globalisation has led to the development of globalisation. The first opportunity that globalisation provides us free trade facility and its resultant effect on the global economy (Milward, 2003, p.10). Free trade would lead to an increase in the trade which would increase the financial flows between various economies. Globalisation would result in an increase in free trade which would increase lateral financial flows and the redistributed capital would help to pull up the impoverished countries from their financial woes. The second opportunity provided by globalisation in development of a transnational framework which would help in the development of a smooth trade system. The origin of internationalisation of industry and commerce can derived from both macroeconomic approach and micro economic approach. The macro economics approach consists of expansion of firms' activities beyond the countries where they have their registered offices can be explained with the help of international division of labour theory and the huge circuits of capital. A micro economic approach deals with the theory of product life cycle and Dunning Eclectic Paradigm (Hansen, 2009, p.3). Nation’s now have less control over their individual industries and economies so the global network is assuming more control over the markets around the world. The global network must keep in mind the welfare of both the global community and the individual nations. Globalisation refers to the intensification of the relationship between various countries which has been set with the help of internationalisation. Foreign Direct Investment involves transfer of intangible or tangible assets from one country to another in order to generate wealth in that country through total or partial control over their assets (Sornarajah, 2010, p.8). Foreign Direct Investment is one of the key elements of the rapidly evolving international economy. This is also referred as globalisation. Fore ign Direct Investment helps to create a stable, long lasting and direct link between economies. Under a correct environmental policy the Foreign Direct Investment can serve as an important tool for the purpose of development of local enterprise. Foreign Direct Investment helps in economic development of the developing countries. The level of economic development is higher in the case of FDI than in licensing, franchising or exporting (Jones and Wren, 2006, p.9). Foreign Direct Investment infers when a group of companies or individuals of one country buy assets of another country (OECD, 2009, p.14). The acquisition of the assets happen when foreign companies or individuals to control the means of production as well as distribution. Example- a company in US can purchase a production facility in Australia. By acquiring the production facility in Australia, the corporation can control the entire production process from US. This would help to ensure the quality of the product. A foreign direct investor can have a varying amount of stake in the company invested by him. FDI indicates at least 10% ownership in a company which helps the investor to control the daily affairs of the company as compared to licensing, export and franchising where very control can be exerted (Cohen, 2007, p.38). Some countries have a cap on the equity investment in their country. FDI helps in generating economic growth for a country so it preferred over licensing, franchising and exporting (Neuhaus, 2006, p.42). People who buy stocks in the company own a part of the company and have the ability to control the affairs of the co