The world we know is progressively becoming more and more globalized. International trade, innovative technologies, accessibility of information and possibility to travel are creating numerous possibilities for both developing and developed countries. Globalization has made this world more interconnected and integrated than ever before. Every day, economical, social and cultural cooperation between nations is becoming easier and faster. It has dramatically accelerated the movement of goods, capital, ideas and services across the borders of different countries (Globalization easily explained. Explainer video, 2013).
Globalization has significantly affected the business perspective of many American companies by expanding markets. Corporations that were previously selling their goods exclusively in the Unites States are now able to trade their products internationally. Until the beginning of 1990s, the majority of American companies produced their goods domestically. However, when the markets of the People’s Republic of China became opened to the rest of the world, the US businesses have gained a possibility to take advantage of the far cheaper labor force. This phenomenon is referred to as outsourcing. Cheaper labor has significantly decreased the costs of produced goods and, in turn, contributed to larger profits of American companies (Parry, 2001).
Outsourcing has made American companies more competitive in the international marketplace and positively affected people in other countries through creating new jobs. Between 1991 and 2000, the U.S. companies have created approximately 3 million jobs in other countries. In addition, contrary to a common opinion that outsourcing increases domestic unemployment, they also created about 5 million jobs for Americans (Parry, 2001). These figures show that a job created overseas does not necessarily mean one is not created in the United States. Expanding a network in an overseas country often involves hiring more employees in the U.S too – managers, experts in logistics, IT, and R&D.
However, globalization has had its adverse affects, as well. One of them is the increasing income inequality, particularly observed in developing countries. Several recently conducted studies confirm that states, rapidly integrating with the world economy, are experiencing an increasing gap between poor and rich population. However, the rates of economic growth in these countries are extremely high, which subsequently decreases the number of people living in poverty (Hansen, 2011).