Globalization is the linkage and dependence between nations and between people throughout the world through trade, investment, travel and popular culture.
Globalization is a process in which between individuals, between groups, and between countries interact, depend, relate, and influence each other across national boundaries.
In many ways, globalization has many of the same characteristics as internationalization so that these two terms are often exchanged.
Some parties often use the term globalization which is associated with the reduced role of the state or national borders. Read also social factor that effecting business in Indonesia.
Broadly speaking, there are several effects of globalization on businesses in Indonesia. There are 13 effects of globalization on business in Indonesia.
1. Globalization of production
The company produces in various countries with a target so that production costs are lower. This is done either because of low labor wages, cheap import duties, adequate infrastructure or because of a conducive business and political climate. The world in this case is a global manufacturing location.
2. Globalization of financing
Global companies have access to loans or investments (in portfolio or direct form) in all countries in the world. For example, PT Telkom in expanding telephone lines, or PT Jasa Marga in expanding the toll road network has utilized a financing system with a BOT (build-operation transfer) pattern with international partners. You may see also history of Islam finance in Indonesia
3. Globalization of labor
Global companies will be able to utilize labor from around the world according to their class. Such as the use of professional staff taken from workers who already have international experience or unskilled laborers who are usually obtained from developing countries. With globalization, the human movement will be easier and more free.
4. Globalization of information networks
The people of a country easily and quickly get information from countries in the world because of technological advances, including through: TV, radio, print media etc.
With an increasingly advanced communication network that has helped expand the market to various parts of the world for the same goods. For example: KFC, levi’s jeans, or hamburgers hit the market everywhere.
As a result, the taste of the world community – both those who live in the city and in the village – leads to global tastes.
5. Trade Globalization
This was realized in the form of tariff reduction and uniformity and the elimination of various non-tariff barriers. Thus trading and competition activities are becoming faster, tighter and fairer. See also reasons why Indonesia good for business
In the positive impact of globalization here our economy will improve, which will be marked by:
6. Global production can be increased
This view is in accordance with the theory of ‘Comparative Advantages’ from David Ricardo. Through specialization and trade, the factors of world production can be used more efficiently. World output increases and people will benefit from specialization and trade in the form of increased income. So that it can increase spending and savings
7. Increase the prosperity of people in a country
That is the effects of globalization on business in Indonesia. More free trade allows people from various countries to import more goods from abroad. This causes consumers to have more choices of goods. In addition, consumers can also enjoy better goods at lower prices.
8. Expand the market for domestic products
A freer foreign trade allows each country to obtain a much wider market than the domestic market. Globalization allows trade between countries. That is why the domestic market will be more widespread.
This will gives benefit domestic producers. The producers will be able to sell their wares at a more favorable price. Of course this is because the rupiah exchange rate is against foreign currencies.
9. Can get more capital and better technology
Capital can be obtained from foreign investment and is mainly enjoyed by developing countries. This is because the problem of lack of capital and experts and experienced educated personnel are mostly faced by developing countries.
10. Provide additional funds for economic development
The development of industrial sectors and various other sectors is not only developed by foreign companies, but mainly through investments made by domestic private companies.
These domestic companies often require capital from banks or the stock market. funds from abroad, especially from developed countries that enter the money market and capital markets in the country can help provide the needed capital. Read also reasons why Indonesia good for invest
As with positive impacts, the negative impact of globalization on the economy also affects the prosperity and progress of society in the economic field, such as:
11. Inhibit the growth of the industrial sector
One effect of globalization is the development of a more free foreign trade system. This development has caused developing countries to no longer be able to use high tariffs to provide protection to newly developed industries (infant industry).
Thus, more free foreign trade creates obstacles for developing countries to advance the domestic industrial sector faster. In addition, dependence on industries owned by multinational companies is increasing.
12. Worsening the balance of payments
Globalization tends to increase imported goods. Conversely, if a country is unable to compete, then exports do not develop. This situation can worsen the balance of payments condition. Another adverse effect of globaliassi on the balance of payments is that net payments of income from factors of production from abroad tend to be deficit.
Increasing foreign investment causes the flow of payments of profits (income) to overseas investment to increase. Not developing exports can adversely affect the balance of payments.
13. The financial sector is increasingly unstable
One of the important effects of globalization is the increasingly large portfolio investment (capital). This investment mainly includes the participation of foreign funds into the stock market. When the stock market is increasing, these funds will flow in, the balance of payments will increase and the value of money will improve.
Conversely, when stock prices on the stock market decline, domestic funds will flow abroad. This caused the balance of payments to tend to get worse and the value of the domestic currency slumped. Instability in this financial sector can have an adverse effect on the stability of overall economic activity.
14. Aggravating the prospects for long-term economic growth
If the matters stated above apply in a country, in the short term, economic growth will become unstable. In the long run, such growth will reduce the pace of economic growth. national income and employment opportunities will grow more slowly and the problem of unemployment cannot be overcome or even worsened.