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The word globalization stems from the world globe, and it translates to the worldwide coming together as countries and nations. Although globalization is a broadly discussed topic, it is still challenging to explain using simple terms. Globalization can be defined as a process through which ideas, knowledge, information, goods, and services are distributed around the world. From an economic point of view, globalization deals with the aspect of trading as well as access to resources of other nations with the inclusion of labor markets with the intention of benefitting the people. Through globalization, the world has become interconnected with each other mitigating the previously well-known isolation due to distance and lack of technology. The impact is exhibited by the rapid increase in interaction between people of various nations and backgrounds sharing their ideas, expertise, goods, services, and investment.

On the other hand, globalization has been a major cause of instigating fear of unemployment among the people. Additionally, globalization has also caused fear of losing one’s cultural beliefs and values. (Ritzer & Dean, 2007)
It is not a myth that globalization has both benefits and drawbacks. Below is an in-depth analysis of the pros and cons of globalization with relevant examples pertaining to the subject matter.

Link to YouTube Video explaining Globalization : https://www.youtube.com/watch?v=JJ0nFD19eT8

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In what ways is globalization goods for firms and consumers

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1. Encourages companies and consumers to benefit from deeper division of labor and economies of scale

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1. Encourages companies and consumers to benefit from deeper division of labor and economies of scale

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With globalization consumers can now get “more bang for the buck”. Trade not only improves the way the economies use their human resources but it also rewards higher skilled workers. Globalization has allowed the companies to off-shore parts of the production in order to invest more in human capital.
Globalization creates new business opportunities which ultimately result in lower consumer prices and higher productivity growth. The growth of customers abroad helps these firms to spread development and production expenditures over many more unit of sales.
Economies of scale are the benefits that can sometimes occur as a result of increasing the size of a business. Globalization has helped increase these advantages, companies now have a better way of using their resources and as a consequence of these forces to trades, the standard has increased.
The growth of customer worldwide helps companies to spread development and production expenditure over many more unit of sales. This scale is the benefit of globalization. Companies have been able to develop businesses that depend on scale of many units to many different customers. Globalization creates opportunities for faster specialization of production and a vast market for these products. A company can no longer become a corporate imperium that produces a huge variety of different products under the protection of trade barriers. As we can see in the case of the automobile industry, it is now divided, with one division producing cars and the other trucks, buses and heavy vehicles. (Erixon, 2018)
Example: If Ericsson’s market for mobile technology would be limited to Sweden it would have been impossible to build basic GSM technology or develop the core equipment for 3G and 4G communication. Likewise, having the ability to hire labor force from other countries helps these companies expand and implement their technologies. The same logic applies to many other sectors that require substantial development and production costs: automobiles, chemicals, computers, electronics, pharmaceuticals, and more. It is therefore unsurprising that the expansion in global trade during the age of globalization happened to a large extent in exactly these sectors.

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2. Competitive markets reduce monopoly profits and incentivize businesses to seek cost-reducing innovations

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2. Competitive markets reduce monopoly profits and incentivize businesses to seek cost-reducing innovations

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A company can no longer become a corporate imperium that produces a huge variety of different products under the protection of trade barriers and leading to the monopolization of the local market. With globalization, the market has become more diverse and this has forced companies to find lower-cost ways to produce their products. This helps increase global competition, which drives down prices and creates a larger variety of choices for the consumers. Lowered costs are a benefit that people in both developing and already-developed countries reap the fruits of. Furthermore, this allows a better lifestyle on less money.
International trade has shown to cut import costs for both consumers and businesses that buy inputs for their own production and assembly. Greater competition from foreign companies has created additional pressures on local companies to constantly search for ways through Research and Development initiatives.
Trade increases the need for firms to be competitive and employ new technology. This effect of trade alone has a positive and strong effect on the behavior of the economy. (Khanna et al., 2005)

Example: After studying half a million firms in twelve European countries, a group of economists found that trade with only one country, China, had contributed significantly to the health of Europe’s economy. Import competition from China pushed European firms to invest more in R&D and information technology, and the productivity of these firms went up substantially. Equally important, that trade also contributed positively to the reallocation of labor between inefficient and efficient firms in Europe. Between 2000 and 2007, increasing trade with China accounted for about 15 percent of all technological upgrading in these firms.

Link of YouTube video that elaborates the aforementioned point: https://www.youtube.com/watch?v=PaXSuuel5ec

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3. Enhanced growth through globalization has led to higher per capita incomes

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3. Enhanced growth through globalization has led to higher per capita incomes

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GDP per capita is a common metric used for measuring national average incomes.

Trade contributes to economic growth by allowing countries to specialize in order to produce goods that they can efficiently produce while importing other goods. Globalization has helped the local products to be sold on an international level resulting in a higher return. Some experts credit globalization for being the reason of economic well-being, contributing to raising living standards and the reduction of extreme poverty (as can be seen in the graph above). Globalization has helped raise the incomes of the poor as much as it has helped in raising the income on average.

Developed industrialized countries tend to benefit the most from globalization, but the developing countries are slowly benefitting too, even though the per capita gains may be lower. (Ospina, 2017)

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4. Advantages of free movement of labor between countries

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4. Advantages of free movement of labor between countries

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Globalization has forced companies to spend more money on human capital to get higher-skilled workers who work more effectively and efficiently. Some countries may face labor shortages regarding skilled positions or undesirable jobs, and this is where immigrants can fill these vacancies. (Pettinger, 2017)

Due to this, a chain reaction has occurred that diminishes the rise in unemployment as the workers can take up jobs overseas, gaining from the booming economy of other countries. The labor market has become more flexible due to this free movement of labor. Some professions that take longer to fill, causing shortages due to higher training times, can be overcome quicker.

Globalization will also prevent wage inflation when an economy faces labor shortages as rising wages will attract more labor preventing excess wage inflation.

Apart from this many countries are facing a demographic time bomb, the rapidly ageing population which usually poses a threat to the economy can be avoided by attracting young labor to areas of declining work population.(Munck, 2000)

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5. Opening up of capital markets allows developing countries to borrow money to over a domestic savings gap

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5. Opening up of capital markets allows developing countries to borrow money to over a domestic savings gap

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Financial globalization has been one of the most dynamic aspects of the continued globalization experienced by the world. Capital markets helped the flow of funds to a large number of emerging economies in the world. Countries that were adjusting to globalization and opening up to international trade needed funding. This was recognized, and institutions such as the IMF (International Monetary Fund) or The World Bank was able to provide payment supports to countries for maintaining an open trade system.
This has improved the efficiency and balance of trade for these developing countries. Firms would benefit from this as it increases their scope to operate within that country. Furthermore, this would help increase the prospective audience for the products. With this, globalization helped meet the needs of the people around the world.

Developing countries can obtain bigger gains through international consumption risk sharing, that is, by effectively selling off a stake in their domestic output in return for a stake in global output.(Ocampo et al., 2000)

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Before we delve into the inequality caused by globalization it is crucial that we are on the same shoe as to what ‘inequality’ means. Inequality, according to research by European commission can be related to two factors: income and opportunity. (European Commission, n.d.)

When we relate globalization to inequality, we usually limit the inequalities caused by it to income and wealth. It is evident from various reports of the IMF that globalization has been a cause of existence of inequality among the poor and the rich especially in countries such as China, Brazil, and India. It should be noted that two of the mentioned countries hold over 1/3 rd of the world’s population. (Bardhan, 2006)

The problems which are consequences of inequality are harmful to both firms and consumers and furthermore, society as a whole. Inequality has been identified as playing a vital role in increasing the crime rates while decreasing the growth of a country. This can be devastating for a country if hasty actions are not taken. (Birdsong, 2015)

Link to YouTube video that demonstrates how globalization accounts for inequality: https://www.youtube.com/watch?v=vecy6YYstOM

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Imagine walking into a store to buy your favorite snack 10 years back and now. Are they of the same price and quantity?

Experts have deemed globalization as a major factor for the rising prices in agricultural sector. Additionally, food price inflation also known as agflation, which is a by-product of globalization is a concern as poorer people suffer tremendously due to this. The way globalization plays a role in agflation is through the increased demand of staple food products in developed countries which in turn, raises the price of those products in the host country. Consumers of that nation are harmed in the process especially if they do not have sufficient funds to acquire food for themselves.  (Shanthi et al., 2015)

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A trade imbalance which occurs due to a trade deficit or a trade surplus is one of the ways globalization affects firms and consumers. A trade deficit happens when a country imports more then it exports-with imports and exports referring both to goods and services. In layman's terms, a trade deficit means that a country is purchasing more goods and services then it is selling. This would translate to hurting the job creation and economic growth in the deficit-running country which would affect the firms operating in that place. Furthermore, consumers are also affected as inflation is often a consequence of this event.

On the other hand, a trade surplus is an economic measure of a positive balance of trade, where a country's exports exceed its imports.

Though globalization, many developed countries are running big trade surpluses which causes an imbalance in the system. This creates additional tensions and pressures and the necessity to introduce policies that would protect the developing and the underdeveloped nations. However, many developing countries steel fall victim to this export dumping by producers in advanced nations. (Hayes, 2021)

Video link explaining trade imbalance in detail: https://www.youtube.com/watch?v=eM9OxAdOT0Y

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Although global free trade is favorable to the entire system, individual firms and workers can be disadvantaged by global competition. The situation is similar to that of domestic competition however, the pool has simply broadened.

This may enforce firms, and citizens to pursue the government to implement protectionist policies to buffer domestic firms or workers from global competition. Protectionism often takes the form of tariffs, quotas, or non-tariff barriers, such as quality or sanitation requirements, that make it more difficult for a competing nation or business to justify doing business in the country. These efforts can often be detrimental to the overall economic performance of both parties. (Stobierski, 2021)

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Increased globalization has been linked to various environmental challenges, many of which are serious, including:

Deforestation and loss of biodiversity caused by economic specialization and infrastructure development

Greenhouse gas emissions and other forms of pollution caused by increased transportation of goods

The introduction of potentially invasive species into new environments

These are concerns for both firms and consumers as the firms have to deal with newer policies and lawsuits that hold them accountable for the issues caused. Consumers are affected in the sense that the environmental issues directly affects their health and well-being. (Stobierski, 2021)

Video link describing the environmental issues due to globalization: https://www.youtube.com/watch?v=d8sh_4fRyJs

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Globalization is as old as time itself. For as long as nations have existed, they have interacted with one another. This is the way it has always been, and it is not going to change anytime soon. In order to have a more just and peaceful world, the disadvantages of globalization need to be better handled, and possible solutions should be implemented. However, globalization brings so many benefits and possibilities to the world it should not be scapegoated in the way that it currently is. Globalization, at its core, is simply trade and the after-effects of trade, and this is a dynamic that we want to preserve between nations.
The benefits of globalization are clear; it offers massive economic benefits and a greater understanding among nations, something that can ultimately lead to World Peace. While the drawbacks of globalization are apparent as it can cause inequality, inflation, trade imbalance, competition and environmental issues, if managed properly, these concerns can be overcome.

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Bardhan, P. (2006). Does Globalization Help or Hurt the World's Poor?: Overview/Globalization and Poverty. Scientific American. Retrieved 1 September 2021, from https://www.scientificamerican.com/article/does-globalization-help-o-2006-04/.

Birdsong, N. (2015). The Consequences of Economic Inequality. Sevenpillarsinstitute.org. Retrieved 1 September 2021, from https://sevenpillarsinstitute.org/consequences-economic-inequality/.

Erixon, F. (2018). The Economic Benefits of Globalization for Business and Consumers |. Ecipe.org. Retrieved 1 September 2021, from https://ecipe.org/publications/the-economic-benefits-of-globalization-for-business-and-consumers/#_ftnref11.

European Commission. Ec.europa.eu. Retrieved 1 September 2021, from https://ec.europa.eu/info/sites/default/files/file_import/european-semester_thematic-factsheet_addressing-inequalities_en_0.pdf.

Hayes, A. (2021). Pros and Cons of a Trade Deficit. Investopedia. Retrieved 1 September 2021, from https://www.investopedia.com/articles/investing/051515/pros-cons-trade-deficit.asp.

Khanna, T., Palepu, K., & Sinha, J. (2005). Strategies That Fit Emerging Markets. Harvard Business Review. Retrieved 1 September 2021, from https://hbr.org/2005/06/strategies-that-fit-emerging-markets.

Munck, R. (2000). Labour and Globalisation: Results and Prospects. Work, Employment And Society, 14(2), 385-393. https://doi.org/10.1017/s0950017000000210

Ocampo, J., Zamagni, S., Ffrench-Davis, R., & Pietrobelli, C. (2000). Financial Globalization And The Emerging Economies. Retrieved 1 September 2021, from.

Ospina, E. (2017). Is globalization an engine of economic development?. Our World in Data. Retrieved 1 September 2021, from https://ourworldindata.org/is-globalization-an-engine-of-economic-development.

Pettinger, T. (2017). Free movement of labour - advantages - Economics Help. Economics Help. Retrieved 1 September 2021, from https://www.economicshelp.org/blog/1386/economics/free-movement-of-labour/.

Ritzer, G., & Dean, P. (2007). Globalization (1st ed., pp. 55-57). Blackwell Publishing.

Shanthi, R., Murari, P., Ahmed, R., & Suganya, M. (2015). BRAND: SCULPTING CORPORATE IDENTITY (1st ed., p. 152). C. Janarthanan.

Stobierski, T. (2021). 6 Pros and Cons of Globalization in Business to Consider. HBS Online - Blog. Retrieved 1 September 2021, from https://online.hbs.edu/blog/post/pros-and-cons-of-globalization.