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(JPMNT) Journal of Process Management – New Technologies, International Vol. 8, No 1, 2020.

GLOBALIZATION'S INFLUENCE ON THE COMPETITIVENESS OF NATIONAL ECONOMY

Dušan Aničić1, Olgica Nestorović2

1University Union - Nikola Tesla, Faculty of and Finance, Belgrade, Serbia, 2International University Travnik, Faculty of Economics, Bosnia and Hercegovina, [email protected], [email protected]

Professional Paper doi:10.5937/jouproman8-24404

Abstract: The process of globalization is the the global in most of the activities. characteristics of modern trends in world economy, The countries of the world are connected implying open national borders for uninterrupted into a multidimensional network of movements of products, capital and labor force around the world. Although the process of economic, social and political connections. globalization caused huge and Individual national economies feel technology advance, numerous faults and increasing positive and negative effects of contradictions of the process have become obvious general world economy flows, looking for in the recent decades. Nowadays, the role of balance between economic independence globalization is considered overrated, the reality being very different from the promises, and and the level of international economy therefore the trust into the process has vanished, as involvement. well as elites and institutions that advocated and imposed it. National economies, especially in Global economy is gaining importance transition countries, strive to catch up with the when markets in some countries are not developed countries and take desired positions in large enough to enable optimal size the global market through the increase in their competitiveness. company creation. Company size allows the provision of market share in a larger Keywords: globalization, competitiveness, market, number of national markets through the enterprise combination of product standardization higher level with the concentration of specific activities in the chains. Introduction Company globalization incentives do not come only from the economy of size but Globalization is the process of creating the the economy of scope as well, that is, conditions for more dynamic movement of activity expansion – more product lines production factors between the countries and more jobs. Technology is one of the with the aim of creating open world main globalization encouragements economy without borders. Market barrier because the world is moving towards elimination, monetary restrictions, capital in global technologies. It is flow control, all lead to more intensive the strongest foundation for competitive and financial flows between certain advantage acquisition in the world. countries. Globalization has changed the structure of the world market, thus only the largest companies can achieve in

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Globalization concept and definition According to the definition stated by Hopkins, globalization is „a process In terms of economy, for a number of transforming economic, political, social reserachers and analysts, globalization is a and cultural relations between countries, process for reduction and complete regions and entire continents, extending, obstacle elimination in the international empowering and accelerating at the same economic exchange and economic time“ (Hopkins, 2002). For Freedman, integration increase among countries, globalization is „ unrelenting integration of border extension (through customs barrier markets, countries-nations and elimination) that enable free movement for technologies in an unprecedented degree people, information, standards and so far, allowing individuals, corporations institutions. Thus directed, globalization and countries-nations to extend all over the also denotes social and cultural relations world in a further, better, wider and and institutions expansion and increase. cheaper way than ever before.....extending In fact, globalization means ’uniting free capitalist market to every country in human effort and activities towards the world“ (Freedman, 1999). accelerated integration of humanity, in For Robertson (1992), globalization is „ global terms, encouraged by compression of the world and unprecedented human, technology, capital, intensification of its awareness at information, ideas and cultural property large.....specific global interrelation and exchange among countries and nations, but awareness on global unity in the twentieth in such a way that neither countries nor century“. For Waters (1995), globalization people control this process as muct as they is a social process where geographical would like(Miletić, 2000). According to limitations on social and cultural events that, in nothing disappear, and people become increasingly else but world integration through trade, aware of the fact. financial flows, technology and information exchange, as well as „Dominant type of globalization is a population migration (Ouattar,1997). In historical transformation: in economy, the the broad sense, globalization refers to the manner of income and existence provision; expansion of global ties and involves in politics, local control degree loss; in several large processes. Therefore, the culture, collectivity achievement loss.... definition of globalization differs Globalization occurs as a political depending on its focus. response to market power expansion .... It is in knowledge area“ (Mittelman, 2000). The third stage of internalization process in world economy is called globalization. For Samuelson, globalization is, in a way, In the first stage, since World War II till a support because “…it allows mutual the end of 1960s, world trade played the reliance of the forces in some countries. main role, and internationalization level But it also makes us open and vulnerable was measured by the share in the world to the weaknesses of others. Everyone (OECD 1992). According to James increasingly depends on total world Stoner (2002), globalization phenomenon economy that relies on its vital organs’ consists of three interrelated factors: a) local proximity factor, b) organization health – USA, Europe and Japan”. location factor and c) organization open attitude factor.

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Samuelson neglects the significance of significant and complex. All countries are smaller countries national economies in in a position to seek a balance between the comparison to G8 members, real economic independence and degree of foundations of the global economy (Jurčić, involvement in the international economy. 2000). It is difficult to find a reciprocity in this situation, especially when we speak about Most authors divide the process of developing countries. There is an globalization impact into three stages or increasing number of economic problems three large waves. The first wave is the that a national economy could solve period from 1870 to 1914, when per capita successfully on its own. income worldwide was growing at such a rate that it colud not prevent the increase It is undeniable that the exposure to the in the number of the poor, therefore the international competition results in work tendency for further growth continued. productivity increase in the national The second wave, from 1950 to 1980, economy. When it happens in one or allowed rich countries to connect tightly, several industries exposed to globalization in order that the rest of the countries processes to a greater extent, it brings remained dependent, with an increasing along certain dangers as well. The danger number of basic needs for their is the creation of general standards of functioning. The current globalization productivity that the other industries must wave started around 1980. adhere to over a certain period of time.

The following factors had decisive impact In his paper „Competitive Advantage of on the increasing globalization trend: Nations“, Porter (2012) argues that the - Increased competitiveness with the national environment plays the central part international character due to the in company’s competitive advantage, and third world countries development that some national economies are more - Technological changes that required stimulative than others. According to large investments because they Porter, a country should create conditions became more rapid and expensive to invest production factors into the - Considerably harder entrance into industries with the highest productivity. In new markets due to higher and some global market industries, companies harsher competitive standards compete, not countries. Country’s - orientation competitive advantage in an industry is relative. The impact of competitiveness in the globalization process Economic and business dynamics lead to competitive advantage, not short-term The characteristic of globalization is advantage in costs. Demand is a factor increasing interdependence between the dynamizing the economic activity. A national economies and the world country’s advantage in an industry is economy. The countries are linked into a frequently geographically concentrated. It multidimensional network of economic, is created over the period of ten or more social and political connections. years, not in a single four-year cycle. Porter particularly emphasizes that some Some national economies experience countries achieve competitive advantage in positive and negative effects of general some industries due to differences, not movements in the world economy to the similarities to others. extent that these links become more

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In the article „ Putting Global Logic First“, global are based on global Ohmae (1995) states that ’s function performance or global need „invisible hand“ reached such strength in . Every industry successful in this modern economy without borders he never area is a serious globalization candidate. even thought about. There is no doubt that market is the main driver of globalization. Product and industry globalization has an The rise in per capita income in many impact on research and development, countries increases the participation of engineering, design cost reduction, consumers with discretionary income as investment, production and marketing demand carriers. Reputation system causes production cost reduction, especially consumers‘ lifestyle and taste convergence and promotion. The pressure in modern world. There is an increasing to create global products is growing along number of global products sold around the with increasing demand for capital world with very little or no modifications investments necessary for introducing new at all to suit consumer demand in each products into the production program. individual country. Tourism and travel, as Global economy gains importance when well as information and communication markets in certain countries are not large system, all contribute to the creation of enough to allow optimal size company global consumers, that is, taste and creation. demand harmonization. A growing number Company size allows the provision of of products have worldwide brands, market share in a large number of national distributed over the global distribution markets through the combination of higher channels, supported by promotion. standardization product level with certain Common consumer needs represent a activity concentration in the . framework for consumers in various Company globalization encouragements countries to have the same demands for do not only come from the economies of product categories or services in the size, but the economy of scope as well, specifically defined industry. Common that is, activity expansion – going for needs make it easier to participate in the several product lines and several main markets because fewer products can businesses. High product development serve more markets. It is the reason for costs according to national market size are some global standard products to be company and industry globalization widely accepted in a large number of stimuli. In a lot of cases, it is better to countries. Certainly, common consumer choose just a few global products than a needs in some countries vary a lot per lot of products intended for narrow industries depending on numerous factors national market. ( degree, national Technology is one of the main culture, physical environment, etc). globalization incentives. It is not difficult Kigen (1995) emphasizes that many global to notice that the world moves towards markets do not appear on their own, but competition in global technologies. they are created through planned Technology is „a product“ that becomes marketing effort (for example, soft drinks). available everywhere rather quickly after Successful global companies discovered its creation. There are no serious barriers that essential segment needs can be for new technology usage in a number of satisfied through global presence in the countries. chosen product – markets. Successful

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The increase in the conditions, as well as how difficult or easy and foreign direct investments, and the it is for a company to enter or exit the reduction of barriers for and service industry. movement, as well as the factor of production across national borders, make A global company that considers the world space for global competition. Competition as one market usually tries to expand into can be defined as a degree to which a several markets simultaneously. It nation can, in free and fair market performs source, experience and system conditions, produce transfer from one location to another, thus that pass the international market test, gaining competitive advantage. The main simultaneously maintaining or increasing factor in global expansion of companies is its citizens‘ real income. When we speak the existence of market opportunities. of global economy, being competitive in Opening opportunities for the national global market means achieving higher economy growth is the best way to enter living standard, i. e., higher quality of life new national markets. If a foreign for its citizens through business activities. company overtakes the existing jobs from the national companies in the country Productivity, as well as its growth rate, are without allowing for new growth and effective competitiveness criteria. employment opportunities, it is natural to Therefore, the governments in some encounter the national companies’ countries should stimulate those industries resistance. Therefore, global companies and companies that can achieve high enter the markets with large growth productivity and acquire competitive potentials or those with already acceptable advantage in the global market. national economy growth rates.

An increasing number of countries, i. e., Consumer need and demand convergence their companies, appear in the global is the main indicator of globalization. market. Companies are global business Global consumers are a consumer group oriented when optimal scope is necessary with homogenous needs and benefits to use the economies of size and required through product attributes from a experience effects unavailable in the set of countries or markets. There is no national market. Global industry is the one successful without global market where competitive position of a company segment identification. Global segments is under the influence of its position in are relatively homogenous consumer other countries and vice versa. Global groups, with similar needs, and strategy is the one that allows a company preferences present in several countries, doing business in a global industry to although they are not main segments in achieve global competitive advantage many markets. It assumes information through company activities integration acquisition on the basis of which to across the world in order to master inter- establish the strength of the segments, and country connectivity. assess the company’s ability to compete with them, with relative success. There is no danger of new competition in closed local industries. There is always a The basic characteristic of global possibility of new competition in global segments is that consumers look for industries or those involved in favorable product and service purchase globalization process. The existing worldwide, i. e., the best product at companies in the industry are important in acceptable in a large number of order to study carefully competition offers.

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Early discovery and presence in global in the world and number of jobs decreased market segments is the hypothesis for the in the process, economic analysts question creation of competitive advantage in the basic postulates of the process. global economy. It is not possible to cover Furthermore, great favors were ’attributed’ all the global market segments to globalization and neoliberalism for the appropriately at a short notice. Global 2008 economic crisis. Most of the product pattern allows easier company transition countries failed to reach the participation in global market segments. level of the developed countries, or make their economies competitive enough in the A significant incentive to globalization world market. process is the integrations within some of the countries. There are four different References stages in regional Friedman, T. L, (1999): The Lexus and the Olive according to scientific references: Tree,, p. 7-8

The first one is the creation of Jurčić, Lj., (2000): „Globalizacija", Ekonomist, zones, thus eliminating customs duties and Zagreb, br. 9-10 / 2000., str. 2-5. quota, as well as licenses among the Hopkins, A. G. (2002): The History of member countries. Globalization — and the Globalization of Histoły, A.G. Hopkins (ed.) Globalization in World History, The second, higher stage, is the creation of (Pimlico,Sydney), pp. 16. a ; not only does this union eliminate duties and quotas, but creates a Keegen, J. W. (1995): Global Marketing Menagement, Fifted, Prentice – Hall Englewood common system of duties and quotas as Cliffs, N.J. pp. well. Miletić, D. S. (2000) „Proces globalizacije i The third stage is a common market, problem korupcije savremenog sveta”, Zbornik which means the elimination of restrictions radova na temu Sistemi korupcija, Centar za on product exchange and production ekonomska istraživanja Instituta društvenih nauka, Beograd, p.p. 198. factors among the member countries. Mittelman, J. H. (2000): "The Globalization The fourth stage, the highest integration Syndrome: Transformations and Resistance”, stage so far, is the creation of the Princeton: Princeton University Press, p. 6. , which means economic Robertson, R. (1992): Globalization, Social theo')/ policies and strategies harmonization and and global culture,Thousand Oaks, CA-London, , unification. So far, this has been achieved p. 8. only through the European Economic Union. Stoner, Dž. A. F. (2002): Menadžment, Želnid, Beograd

Conclusion Ohmae, K. (1995): „Putting Global Logic First”, Harvard Business Review, Journal, pp. 119. Globalization process has been created with the aim of faster world economy Ouattar, A. D. (1997): „The Challenges of development, and it has been supported Globalization for Africa", South Africa Economic heartily by the most developed parts of the Summit, World Economic Forum, Harrare, May 21, pp.2. world and its financial institutions. However, the positive side of the process Waters, M. (1995): Globalization, London-New was best reflected in financial and York, itd: Routledge, Weiss., p. 3. corporate sectors. As inequalities widened

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