Globalization Evolution in the UAE

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Table of Contents

Abstract
Introduction
Globalization: Causes, features, and details
Case studies
Conclusion
References

Abstract

The present paper is aimed at exploring the issue of globalization and applying it to the Emirati context. It gives some definitions of the process of globalization and reviews assorted opinions on the subject. Attempting to answer the question of whether the process is more beneficial than harmful, the paper outlines the causes of globalization, its main types, and features that analyze its impact on economic growth and emphasize the challenges that it poses.

The paper provides the cases of Etisalat and Al Habtoor Motors – the UAE-based companies that have gone global at some point. Based on these cases, it explores how Emirates is expanding in the global market. The paper concludes that, so far, globalization has benefitted the country in economic terms.

Introduction

Globalization is not a new phenomenon for us as citizens of Earth. The contacts between populations happened before, and the exchange of cultures complemented the trading of goods. However, the culture of globalization did not arise until relatively recently. To be at better terms with the idea of a globalized world we inhabit, it is worth reviewing what globalization is and what it is meant for.

Definitions

The term “globalization” roots from the term “global” – that which refers to the world as a whole. There are many definitions of globalization, regarding it from the cultural and economic standpoint, but they are all similar in that basic assumption. For instance, from one perspective, the process is described as a growing interdependence of the nations’ economies (Ritzer & Atalay, 2010). Another definition analogizes it with diffusion, in all aspects of life: practices, mindsets, culture, and technology (Ritzer & Atalay, 2010). Some sources go as far as to assume that globalization is a closed-loop process: it is triggered by cross-border trade and results in an increase in it.

Concepts

Some basic concepts pertaining to this process are liberalization, universalization, and westernization. The first one is visibly changing the world towards creating a borderless economy – the one that is not restricted by states and does not pose territorial barriers to trading. The second is consistent with how the cultural phenomena “migrate” around the world (e.g., exotic foods, music, clothing, and so forth), although the economy and legal practices are also becoming universalized. The last concept seems to concern globalization experts: they find evidence that globalization is the guise under which the West (particularly, the U.S.) is imposing its values of capitalism, individualism, rationalism, etc., on the rest of the world. This supposition is exactly what makes globalization a controversial issue.

Proponents of the process insist that it helps the poor nations to develop and stabilize their economy. In their view, globalization is a unique process in that it both increases the life quality and enriches cultures by merging them together. The oppositionists maintain that globalization is synonymous with Americanization, and it has a destructive impact on local cultures and practices.

As a historical phenomenon, globalization cannot have any objectives as such. Rather, it can be analyzed in terms of its impact and where it can potentially lead. An analysis of its evolution, features, and main tendencies can provide a holistic view and give an answer to the most pressing question: what is good and what is bad about globalization.

Globalization: Causes, features, and details

Causes

However controversial the subject may be, all experts agree that it is a unique phenomenon. Although it is not new, most of the diffusion as we know it has emerged during the last several decades. The necessity to reconcile on the aftermath of World War I and the carnage of World War II was one of the factors to stimulate the process. The growth of multinational corporations and trading blocks during the 20th century encouraged this reconciliation and benefitted the global economy, which was only beginning to form as it is. The gradual reduction of the national trading barriers made for the financial system to become increasingly globalized. Most importantly, however, the technological advancements in terms of transportation and communications made the process faster, cheaper, and more efficient.

Evidently, the process is rooted deeply in the past. However, the unprecedented developmental leap the humanity made during the previous century, and the political picture of the world at this time, were the trigger to start the process that sustains itself ever since.

Types

Various sources identify up to 18 types of globalization, but there are three instances in which the process is most impactful: economy, politics, and culture.

Economic globalization means that every country’s economy influences all the others, to some extent. More advanced countries enter the markets of developing nations because the latter shows the demand for the former’s products. Likewise, the advanced ones create a supply chain with the developing countries as the main source of raw products and natural resources. In other words, all economies are interconnected and depend upon each other to function (Surugiu & Surugiu, 2014).

Political globalization is the nations’ attempt to create a bonded global community, free from conflict and bigotry. Organizations like the UN and the League of Nations are some examples of the global enterprises that try to keep diverse nations committed. These and other organizations are created in line with a vision that the unification of the world and global safety is viable.

Cultural globalization happens inflow: the ideas and the knowledge diverse cultures generate are spread across the world through various media. For instance, literature written by Western authors is translated into a mass of other languages and is well-known and loved beyond the borders of the U.S. The networking of cultures is another stage of the process of creating a global community – and a global culture (Surugiu & Surugiu, 2014).

Features

Some of the features of globalization were outlined above, the main assumption being that it is not a new, Western concept. Indeed, the contacts between nations have been made before, which was only natural, although the slow communications made it complicated. Nevertheless, the trading relationships existed, and the cultural exchange as well (Khatri, 2015).

Another feature of globalization is that it is not merely a theory in economics. While our ancestors regarded the contacts as an economic advantage, the modern world has come to see them as a mindset. Today, the world is embracing diversity, openness to new ideas, and a broader framework of thought that opens opportunities other than trade (Khatri, 2015).

At this, opportunities are a separate feature in itself. While some experts are concerned that Westernization disrupts local economies by subjecting them to international competition, others believe that the benefit outweighs the cost. Indeed, the smaller and less developed countries are thought to benefit from providing their resources, as well as the culture-specific products and raw materials they supply. The beneficence factor, therefore, pertains to both parties.

Another feature that subsumes reciprocity results from the global concern with environmental, legal, and other issues that humanity makes it’s own. In the globalized context, such issues as terrorism, climate change, human rights abuse, pollution, etc., are the problem of humankind as a whole. The issues receive immediate attention from the global community and are dealt with by conjoined efforts.

Some of the features stated above include the linkage of politics and economy, raised living standards, and technology that serves humankind. All these ideas speak for globalization as a means to make the world a better place in terms of life quality and productivity.

Globalization and growth

Some of the ways in which globalization positively influences economic growth are foreign direct investment (FDI), technological innovation, and economies of scale.

In the first instance, FDI is the process that has become more popular than simple cross-border trading. By investment, the shareholders increase the speed with which technology is transferred, restructure the whole industries to meet the needs of contemporary markets, and thus help the global companies grow (Grossman & Helpman, 2015).

Technological innovation is the growth factor influenced by international competition. Paired with the growing interest in FDI, the innovation speeds up the communication, production, and supply, which helps increase the economy outputs.

Scaling is a process that can only be initiated under the condition of globalization. It makes it possible for large-scale companies to optimize their pricing strategies and cut costs. This can produce a hazard for small businesses as they try to compete within their homeland, although the economic benefit for the global organizations and consumers is evident (Grossman & Helpman, 2015).

Challenges

As stated, globalization is a potential threat to the domestic-scale companies whose markets are being entered by the global giants rendering similar services. Other challenges primarily arise from the economies’ interdependence, national sovereignty, and equity distribution.

While interdependence encourages sharing and dealing with universal problems together, it can result in global instability, under some circumstances. For instance, should the local economy fluctuate, the impact would be discernible on a global scale?

National sovereignty is one of the conditions on which organizations like the UN and WTO are formed. However, the global community subsumes that the nations’ policies are integrated, and the leaders’ actions are visible to all other countries. This, and the flow of foreign people and immigrants, can produce a reactive response and create an environment of nationalism and xenophobia (Ritzer & Dean, 2015).

Finally, the primary concern of the Westernization opponents is that the West would be the one to receive most of the benefit. Other countries and individuals can lose profit and the sense of stability as their values, policies, and practices are skewed towards the Western ones.

On the whole, the impact of globalization is palpable in every aspect of life. While there are certain drawbacks to it, the process seems just as beneficial as it is unstoppable. Some of the issues and advantages of globalization can be analyzed through studying cases.

Case studies

The UAE has largely benefitted from globalization. During the last 40 years, the country has evolved into one of the most powerful economies in the world, utilizing the abundant resources as its ultimate growth strategy. As the country developed, it deviated from solely exploiting its oil and gas: other industries showed increasing potential, which facilitated the growth and globalization of several notable corporations.

Etisalat

The name of Etisalat, the UAE-based telecommunications establishment, can be synonymized with the Emirates’ entrance to the global market. Ever since its inception, the company almost monopolized the telecom sector. However, in spite of the monopolization, the company has always been at the forefront of innovation. The innovations that Etisalat had to offer the Emirati market were based on what the consumer wanted most – in the case of a telecom provider, it was the mobile penetration, which was more than 100% by 2005.

The company’s ascent into the global market began with neighboring Egypt in 2006. 50 days after it entered, the number of Etisalat mobile network subscribers spiked up to 1 million (Hitt, Ireland & Hoskisson, 2016). After that, it took 100% ownership of Atlantique Telecom and thus entered West Africa. The company has been particularly successful in Nigeria where it is known as a top-quality service provider. Having entered the market in 2008, the company has acquired more than 5 million clients in three years (Hitt et al., 2016). At the moment, Etisalat operates in all 36 states of the country.

The success and future expansion of Etisalat are dependent on its perceptivity to the trends of the global markets. So far, it has provided services of exceptional quality and attracted clients with its innovative products for local markets. It has been sensitive to the needs of the Nigerian market and was able to provide customized solutions for it. Another example of such perceptivity was Etisalat’s merging with Afghanistan: it has provided the locals with attractive tariffs to connect to UAE. The result was that the traffic owned by Etisalat has quadrupled since its inception in 2010 (Hitt et al., 2016).

Another field that Etisalat is actively exploring is the technology itself. Cloud computing is an emerging trend worldwide, and at the moment, Etisalat is considering a program launch to more efficiently connect the regions it operates in. Another area that Etisalat wants to take the lead of (in the Emirati globalization context) is M2M – Machine to Machine technology. The company offers a range of M2M-related services that allow users to manage their devices in a smart way.

The technology serves the global business practices in that it allows us to oversee all the SIM activities, streamline the operations, and perform basic analytics. Etisalat’s M2M Control Center empowers its business users to have full control and insight into their business operations – which pertains directly to what the global market needs: it connects, integrates practices, and facilitates the sharing of them (M2M Control Center, 2016)

Al Habtoor Motors

Al Habtoor Motors is a subdivision of the well-known Al Habtoor Group that specializes in hospitality services, real estate, publishing, and even education (The Group, 2016). The Motors subdivision was formed in 1983 and has become one of the largest automobile distributors in the UAE (About Al Habtoor Motors, 2016).

The secret of the company’s success lies in its globalization-induced practices. It cooperated with automobile manufacturers all over the world, and it mainly strives for import. Some of its most recognized suppliers include Bentley (Great Britain), Bugatti (France), Mitsubishi (Japan), and Chery (China). Specifically, the entrance of Chery into the UAE market happened with the formation of a partnership with Al Habtoor Motors, which was mostly focused on top-class automobiles before that (Al Habtoor Motors Signs with Chery, 2016). The cooperation with Chery was a strategic decision for both the Chinese manufacturer and the UAE-based vendor.

The former found a way to enter the Emirati market and experience the fast growth and fair competition such a market could provide. Moreover, they have achieved their goal of finding a native automobile dealer with global experience and an established reputation to distribute their passenger and commercial vehicles as masterfully as the top-class cars. Al Habtoor benefitted even more: not only did it expand its global market outreach by partnering with China but it also widened its client base by providing more affordable products than Bentley or Bugatti.

Conclusion

Globalization is a process offering multiple advantages in terms of politics, culture, and economics. It facilitates the creation of a unified global economy where large-scape organizations can develop, expand, and thrive. Some experts indicate their concern about the small businesses and Westernizations of the local economies. So far, however, the UAE-based companies have experienced success and growth while reaching out beyond the country’s borders.

The cases of Etisalat and Al Habtoor Motors illustrate how the companies benefit other countries’ markets and gain from foreign contacts as well. The innovative practices of one company and the client base expansion of the other provide some evidence that globalization is largely beneficial in the Emirati context.

References

About Al Habtoor Motors. (2016). Web.

Al Habtoor Motors Signs with Chery, China’s No. 1 Selling Chinese Car Brand. (2016). Web.

Grossman, G. M., & Helpman, E. (2015). Globalization and Growth. American Economic Review, 105(5), 100-104.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2016). Strategic Management: Concepts and Cases: Competitiveness and Globalization. Boston, MA: Cengage Learning.

Khatri, J. (2015). Ten Basic Characteristics of Globalization. Web.

M2M Control Center. (2016). Web.

Ritzer, G., & Atalay, Z. (2010). Readings in Globalization: Key Concepts and Major Debates. Hoboken, NJ: John Wiley & Sons.

Ritzer, G., & Dean, P. (2015). Globalization: A Basic Text. Hoboken, NJ: John Wiley & Sons.

Surugiu, M., & Surugiu, C. (2014). International Trade, Globalization and Economic Interdependence between European Countries: Implications for Businesses and Marketing Framework. Procedia Economics and Finance, 32, 131-138.

The Group. (2016). Web.

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