Does Globalization create the Need for Cultural Understanding?

It seems like just a short time ago we lived in a world in which contact with other cultures was incidental and peripheral. Sure, there used to be immigrants from other countries and then there was of course some contact when we travelled, but for most there was no real need to dive deeper towards understanding other cultures. Moreover, the impact of developing countries and regions at the other side of the globe on our daily life was very minimal, if at all. Well, that’s changing, and there is now a need to accept and embrace globalization, or be destined to failure (or worse, talk of isolationism as a way around it).

In today’s world everything is connected with everything, and even minor accidents in a remote part of the world can have a big impact on all of our lives. Foreign companies buy shares in European companies and all of a sudden you lose your job. Companies expand into other regions, and all of a sudden you move to Shanghai or Buenos Aires. Demonstrations and uprisings in the Middle East affect the price of petroleum, pirates in the Indian Ocean affect global trade, and capitalism in China becomes both a problem and a panacea.

Today we are fairly well informed about all of these things, as we can watch or follow the events live on the Internet and discuss it with the people around us. Some of those people may even come from those regions.

Tourists and business travellers no longer want to be seen as the typical foreigner visiting, since they know that speaking at least a few phrases and understanding some key points of the culture will help them to have better success and a more meaningful experience.

Of course, the other side of the coin is the resistance that developed nations are pushing back with, as they allow politics, emotions, prejudices and fear, rather than common sense, to dictate their actions. I have noted that many bright and accomplished people are opposing the inevitable change and natural progressions that are occurring as we globalize. Perhaps, they aren’t as smart as I thought. Is it greed or ignorance that makes so many people fear globalization?

One must remember that a significant re-distribution of wealth and quality of life is now happening, which had never been seen before. Those who have benefitted during the 20th century did so at very disproportionate levels, as wealth and quality of life were primarily amassed in the West.

During the days of communism, the West spent lots of time and money trying to thwart its rise, by promoting capitalism and materialistic wealth as the products of democracy. Now that the desires of capitalism, freedoms and democracy have won out, the old adage of “be careful of what you want, as you just may get it” comes to mind. Many in the West are resisting the changes, as they feel that things are being taken away from them as developing nations sacrifice to get a piece of the global pie. Well, that pie is about to get bigger for all!

While it is true that much of the world’s manufacturing base has shifted away from the West, to developing countries in emerging markets, it will be those emerging economies that will want more. This is where the global growth is lurking, for those who embrace and accept the globalization and multiculturalism of the new world.

It is happening quickly, and will even be more rapid over this decade, with tremendous, never before seen growth levels. The only thing standing in everyone’s way is fear (and politics). What is the best way to fight fear? Understanding!

And we are pretty well informed about all of the above as we can watch or follow the events live on the Internet and discuss it with the people around us, some of them might even come from those regions.

As Pankaj Ghemawat recently posted in his Wall Street Journal commentary, The Seven Secret’s of Successful Globalization:

“A fashionable consensus among MBA students, managers and luminaries such as Colin Powell, George Soros and Tom Friedman, to name but a few, has been building around the notion that the world is globalized—that borders don’t matter at all.

But fashion is no substitute for the facts…” (Following are a few excerpts from Mr. Ghemawat’s article):

• First-generation immigrants represent only 3% of the world’s population. The percentage of the world’s population comprised of immigrants is the same as it was in 1910.
• Foreign direct investment is about 10% of global fixed capital formation. FDI-intensity has never exceeded 20%.
• Some pre-crisis measures of cross-border capital flows/stocks are actually comparable to earlier peaks more than 100 years ago—and thanks to the crisis, are now lower.
• Less than 20% of the bits transmitted on the Internet cross national borders. International and particularly intercontinental Internet traffic is decreasing rather than increasing.
• International trade accounts for close to 30% of global GDP, but that percentage recedes back toward 20% if we strip out double-counting. While trade-intensity has been setting new records, the big drop-off in 2009 is a reminder that trends can be reversed.

Instead of viewing the world as a collection of standalone countries neatly divided by clearly marked borders, we need to think of the world in terms of countries that are embedded in space, at varying distances from each other (World 3.0). In World 3.0, linkages between countries can be substantial, but the countries themselves remain distinct, and the world diverse.

Focusing on such distances or differences and how to deal with them is to unlock what, to use an acronym, seem to be the seven “secrets” of successful globalization.

1. Sensitivity to differences.
2. Evaluation of cross-border moves.
3. Closeness versus distance.
4. Regional realities.
5. Economic arbitrage.
6. Timing.
7. Strategy options.

Adaptation to differences, aggregation at the regional level (or on some other basis) and arbitrage are just some of the strategy options touched on Mr. Ghemawat’s article. I agree fully with his statement that “Recognition of the full set of options—instead of simply treating globalization as a matter of cloning the domestic business model everywhere—is essential to increasing the odds of global success, and to maximizing value creation.” 

In closing, I’d like to reiterate that the only thing standing in everyone’s way is fear (and politics), and that the best way to fight fear is with understanding. It is always better to fight fire with water, than with fire. Cultural understandings will easily douse the flames of fear that are brought on by globalization.

James A. Vena
Founder & CEO of iComTrader
For more information about how to effectively globalize business through cost effective growth, please feel free to contact James, or read more of his articles and op-eds at the following sites:

Company Website – http://www.iComTrader.com
“Vena’s Viewpoint” Blogs – http://www.icomtrader.com/blog.cgi?category=Vena’sViewpoint
LinkedIn Profile: http://www.linkedin.com/in/javena
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About the Author:
A lifelong international trader, global business developer, venture capitalist and entrepreneur, James Vena has founded, developed and managed several global trading ventures. The iComTrader international network is his latest creation, along with iComTrader Int’l Trading, iComTrader.com and more recently iComTrader Global Management, Inc.

His vision has been simply to merge skilled people with modern technology to create new avenues of commerce and globalization. He sees the value of social networking via Internet, but has never lost sight of the importance of “people doing business with people”.

Combining the exchange-like portal of iComTrader.com, set into a global network of skilled trade professionals, has helped James to achieve his vision of turning any product or service into a commodity, with an exchange-like venue to support real and transparent pricing, rather than anecdotal values. Now, with a roster of worldwide partners, the clients of iComTrader are experiencing first hand the power and value of his vision.