In this developing society, globalization is being talked about more frequently. But what is globalization? And what is its impact on the individual corporation? In fact, globalization is not a new word. The earliest forms of globalization were based on business, the international exchange of tangible goods.
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Take silk as an example, since 110BC, there was some merchantmen engaged in international business between China and Middle Asia, and even to the Mediterranean Sea. Their route was called the Silk Road, which is very famous and is considered to be a sign of early international business and globalization. The early globalization was based on trading, therefore previous theories were also focused on this issue. One of them is Adam Smith’s absolute advantage. He believe that replacing the restrictive mercantile system with free international exchange would led to reduction in levels of poverty and would stimulate social and moral improvement in all participating countries. Smith reasoned that countries should specialize in production of goods for which they could achieve a low unit cost of production and import them if it is cheaper to do so than to produce them domestically. However, Smith had not considered the situation where two countries might both benefit from trade exchange with each other even where one holds absolute advantage over the other in the production of all goods. Based on this, David Ricardo presented his new theory (David Ricardo , 1817)-theory of comparative advantage. And that has become one of the most important concepts in international trade theory. In his theory, the choice of which commodity each country should specialize in is not determined by a simple comparison of the cost of production between countries, as defined by the cost of labour. This comparative advantage is considered as the one of the most common theories in the world because it includes an important factor of production-labour, which is one of the most important factors in international business environment. The theory of comparative advantage is more flexible and more adapt to the modern complex global environment, as well. However, international business is only a part of modern globalization. And in the new age, as there are different focus on the issue, there is not an universal definition of globalization(Jan Aart Scholte 2002 ). Someone define globalization as a concept, refers to both the compression of the world and the intensification of consciousness of the world as a whole. (Robertson,1992). However, this concept does not include maybe the greatest connotation of globalization- its impact on economy. Economy globalization, stands for the globalization of business, investment, finance and production, in other words, it is the best collocate of the production element in the whole world. It is rooted of the great evolution of productivity and international labour distribution, which forcing the more span of ethnic and country boundary.
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