We have now entered the era that Thomas Friedman calls Globalization 3.

0, where thanks to digitization, miniaturization, virtualization, personalization, and wireless, [anyone] can be processing, collecting, or transmitting voice or data from anywhere to anywhere (2005). The digital revolution has truly changed the way the world does business. In the beginning, companies set up websites, which gradually became more extensive and elaborate and allowed users from all over the world to buy products and services online. Furthermore, the Internet has allowed these companies to control and track every aspect of their business with the click of a mouse. The most adept of these companies have realized that this allows them to provide customized service to consumers, by actually enabling their customers to serve themselves in their own wayaccording to their own tastes (for a simple example, think of Dell computers), creating what Friedman (2005) calls the self-directed consumer. Companies are thus able to meet the needs of their clients, as well as their own needs, in ways never before thought possible. In addition to these uses by more traditional organizations, a number of businesses

have sprung up as a direct result of the digitalization of the world to offer services that would also be unthinkable otherwise. There are those who provide the infrastructure and hardware for this new technology, but there are also those companies that thrive on the very bonds that the Internet creates with every other part of the world. Examples include search engines like Google and Yahoo, auction sites like eBay, and networking sites like MySpace, whose products can include intangible things like knowledge or friendship (Battelle, 2005). These companies too are taking advantage of global markets, as eBay now receives fifty-one percent of its revenue from outside the U.S., while seventy-five percent of Googles page views occur in other countries (Hof, 2006). In terms of communication, this age of digitalization is an unbelievable boon, particularly for business corporations. First off, the Internet allows unfiltered positions to be heard by bypassing the traditional agenda setting conducted by media gatekeepers (Sparks-Fitzgerald & Spagnolia, 1999). In addition, the two-way flow of communication it offers allows for significant feedback, often almost instantaneously, as is the case with blogs and

discussion boards. This speed of the Internet is also greatly beneficial to corporations, particularly in the case of a crisis, as it allows quicker reaction times as well as wide dissemination of information (Sparks-Fitzgerald & Spagnolia, 1999). At the same time, however, this also opens up access to new users from completely different cultures whose needs may need to be addressed, as with any company doing business outside of its home market

c. MNCs and International economic Competition

The 15 members of the European Union are also members of the EMS. This group has tried to form an island of fixed exchange rates in a sea of major floating currencies. Since the EMS members have significant trade with each

other, they perceive significant benefits in their daily interaction with each other with fixed exchange rates.

Introduction of the Euro into the international financial markets helps these member countries in at least three different ways: i) countries in the Euro zone enjoy lower transaction costs; ii) currency risks and costs related to exchange rate uncertainty are reduced; iii) all consumers and businesses both inside and outside the Euro zone enjoy price transparency and increased price-based competition. Member EMS countries that have not joined the Euro yet, have been weighing the pros and cons of doing so. The UK feels the Euro will increasingly infringe on its sovereignty and has so far decided not to participate. Sweden does not see significant benefits from EU membership as one of its newest members and so has not joined. Denmark, like the UK and Sweden, has a strong political element which is highly nationalistic, and has also stayed away. Monetary policy for the EMU is conducted by the European Central Bank (ECB), which has the major responsibility of safeguarding the stability of the Euro. Stability is achieved by protecting the currencys purchasing power which can quickly erode with inflation. The ECB, which has been modeled after the Federal Reserve System in the US or the Bundesbank in Germany, will target inflation so as to reduce the probability of undermining the Euro. The idea of optimum currency areas emerges from the trade-off between the gains and losses implicit in too large or too small unit currency areas. In other words, such an optimum currency area trades off the lower transaction costs associated with a single currency against its greater vulnerability to economic shocks. It is difficult to assess how large or small such an optimum currency area should be. Some economists argue that Europe would be better with four or five different regional currencies than only one. Similarly, some others have argued that the US too might do better with several regional currencies to cushion shocks such as the ones in the Midwest and the Southwest during the 1980s and the Northeast and California in the 1990s. However, the experience with floating exchange rates since the 1970s will encourage second thoughts among the proponents of that system. On the other hand, economic flexibility, especially of labor markets is critical to costs associated with currency union. Such flexibility can be attained through further deregulation, privatization, freer trade, labor market and social welfare reform, as well as a reduction in economic controls, state subsidies, and business regulations. If these changes do not occur in a sizable single currency area such

as the Euro zone or the US for that matter, monetary union will intensify economic shocks because their effects can no longer be mitigated by exchange rate adjustments. Economic flexibility in labor markets is essential, else, monetary union can impose high costs when wages and prices are inflexible. Take the case of global demand for French goods: if it falls sharply, French goods must be made cheaper and new, efficient industries must replace old, inefficient industries. One way out is to reduce wages which cannot be done quickly. Eventually, higher unemployment forces lower wages, but the social and economic costs of the process are high. In contrast to lowering wages by 10%, a depreciation of the French franc by 10% would have achieved the change quickly and effortlessly. On the other hand, if the demand for French goods rises sharply, it would lead to inflation unless the French franc is allowed to appreciate. That is, currency changes can substitute for periodic phases of inflation and deflation as illustrated by these demand changes in the upward or downward direction, respectively. Now that France has entered the Euro zone, it no longer has the option of changing its exchange rate to face such demand shocks effectively.