GLOBALIZATION

INTRODUCTION
Globalization refers to the shift towards a more integrated and interdependent world economy. The trend away from distinct national economic units and toward one huge global market is known as a) Internationalization b) Economic integration c) Globalization d) Privatization Today everyone know Nintendo Starbucks Coca-Cola Ikea McDonalds Samsung

Effects of globalization can be seen everywhere: The cars people drive The food people eat The jobs where people work The clothes people wear

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What Is Globalization? Globalization is the growing integration of the worlds economy. It is suggested that economic decision taken in one part of the world will affect other parts of the worlds so businesses need to base their business decision-making on what is happening in the world market rather than the national market. 'Globalization' is commonly used as a shorthand way of describing the spread and connectedness of production, communication and technologies across the world. That spread has involved the interlacing of economic and cultural activity. Rather

confusingly, 'globalization' is also used by some to refer to the efforts of the International Monetary Fund (IMF), the World Bank and others to create a global free market for goods and services. This political project, while being significant - and potentially damaging for a lot of poorer nations - is really a means to exploit the larger process. Globalization in the sense of connectivity in economic and cultural life across the world, has been growing for centuries. However, many believe the current situation is of a fundamentally different order to what has gone before. The speed of communication and exchange, the complexity and size of the networks involved, and the sheer volume of trade, interaction and risk give what we now label as 'globalization' a peculiar force. With increased economic interconnection has come deep-seated political changes poorer, 'peripheral', countries have become even more dependent on activities in 'central' economies such as the USA where capital and technical expertise tend to be located. There has also been a shift in power away from the nation state and toward, some argue, multinational corporations. We have also witnessed the rise and globalization of the 'brand'. It isn't just that large corporations operate across many different countries - they have also developed and marketed products that could be just as well sold in Peking as in Washington. Brands like Coca Cola, Nike, Sony, and a host of others have become part of the fabric of vast numbers of people's lives.

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FEATURES OF CURRENT GLOBALIZATION NEW MARKETS NEW ACTORS NEW RULES AND NORMS NEW (FASTER AND CHEAPER) TOOLS OF COMMUNICATION NEW MARKETS Growing global market in services-banking insurance transport New financial market deregulated. Globally linked. Working. Around the clock with action at the distance in real time .with new instrument such as derivatives. Deregulation of antitrust laws and proliferation of mergers and acquisition. Global consumer market with global brand

NEW ACTORS

Multinational Corporation intriguing their production and marketing dominating food production. The world trade organization the first multilateral organization with authority to enforce national government, compliance with rules. An international criminal court system in the making. A becoming international network of ngos. Regional blocs prolifiring and gaining impotence European Union association of south east. Asian nation mercosur North American free trade association southern African development community among mint other.

More policy coordination groups G-7.G-40.G-22.G-77.OECD.

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NEW RULES AND NORMS Market economics policies speeding around the world with gather privatization and liberalization then in earlier. Widespread adoption of democracy as choice of political regime. Human right convention and instruments building up in both coverage and number of signatories and growing awareness among people around the world. Consensus goals and action agenda for development. Convention and agreement of the global environment-biodiversity. Ozone layer ; disposable of hazardous wastes desertification. Climate change. Multilaterals agreement in trade taking on such new agendas as environmental and social conduction. New multilateral agreement for services intellectual property communication more binding on national governments then any previous agreement. The multilateral agreement on investment under debate.

NEW TOOLS OF COMMUNICATION Internet and electronic communication linking many people simultaneously. Cellular phones. Fax machine. Faster and cheaper transport by air rail and road Computer aided design.

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ESSENTIAL CONDITION FOR GLOBALIZATION Business Freedom: There should not be unnecessary government restrictions which come in the way of globalization, like import restriction, restrictions on sourcing finance or other factors from abroad, foreign investment etc. that is why the economic liberalization is regarded as a first step on the facilitating globalization. Facilities: The extent to which an enterprise can develop globally from home country base depends on the facilities like the infrastructural facilities. Government Support: Although unnecessary government interference is a hindrance to Globalization, government support can encourage Globalization. Government support may take the form of policy and procedural reforms, development of common facilities like infrastructural facilities, R and D support, financial market reforms and so on. Resources: Resources are one of the factors which often decide the ability of a firm to globalize. Resourceful companies may find it easier to thrust ahead in the global market. resources includes finance, technology, R & D capabilities, managerial expertise, company and brand image, human resource etc. it should, however be noted that many small firms have been very successful in international business because of one or other advantage they possess. Competitiveness: The competitive advantage of the company is very important determinant of success in global business. A firm may derive competitive advantage from any one or more of the factor such as low costs and price, product quality, product differentiation, technological superiority, after sales service, marketing strength etc. sometimes small firms may have an edge over others in certain aspects or times of business.
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Orientation: A global orientation on the part of the business firms and suitable globalization strategies are essential for globalization.

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Foreign Market Entry Strategies
Export Exporting, the most traditional mode of entering the foreign market, is quite a common one even now. International trade has been growing much faster than the world output resulting in greater world economic integration. Exporting is the appropriate strategy when one of more of the following conditions prevail. The volume of foreign business is not large enough to justify production in the foreign market. Cost of production in the foreign market is high. The foreign market is characterized by production bottlenecks like infrastructural problems, problems with materials supplies etc. There are political or other risks of investment in the foreign country. The company has no permanent interest in the foreign market concerned or that there is no guarantee of the market available foe long period. Foreign investment is not favoured by the foreign country concerned. Licensing or contract manufacturing is not a better alternative.

Licensing Licensing which involve minimal commitment of resources and effort on the part of the international marketer are easy ways of entering the foreign markets. Under international licensing, a firm in one country permits a firm in another country to use its intellectual property such as patents, trade mark, copyrights, technology, technical know-how, marketing skill or some other specific skill. The monetary benefit to the licensor is the royalty or fees which licensee pays. In many countries, such fees or royalties are regulated by government; it does not exceed five percent of the sales in many developing countries.

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Contract Manufacturing Under contract manufacturing, a country doing international marketing contract with firms in foreign countries to manufacture or assemble the products while retaining the responsibility of marketing the product. Advantage: The company does not have to commit resource for setting up production facilities. It frees the company from risks of investing in foreign countries. If idle production capacity is readily available in the foreign country, it enables the marketer to get started immediately. Disadvantage: There will be the loss of potential profits from manufacturing. Less control over the manufacturing process. Contract manufacturing also has the risk of developing potential competitors.

Management Contract Under the management contract, the firm providing the management know how may not have any equity stake in the enterprise being managed. In short, in a management contract the supplier brings to gather a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership thus kotler observes, management contracting is a low-risk method of getting into a foreign market and it starts yielding income right from the beginning. The arrangement is especially attractive if the contracting firm is given an option to purchase some shares in the managed company within a started period.

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Assembly operations As Miracle and Albaum point out, a manufacturer who wants many of the advantages that are associated with overseas manufacturing facilities and yet does not want to go that far may find it desirable to establish overseas assembly facilities in selected markets. In a sense, the establishment of an assembly operation represents a cross between exporting and overseas manufacturing. Fully owned manufacturing facilities Companies with long term and substantial interest in the foreign market normally establish fully owned manufacturing facilities there. As Drucker points out, it is simply not possible to maintain substantial market standing in an important area unless one has a physical presence as a producer. Establishment of manufacturing facilities abroad has several advantages. It provides the firm with complete control over production and quality. It does not have the risk of developing potential competitors as in the case of licensing and contract manufacturing. Joint venturing Joint venture is very common strategy of entering the foreign market. in the widest sense, any form of association which implies collaboration for more than a transitory period is a joint venture. Such a broad definition encompasses many diverse types of joint overseas operations, viz, 1. Sharing of ownership and management in an enterprise. 2. Licensing agreements. 3. Contract manufacturing. 4. Management contracts. Countertrade Countertrade is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods, instead of money payment.
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Mergers and acquisitions Merger and acquisition have been a very important market strategy as well as expansion strategy. A number of Indian companies have also used this entry strategy. Mergers and acquisitions have certain specific advantages. It provides instant access to markets and distribution network. As one of the most difficult areas in international marketing is the distribution, this is often a very important consideration for merger and acquisition. Strategic alliance Strategic alliance has been becoming more and more popular in international business. Also known by such names as entente and coalition, this strategy seeks to enhance the long term competitive advantage of the firm by forming alliance with its competitors, existing or potential in critical areas, instead of competing with each other. the goals are to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes. The third country location Third country location is sometimes used as an entry strategy. When there are no commercial transactions between two nations because two nations because of political reasons or when direct transactions between two nations are difficult due to political reasons or the like, a firm in one of these nations which wants to enter the other market will have to operate from a third country base.

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GLOBALIZATION GLOBALIZATION OF INDIAN BUSINESS

Obstacles to Globalization:
Government policy and procedure Government policies and procedure in India are among the most complex confusing and comprising and cumbersome in the world even after the match publicized liberalization is swift and efficient action. Government policy and the bureaucratic culture in India in this respect are not that encouraging. High cost High cost of many vital input and other factors like raw material and intermediates power finance infrastructural facelifts like port etc., tend to reduce the international competitiveness of the Indian business. Poor infrastructure Infrastructure in India is generally inadequate and inefficient therefore very costly. Obsolesce The technology employed mode and style of operations etc. are in general obsolete and these seriously affect the competitiveness Resistance to change There are several socio-political factors which resist change and this comes the way in the way of modernization and efficiently Improvement. Technological modernization in resisted due to fear unemployment. The extent of excess employed by the Indian industry is alarming because of this labour productivity is very low and this in some cases more than offsets advantage of cheap labour. Poor quality image. Due to various regions the quality of many Indian product is poor even when the quality is good the poor quality has becomes a handicap.

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Supply problem Due to various region like low production capacity shortage of row material and infrastructure like power and port facilities. Indian companies in many instance are not able to accept large order to keep up delivery schedule. Small size Because of small size and the low of level of resource in many cases Indian firms are not able to complete with the giants of other countries. Even the large of Indian companies are small compared to the multinational giants. Lack of experience. The general lack of experience in managing international business I another important problem. Limited R & D and marketing recherch Marketing recherch and R & D in other areas are vital inputs for development of international business. However these are poor in Indian business. Growing compaction The compaction is growing not only from the development countries but also forms the developing countries firms indeed the growing competition from the developing countries firms is serious challenge to India international business. Trade barriers Although the tariff barriers to trade to have been progressively reduced thanks to the GSTTMTO the non-tariff barriers have been incasing. Particularly in the developed countries further the trading blocs like the NAFTA EC etc. could also adversely affects Indians business.

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Factors favoring globalization
Human resource. A part from the low cost of labor. There are several other aspects of human resource to Indian favour Indian has one of the largest pool of scientific and technical manpower. The number of management graduates is also sugaring it is wildly recognized given the right environment Indian scientist and technical personnel can do excellently Wide base Indian has very broad resource and industrial base which can support a verity of business. Growing entrepreneurship Many of the establish industries are planning to go intentional in a big way added to this is the considerable growth of new and dynamic entrepreneur who could make a significant contribution to the globalization in Indian business. Growing domestic market The growing domestic market enables the Indian companies to consolidate their position and gain more strength to make foray into the foreign market or to expect their foreign business. Niche market There are many marketing opportunities abroad present in the form of market niche. Such niche market is particularly attractive from small companies Expending market. The growing population and disposable income and the resultant expending internal marketing provide enormous business opportunities Economic liberalization The economic liberalization in Indian is an encouraging factor of globalization the delivering of industries removal of restrictions on growth opening up of industries earlier received for the public sectors.

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Competition The growing competition both from within the countries and abraded .provokes many Indian companies to look to foreign market seriously to improve their competitive position and to increase the business. Sometimes companies enter foreign market as to counter competitive strategy to the foreign companies it own home market to weaken its competitive strength.

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BENEFIT OF GLOBALIZATION I M P A C T Developing O Nations N Human Rights Creates cultures that support law and free expression. Spreads economic / political freedom to far corners Promotes national economic development, higher standard of living, better working conditions, cleaner environments. Environment Topic Consumers Employees Explain Free trade promotes lower costs, etc. Faster economic growth Higher wages Improved working conditions Creates resources needed to address environmental issues

LIMITATION Globalization is responsible for destruction of environments and emerging economies, abuses of human rights, undermining of local cultures, and the sovereignty of nationstates Power of international bodies Destroys manufacturing jobs in wealthy nations Wage rates of unskilled in advanced countries decline Companies move to countries with fewer labor and environment regulations Loss of sovereignty Homogenized cultures
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GLOBALIZATION
THE EMERGENCE OF GLOBAL INSTITUTIONS GLOBAL INSTITUTIONS: Help manage, regulate, and police the global market place Promote the establishment of multinational treaties to govern the global business system

Examples of Global Institutions: World Trade Organization (WTO):

Responsible for policing the world trading system and ensuring that nations adhere to the rules established in WTO treaties International Monetary Fund (IMF):

Maintains order in the international monetary system World Bank:

promotes economic development United Nations (UN):

Maintains international peace and security, develops friendly relations among nations, cooperates in solving international problems and promotes respect for human rights, and is a center for harmonizing the actions of nations MULTINATIONAL COMPANIES What is a multinational company? A multinational company is an organization which owns or controls production or services facilities outside the country in which it is based. This means that they do not just export their products abroad, but actually produce their products in other countries. It is commonly understood that a company is called a multinational company provided it operates in more than four countries.

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GLOBALIZATION
Examples of multinational companies are many such as: HSBC, Toyota, Honda and so on. Chinas HEIR is becoming a multinational one. Some reasons why a company may become a multinational firm: To avoid protectionist policies on trade, producing in another country can prevent the tariff or quota restrictions on foreign trade. To realize globalization of the market and enjoy large scale economy. To realize the diversification of markets and spread risks of operation To take advantages of information technology and high speed travel

BENEFITS FOR A LOCAL COUNTRY: Creating new jobs opportunities Improving living standards for people Creating competition for domestic businesses and causing them to improve efficiency Bringing new technology Bringing new management ideas and styles Improving the balance of international payments if exporting.

PROBLEMS FOR A LOCAL COUNTRY: Resulting in some local firms to close plants or cut down employees Affecting the balance of payments if the multinational company imports huge amount of components from other countries Causing difficulties in government control because of the strong power of the business Causing environmental problems to the local country

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FACTOR AFFECTING TO GLOBALIZATION

Factors contributing globalization

to

Explain how

Technological change

More powerful computers and internet have allowed the easy transfer of data, which plays an important role in speeding up the globalization. Air transportation and telephone costs have improved the developing environment for globalization. More and more consumers today are willing to buy foreign or new products for fashion or new styles. New markets have been opened up in countries like former Eastern European countries and China. The growth of new markets has increased the trend of globalization. More and more fierce competition has forced businesses to seek opportunities in the world markets. To compete successfully, businesses today must develop a global strategy.

The reduction of transportation costs Consumer change taste

The growth of new markets

Competition

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GLOBALIZATION
IMPACT OF GLOBALIZATION: Globalization and de-localization Many of the activities that previously involved face-to-face interaction, or that were local, are now conducted across great distances. There has been a significant de-localization in social and economic exchanges. Activities and relationships have been uprooted from local origins and cultures. One important element in this has been the separation of work from the home. But delocalization goes well beyond this. Increasingly people have to deal with distant systems in order that they may live their lives. When we buy books from an internet supplier like Amazon our communications pass through a large number of computers and routers and may well travel thousands of miles; the computers taking our orders can be on a different continent; and the books can be located anywhere in the world. The 'spaces' we inhabit when using the internet to buy things or to communicate can allow us to develop a rather different sense of place and of the community to which we belong. Globalization and the decline in power of national governments It isn't just individuals and neighborhood institutions that have felt the impact of de-localization. A major causality of this process has been a decline in the power of national governments to direct and influence their economies. Shifts in economic activity in say, Japan or the United States, are felt in countries all over the globe. The internationalization of financial markets, of technology and of some manufacturing and services bring with them a new set of limitations upon the freedom of action of nation states. In addition, the emergence of institutions such as the World Bank, the European Union and the European Central Bank, involve new constraints and imperatives Technological innovation and globalization As we have already noted, a particular feature of 'globalization' is the momentum and power of the change involved. 'It is the interaction of extraordinary technological innovation combined with world-wide reach that gives today's change its particular complexion'. Developments in the life sciences, and in digital technology and the like, have opened up vast, new possibilities for
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production and exchange. Innovations like the internet have made it possible to access information and resources across the world - and to coordinate activities in real time. Globalization and the knowledge economy Earlier we saw Castells making the point that productivity and competitiveness are, by and large, a function of knowledge generation and information processing. This has involved a major shift and entails a different way of thinking about economies. For countries in the vanguard of the world economy, the balance between knowledge and resources has shifted so far towards the former that knowledge has become perhaps the most important factor determining the standard of living - more than land, than tools, than labour. Globalization and risk As well as opening up considerable possibility, the employment of new technologies, when combined with the desire for profit and this 'world-wide' reach, brings with it particular risks. Indeed, writers like Ulrich Beck have argued that the gain in power from the 'techno-economic progress' is quickly being overshadowed by the production of risks. Hazards linked to industrial production, for example, can quickly spread beyond the immediate context in which they are generated. In other words, risks become globalized. Globalization and the rise of multinational corporations and branding A further, crucial aspect of globalization is the nature and power of multinational corporations. Such companies now account for over 33 per cent of world output, and 66 per cent of world trade. Significantly, something like a quarter of world trade occurs within multinational corporations. This last point is well illustrated by the operations of car manufacturers who typically source their components from plants situated in different countries. However, it is important not to run away with the idea that the sort of globalization we have been discussing involves multinationals turning, on any large scale, to transnational:

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Globalization and the impact of multinationals on local communities Multinationals can impact upon communities in very diverse places. First, they look to establish or contract operations in countries and regions where they can exploit cheaper labour and resources. While this can mean additional wealth flowing into those communities, this form of 'globalization' entails significant inequalities. It can also mean large scale unemployment in those communities where those industries were previously located. The wages paid in the new settings can be minimal, and worker's rights and conditions poor. Branding and globalization The growth of multinationals and the globalization of their impact is wrapped up with the rise of the brand. The astronomical growth in the wealth and cultural influence of multi-national corporations over the last fifteen years can arguably be traced back to a single, seemingly innocuous idea developed by management theorists in the mid-1980s: those successful corporations must primarily produce brands, as opposed to products. Globalization and the multinationals While there is no doubting the growth in scale and scope of multinational corporations - the degree of control they have over the central dynamics of globalization remains limited. In reality, they are often weak and amorphous organizations. They display the loss of authority and erosion of common values that afflicts practically all late modern social institutions. The global market is not spawning corporations which assume the past functions of sovereign states. Rather, it has weakened and hollowed out both institutions.

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Conclusion

One commentator has argued that there is a very serious case not against 'globalization', ... But against the particular version of it imposed by the world's financial elites. The brand currently ascendant needlessly widens gaps of wealth and poverty, erodes democracy, seeds instability, and fails even its own test of maximizing sustainable economic growth. The gap between rich and poor countries has widened considerably. However, as Seen (2002) has commented, to 'see globalization as merely Western imperialism of ideas and beliefs would be a serious and costly error'.

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Bibliography

Cherunilam, Francis, Business Environment, Ahmedabad; Himalaya Publishing House, Twentieth Revised edition. 678 -699.

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