ABSTRACT

Globalization is a term which is gaining immense importance in today’s world. The

inevitability of international business for organization is very well expressed by many
management experts. Globalization has gone through many historical phases. Many
reasons have facilitated its growth. Globalization has its impact on every sector of the
economy across the world. When a firm decides to enter the international arena it must
make a choice regarding different strategies to be adopted. Many MNC’s have made their
presence felt worldwide. The aim of every economy must be to go for inclusive
globalization which will give equal opportunities to all the nations to navigate the global
seas. This paper deals with all the aspects mentioned herein.

INTRODUCTION
International business is a term which involves import and export of goods and services manufactured and
marketed by MNC are to source globally. It describes all commercial transactions that take place between
two or more countries for profit. International business is the economic system of exchanging goods and
services, conducted between individuals and business in multiple countries. Differences in the business
environment between regions or nations may call for different business strategies. A firm in international
business encounters different sets of environment:
Internal environment
Domestic environment
Foreign environment
Global environment.
The competence of a firm to do International Business depends on a number of internal factors such as the
mission and vision of the firm, the attitude, the people in the organization, etc. domestic environment
includes micro and macro environment. Foreign environment refers to the environment of the relevant
foreign market. And the global environment refers to the global factors that are relevant to business such as
the WTO principles and agreements.

GLOBALIZATION
Globalization means integrating the domestic economy with the world economy. It is a process that draws
countries out of their insulation and makes them join rest of the world in its match towards a new world
economic order. It involves increasing among national economic systems, more integrated financial
markets, economies of trade, higher factor mobility, free flow of technology and spread of knowledge
through out the world.
Globalization means opening up of the economy to foreign direct investment by providing requisite
facilities, removing administrative and other constraints, allowing domestic companies to enter into joint
ventures and foreign collaborations, bringing down quantitative and non-quantitative restrictions to trade,
diluting the role of public sector and encouraging privatization and so on.
It would eventually mean being able to manufacture in the most effective way anywhere in the world. It
aims at integrating the world into one global village. Globalization is the shedding down of walls of distrust
and barriers of suspicion in between countries, to make a bridge where ideas and beliefs can cross the
borders.

THE GROWING RELEVANCE OF GLOBALIZATION

The inevitable of globalization for organization is very well expressed by management guru Peter Drucker
in his management challenges for 21st century. “All institution has to make global competitions a strategic
goal. No institution whether a business, a university or a hospital can hope to survive let alone to succeed,
unless it measures up to the standards set by the leaders in its field, any place in the world.”
HISTORICAL PHASES OF GLOBALIZATION
1. The germinal phase (Europe, 1400-1750):
• Dissolution of Christendom and emergence of state
• Communities
• Catholic church
• European exploration of Africa, Asia and the Americas
• Colonialism
• Individual.
2. The incipient phase (1750-1875):
• Establishing of nation state
• Citizenship and passports
• International exhibitions and communication agreements
3. The take-off phase (1875-1925):
• First World War
• Mass international migration and restrictions thereon
4. The struggle for hegemony phase (1952-1969):
• League of Nations and UN
• Second World War
• Emergence of third World War
5. The uncertainty phase (1969-1992):
• Exploration of space
• World communities based on gender, ethnicity and race
• International relation more complex and fluid
• Global environment problem recognized
• Global mass media via space technology

PRO’S OF GLOBALIZATION
1. The steady of cash flows into the developing countries decreases the dollar difference.
 2. There is a worldwide market for the companies and for the people there is more access to products of
different countries.
3. Increase in the production sector, due to worldwide market.
4. Politics is emerging and the decisions taken are beneficial for the people worldwide.
5. Advancement in technology.
6. Influx of information between two countries.
7. Cross cultural communication between two countries.
8. Decrease in brain drain.
9. With globalization, there is a global market for companies to trade their products and a wider range
of option for people.
10. Competition keeps prices low; as a result inflation is less likely to occur.
11. Ecological imbalances melted out, governments of countries show concern about each other.

CON’S OF GLOBALIZATION
1. It leads to competition for the small domestic players of company
2. Globalization is causing Europeans to lose their jobs as work is being outsourced to the Asian
countries. The cost of labor in the Asian countries is low as compared to other countries.
3. There are experts, who believe that globalization is the cause for the invasion of communicable
diseases and social degeneration in countries.
4. Poor countries are exploited by the richer countries where the workforce is taken advantage of and
low wages are implemented.
5. it is becoming hard for the countries to ask their public to go through the pains and uncertainties of
structural adjustment for the sake of benefits yet to come.

DRIVES TOWARDS GLOBALIZATION

Globalization started after World War II, but since the mid-1980’s it has improved considerably
globalization is driven by how much factors: one involves technological advances that have lowered the
cost of transportation, communication and computation for a firm to locate different phases of production
in different countries. The other factors has to do with the increasing liberalization of trade and capital
markets: more and more governments are refusing to protest their economies from foreign competition or
influence through import tariffs and non-tariff barriers such as import, export restraints and legal
prohibitions.
An increase in interaction of national economic systems all over the world through the growth in
international trade, investment and capital flows is seen as a worldwide drive toward globalization.

TECHNOLOGICAL ADVANCEMENTS FACILITATING GLOBALIZATION

Technological developments are considered as the main facilitator and driving force of globalization. In
this era of rapid technological advances, the business sector has done well to adapt and exploit the
enormous advantages of scientific and techno-innovations to improve their operations and bottom-line.
Technology gave birth to several innovations in telecommunications such as the local and international
direct dial telephone system, fax machines, computers, and the Internet. These innovations are used to
improve the performance of business organizations in terms of operations and marketing..
The world had become “flat” in terms of how information is shared and received; how business and trade
is done; and how people from different countries interact with each other. Science and technology has
broken down walls and divisions that have kept many countries and people apart.

In the early days of globalization, people were afraid that it would usher in an era of unprecedented
monopoly and control over the world economy by a few powerful, industrialized nations. After economic
safety nets were put in place, it is now possible for small countries to gradually penetrate the market of the
larger, more advanced nations.
The Internet has made it possible to communicate with other people and companies across the oceans in
real-time. It has enabled trouble-free communication during a business meeting or in the middle of a
business production process.

Indeed, the Internet and the phenomenon called globalization revolutionized the way business and trade is
done. The Internet and globalization gave birth to new industries such as Business Process Outsourcing or
BPO. The BPO industry actually includes much business such as the contact center services, accounting
services, web-design, and other back-office services
Time, distance, and geography are fast becoming irrelevant when it comes to doing business due to
globalization and technological advancements. The good news is, these sweeping changes have also helped
companies to improve their profitability and expand their market reach.

INCLUSIVE GLOBALIZATION
In the latter decades of the 20th century, there was a widely held view that a rising tide of global economic
integration would lift all boats. Some developing countries have indeed been lifted up and are now sailing
ahead so fast that they are starting to catch up with developed countries. But many other poor nations have
been left behind by the tide, and are not yet able to navigate global seas
The gap between rich and poor citizens, within both developed and developing nations, is also growing; the
richest two percent of the world’s adult population now owns more than half of global household wealth.
The bottom half of adults own barely one percent. So the gains from global growth are being highly
unequally distributed.
In 2007, over a billion people had almost no income (the equivalent of a dollar a day or less for each).
They typically spent more than half of what they did earn on food for their families, leaving even less for
shelter, water, education and health care. Most of these people pooled their incomes through work that was
insecure, underpaid and at times unsafe.
The relevance of inclusive globalization can be very well understood from the golden words of Jawaharlal
Nehru "There can be no security or real peace if vast numbers of people in various parts of the world live in
poverty and misery. Nor can there be a balanced economy for the world as a whole if the underdeveloped
parts continue to upset that balance and drag down even the more prosperous nations."
Nations need institutions capable of providing sound economic governance to reduce the disparities.
Democratic participation can ensure that economic decision-making and other public policies take into
account the realities of people’s lives at all levels of society (not just the rich and powerful). The UN
system, grounded in the universal values inscribed in the UN Charter, supports collective efforts in nearly
every developing country

GLOBALIZATION AND GOVERNANCE

Global governance is the system of rules and institutions established by the international community and
private sectors to manage political, economic and social affairs. Good governance at both the national and
global level, should future values such as freedom, security, diversity, fairness and solidarity. It should also
ensure respect for human rights, international rule of law, democracy and participation, promote
entrepreneurship and adhere to the principles of accountability.
Increasing globalization has generated a need for better global governance, broadening range of issues
that cannot be dealt with except through collaborative globalization. To strength respect for core labor
standards and a coherent framework for the cross-border movement of people, WTO rules now make the
selective protection or strategic promotion of domestic firms’ vis-à-vis foreign competition much more
difficult that it was under the GATT. All the global rules should be reviewed to allow greater policy
spare for developing countries to adopt measures to accelerate their developing in an open economic
development.

THE IMPACT OF GLOBALIZATION

Globalization has significantly enhanced the speeding up of development and the reduction of absolute
poverty in the world with economic, social and environmental sustainability.

➢ The Impact on Economic Growth

Growth plan has unevenly distributed across countries, among both industrialized and developed countries.
In terms of per capital income growth, only 16 developing countries grow at more than 3% per annum
between 1985&2000.At the same type, the income gap between the richest and poorest countries increased
significantly.

➢ Uneven impact across countries

GDP per capita in the poorest and the richest countries, 1960-62&2000-02

Source: Based on a sample of 94 countries & territories with continuous time series data from 1960 to 02,
as available from World Bank world development indicators 2003 (Online Version)
The industrial countries, with their strong initial economic base, abundance of capital & skill, and the
technological leadership, were well placed to gain substantial benefits from increasing globalization of the
world economy.
The impacts of trade, investment and financial liberalization cross borders investments have raised the rate
of growth from the transfer of technology and skills to the local economy. The investment raises labor
productivity and incomes and hence exerts a positive effect on growth and employment. Globalization also
affects public finances. Tax rates have particularly declined on relatively more mobile factors of
production. In the worlds 30 richest countries the average level of corporate tax fell from 37.6% in 1996 to
30.8% in 2003.

➢ Employment, inequality & poverty

The share of self-employment, which for most developing regions is a proxy indicator for the size of the
informal economy, increased in all developing regions except for East and South-East Asia.
Outside the industrialized countries, there has been a mixed picture on changes in income inequality while
the large majority of countries have experienced a rise in income inequality; it remains an open question as
to what extent globalization is to blame.

The number of people living in absolute poverty has declined significantly from 1237 million in 1990 to
1100 million in 2000.However,most of this improvement is accounted for by the changes in first two very
large countries, China & India, where 38% of the worlds population live.

➢ The Impact on People.

Globalization has not evenly distributed the economic benefits and social costs among social groups.
People with capital, entrepreneurial ability and education and skills have benefited. Others like the poor,
illiterate and unskilled workers and indigenous have lost out.

➢ Wider-Effects
There is other far reaching ways in which globalization has touched the lives of people. We focus on two
key aspects: increased global interconnectivity and the growth of illicit cross-border activities. It has made
people aware of events and issue everywhere. This has vastly expanded awareness of global disparities in
living standards and life chances, and political and social rights.

GLOBAL STRATEGY
What must be (versus what is) the extent of market presence in the world's major markets? How to build
the necessary global presence? What must be (versus what is) the optimal locations around the world for
the various value chain activities? How to run global presence into global competitive advantage? These
are the questions which must be answered by a sound global strategy. Global strategy is an organization
guide to globalization.

MARKET ENTRT STRATEGY

Once the firm has decided to enter the international arena it must make a choice regarding the strategy to be
adopted for organizing its foreign business activities. Following are the different entry modes:
Exporting
Exporting is the most traditional and well established form of operating in foreign markets. Exporting can
be defined as the marketing of goods produced in one country into another

Licensing: Licensing is defined as "the method of foreign operation whereby a firm in one country agrees
to permit a company in another country to use the manufacturing, processing, trademark, know-how or
some other skill provided by the licensor"
Joint ventures
Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control
over property rights and operation". Joint ventures are a more extensive form of participation than either
exporting or licensing
Export processing zones (EPZ)
Whilst not strictly speaking an entry-strategy, EPZs serve as an "entry" into a market. They are primarily an
investment incentive for would be investors but can also provide employment for the host country and the
transfer of skills as well as provide a base for the flow of goods in and out of the country.
MULTINATIONAL CORPORATION
An MNC is one with significant investments and operations in a number of countries, generating
significant share of the total revenue from foreign markets. The headquarters of an MNC are located in one
country (home country) while the enterprise carries out operations in a number of other countries as well
(host countries).The Multinational corporations is also known by names such as international corporations,
transnational corporations, global corporations (or firms, companies or enterprises) etc.The MNC’s account
for a significant share of the world’s industrial investment, production, employment and trade.

Problems
1) MNC’s may destroy competition and acquire monopoly powers
2) MNC’s retard growth of employment in the home country.
3) The MNC’s are often criticized for their business strategies and practices in the host countries.
4) The high power of the MNC’s poses the risk that they may threaten the sovereignty of the nations
in which they do business.
5) MNC’s are accused of major environmental issues like polluting the environment, depletion of
non-renewable natural resources etc.
6) MNC’s can evade national economic autonomy due to their power and flexibility.
Criticisms of Multinational Corporations
 • Companies interested in profit at the expense of the consumer. Multinational companies often
have monopoly power which enables them to make excess profit.
• Their market dominance makes it difficult for local small firms to thrive. For example, it is argued
that big supermarkets are squeezing the margins of local corner shops leading to less diversity.
• In the pursuit of profit, Multinational companies often contribute to pollution and use of non
renewable resources which is putting the environment under threat.
• MNC’s have been criticized for using ’slave labor’ workers who are paid a pittance by Western
standards
TYPES OF MNC’S
• International companies are importers and exporters; they have no investment outside of their
home country.
• Multinational companies have investment in other countries, but do not have coordinated product
offerings in each country. More focused on adapting their products and service to each individual
local market.
• Global companies have invested and are present in many countries. They market their products
through the use of the same coordinated image/brand in all markets. Generally one corporate
office that is responsible for global strategy. Emphasis on volume, cost management and
efficiency.
• Transnational companies are much more complex organizations. They have invested in foreign
operations, have a central corporate facility but give decision-making, R&D and marketing powers
to each individual foreign market.
EFFECT OF GLOBALIZATION ON INDIAN ECONOMY
1) India’s share in the world trade has risen to .86% in 2003 from .53% in 1991.
2) Exporters are responding well to sweeping reforms in exchange rate and trade policies.
3) Exports now finance over 80% of imports.
4) During 2001-2009 we had surplus in current account ranging between 07-08% of GDP.
5) Exchange rate for the rupee has remained almost steady.
6) International confidence in India has been restored
7) Certain benefits have accrued to the Indian consumer in the form of large variety of consumer goods,
improved quality of goods.
8) Markets have stared responding to the movements ahead. A fluctuation in the U.S market or U>K
market has started affecting Indian market.
9) The rating agencies which rate investment risks in countries for global investors, have upgraded India’s
rating.
10) More and more companies are opening branch offices/subsidiaries in other countries and are making
their presence felt. Example: Asian paints, Tata’s, Ranbaxy Infosys etc.

MEASURES TOWARDS GLOBALIZATION

To pursue the objective of globalization, the following measures have been taken:
1) Convertibility of rupee
The most important measure for integrating the economy of any country is to make its currency fully
convertible i.e., allow it to determine its own exchange rate in the international market without any official
intervention.
2) Import liberalization
As per the recommendation of the World Bank, free trade of all terms except negative list of imports and
exports has been allowed. In addition, import duties on a wide range of capital commodities have been
drastically cut down. India, being a member of WTO has since April 2001, totally removed the quantitative
restrictions on foreign trade.
3) Opening the capital to foreign capital
The government has taken a number of measures to encourage foreign capital in India. The foreign direct
investment floodgates have been opened.
MAIN ORGANISATIONS FOR FACILITATING GLOBALIZATION

The international monetary fund

The IMF was organized in 1946 and commenced its operations in March, 1947
The following are the major functions of the IMF:
1) it functions as a short term credit institution.
2) It provides machinery for the orderly adjustment of exchange rates.
3) It is a reservoir of the currencies of all the member nations.
5) It is a sort of lending institution in foreign exchange.
5) It provides machinery for international consultations.

The World Bank

The international bank for reconstruction and development (IBRD) more popularly known as the he World
Bank was formed as a part of the deliberations of Bretton Woods in 1945.
The main functions of the World Bank are:
1) To help its member countries in the reconstruction and development of their territories.
2) To encourage private foreign investment and credit by providing guarantee of repayment of the
private investors.
3) To promote the long term balanced growth of international trade.
The world trade organization a powerful body which broadly aims at making this world a big village
where there is free flow of goods and service and where there’re no barriers to trade.

WORLD TRADE ORGANIZATION

The WTO came into existence on 1st January, 1995. WTO is
Following are the functions of WTO:
1) The WTO shall facilitate the implementation, administration and operation of world trade
agreements.
2) The WTO shall provide the forum for trade negotiations among its member countries.
3) The WTO shall handle trade disputes.
4) The WTO shall monitor national trade policies.
5) It shall provide technical assistance and training to developing countries.
CONCLUSION
Globalization is the interaction, integration of all the economies of the world through free trade
treaties.The term “globalization” has quickly become one of the most fashionable
buzzwords of contemporary political and academic debate. It has significantly enhanced the
speeding up of development of all the economies. Its impact has been on every person, company,
organization, and economy globalization is not merely an intensification of global
interconnectedness brought about by market forces and technological change. Rather, it is
a worldview shaped by capital and hegemonic power that aspires to establish a global
system in line with the interests of capital. Capitalism, as a market-oriented system of
production, has an inherent globalizing tendency. The financial crises affecting different
countries have shaken the confidence of the advocates of Globalization. Yet despite
notable setbacks and shaken confidence, the advocacy for globalization remains strong.
There are many organizations like the IMF, World Bank and WTO which has facilitated
the growth of MNC’s and continuously provides full support to them.
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Special Report - The Global 2000," Forbes, April 2, 2008
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