Paper: 05, Principles and Practices of Management

Module: 35, Globalisation and Management

Prof. S P Bansal
Principal Investigator Vice Chancellor
Maharaja Agrasen University, Baddi

Prof YoginderVerma
Co-Principal Investigator Pro–Vice Chancellor
Central University of Himachal Pradesh. Kangra. H.P.

Prof. Tejinder Sharma

Paper Coordinator Department of Commerce
Krukshetra University, Kurukshetra

Dr. Pooja Malhotra

Content Writer Assistant Professor
Dyal Singh College, Karnal
 Items Description of Module
Subject Name Principles and Practices of Management
Paper Name Management
Module Title Globalisation and Management
Module Id Module no.-35
Pre- Requisites Basic knowledge of what management is.
Objectives To study the concept and implications of globalisation in Management
Keywords Globalisation, Management, dynamism, complexity

QUADRANT-I

1. Module 35:Globalisation and Management

2. Learning Outcome
3. Concept and Origin of Globalisation
4. Driving Forces of Globalisation
5. Globalisation and management
6. Summary

1. Learning Outcome:
After completing this module the students will be able to:
 Understand the concept and origin of Globalisation
 Understand the driving forces of Globalisation.
 Describe the impact of globalisation on management and strategies to adapt to
globalisation challenges.

2. Introduction

Present is the era of globalisation. In the present scenario of globalisation, the organisations have
brought drastic changes at all levels. There is a huge diversity and complexity in international
business due to differences in political, economic, cultural, social, technological and regional
environment. Managers have to devise the strategies which can work at international level in different
parts of the world. They have to plan different strategies for different markets e.g., entry strategies for
new markets, devising supply chain management policies, establishing information systems,
managing international human resources etc. the management of an organisation operating on
international level has to assess regional, cultural and institutional differences in different markets
globally. The purpose of this chapter is to understand the concept of globalisation and its impact on
business houses and also to describe the strategies how business houses can manage their operations
in different parts of the globe.
3. Globalization
On the term globalization, there are different viewpoints. Some recognize globalization with increased
speed of transportation and communication technology. Others identify globalization with increasing
powers of Multinational Corporations (MNCs). Others view globalization as a force eliminating cross
border boundaries. In simple terms, Globalization includes accelerating amounts of cross-border trade
and with the advancements in telecommunications technology and transportation, reducing the
distances between nations. Globalization can better be described as a process by which the world
economies are unified into a single entity and all work together. The process includes the integration
of economic, technological, socio-cultural and political forces. Further, globalization facilitates
movement of goods, services, people, capital and technology etc across borders.
3.1 Origin of Globalisation
Globalisation is seemed to be started some way back in the19th century. As per many analysts, there
are four phases of globalisation. In about 1880, the first phase gained momentum because of
automation and improvements in transportation that enabled trustworthy long-distance trade. In the
late 1800s, Telegraph and telephone communication facilitated transfer of information, which many
firms found to be very useful in managing their supply chains. Phase two peaked in the first decades
of the twentieth century, when territories under the control of European colonial powers were
observed as sites to establish multinational subsidiaries. During this period, American corporations
started expanding their operations into profitable European markets. This phase is supposed to have
ended with the economic crash in 1929, which resulted in a global depression and many governments
move to inward-looking polices. During the third phase, tariff barriers were lowered and there was a
consequential increase in international trade after the end of World War II. The individuals
particularly in the richer economies became wealthier and this led to high demand for consumer
goods. As USA was the largest and the least war damaged economy after 1945, hence, it became the
most leading power in terms of globalisation. The fourth and the final phase started with two of main
changes that are, first, changes in technology, i.e. widespread availability of the personal computer
(PC) and the increasing use of internet/world wide web and mobile communications and the robotics
developments used in the automation of production etc. These factors not only affected manufacturing
industry; but the service sector, like banking and tourism, have also benefited from these changes.
Distance is no longer an issue. The world has reduced to a manageable size. The second factor is the
change in govt attitudes and their economic policies that allowed companies as well as consumers to
take advantage of these technological advances. It is evident that there has been much convergence of
global economic thinking, with many more countries moving towards an acceptance of liberal, free
market ideas and views. Social trends also get changed, as consumers are less concerned with
products’ national identities.
3.2 Driving Forces of Globalization:
The factors that have accelerated the progress of globalization and are likely to carry on the same in
new future include:
1. Communication and transportation technologies: the advances in transportation systems have
greatly reduced the cost of moving goods, services and factors of production across national borders.
Information technology which includes the use of computer and telecommunication technologies to
transmit information has greatly enhanced efficiency and made it easier and faster to complete
international transactions.
2. Economies of scale and local demands: - economies of scales have facilitated companies to sell
cheaper goods and services across the globe. Almost identical products are sold all over the world that
local preferences and tastes are vanished now. However, to cater to local needs, companies can gain
substantial benefits by making minor changes to suit different national markets. Companies work now
on the concept of “think globally and act locally”.
3. Deregulation and Liberalization of Trade and capital markets: - Deregulation and a widespread
drive toward liberalization of trade and capital markets have led to integration of world economies.
Exhibit 1 shows macro-environment factors that have impact on globalisation:

Exhibit 1: Macro-economic Factors having impact on globalisation

4. Globalization and Management
Globalisation has brought remarkable changes in the area of management practices. Globalisation has
provided new opportunities and new methods and ways of performing jobs. With this, new ways to
manage people are also evolving. The autocratic management style as per Theory X has been
transformed into the participative management (Theory Y). In place of hierarchical position systems
where everything was centralised, flat organization structures have developed which involve
decentralisation of decision making. Employees are given more liberty to perform their duties. Some
of the challenges brought by globalization are building competitive advantage, updated knowledge
and information about the markets, maintaining ethical standards, remaining innovative, using latest
technologies, managing a diverse workforce, and maintaining quality of products and services. These
challenges are explained as follows:

4.1 Impacts of Globalization on Business and Relative Strategies:

Globalization is an important external factor which affects almost all the organizations. Globalization
has increased competition, frequent changes of technology, diversity of human resources, managing
cultural and national differences etc. following are the areas or factors which are affected by
globalization:

4.1.1 Competition

Globalization has increased competition. Due to globalization, market has widened with increased
number of buyers and sellers. Buyers have more options to buy. Due to global markets, buyers are
able to get low priced products and services with good quality in a short span of time. Companies will
have to meet these expectations in order to remain in competition. The competition arises not only
from domestic firms but from global marketers too. Hence, companies are facing competition related
to price and cost of the product and service, target market, customer preferences, timely delivery,
technological advancements, etc. a company must be readily adaptable to changes in global market.

4.1.2 Technological Advancements

In order to remain competitive, companies have to adopt latest technologies. Use of technology
particularly internet and ecommerce have widened the operations of companies into global markets.
Technology is also helpful in producing goods and services in a cost effective manner, hence resulting
in lower price of the goods and services. Globalization has increased the pace of transfer of
technology and the use of technological advancements.

.4.1.3 Transfer of Knowledge/Information

 Globalised economy is the knowledge economy. Information is also an important input in present
scenario. With globalization, information can be transferred and exchanged very easily with other
countries. Frequent changes at global front require quick transfer of knowledge and information and
the success depends on efficient utilization of that information and knowledge.

4.1.4 Business ethics

In present era, companies cannot have their sole goal of profit earning only. They must be socially
responsible in order to succeed in long run both at local level as well as at global level. The
companies should conduct their business ethically, or it may have a problem for them in the long run.

4.1.5 Diverse Workforce Management

With globalization, another challenge for managers is to treat human resources in a fair and
reasonable manner. Globalization has changed the age, gender, religion, race, traditions, and socio-
economic background of the employees, in view of which managers must develop such human
resource practices and procedures that are fair and equitable and do not distinguish between any
employee of the company.

4.1.6 Innovation:- to succeed in globalised economy, company must be innovative. Innovation refers
to creating new goods and services or producing in better ways to benefit the economy at large.
Hence, managers must develop such environment in the organization where workforce is motivated to
innovate.

4.1.7 Enhanced Quality: it is a great challenge from the globalised economy for the managers to
improve the quality of goods and services. To meet this challenge, managers must adopt improved
technologies and ways to enhance the quality. The workforce should also be trained to monitor and
evaluate the quality of goods and services and must find better ways to perform their duties on a
continuous basis.
5. Summary

In present era, the world has become a global Village. The advancements of technology in
communication and transportation have made possible the easy movement of goods, services,
technology, information and people etc. globalization has also provided challenges for the
management operating at global level. Companies have to adapt and devise strategies to compete and
succeed at the international level. Some of the challenges brought by globalization are building
competitive advantage, updated knowledge and information about the markets, maintaining ethical
standards, remaining innovative, using latest technologies, managing a diverse workforce, and
maintaining quality of products and services.