Globalisation

Meaning

 Globalisation is a way of corporate life necessitated, facilitated and

nourished by the world economy.

 Expansion of economic activities across political boundaries of the

nation state.

 It refers to the process of increasing economic integration and growing

economic interdependence between countries in the world economy.

 It encompasses the following

 Doing, planning to expand business globally

 No distinction between domestic market and foreign market
 Planning product development on the global market consideration
 Global sourcing of factors of production from the best source
anywhere in the world
 Global orientation of organisational structure and management
culture.
Drivers of Globalisation

 Growing economic interdependence of countries worldwide through

 International Trade
 International Capital flows
 Technology advancement
 Communication
 Population mobility
Stages of Globalisation
Domestic Firm / moves
To new market overseas

International Firm
Joint Venture / Subsidiaries

Set up there own manufacturing,

marketing and sales in foreign land

Multinational Firm

Global Firm
Essential Conditions of Globalisation

 Business Freedom / Economic Liberalisation:

No unnecessary Govt restrictions

 Facilities:
Infrastructural facilities available in the home country.

 Government support:
Policy and procedural reforms, financial market reforms,
R & D support .

 Resources:
Finance, technology, R& D capabilities, company brand image,
human resources

 Competitiveness:
Competitive advantage of the company is an important determinant
of success in global business.
Benefits of Globalisation
1) Promotes Foreign capital

2) Increase in competition would make companies more cost and quality

conscious.

3) Global competition keeps a check on prices.

4) It improves standard of living

5) Enhances consumer choice and surplus

6) Better pay package

7) Gives encouragement to innovation

8) Opens up opportunities for firms in developing countries.

9) Capital flow gives the country access to foreign investment and keep the
interest rate low.
Challenges of Globalisation
Globalisation gives lot of challenges for the firms and nations. Like:

 Attracting foreign investment

 Globalisation may increases the economic inequality. Therefore

globalisation should be accompanied by socio-economic reforms.

 Merger and acquisition pose a challenge to government for ensuring fair

competition. An effective policy to safeguard domestic companies is
required.

 Rise in domestic unemployment of unskilled labour, which needs to be

absorbed

 Increase competition worldwide, as only efficient firms can survive.

Challenges of Globalisation

 Sometimes domestic- smaller / medium firms (domestic firms) have an

edge over multinationals in respect of standardisation , adaptability,
better knowledge of consumer taste and preferences. So domestic firms
need to induce technology of MNCs.

 Technology of MNCs may not suit the host country.

 Dumping of obsolete technology.

 Replacement of traditional and indigenous products by modern products

resulting in ruin of traditional crafts and industries.

 Globalisation could lead to serve the vested interest of certain sections.

 Developed countries are putting more barriers to trade than developing

countries. So countries to tackle the NTBs
India and Globalisation
Obstacles

 Govt Policy and Procedures:

 High cost:

 Poor infrastructure:

 Obsolescence:

 Resistance to change:

 Poor quality Image:

 Supply problem:

 Small size:

 Lack of experience

 Limited R & D and marketing research

 Trade barriers

 Growing competition form developing countries.

India and Globalisation
Advantages

 Human Resources:

 Wide Base:

 Growing entrepreneurship:

 Growing domestic Market

 Competition

 Niche Market

 Competition
Regional Trade
Agreements
RTA focus – not only true for India but it
is a global reality
300

2007
Types of RTA’s
 Preferential Trade Agreement:
 A grouping of countries where partial preference to trading
partners are given.
Central American Common Market (CACM)

 Free Trade Area:

 A grouping of countries to bring free trade between them.

 North American Free Trade Area (NAFTA)

 ASEAN Free Trade Area (AFTA)

 EFTA ( European Free Trade Association)

 LAFTA ( Latin america Free trade association)

 Custom Union:
 Eliminates all restrictions on Trade members but also adopts a
uniform commercial policy against the non-member.
 European Economic Community (EEC)
 Common Market:
 It allows free movement of labour and capital in addition to
having free movements of goods and having common
commercial policy for non-members.
 ECM ( European Common Market)

 CACM ( Central American Common Market)

 Economic Union:
 Members countries have same economic policies, including
monetary and fiscal policy.
 EU ( European Union)