GLOBALIZATION

The individual summary narrates about the presentation held on 6 th of October 2009 in the tutorial
lecture of global business. As a team member of “Sultans of Swing”, the part performed in the
presentation was in relation to the positive and negative effects of the globalization.

The topic revolves about globalisation, which is nothing but increase in global integration and
solidarity from economic, social, technological, cultural, political and ecological angles. It also leads
to expansion of economic relations between different countries which ultimately end up in creating a
world economy in which all of national economies depend on each other.

These effects of Globalization are manifold which affects various aspects of the world economy in
order to bring overall financial betterment.

POSITIVE EFFECTS:

 Liberalisation of trade and finance- This included relaxation of government rules and
regulations in order to promote free flow of goods from one place to another to encourage
trade between two organisations. This promotion of liberal trade activities can be considered
as the greatest contribution of Globalisation which acted as a boon to the world economy.
Mutual free trade has been promoted due to liberalisation and several countries has been
benefitted due to this cause in following ways such as considerable reduction in the cost of
transportation, decrease or abolition of control over capital and the capital market ,non
payment of tariffs for formation of free zones for carrying out trade activities, decrease or
abolition of subsidies in domestic trades etc.

 Wider market- Globalisation has increased the market horizons and increased it’s size. The
emergence of worldwide production markets give broader access to a range of foreign
products for consumers and companies to domestic people eg Nike from US, Adidas from
Germany, Sony from Japan etc. Due to this expansion, companies today no longer rely upon
preferences of single country as they have branches all over to cater different people
belonging to different cultures.

 Potential untapped markets- Globalisation have given a chance to explore and exploit
potential untapped markets. These potential markets provide a chance to sell products at
higher price than in the domestic market. For eg. Bata sells its pair of shoes in UK market for
£200 whose actual cost in domestic market is around 600 Rs in India.

 Economic growth of the world- Globalisation has lead to specialisation, division of labour
and enhancement of productivity which ultimately lead to overall economic growth of the
world. The spectacular change which we have seen in the Indian economy last decade is all
credited to globalisation. In the world economic arena, Globalization facilitates the formation
of a common worldwide market, on the basis of the liberal exchange of both cash and kinds.

 Optimum utilisation of world resources- Globalisation provides flow of natural resources,

raw materials and human resources from countries which have them in abundance to the
countries which are in short supply. For eg. flow of human resources from India, consumer
goods from the UK, France and Italy.

 Reduced risks- Globalisation has lead to decrease in level of risks as companies now have
their branches in all over the world and their revenue is not dependant on single company.
  Division of labour and specialisation- Globalisation leads to division of labour and
specialisation. Brazil specialises in coffee, Kenya in tea, Japan in automobiles and electronics
etc. This helps in giving specialised identitity to different countries based on their nature.

 Increased Socio-Economic welfare- Globalisation enhances consumption level, and economic

welfare of the people of the trading countries. For eg. the people of China are now enjoying
variety of products of various countries than before as China has been actively involved in
international business like coco-cola, McDonald’s range of products, electronic products of
Japan and coffee from Brazil. Thus, the Chinese consumption levels and socio-economic
welfare are enhanced.

 High living standards- Comparitive cost theory indicates that the countries which have the
adv antage of raw materials, human resources, natural resources and climatic conditions in
producing particular goods can produce the products at low cost and also of high quality.
Customers in various countries can buy more products with the same amount of money.

NEGATIVE EFFECTS OF GLOBALISATION:

 Huge foreign indebtedness- Developing countries which have less purchasing power
has been lured into debt trap due to MNC’S operating in these countries. In order to
find short-cut to success, these countries end up trapping itself in huge debt trap. For
eg. Mexico, Brazil, Poland, Romania etc.

 Exchange instability- Currencies of some countries are depreciated due to imbalances

in the balance of payments, political instability and foreign indebtedness. This, in
turn, leads to instability in the exchange rates of domestic currencies in terms of
foreign currencies. For eg. India, Pakistan, Zambia depreciated their currencies many
times.

 Entry requirements- Domestic government impose entry requirements to

multinationals. For eg. an MNC can enter Eritrea only through a joint venture with a
domestic company.

 Tariffs, Quotas and Trade Barriers- Governments of various countries impose tariffs,
import and export quotas and trade barriers in order to protect domestic business.
Further, these barriers are imposed based on the political and diplomatic relations
between or among governments. For eg. China, Pakistan and USA(before 1998)
imposed tariffs, quotas, and barriers on imports from India. But the erstwhile USSR
and present Russia liberalised imports from India.

 Corruption- Corruption has become an international phenomena. The higher rate

bribes discourage the foreign investors to expand their operations.

 Bureaucratic Practices of Government- Bureaucratic attitudes and practices of

Government delay sanctions, granting permission, and licences to foreign companies.
The best example is Indian Government before 1991. Such practices make the
MNC’s to enter other countries.
  Technological pirating- Copying the original technology, producing imitative
products, imitating other areas of business operations were common in Japan during
1950’s and 1960’s in Korea, India etc. This practice invariably alarms the foreign
companies against expansion.

 High cost- Internationalising the domestic business involves market survey, product
improvement, quality upgradation, managerial efficiency, which need large
investments and involve higher cost and risk.

REFERENCES:

 Anonymous,2009. “negative effects of globalisation” [online] available at :

http://www.buzzle.com/articles/negative-effects-of-globalization.html Accessed on
14th December, 2009.
 Anonymous,2009.”effects of globalisation” [online] available
at:http://ameyawaghmare.wordpress.com/2008/04/11/effects-of-globalisation/
Accessed on 14th December, 2009.
 Anonymous.”effects of globalisation” [online] available at
http://www.economywatch.com/economics-theory/globalization/effects.html Accessed
on 14th december, 2009.