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International Environment

GLOBALIZATION
Globalization in a literal sense is international integration. It can be described as a
process by which the people of the world are unified into a single society and functioning
together. This process is a combination of economic, technological, socio cultural and
political forces. Globalization, as a term, is very often used to refer to economic
globalization that is integration of national economies into the international economy
through trade, foreign direct investment, capital flows, migration, and spread of
technology.
According to IMF,” It represents the growing economic interdependence of the
countries worldwide through increasing volume & variety of cross border transactions in
goods & services & of international capital flows & also through the more rapid &
widespread diffusion of technology.”

FEATURES OF GLOBALISATION:

1. Operation & planning to expand business throughout the world.


2. Erasing difference between domestic & foreign market.
3. Buying & selling of goods & services from any country.
4. Establishing manufacturing & distribution facilities in any part of the world.
5. Product planning& development are based upon international considerations.
6. Sourcing of material from any part of the world.
7. Global orientations in strategy formulation.
8. Considering the entire globe as a single market.

EMERGENCE OF GLOBALIZATION

The word "globalization" has been used by economists since 1981; however, its concepts
did not permeate popular consciousness until the later half of the 1990s. The earliest
concepts and predictions of globalization were penned by an American entrepreneur-
turned-minister Charles Russel who first coined the term 'corporate giants' in 1897. The
first era of globalization during the 19th century was the rapid growth of international
trade between the European imperial powers, the European colonies, and the United
States. After World War II, globalization was restarted and was driven by major advances
in technology, which led to lower trading costs.

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Globalization in its largest extent began a bit before the turn of the 16th century, in
Portugal. The country's global adventurism in the 16th century linked continents,
economies and cultures as never before. The westernmost country in Europe was the first
to significantly probe the Atlantic Ocean, colonizing the west coast of Africa. In 1488,
The Portuguese established ports, forts and trading posts as far west as Brazil, Japan and
Timor and along the coasts of Africa, India and China. For the first time in history, a
wave of global trade reached all corners of the world.

Globalization is viewed as a centuries long process, tracking the expansion of human


population and the growth of civilisation that has accelerated dramatically in the past 50
years. Early forms of globalization existed during the Roman empire, the Parthian
empire, and the Han dynasty when the silk road started in China, reached the boundaries
of the Parthian empire, and continued onwards towards Rome. The Islamis golden age is
also an example, when muslim traders established an early global economy across the
world. Later during the mughal empire global trade was enhanced. Global integration
continued through the expansion of European trade, as in the 16th and 17th centuries,
when the Portugues and Spanish empire reached to all corners of the world.

Globalization became a business phenomenon in the 17th century when the Dutch East
India Company, which is often described as the first multinational corporation, was
established. Because of the high risks involved with international trade, the Dutch East
India Company became the first company in the world to share risk and enable joint
ownership through the issuing of shares: an important driver for globalization.

Liberalization in the 19th century is sometimes called "The First Era of Globalization" a
period characterized by rapid growth in international trade and investment, between the
European imperial powers, their colonies, and, later, the United States. It was in this
period that areas of sub-saharan Africa and the Island Pacific were incorporated into the
world system. The "First Era of Globalization" began to break down at the beginning
with the first World War, and later collapsed during the late 1920s and early 1930s.

RECENT EVOLUTIONS

Globalization in the era since World War II was first the result of planning by
economists, business interests, and politicians who recognized the costs associated with
protectionism and declining international economic integration. Their work led to the
Bretton Woods Conference and the founding of several international institutions
intended to oversee the renewed processes of globalization, promoting growth and
managing adverse consequences.

These were the International Bank for Reconstruction and Development (the World
Bank) and the International Monetary Fund. It has been facilitated by advances in
technology which have reduced the costs of trade, and trade negotiation rounds,
originally under the auspices of GAAT, which led to a series of agreements to remove
restrictions on free trade.

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Since World War II, barriers to international trade have been considerably lowered
through international agreements – General Agreement on Tariff & Trade (GATT).
Particular initiatives carried out as a result of GATT and the World Trade Organisation
(WTO), for which GATT is the foundation, has included:

• Promotion of free trade:


o Reduction or elimination of tariffs; construction of free trade zones with
small or no tariffs
o Reduced transportation costs.
o Reduction or elimination of capital controls
o Reduction, elimination, or harmonization of subsidies for local businesses
• Restriction of free trade:
o Harmonization of intellectual property laws across the majority of states,
with more restrictions.
o Supranational recognition of intellectual property restrictions (e.g. patents
granted by China would be recognized in the United States)

The Uruguay round (1984 to 1995) led to a treaty to create the WTO to mediate trade
disputes and set up a uniform platform of trading. Other bi- and multilateral trade
agreements, including sections of Europe's Masstricht Treaty and the North American
Free Trade Agreement (NAFTA) have also been signed in pursuit of the goal of
reducing tariffs and barriers to trade. In case of India the process of globalization started
in 1991 through the adoption of the policy of liberalization, privatization, globalization
(LPG)