Globalisation

Rajat Bansal
Chirag Dua
Nitin Kaushik
The International Monetary Fund (IMF) define globalisation as
the growing economic interdependence of countries world
wide through increasing volume and variety of cross border
transactions in goods and services and of international
capital flows and also through the more rapid and
widespread diffusion of technology.
Globalization (or globalisation) describes the process by which
regional economies, societies, and cultures have become
integrated through a global network of communication,
transportation, and trade. The term is sometimes used to refer
specifically to economic globalization: the integration of national
economies into the international economy through trade, foreign
direct investment, capital flows, migration, and the spread of
technology. However, globalization is usually recognized as being
driven by a combination of economic, technological, sociocultural,
political, and biological factors.The term can also refer to the
transnational circulation of ideas, languages, or popular culture.
Level of globalisation
There are two level of globalisation :=

1. Macro Level (globalisation of the world economy)
2. Micro Level (globalisation of the business and the firm)
Globalisation of world economy
A global or transnational economy is one which transcends the
national borders unhindered by artificial restrictions like
Government restrictions on trade and factor movements.
Globalisation is a process of development of the world into a
single integrated economic unit.
The transnational economy is different from international
economy. The international economy is characterised by the
existence of different national economies the economic relations
between them being regulated by the national Governments.
The transnational economy is a borderless world economy
characterized by free flow of trade and factors of production
across national borders.
The transnational economy is characterised by :=

1. It is shaped mainly by money flows rather than by trade in
goods and services. These money flows have their own
dynamics.
2. In the transnational economy the goal is market maximisation
and not profit maximisation.
3. Trade, is becoming a function of investment.
4. The decision making power is shifting from the national state
to the region.
5. There is a genuine and almost autonomous world
economy of money, credit and investment flows. It is
organised by information which no longer knows national
boundaries.
Globalisation of Business
Globalisation in its true sense is a way of corporate life
necessitated, facilitated and nourished by the
transnationalisation of the world economy and developed by
corporate strategies. Globalisation is an attitude of mind it
is a mind-set which views the entire world as a single market
so that the corporate strategy is based on the dynamics of
the global business environment. International marketing or
international investment does not amount to globalisation
unless it is the result of such a global orientation.

It do the following

doing, or planning to expand, business globally.
Giving up the distinction between the domestic market and
foreign market and developing a global outlook of the
business.
locating the production and other physical facilities on a
consideration of the global business dynamics,
irrespective of national considerations.
Global sourcing of factors of production i.e. raw material,
componenets , machinery, technology, finance etc. are
obtained from the best source anywhere in the world.

Positive effects of globalisation
Globalization has various aspects which affect the world in several
different ways
Industrial - emergence of worldwide production markets and
broader access to a range of foreign products for consumers and
companies. Particularly movement of material and goods between
and within national boundaries. International trade in
manufactured goods increased more than 100 times (from $95
billion to $12 trillion) in the 50 years since 1955. China's trade with
Africa rose sevenfold during 2000-07 alone.

Financial - emergence of worldwide financial markets and better
access to external financing for borrowers. By the early part of the
21st century more than $1.5 trillion in national currencies were
traded daily to support the expanded levels of trade and
investment. As these worldwide structures grew more quickly than
any transnational regulatory regime, the instability of the global
financial infrastructure dramatically increased, as evidenced by
the Financial crisis of 20072010.
Economic - realization of a global common market, based on the
freedom of exchange of goods and capital.The
interconnectedness of these markets, however, meant that an
economic collapse in one area could impact other areas. With
globalization, companies can produce goods and services in the
lowest cost location. This may cause jobs to be moved to
locations that have the lowest wages, least worker protection and
lowest health benefits. For Industrial activities this may cause
production to move to areas with the least pollution regulations or
worker safety regulations.
Informational - increase in information flows between
geographically remote locations. this is a technological change
with the advent of fibre optic communications, satellites, and
increased availability of telephone and Internet.

Language - the most popular first language is Mandarin (845
million speakers) followed by Spanish (329 million speakers) and
English (328 million speakers). However the most popular
second language is undoubtedly English, the "lingua franca" of
globalization:
About 35% of the world's mail, telexes, and cables are in English.
Approximately 40% of the world's radio programs are in English.
About 50% of all Internet traffic uses English.




Cultural - the desire to increase one's standard of living and enjoy
foreign products and ideas, adopt new technology and practices,
and participate in a "world culture".


Technical - Development of a Global Information System, global
telecommunications infrastructure and greater transborder data
flow, using such technologies as the Internet, communication
satellites, submarine fiber optic cable, and wireless telephones
Increase in the number of standards applied globally; e.g.,
copyright laws, patents and world trade agreements.

Negative effects

Globalization has generated significant international opposition
over concerns that it has increased inequality and
environmental degradation. In the Midwestern United States,
globalization has eaten away at its competitive edge in industry
and agriculture, lowering the quality of life.


Brain drain
Opportunities in richer countries drives talent away from poorer
countries, leading to brain drains. Brain drain has cost the
African continent over $4.1 billion in the employment of 150,000
expatriate professionals annually. Indian students going abroad
for their higher studies costs India a foreign exchange outflow of
$10 billion annually.



Disease
Globalization has also helped to spread some of the deadliest
infectious diseases known to humans.Starting in Asia, the Black
Death killed at least one-third of Europe's population in the 14th
century. Even worse devastation was inflicted on the American
supercontinent by European arrivals. 90% of the populations of
the civilizations of the "New World" such as the Aztec, Maya, and
Inca were killed by small pox brought by European colonization.
Modern modes of transportation allow more people and products
to travel around the world at a faster pace, but they also open the
airways to the transcontinental movement of infectious disease
vectors. One example of this occurring is AIDS/HIV. Due to
immigration, approximately 500,000 people in the United States
are believed to be infected with Chagas disease. In 2006, the
tuberculosis (TB) rate among foreign-born persons in the United
States was 9.5 times that of U.S.-born persons.
Drug and illicit goods trade

The United Nations Office on Drugs and Crime (UNODC) issued
a report that the global drug trade generates more than $320
billion a year in revenues.Worldwide, the UN estimates there are
more than 50 million regular users of heroin, cocaine and
synthetic drugs. The international trade of endangered species is
second only to drug trafficking. Traditional Chinese medicine
often incorporates ingredients from all parts of plants, the leaf,
stem, flower, root, and also ingredients from animals and
minerals. The use of parts of endangered species (such as
seahorses, rhinoceros horns, saiga antelope horns, and tiger
bones and claws) has created controversy and resulted in a
black market of poachers who hunt restricted animals. In 2003,
29% of open sea fisheries were in a state of collapse.
Essentials conditions for
Globalisation
There are some essential conditions to be satisfied on the part of
the domestic economy as well as the firm for successful
globalisation of the business. They are:=

Business freedom := there should not be unnecessary
Government restrictions which come in the way of globalisation,
like import restriction, restrictions on sourcing finance and other
factors from abroad, foreign investments etc. that is why the
economic liberalisation is regarded as a first steps towards
facilitating globalisation.

Facilities := the extent to which an enterprise can develop
globally from home country base depends on the facilities
available like the infrastructural facilities.

Government Support := although unnecessary government
interference is a hindrance to globalisation, government support
can encourage Globalisation. Government support may take the
form of policy and procedural reforms, development of common
facilities like infrastructural facilities, R & D support, financial
market and so on.

Resources:= resources is one of the important factors which
often decides the ability of a firm to globalise. Resourceful,
companies may find it easier ti thrust ahead in the global market.
Resources include finance, technology , R & D capabilities,
managerial expretise, company and brand image, human
resource etc. it should, be noted that many small firms have been
very successful in international business because of one or other
advantage they possess.




Competitiveness := the competitive advantage of the company
is a very importance determinant of success in global business. A
firm may derive competitive advantage from any one or more of
the factors such as low costs and price , product quality, product
differentiation ,technological superiority, after sales service,
marketing strength etc. Sometimes small firms may have an edge
over others in certain aspects or times of business.



Globalisation of Indian Business
Indias economic integration with the rest of the world
was very limited because of the restrictive economic
policies followed until 1991. Indian firms confined
themselves, by and large, to the home market.
Foreign investment by Indian firms was very
insignificant.
With the new economic policy ushered in 1991, there
has, however, been a change. Globalisation has in
fact become a buzz-word with Indian firms now, and
many are expanding their overseas business by
different strategies.