You are on page 1of 10

What is Globalization?

Globalization means the coming together of different societies and economies via cross border flow
of ideas, finances, capital, information, technologies, goods and services. The cross border
assimilation can be social, economic, cultural, or political. But most of the people fear cultural and
social assimilation as they believe this would have a negative impact on the existing culture of their
society. Globalization therefore has mostly narrowed down to economic integration and this mainly
happens through three channels; flow of finance, trade of goods and services and capital
movement.
Globalization is a term that includes a wide range of social and economic variations. It encompasses
topics like the cultural changes, economics, finance trends, and global market expansion. There are
positive and negative effects of globalization - it all comes as a package. Globalization helps in
creating new markets and wealth, at the same time it is responsible for extensive suffering, disorder,
and unrest. The great financial crisis that just happened is the biggest example of how negative
globalization can turn. It clearly reveals the dangers of an unstable, deregulated, global economy. At
the same time, this gave rise to important global initiatives, striving towards betterment. Globalization
is a factor responsible for both repression and the social boom.
What happens when there is a growing integration of economies across the globe? Majorly there
have been positive impacts of this global phenomenon - through liberalization, privatization and
globalization (LPG). Due to globalization, there has been significant flow of inward foreign direct
investment. MNC companies are getting a chance to explore various different markets across
economies and explore the untapped potential.
Globalization in India
Globalization has had a huge impact on the Indian economy. Globalization affected the Indian
economy both positively and negatively.
India's economy opened up during the early nineties. The policy measures on the domestic front
demanded that there was a requirement of multinational organizations to set up their offices here.
The market became more open and the economy started responding to the external (global) market.
The direct impact of globalization was directly seen on the GDP of the country which increased
significantly.
The liberalization of the Indian economy along with globalization helped the country to step up its
GDP growth rate considerably. The GDP growth rate picked up instantly from 5.6 percent in 1990-91
to 77.8 percent in 1996-97. Since then the growth rate did manage to slump down due to drought
and other factors but the country still managed to survive in the rat race and maintained a GDP
growth of about 5 to 6 percent. Today India is regarded as being the one of the fastest developing
countries just after China.
Globalization has also played a major role in generating employment opportunities in India. After
liberalization in the 1990s, the scenario of employment in India has witnessed a phenomenal
change. Cities like Bangalore, Delhi, Mumbai and Chennai provide employment to a chunk of the
Indian population since it is in these cities only that most foreign companies have set up their
operations.

Impact of Globalization
It was in July 1991, when foreign currency reserves had tumbled down to almost $1
billion;inflation was at a soaring high of 17%, highest level of fiscal deficit, and foreign investors
loosing confidence in Indian Economy. With all these coupling factors, capital was on the verge of
flying out of the country and we were on the brink of become loan defaulters. It was at this time that
with so many bottlenecks at bay, a complete overhauling of the economic system was required.
Policies and programs changed accordingly. This was the best time for us to realize the importance
of globalization.
India welcomed globalization with open arms, the result of which can be seen clearly. India's Export
and Imports have grown significantly over the last two decades. Quite a large number of Indian
companies have made a reputation for themselves on the global scenario. India has become a one a
stop destination for many services specially related to IT and IT support.
Measures of Globalization

1. Devaluation: The first initiative towards globalization had been taken the moment there was
an announcement of devaluating the Indian currency by a hoping 18-19% against all the
major global currencies. This was a major initiative in the international foreign exchange
arena. The Balance of payment crisis could also be resolved by this measure.
2. Disinvestment: The core elements of globalization are privatization and liberalization. Under
the privatization scheme, bulk of the public sector undertakings have been/ and are still
being sold to the private sector. Thus the concept of PPP (public private partnership) came
up.
3. Allowing Foreign Direct Investment (FDI): Allowing FDI inflows is a major step of
globalization. The foreign investment regime has been quite transparent and thus the
economy is getting boosted up. Various sectors were opened up for liberalizing the FDI
regime.

Disadvantages of Globalization
Along with its many benefits globalization also comes with some negative effects. One of the major
concerns of globalization is that it leads to unequal distribution of income within the country, the
second fear is that globalization hampers the domestic policies of the country, Globalization also
increases the risk of spreading of communicable diseases, monopoly can also set in with
globalization and lastly outsourcing of jobs to the developing nations only results in the loss of jobs
for the developed nations.
Is globalization delivering all the desired results to the masses? Or only a few can feel the benefits
of globalization ?Figures have out rightly proved that the global average per capita income showed a
strong surge throughout the 20th century but the income gap between rich and poor countries have
not been bridged for many decades now. The ultimate inference being that globalization hasn't
shown positive results.

Benefits of globalization

"We have moved from a world where the big eat the small to a world where the fast eat the slow", as
observed by Klaus Schwab of the Davos World Economic Forum. All economic analysts must agree
that the living standards of people have considerably improved through the market growth. With the
development in technology and their introduction in the global markets, there is not only a steady
increase in the demand for commodities but has also led to greater utilization. Investment sector is
witnessing high infusions by more and more people connected to the world's trade happenings with
the help of computers. As per statistics, everyday more than $1.5 trillion is now swapped in the
world's currency markets and around one-fifth of products and services are generated per year are
bought and sold.
Buyers of products and services in all nations comprise one huge group who gain from world trade
for reasons encompassing opportunity charge, comparative benefit, economical to purchase than to
produce, trade's guidelines, stable business and alterations in consumption and production.
Compared to others, consumers are likely to profit less from globalization.
Another factor which is often considered as a positive outcome of globalization is the lower inflation.
This is because the market rivalry stops the businesses from increasing prices unless guaranteed by
steady productivity. Technological advancement and productivity expansion are the other benefits of
globalization because since 1970s growing international rivalry has triggered the industries to
improvise increasingly.
Some other benefits of globalization as per statistics:

Commerce as a percentage of gross world product has increased in 1986 from 15% to
nearly 27% in recent years.

The stock of foreign direct investment resources has increased rapidly as a percentage of
gross world product in the past twenty years.

For the purpose of commerce and pleasure, more and more people are crossing national
borders. Globally, on average nations in 1950 witnessed just one overseas visitor for every
100 citizens. By the mid-1980s it increased to six and ever since the number has doubled to
12.

Worldwide telephone traffic has tripled since 1991. The number of mobile subscribers has
elevated from almost zero to 1.8 billion indicating around 30% of the world population. Internet
users will quickly touch 1 billion.

Globalization leading to social anxieties:

Listed below are the three sources of anxiety between worldwide markets and social steadiness:

Across the nations, globalization triggers the services of large sections of working people
more effortlessly substitutable,

Commerce can set free factors that weaken guidelines in national practices, for example
workers in South Carolina are replaced by child laborers in Honduras,

Globalization and its cutthroat rivalry makes it hard for administration to perform important
tasks of offering the social programs

Key areas which demand immediate attention:

Public education, which will demand proper evaluation and outcomes of globalization
incorporating its benefits.

Amending practices to review the international fiscal institutions to assist in averting


crises, facilitating helpful early warning systems, better synchronization of exchange rates
among the world markets and arranging the private sector in order in performing rescue
functions, and

Reorganizing the bilateral liberalization of the global financial system, which should tackle
the major areas related to food trade, labour pacts and the environment.

Causes of speedy growth of global business:

Increasing real living standards


Liberalization of trade supported by World Trade Organisation, growth and expansion of
the European Union

Switch to market structures in Eastern Europe

Speedy growth of the Asian Tigers and also in China and India

Privatization and liberalization of national economies

Deregulation of worldwide capital economies

Dip in transport charges

Enhancement in global communications

The Impact of Globalization on Business:

Expanding the geographic footprint of any business in the era of globalization is not at all a perilous
and costly job as it has been in the past. To remain competitive in today's scenario aggressive
measures should be implemented to expand business. Starting business internationally is as
defensive as an offensive play. Going by the global demands and considering the total size of
international economies would reveal that in comparison with the size of national market the
potential buyers generally reside in international markets.
In comparison, if a business does not aim international market and the international customers then
the company will not only be lagging behind taking the first mover's benefit of preserving customer
dependability, but would also lose on collaborations with key partners and distribution pacts. With
increase in consumers' demands and flattening of global market the international business is
expected to assist several markets in a faultless manner. Changing slowly to economic alterations in
today's world could ultimately harm the business.
Examining the alleviating factor that globalization had on the world business would reveal that trade
shortage, petroleum costing, dip in equity markets, housing calamity, restricted influx of funds, and
total cost of living is defying us than ever before. With so many negative traits in world economy,
conservative economic theory recommends that the interest rate today hold similarity with that of
1980 than the low interest rates we are witnessing today. In comparison with the financial scenario of
1980, the contemporary market is the outcome of a worldwide economy which is performing the role
of an alleviating factor.
By considering the following, it is estimated that by 2015, the developing economies will account for
50% of world GDP.

Growing economies Over the last few years China and India has witnessed 9% and
7% of annual growth respectively. Demographics Economies now characterize younger
populations, increasing number of well-qualified population, growing middle class populations,
elevating incomes and urbanization.

Commercial need The financial growth, as well as the existence of worldwide firms
that accompanies job opportunities focused around intellectual capital is generating need for
marketable real estate infrastructure.

Infrastructure development Communications, utilities, and well-organized


transportation has steadily improved over the past few years as compared to what it was few
decades ago.

Opening up of closed market structures Most flourishing developing economies


have been occupied in methodical reorganization of basic community norms ignored in the

developed economies. The factors which trigger growth and monetary infusions incorporate
property privileges, legal procedure, published guideline, privatization of state owned firms,
removal of capital management, and liberalization of norms related foreign direct investment.

Factors accounting for the growth of multinational companies:

Exploration of developing markets

Globalization of economies

Need to minimize manufacturing expenses

Need to switch production to nations with cheap labor

Need to avert transportation charges

Need to avert tax and non tax hindrances

Promote vertical incorporation

Expansion of product life cycles

Deregulation of capital economies

Financial Globalization and Exchange Rates


Financial Globalization and Exchange Rates are the two components which are discussed at length
amongst all economic experts and analysts since long time back. There have been many scholars
who dedicated their entire research to explain the inter-relation between the two and how the interplay between these phenomena affects any financial structure of the nation.
It has been noticed in the last decades that the global economy has been much influenced by a
considerable increase in trans-border asset trade. A combination of trade liberalization, capital flow,
decreasing transaction expenses and a positive development in financial sophistication has worked
out well for the investors, who gradually were encouraged by the trend to enhance the allocation of
foreign assets in their kitty. With an increase in the international financial trade, the nations that
adopted expanded economic outlook experienced that their external assets and liability holdings
grew more than Gross Domestic Product (GDP).
These and many such insights prompted analysts to delve deep into the topic and explore a link
between Financial Globalization and Exchange Rates. However, before going directly into that
aspect, let us first get acquainted with these two elements separately in brief.

About Financial Globalization

In definite terms, financial globalization signifies relation between domestic economic system of a
particular nation and foreign bodies along with financial markets. A massive improvement in global
economy and technology, specifically in the fields of transport and communications, led to the
beginning of financial globalization. IMF and World Bank, in this regard, are the two international
finance bodies that support world trade to continue the trend of financial globalization.
About Exchange Rates

Exchange rates between two currencies depict the value of one currency against the other, for
example what will be the value of international currency when measured in terms of the currency
of ones own nation.
Relation between Financial Globalization and Exchange Rates

Financial globalization and exchange rates play an important role in improving the economic outlook
of any nation, which can be showed in the following manner:

If the net foreign assets of any nation are in the positive, the actual exchange rates of that
nation will show appreciation. However, under huge external liabilities, the nations exchange
rates are likely to depreciate more.

Financial consolidation helps nations to manage extensive creditor and debtor portfolios.
Countries with increasing external assets or liabilities may manage trade surpluses or deficits
and thereby obtain appreciation or depreciation in exchange rates.

Globalization of finances is useful in solving transfer problems. It removed confinements


from current and capital account and brought forth equity financing that minimized transfer
effect imports, generally induced by debt financing.

It cannot be denied that financial globalization and exchange rates have enhanced the economic
system in the international arena to a considerable extent and have made accessibility process easy
and smooth.

Global Marketing in the 21st Century:


Global Marketing in the 21 st Century The world is shrinking rapidly with the advent of faster
communication, transportation, and financial flows. International trade is booming and accounts for
25% of U.S. GDP. Global competition is intensifying. Higher risks with globalization.

Major International Marketing Decisions:


Major International Marketing Decisions
Looking at the Global Marketing Environment:
Looking at the Global Marketing Environment The International Trade System: Restrictionstariffs,
quotas, embargos, exchange controls, and non-tariff trade barriers. The World Trade Organization
and GATT: Helps Tradereduces tariffs and other international trade barriers. Regional Free Trade
Zones: Groups of nations organized to work toward common goals in the regulation of international
trade.
Industrial Structure:
Industrial Structure Shapes a countrys product and service needs, income levels, and employment
levels. Subsistence Economies Raw Material Exporting Economies Industrializing Economies
Industrial Economies Income Distribution
Political-Legal Environment:
Political-Legal Environment Attitudes Toward International Buying Government Bureaucracy
Political Stability Monetary Regulations
Cultural Environment:
Cultural Environment Sellers must examine the ways consumers in different countries think about
and use products before planning a marketing program. Business norms vary from country to
country. Companies that understand cultural nuances can use them to advantage when positioning
products internationally.
Cultural Differences:
Cultural Differences When Nike learned that this stylized Air logo resembled Allah in Arabic
script, it apologized and pulled the shoes from distribution.
Deciding Whether to Go Global:
Deciding Whether to Go Global Reasons to consider going global: Foreign attacks on domestic
markets Foreign markets with higher profit opportunities Stagnant or shrinking domestic markets
Need larger customer base to achieve economies of scale Reduce dependency on single market
Follow customers who are expanding
Deciding Which Markets to Enter:
Deciding Which Markets to Enter Before going abroad, the company should try to define its
international marketing objectives and policies. What Volume of Foreign Sales is Desired? How
Many Countries to Market In? What Types of Countries to Enter? Choose Possible Countries and
Rank Based on Market Size, Market Growth, Cost of Doing Business, Competitive Advantage, and
Risk Level
Colgate Goes to China:

Colgate Goes to China Using aggressive promotional and educational programs, Colgate has
expanded its market share from 7% to 35% in less than a decade.
Market Entry Strategies :
Market Entry Strategies
Market Entry Strategies:
Market Entry Strategies Exporting: Indirect: working through independent international marketing
intermediaries. Direct: company handles its own exports.
Market Entry Strategies:
Market Entry Strategies Joint Venturing: Joining with foreign companies to produce or market
products or services. Approaches: Licensing Contract manufacturing Management contracting
Joint ownership
Joint Ownership:
Joint Ownership KFC entered Japan through a joint ownership venture with Japanese
conglomerate Mitsubishi.
Market Entry Strategies:
Market Entry Strategies Direct Investment: The development of foreign-based assembly or
manufacturing facilities. This approach has both advantages and disadvantages.
Deciding on the Global Marketing Program:
Deciding on the Global Marketing Program Standardized Marketing Mix: Selling largely the same
products and using the same marketing approaches worldwide. Adapted Marketing Mix: Producer
adjusts the marketing mix elements to each target market, bearing more costs but hoping for a
larger market share and return.
Marketing Mix Adaptation:
Marketing Mix Adaptation In India, McDonalds serves chicken, fish, and vegetable burgers, and
the Maharaja Mactwo all-mutton patties, special sauce, lettuce, cheese, pickles, onions, on a
sesame-seed bun.
Five Global Product and Promotion Strategies:
Five Global Product and Promotion Strategies
Global Product Strategies:
Global Product Strategies Straight Product Extension: Marketing a product in a foreign market
without any change. Product Adaptation: Adapting a product to meet local conditions or wants in
foreign markets. Product Invention: Creating new products or services for foreign markets.
Global Promotion Strategies:

Global Promotion Strategies Can use a standardized theme globally, but may have to make
adjustments for language or cultural differences. Communication Adaptation: Fully adapting an
advertising message for local markets. Changes may have to be made due to media availability.
Global Pricing Strategies:
Global Pricing Strategies Companies face many problems in setting their international prices.
Possible approaches include: Charge a uniform price all around the world. Charge what consumers
in each country will pay. Use a standard markup of costs everywhere. International prices tend to
be higher than domestic prices because of price escalation . Companies may become guilty of
dumping a foreign subsidiary charges less than its costs or less than it charges in its home
market.
International Pricing:
International Pricing Twelve European Union countries have adopted the euro as a common
currency, creating pricing transparency and forcing companies to harmonize their prices
throughout Europe.
Whole-Channel Concept for International Marketing:
Whole-Channel Concept for International Marketing
Deciding on the Global Marketing Organization:
Deciding on the Global Marketing Organization Organize an export department Create international
divisions Geographical organizations World product groups International subsidiaries Become a
global organization

You might also like