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Unit II Meaning - Features Stages of Globalisation Methods of Globalisation

The program Globalization and World Economy deals with

economic questions pertaining to foreign policy and international relations.

The movement towards the expansion of economic and social

ties between countries through the spread of corporate institutions and the capitalist philosophy that leads to the shrinking of the world in economic terms

1.Joseph and John Donahue: Globalism is a state of the world involving networks of interdependence at multicontinental distances. 2. World Bank: Globalization is the growing integration of economies and societies around the world. 3.The term globalization describes the increased mobility of goods, services, labor, technology and capital throughout the world.

Key features of Globalization

Rapid expansion of Increased freedom and

international trade

Internationalization of products and services by large firms Growing importance of MNCs Increase in capital transfers across national borders Globalization of technology

capacity of firms to undertake economic transactions across nations

Fusing of national markets Economic integration Global economic

Shifts in production from

country to country

Drivers of Globalization
In general, globalization represents the increasing integration of the world economy, based on five interrelated drivers of change: International trade (lower trade barriers and more competition) Financial flows (foreign direct investment, technology transfers/licensing, portfolio investment, and debt) Communications (traditional media and the Internet) Technological advances in transportation, electronics, bioengineering and related fields Population mobility, especially of labor
Each of these drivers of change has accelerated in recent years and each reinforces the other

Stages of Globalization
Globalization Process

Domestic Company Exports thru dealers or distributors of the home country.

Domestic Company countries on its own. Exports to foreign

In the third stage, the domestic company becomes an International company by establishing production and marketing operations in various key foreign countries.

Stages of Globalization

In the fourth stage, the company replicates a foreign company in the foreign country by having all the facilities including R&D and HR etc.,
In the fifth stage the Company becomes a true foreign company by serving the customers just like the host company serves.

Essential Conditions for Globalization

Business Freedom

Government Support Resources Competitiveness Orientation

Foreign Market Entry Strategies/Modes of Entering International Business

Exporting - Indirect Exports, Direct Exports, Intracorporate


Licensing & Franchising Contract Manufacturing Mergers & Acquisitions Joint Ventures Third Country Location Turnkey Project Strategic Alliance

Effects Of Globalization
ADVANTAGES Free Flow of Capital Free Flow of Technology Increase in Industrialization Spread up of production facilities throughout the globe Balanced Development of World Economies Increase in Production and Consumption Lower Prices with high quality

Effects Of Globalization

Cultural Exchange and demand for a variety of products. Increase in Employment and Income Higher Standards of Living Balanced Human Development
Increase in welfare and prosperity.

Effects Of Globalization

Globalization kills domestic business. Exploits Human Resources. Leads to Unemployment and Under employment Decline in demand for domestic products. Widening gap between rich and poor

Effects Of Globalization

Transfer of Natural Resources Leads to commercial and political colonialism National sovereignty at stake.