 Globalization

refers to rapid increase in the share of economic activity taking place across national borders.  It goes beyond the international trade includes the way in which goods/ services are produced /created, delivered &sold & movement of capital.

Definition :

A typical - but restrictive - definition can be taken from the International Monetary Fund which stresses the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology.


 .KEY PLAYERS They are Multinational firms which carry out business across the national borders. technical achieving development aims through the provision of loans.  The World Trade Organization (WTO) THROUGH WHICH INTERNATIONAL TRADE AGREEMENTS ARE NEGOTIATED& ENFORCED The World Bank & International Monetary Fund (IMF) are means to assist Govt .

STAGES IN GLOBALISATION   Domestic company links with dealer & distributor. At this stage the managers are expected to perform the tasks which they were doing in domestic markets to replicate them in foreign markets. Company does the activities on its own. Company starts full-fledged operations including business systems and R&D. . Company begins to carryout its own manufacturing . marketing & sales in the foreign markets.

Hence the liberalization is the 1st step towards facilitating globalization.Conditions for globalization  “Business Freedom”-No unnecessary Government restrictions like restrictions on sourcing of funds and other factors from abroad. “Facilitators”-Infrastructure facilitation available at home country an help entrepreneurs go globally. “Government support” –Government support available in the form of policy & procedure reform encourage globalization   .

brand image.  “Competitors”. managerial expertise etc. They include finance .This is an important factor which company’s success in global market bank on.“Resources”-Resources is an important factor which decides the ability of affirm to globalize.  . product differentiation. company’s image. market strengths etc are few to name. The factors like low costs& price. product quality. technological After sales service.

 They may be attracted to certain countries because of subsidies those countries provide.  Reasons For Globalization .  They may want to obtain access to low cost factors of production such as labour.  They may be seeking new markets for their products.  Domestic markets may no longer be able to absorb production at minimum efficient scale.Firm operate internationally for a number of reasons: They may be seeking to secure better sources of raw materials & energy.

Domestic markets become saturated .  They may be seeking opportunities for economies of scope & for learning.  Contd… .They may be motivated by life style factors.As they mature . firms look abroad for new opportunities.

to assess whether it is worthwhile or not.Entering global markets:  There are a number of steps that need to be taken before you decide to enter international markets.  . A PEST/STEP analysis needs to be conducted on the market you enter. Analyze the international marketing environment.

Is it a democracy. A PEST/STEP analysis needs to be conducted on the market you enter. communist.“Entering global markets” Analyze the international marketing environment. Will the seller be paid in a currency that they value or will payments only be accepted in the host nation currency? . Political factors Consider:  The political stability of the nation. to assess whether it is worthwhile or not. or dictatorial regime?  Monetary regulations.

 Are there import tariffs imposed.Economical Factors Consider:  Consumer wealth and expenditure within the country.  National interests and inflation rate.  Are quotas imposed on your product.  Does the government offer subsidies to national players that make it difficult for you to compete? .

Will language be a barrier to communication for you? Does your host nation speak your national language? What is the meaning of your brand name in your host country’s language?  Customs: what customs do you have to be aware of within the country? This is important.Social Factors Consider:  Language. You need to make sure you do not offend while communicating your message.  Social factors: What are the role of women and family within society?  Religion: How does religion affect behaviour?  Values: what are the values and attitudes of individuals within the market? .

 Do all homes have access to energy (electricity)  Is there an Internet infrastructure.Technological Factors Consider:  The technological infrastructure of the market. Does this infrastructure support broadband or dial up?  Will your systems easily integrate with your host country’s? .

Threats of terrorism and armed conflict 5..Global Business Trends 1. Rise of new producers and consumers 6. Growth of WTO and regional trade groups 3. Management of global environmental resources . Global acceptance of free market system 4. Impact of the Internet on global communication 2.

SWOT Analysis of Globalisation Strengths   Weaknesses    economic growth reduction of poverty Bad communication Diseconomies to scale Increasing use of blimps as transport [*]Uneven distribution of wellfare [*]The role of the less economically developed countries is to provide cheap labour and inexpensive raw materials .

Opportunities  Threats         Emerging markets and expansion abroad Innovation Online Product and services expansion Takeovers Comperative advantage       Competition Cheaper technology Economic slowdown External changes (government. products. etc) Exchange rate fluctuations Lower cost competitors or imports Maturing categories. or services . taxes. politics.

 The organization produces their product in their home market and then sells them to customers overseas. 1. . 2.Trading overseas  There are a number ways an organization can start to sell their products in international markets. Indirect export  The organizations sell their product to a third party who then sells it on within the foreign market. Direct export.

Franchising  Franchising is another form of licensing. Licensing  Another less risky market entry method is licensing. Here the organization puts together a package of the ‘successful’ ingredients that made them a success in their home market and then franchise this package to oversea investors. . The Franchise holder may help out by providing training and marketing the services or product. use the brand name etc in return that they will receive a royalty payment. Here the Licensor will grant an organization in the foreign market a license to produce the product. 4.3. McDonalds is a popular example of a Franchising option for expanding in international markets.

Clearly contracting out saves the organization exporting to the foreign market. .5. 6.Manufacturing abroad  The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country.Contracting  Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organization to produce the product on their behalf. The government of the host country may give the organization some form of tax advantage because they wish to attract inward investment to help create employment for their economy.

Joint Venture  To share the risk of market entry into a foreign market.7. of course profits will have to be shared out also . The two companies may share knowledge and expertise to assist them in the development of company. two organizations may come together to form a company to operate in the host country.

Conclusion .

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