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PRAHLADRAI DALMIA

LIONS COLLEGE OF
COMMERCE AND
ECONOMICS

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not have been Possible without the
guidance, aid & encouragement of
Many people.
We would like to express our sincere
Gratitude to them.
We would like to thank our project
Guide Prof.
MEHA TODI without whose
encouragement & Guidance the
completion of this project would have
been Impossible.
Last but not the least we would like to
thank our family Members & friends
who helped us in this project.
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What do u mean by Globalization ?
• Globalization in its literal sense is the process of
transformation of local or regional phenomena into
global ones. It can be described as a process by which
the people of the world are unified into a single society
and function together. This process is a combination of
economic, technological, socio-cultural and political
forces. Globalization is 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 the
spread of technology.

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Definition
• Tom G. Palmer of the Cato Institute defines globalization
as "the diminution or elimination of state-enforced
restrictions on exchanges across borders and the
increasingly integrated and complex global system of
production and exchange that has emerged as a result."
• Herman E. Daly argues that sometimes the terms
internationalization and globalization are used
interchangeably but there is a slight formal difference. The
term "internationalization" refers to the importance of
international trade, relations, treaties etc. International
means between or among nations.

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HISTORY
 The term "globalization" has been used by
economists since the 1980s although it was used in
social sciences in the 1960s
 Its concepts did not become popular until the latter
half of the 1980s and 1990s.
 Globalization is viewed as a centuries long process,
tracking the expansion of human population and the
growth of civilization, that has accelerated dramatically
in the past 50 years.

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 The Islamic Golden Age is also an example, when Muslim
traders and explorers established an early global economy
across the Old World resulting in a globalization of crops,
trade, knowledge and technology; and later during the Mongol
Empire, when there was greater integration along the Silk Road.
 Portugal's exploration and trade with most of the coast of
Africa, Eastern South America, and Southern and Eastern Asia,
was the first major trade based form of globalization.
 In the 17th century, globalization became a business
phenomenon when the British East India Company (founded in
1600), which is often described as the first multinational
corporation, was established, as well as the Dutch East India
Company (founded in 1602) and the Portuguese East India
Company (founded in 1628).

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 Because of the high risks involved with international
trade, the British East India Company became the first
company in the world to share risk and enable joint
ownership of companies through the issuance of shares
of stock
 Globalization was achieved by the British Empire(the
largest empire in history)
 The 19th century is sometimes called "The First Era
of Globalization."
 The "First Era of Globalization" began to break down
at the beginning of the 20th century with the first World
War.

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Evolution
• Globalization, since World War II, is largely the result of planning by
politicians to breakdown borders hampering trade to increase prosperity and
interdependence thereby decreasing the chance of future war. Their work led
to the Bretton Woods Conference, an agreement by the world's leading
politicians to lay down the framework for international commerce and
finance, and the founding of several international institutions intended to
oversee the processes of globalization.
• These institutions include the International Bank for Reconstruction and
Development (the World Bank), and the International Monetary Fund.
Globalization has been facilitated by advances in technology which have
reduced the costs of trade, and trade negotiation rounds, originally under the
auspices of the General Agreements on Tariffs & Trade (GATT), which
led to a series of agreements to remove restrictions on free trade.
• Since World War II, barriers to international trade have been considerably
lowered through international agreements - GATT. Particular initiatives
carried out as a result of GATT and the World Trade Organisation
(WTO), for which GATT is the foundation, have included:

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• Promotion of free trade:
– Reduction or elimination of tariffs; creation of free trade zones with
small or no tariffs
– Reduced transportation costs, especially resulting from development of
containerizing for ocean shipping.
– Reduction or elimination of capital controls
– Reduction, elimination, or harmonization of subsidies for local
businesses
– Creation of subsidies for global corporations
– Harmonization of intellectual property laws across the majority of
states, with more restrictions.
– Supranational recognition of intellectual property restrictions (e.g.
patents granted by China would be recognized in the United States)

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• Global conflicts, such as the 9/11 terrorists attacks on the United
States of America, is interrelated with globalization because it was
primary source of the "war on terror", which had started the steady
increase of the prices of oil and gas, due to the fact that most OPEC
member countries were in the Arabian Peninsula.

• World exports rose from 8.5% of gross world product in 1970 to
16.1% of gross world product in 2001.

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Advantages
 Increased free trade between nations .
 Increased liquidity of capital allowing investors in developed nations to invest in
developing nations
 Corporations have greater flexibility to operate across borders
 Global mass media ties the world together
 Increased flow of communications allows vital information to be shared between
individuals and corporations around the world
 Greater ease and speed of transportation for goods and people
 Reduction of cultural barriers increases the global village effect
 Spread of democratic ideals to developed nations
 Greater interdependence of nation-states
 Reduction of likelihood of war between developed nations
 Increases in environmental protection in developed nations

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Disadvantages
 Increased flow of skilled and non-skilled jobs from developed to developing nations
as corporations seek out the cheapest labor
 Increased likelihood of economic disruptions in one nation effecting all nations.
 Corporate influence of nation-states far exceeds that of civil society organizations
and average individuals
 Threat that control of world media by a handful of corporations will limit cultural
expression
 Greater chance of reactions for globalization being violent in an attempt to preserve
cultural heritage
 Greater risk of diseases being transported unintentionally between nations
 Spread of a materialistic lifestyle and attitude that sees consumption as the path to
prosperity
 International bodies like the World Trade Organization infringe on national and
individual sovereignty
 Increase in the chances of civil war within developing countries and open war
between developing countries as they vie for resources
 Decreases in environmental integrity as polluting corporations take advantage of
weak regulatory rules in developing countries

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Effects of globalization
• 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.
• Financial - emergence of worldwide financial markets and better access to
external financing for borrowers. Simultaneous though not necessarily
purely globalist is the emergence of under or un-regulated foreign exchange
and speculative markets.
• Economic - realization of a global common market, based on the freedom of
exchange of goods and capital.
• Informational - increase in information flows between geographically
remote locations. Arguably this is a technological change with the advent of
fiber optic communications, satellites, and increased availability of
telephone and Internet.
• Language - the most popular language is English.
 About 75% of the world's mail, telexes, and cables are in English.
 Approximately 60% of the world's radio programs are in English.
 About 90% of all Internet traffic uses English.

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• Competition - Survival in the new global business market calls for improved productivity and
increased competition. Due to the market becoming worldwide, companies in various
industries have to upgrade their products and use technology skillfully in order to face
increased competition.
• Cultural - growth of cross-cultural contacts; advent of new categories of consciousness and
identities which embodies cultural diffusion, 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 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.
• Legal/Ethical
– The creation of the international criminal court and international justice movements.
– Crime importation and raising awareness of global crime-fighting efforts and
cooperation.

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• Social (International cultural exchange) - increased circulation by people of all nations with
fewer restrictions.
– Spreading of multiculturalism, and better individual access to cultural diversity (e.g.
through the export of Hollywood and Bollywood movies). Some consider such
"imported" culture a danger, since it may supplant the local culture, causing reduction in
diversity or even assimilation. Others consider multiculturalism to promote peace and
understanding between peoples.
– Greater international travel and tourism
– Greater immigration, including illegal immigration
– Spread of local consumer products (e.g. food) to other countries (often adapted to their
culture).
– Worldwide fads and pop culture such as Pokémon, Sudoku, Numa Numa, Origami, Idol
series, YouTube, Orkut, Facebook, and MySpace. Accessible to those who have Internet
or Television, leaving out a substantial segment of the Earth's population.
– Worldwide sporting events such as FIFA World Cup and the Olympic Games.
• Incorporation of multinational corporations in to new media. As the sponsors of the All-
Blacks rugby team, Adidas had created a parallel website with a downloadable interactive
rugby game for its fans to play and compete.

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Business

• Globalization has had extensive impact on the world of business. In a business
environment marked by globalization, the world seems to shrink, and other
businesses halfway around the world can exert as great an impact on a business as
one right down the street. Internet access and e-commerce have brought small-scale
coops in Third World nations into the same arena as thriving businesses in the
industrialized world, and visions of low-income workers handweaving rugs on
primitive looms that compete with rug dealers in major cities are not totally far-
fetched.

• Globalization has affected workforce demographics, as well. Today's workforces
are characterized by greater diversity in terms of age, gender, ethnic and racial
background, and a variety of other demographic factors. In fact, management of
diversity has become one of the primary issues of 21st-century business.

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Culture
• One powerful source has blown down cultural boundaries around the entire world.
What is this influential tool? It is the Internet and its endless margin of discovery.
With the Internet people can easily access someone half way across the world. They
could converse with someone living a completely different lifestyle yet still have
something in common, the Internet.
• The Internet in essence makes the world a smaller place.
• McDonalds was once an American favorite with its cheery mascot, Ronald, red and
yellow theme, and greasy fast food. Now it is a global enterprise with 31,000
locations worldwide with locations in Kuwait, Egypt, and Malta. This restaurant is
just one example of food going big on the global scale.
• Meditation has been a sacred practice for centuries in Indian culture. It calms the
body and helps one connect to their inner being while shying away from their
conditioned self. Before globalization Americans did not meditate or crunch their
bodies into knots on a yoga mat. After globalization this is a common practice, it is
even considered a chic way to keep your body in shape.
• Another common practice brought about by globalization would be Chinese symbol
tattoos.

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Multinational Corporation
• Enterprise operating in several countries but managed from one
(home) country. Generally, any firm or group that derives a
quarter of its revenue from operations outside of its home country
is considered a MNC, and may fall into one of the four categories:
(1) multinational, decentralized firm with strong home country
presence,
(2) Global, centralized firm that acquires cost advantage through
centralized production wherever cheaper resources are
available,
(3) international, firm that builds on the parent firm's tecnology or
R&D, or
(4) transnational, firm that combines the previous three
approaches. According to UN data, some 35,000 firms have
direct investment in foreign countries, and the largest 100 of
them control about 40 percent of world trade.

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Three Stages of Evolution
1. Export stage
initial inquiries ⇒ firms rely on export agents
expansion of export sales
further expansion ⇒ foreign sales branch or assembly operations
(to save transport cost)

2. Foreign Production Stage
There is a limit to foreign sales (tariffs, NTBs). Wages and land rents might
be lower in the foreign countries.

DFI versus Licensing
Once the firm chooses foreign production as a method of delivering goods
to foreign markets, it must decide whether to establish a foreign
production subsidiary or license the technology to a foreign firm.

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Licensing
Licensing is usually first experience (because it is easy)
e.g.: Kentucky Fried Chicken in the U.K.
it does not require any capital expenditure
it is not risky
payment = a fixed % of sales
Problem: the mother firm cannot exercise any managerial control over the
licensee (it is independent)
The licensee may transfer industrial secrets to another independent firm, thereby
creating a rival.

Direct Investment
It requires the decision of top management because it is a critical step.
it is risky (lack of information) (US firms tend to establish subsidiaries in Canada
first. Singer Manufacturing Company established its foreign plants in Scotland
and Australia in the 1850s)
plants are established in several countries
licensing is switched from independent producers to its subsidiaries.
export continues

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3. Multinational Stage
The company becomes a multinational enterprise
when it begins to plan, organize and coordinate
production, marketing, R&D, financing, and staffing.
For each of these operations, the firm must find the
best location.

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Changing Attitude of MNC’S toward India
• Multinational corporations were previously criticized on the ground that they recklessly use
natural resources, interfere in economic and political systems and harm national interests.
• But in recent years we have observed changing in the attitude of MNC’S toward India ;
• In the past they used to bring Managerial personnel's from their country of origin, but now
they employ local people. And thus more and more Indians are getting employed in these
corporations.
• In the past they use to bring the same product that they are using. But now in order to attract
more and more customers they modify their products and services according to the need of
customers in India. In short MNCs have added Indianness in their product. For ex:- The new
launch of McDonald “Chatpatta McAlloo Tikki”
• These corporations are ready to accept our terms and conditions to enter in India market
which is very large and widespread.
• Previously they tend to develop monopolies but now they are ready to face healthy
competition and provide better services to survive in market. And thus customers are
benefited with good quality product and also at reasonable price.
• In past times they have supplied outdated technology, but now due to Globalization we enjoy
advanced technology at par with others.

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Advantages
 The foray of multinationals into a country requires labour thereby ensuring
new job opportunities.( MNCs provide job oppurtunityAbout 2000 Indians
leave India annually to take up middle and senior management jobs in
foreign country’s )
 They will bring in advanced technology and management style.
 The pressure of competition forces companies to undertake product
innovation as a result of which new and better products flock the market.
 Better logistics management and financial strength enjoyed by
multinationals sets new standards in the prevailing markets.
 Expands and creates new markets.
 Improves the income to the exchequer by way of direct and indirect taxes.
 Provides economic support for developing nations.
 Development of country’s economy.
 Raise in standard of living.
 MNCs invest their funds in poor countries and operate as per local laws.

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Disadvantages
 Share of profit remitted to the parent company reduces the amount of
money created.
 A strict money-making oriented approach of multinationals may prove to be
non beneficial.
 High and regulated transfer prices may increase the costs of operations.
 The enormous financial strength and influence enjoyed by multinationals
may be selfishly utilized through political pressure.
 Multinationals may abuse resources such as labour and natural resources
to gain competitive advantage in international markets.
 Employees in developed nations are always under the threat of low job
securities or loss of jobs.

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Beacon Kone J.K. Helene Curtis
Beacon Neyrpic J.K. Satoh Agricultural
Beacon Rotork Controls Khatau Junker
Beacon Tileman Kinetic Honda
Beacon Weir Kirloskar Rateau
Birla Yamaha Kirloskar Warner Swassey
Birla 3M Kirloskar Cummins
DCM Toyota Kothari General Foods
Essar Brown Root L & T Gould
Essar Forasol Lohia Starlinger
Fuller KCP Mafatlal Zinser Engg
EIMCO KCP Mahindra British Telecom
Escorts JCB Mahindra Owen
Great Atwood Mahindra Ugine Steel
Greaves Dronsfield Modi Champion
Greaves Foseco Modi Olivetti
Greaves Midwest Engg Modi Telematics
Crompton Greaves Modi Xerox
David Brown Greaves Murugappa Morganite Ceramic
Drayton Greaves Nagarjuna Signode
Hero Honda Nava Bharat Parker Drilling
Hindustan Textronix Inst. Nicco Hambro Financial

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Furmanite Nicco Tata Unisys
Nicco Helifusion Tata Yodogawa
Sundaram Abex
Shriram Honda Power
Sundaram Clayton
Equipt TVS Suzuki
SRF Nippondenso TVS Whirlpool
Tata Bradbury Wilkinson Lucas TVS
Tata Honeywell Harita Grammar
Tata Klockner Indl Plants United Van Der Horst
Tata Korf Engg Services
Tata Timken
Tata Robins Fraser

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Illustrative List of Companies in which
Foreign Shareholders were Allowed to
Appoint Managerial Personnel/Exercise Veto
Powers
by the Government of India

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Abbott Laboratories India German Remedies Ltd
Astra-IDL Ltd Glaxo India Ltd
Automotive Axles Ltd Godfrey Phillips India Ltd
Axles India Ltd Gramophone Co. of India Ltd
Bihar Sponge Iron Ltd Hinditron Tektronix Instruments
Birla Yamaha Ltd Hindustan Ciba-Geigy Ltd
Boehringer-Knoll Ltd Hindustan Powerplus Ltd
Burroughs Wellcome & Co. (I) Hoechst India Ltd
Cadbury India Limited Incon (I) Ltd
Carrier Aircon Ltd IND-Suzuki Motorcycles Ltd
Cemindia Co. Ltd Indian Duplicator Co Ltd
Colgate Palmolive (I) Ltd India Nippon Electrical
Corn Products Co. (I) India Photographic Co Ltd
DCM Toyota Indian Sewing Machine Co Ltd
Digital Equipment (I) Ltd Indian Shaving Products Ltd
E Merck (I) Ltd Indian Xerographic Systems
ESAB India Ltd Indo-Asahi Glass Co Ltd
Eskayef Ltd Indo matsushita Appliances
Fulford (I) Ltd Indrol Lubricants & Specialities Ltd
Fuller KCP Ltd Infar India Ltd
Gabriel India Ltd International Computers Indian Mfrs Ltd

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Invel Transmission Ltd Pond's (I) Ltd
Kalyani Brakes Ltd Revathi-CP Equipment Ltd
Kanthal Bimetals India Ltd SRF Nippondenso Ltd
Kirloskar Warner Swassey Sesa Goa Ltd
Kothari General Food Corpn Steelage Industries Ltd
Lipton India Ltd Stormac India Ltd
May & Baker India Ltd Sulzer India Ltd
Miles India Ltd TVS Whirlpool
Modi Champion Ltd Tata Burroughs Ltd
Modi Olivetti Tasta Honeywell Ltd
Modi Xerox Limited Telemechanique & Controls (I)
Monotype India Ltd Thomas Cook India
Moran Tea Co India Ltd Tri-Sure India Ltd
Nagarjuna Signode Ltd Uni-Abex Products Ltd
National Peroxide Ltd Uptron Colour Picture Tubes
Nicco Batteries Ltd Utility Engineers (I) Ltd
Nicholas Laboratories India Vespa Car Co. Ltd
PCS Data General India Ltd WG Forge & Allied Industries
Padmatex Engineering Ltd Wendt (I) Ltd
Peico Electronics & Electricals Ltd
Perfect Circle Victor Ltd
Pfizer Ltd

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Illustrative List of MNCs in Indian
Economy
Operating in Consumer Goods
Industries

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Name of the MNC Consumer Goods
Produced/Marketed
Bata India Shoes, Socks, Readymade Garments,

Leather
Bags.
Berger Paints India Ltd Paints
Brooke Bond India Ltd Tea, Coffee, Masalas, Leather
Colgate Palmolive India Tooth Paste, Tooth Powder, Tooth and
Shaving Brushes,Shaving
Cream,Soaps, Cold Creams
Crompton Greaves Domestic Electric Fans, Electric Lamps

Goodlass Nerolac Paints Paints
Hero Honda Motor Cycles

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Hindustan Lever Soaps, Tooth Paste, Margarine,Shampoos,
Detergents,Cleaning Powder, Carpets,
Readymade Garments, Marine Products,
Leather Goods, Carpets

ITC Ltd Cigarettes, Hotels, Vegetable Oils, Carpets,
Marine Products

Johnson & Johnson Ear Buds, Baby soaps, Baby Talcum
Powders, Baby Lotions, Sanitary Napkins

Kelvinator India Domestic Refrigerators
Nestle India Coffee, Tea, Baby Foods, Dairy Products,
Noodles, Ketchup
Pepsi Foods Potato Chips, Soft Drinks
Pond's India Toilet Soaps, Talcum Powder, Cold Cream,
LeatherGoods, Marine Products

Procter & Gamble Balm, Chicklets, Digestive Tablets

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Some of Indian
MNC’s

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Baba Kalyani
Bharat Forge
The value of his shareholding in the company today is much
higher than the total market value of the whole company in
1999

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Sunil Mittal ,

Bharti Tele-Ventures
One equals three: Bharti’s market cap is almost one and a half
timesthe combined market cap of the three other listed telecom
companies

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N. Prasad
Matrix Laboratories
With 245 per cent yearly growth in market cap over the past
five years, this new entrant has been the fastest riser

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TPG Nambiar
BPL
Today, its market value is far less than even
the profits made by some of its peers

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Rajan Nanda
Escorts
Within a generation and a half of its founding,
the Nandas’ flagship has fallen off the top 100
list
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Aurobindo Pharma Mahindra and Mahindra

AV Birla group Maruti

Bharat Earth Mover Limited (BEML) NIIT

Bharat Heavy Electricals Limited Reliance
(BHEL)
Indian Hotels Satyam computers

Dr Reddy’s lab Sundram Fasteners

Tata Motors Tata consultancy services (TCS)

Tata Steels

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“Time is a great teacher, but
unfortunately it kills all its pupils….”
- Louis Hector Berlioz

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REFFERENCES
www.wikipedia.com

www.google.com

Technology exports (vol. 8) By
Ashwani Gupta

Indian Economic Outlook
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