GLOBALIZATION

MEANING: For developing countries, globalization means integration with the world
economy. In simple terms globalization refers to the process of integration of the world in to one
huge market. Globalization is the elimination of state enforced restrictions on exchanges across
borders and increasing integrated and complex global system of production and exchange.
Globalization is both an active process of corporate expansion across borders and a structure of
cross border facilities and economic linkages that has been steadily growing and changing.
According to Charles Hill – Globalization is the shift towards a more integrated and
interdependent world economy. Globalization has two main components the globalization of
markets and the globalization of production.
NATURE OF GLOBALIZATION
1. Liberalization: It stands for the freedom of the entrepreneurs to establish any industry or
trade or business venture, within their own countries or abroad.
2. Free trade: It stands for free flow of trade relations among all the nations. Each state grants
MFN (most favored nation) status to other states and keeps its business and trade away from
excessive and hard regulatory and protective regimes.
3. Globalization of Economic Activity: Economic activities are be governed both by the
domestic market and also the world market. It stands for the process of integrating the
domestic economy with world economies.
4. Liberalization of Import-Export System: It stands for liberating the import- export activity
and securing a free flow of goods and services across borders.
5. Privatisation: Keeping the state away from ownership of means of production and
distribution and the free flow of industrial, trade and economic activity across borders.
6. Increased Collaborations: Encouraging the collaborations among the entrepreneurs with a
view to secure rapid modernisation, development and technological advancement.
7. Economic Reforms: Encouraging fiscal and financial reforms with a view to give strength
to free world trade, free enterprise, and market forces.
OBSTACLE TO GLOBALIZATION
1. High Cost: High cost of many vital input and other factors like raw material and
intermediaries like power, finance, and infrastructural facilities etc. tend to reduce the
international competitiveness of the Indian Business.
2. Government Policies and Procedure: Government Policies and Procedure in India are
among the most complex, confusing and bulky in the world. After liberalization they do not
present a helpful situation.
3. Supply Problem: Due to various reasons like low production capacity, shortages of raw
materials and infrastructures like power and seaport facilities, Indian companies in many
instances are not able to accept large orders or keep up delivery schedules.
4. Poor Quality Image: Due to various reasons the quality of many Indian products is poor.
Even when the quality is good, the poor quality image India has become an obstacle to
globalization in India.
5. Lack of Experience: The general lack of experience in managing international business is
another important problem of Globalization.
6. Poor Infrastructure: Infrastructure in India is generally inadequate & Insufficient and very
costly. This is a serious problem affecting the growth as well as competitiveness.
7. Small Size: Because of the small size and the low level of resources, in many cases Indian
firms are not able to compete with the giants of other countries. Even the largest of Indian
firms are small compared to multinational giants.
BENEFITS OF GLOBALIZATION
1. Boost the Economy: Globalization has boosted the flow of foreign investment. In India
through certain industries like petroleum, BPO, manufacturing etc. industries. The economy
of India has increased rapidly due to this international investment.
2. Provides Employment: Various international firms have setup industries in India mainly in
the sectors of IT, manufacturing etc. It helps the Indian economy’s providing employment
opportunities to the people. It results a large amount of unemployment has been reduced.
3. Availability of Goods and Services: The availability of goods & services at low cost to the
worldwide market has been possible with the help of globalization. This has increased the
level of consumer demand & enhanced the standard living of people.
4. Availability of Advanced Technology: Globalization has not only opened the boundaries
for India but also provides new and advanced technologies. This helps the economy to
become technologically competitive in the world market.
5. Free flow of Capital: it encourages free flow of capital among different countries. It also
encourages international firms to obtain capital at low cost. In globalization motivates
developed countries to invest in developing countries to increase their foreign investments.
6. Cultural Exchange: Managing an international workforce includes teams working across
different locations, people traveling and moving countries for work, having a range of
different work ethics and practices and even religious differences. All of these can be
challenges, but overwhelmingly are a positive thing in the workplace as it brings together
different ideas and insights and perspectives.
7. Larger markets: Globalization opens up new opportunities for businesses to sell their
goods and services to a much larger markets, which means more potential sales and greater
profits. Depending on the organization it can open up other opportunities in terms of
distribution, logistics, marketing and management of these goods and services.
LIMITATIONS OF GLOBALIZATION
1. Reduced Job & Incomes: With the advance of technologies and new production facilities
manpower requirement in industries like cement, manufacturing etc have considerably
reduced. Hence due to globalization many people lost their jobs in developing countries.
2. Cut throat competition: Globalization has enabled severe competition due to which
domestic markets are incurring huge losses. Now people are willing to spend their money
for quality products at low cost. The market share of local manufactures in reducing rapidly.
3. Consumerism: Globalization produces consumerism. People being attracted by attractive
goods and advertisements want to buy these goods. They would not to hesitate to earn
money for this by unfair means. This result in increase in corruption and other social evils.
4. Inequality: Globalization is one of the major causes of poverty in developing countries like
India. With increasing economic growth gap between rural and urban is also increasing.
Rapid globalization of markets has widened the gap between rich and poor.
5. Improper Labour Practices: Free trade facilities developed countries setup their
manufacturing units outside national borders in order to gain cheap labour & resources.
This leads to exploitation of labour & resources of developing & underdeveloped countries.
6. Inflation: Globalization is a significant factor behind rise in inflation. With improving
economic condition and increasing demand for food and energy there has also been an
unreasonable increases in prices of commodities also known as inflation.
Stages of Globalization
DOMESTIC COMPANY

INTERNATIONAL COMPANY

MULTINATIONAL COMPANY

GLOBAL COMPANY

TRANSNATIONAL COMPANY

1. Domestic company:
• Market potential is limited to the home country.
• Production and marketing facilities are located at home only.
 • They do not think globally and avoid taking risk in going global.
• Their top management may have traditional kind of business management competency
and less global expertise.
2. International Companies
• The operations of such companies lie in one single home country as the base center.
• These companies’ only export or import products from the home country.
• The offices, hence, only exist in the home country and there is no foreign direct
investment in other countries.
• They have to continuously adjust to trading norms of the home country.
3. Multinational Companies
• These companies have direct operations in more than a single country, however, it is
usually not a very large number.
• However, MNC’s have a centralized structure, with the head office in the home country.
• In this case, products are decided and developed by the head office and subsidiary offices
do have options to adapt to local markets if needed.
• Adidas is an amazing example to explain multinational companies.
4. Global Companies
• These companies work to have a foothold in a large number of countries, usually larger
than a Multinational Corporation.
• They, however, do not follow the system of having an official head office.
• Various subsidiaries are set but standard products are sold, without any flexibility in
terms of adapting to local consumers.
• McDonald’s – a fast-food chain, is an exemplary example of this kind of companies.
5. Transnational Companies
• These companies are operating in multiple countries, having foreign direct investment in
all of them.
• Such companies follow a flexible approach, understanding and adapting to the local
culture and demand of each country.
• Hence, offices in each country work in a decentralized manner with decision-making
powers.
• Nokia is one of the examples in the Indian context.