UNIT :1

GLOBLIZATION AND IB
Forces Driving Globalization:
• Globalization is driven by various new
development and gradual changes in the world
economy.
• Generally, organizations go global for expanding
their markets and increasing their sales and
profits. One of the major forces of globalization is
the expansion of communication systems.
• In the present era, it has become easy to distribute
information to any part of the world through the
Internet.
                                                                                                   
•  Advancement of Technologies:
• Refers to one of the crucial factors of globalization. Since
1990s, enhancement in telecommunications and Information
Technology (IT) has marked remarkable improvements in
access of information and increase in economic activities.
This advancement in technologies has led to the growth of
various sectors of economies throughout the world.
• Apart from this, the advancement in technology and
improved communication network has facilitated the
exchange of goods and services, resources, and ideas,
irrespective of geographical location. In this way, advanced
technologies have led to economic globalization.
• Reduction in Cross-trade Barriers:
• Refer to one of the critical forces of globalization. Every-
country restricts the movement of goods and services
across its border. It imposes tariffs and quotas on the goods
and services imported in its country. In addition, the
random changes in the regulations create a chaos in global
business environment.
• Such practices impose limits on international business
activities. However, gradual relief in the cross-border trade
restrictions by most governments induces free trade,
which, in turn, increases the growth rate of an economy.
• Increase in Consumer Demand:
• Acts as a main driver to facilitate globalization.
Over the years, with increase in the level of income
and standard of living, the demand of consumers
for various products has also increased. Apart from
this, nowadays, consumers are well aware about
products and services available in other countries,
which impel many organizations to work in
association with foreign players for catering to the
needs of the domestic market.
• High Competition:
• Constitutes an important driver for bringing about globalization.
An organization generally strives hard to grain competitive edge
in the market. The frequent increase in competition in the
domestic market compels organizations to go global. Thus,
various organizations enter other countries (for selling goods and
services) to expand their market share.
• They export goods in foreign markets where the price of goods
and services are relatively high. Many organizations have
achieved larger global market shares through mergers and
acquisitions, strategic alliances, and joint ventures. So, these are
the major factors that have contributed a lot in globalization and
the growth of global economy.
The Criticism Of Globalization:
• Criticism of globalization is skepticism of the
claimed benefits of globalization. Many of these
views are held by the anti-globalization movement.
Globalization has created much global and internal
unrest in many countries. While the dynamics of
capitalism is changing and each country is unique
in its political makeup, globalization is a set-in-
stone "program" that is difficult to implement
without political unrest. Globalization can be partly
responsible for the current global economic crisis.
• Case studies of Thailand and the Arab nations' view
of globalization show that globalization is a threat to
culture and religion, and it harms indigenous people
groups while multinational corporations profit from
it. Although globalization has promised an improved
standard of living and economic development, it has
been heavily criticized for its production of negative
effects. Globalization is not simply an economic
project, but it also heavily influences the country
environmentally, politically, and socially as well.
Economic impacts
• Limitations on growth
• Global Economic Crisis
Political impacts
• Globalization as American hegemony
• Power of transnational corporations
Environmental impact
• Damage from transnational corporations
• Agriculture
Social impacts
• Growing inequality
• Loss of languages
• Prejudice
Modes of Operating in IB:
• Direct Exporting
• Licensing and Franchising 
• Joint Ventures
• Strategic Acquisitions 
• Foreign Direct Investment 
Direct Exporting:

Direct exporting involves
● Direct exporting, in this
●
In case you foresee a
●

you directly exporting case, could also be potential demand for your
your goods and products understood as Direct goods and products in an
Sales. This means you overseas market, you can
to another overseas
opt to supply your
market. For some as a product owner in goods to an
businesses, it is the India go out, to say, the importer instead of
fastest mode of entry into middle east with your establishing your own retail
the international own sales force to reach presence in the overseas
business. out to the customers. market.
Advantages of Direct Exporting

2. 3.
You can utilize the This strategy
1
direct exporting helps you to
You can select
strategy to test your protect your
your foreign
products in patents,
representatives
international markets goodwill,
in the overseas
before making a trademarks and
market.
bigger investment in other intangible
the overseas market. assets.
Licensing and Franchising 
When does
this work
the best?
Companies which want to
●
In Licensing agreement
● ●
I explored this strategy in the
establish a retail presence and franchise, an case where one of the
established companies of
in an overseas market with overseas-based business the other country already
minimal risk, will pay you a royalty or had a loyal audience with
the licensing and commission to use your them.
franchising strategy brand name, ●
At the same time, their product
allows another person manufacturing process, line had gaps which I was able
to fill up. Therefore, just like two
or business assume the products, trademarks and pieces of jigsaw, it made
risk on behalf of the other intellectual complete sense for them to carry
company. properties. my product.
Advantages of Licensing and Franchising

Low cost of entry Offers you a passive

into an international source of income
market Reduces political risk
Allows expansion in
Licensing or as in most cases, the
multiple regions with
Franchising licensing or
minimal investment
partner has franchising partner is
knowledge about a local business
the local market entity
Joint Ventures

A joint venture is
● Companies wishing to
● ●
Both business entities share
expand into overseas the investment, costs,
one of the preferred markets can form joint profits and losses at the
modes of entry into ventures with local predetermined proportion.
This mode of entry into
international business
●

businesses in the overseas

international business is
for businesses who do location, wherein both joint suitable in countries wherein
not mind sharing their venture partners share the the governments do not
rewards and risks allow one hundred per cent
brand, knowledge, and associated with the foreign ownership in
expertise. business. certain industries.
Advantages of Joint Venture 

The political risks

Enables transfer of
involved in joint-
Both partners can technology,
venture is lower due
leverage their intellectual
to the presence of the
respective expertise properties and
local partner, having
to grow and expand assets, knowledge of
knowledge of the
within a chosen the overseas market
local market and its
market etc. between the
business
partnering firms
environment
Strategic Acquisitions 

Strategic acquisition You can retain the

●

This acquired
●
●
existing management
implies that your company can be of the newly acquired
company acquires company to benefit from
directly or indirectly
a controlling their expertise, knowledge
involved in offering and experience while
interest in an
existing company similar products or having your team
in the overseas services in the members positioned in the
board of the company as
market.  overseas market. well.
Advantages of Strategic Acquisitions

Your business does not

need to start from Your business can
scratch as you can use benefit from the It is one of the fastest
the existing
expertise, knowledge modes of entry into
infrastructure,
manufacturing
and experience of the an international
facilities, distribution existing management business on a large
channels and an and key personnel by scale
existing market share retaining them
and a consumer base
 Foreign Direct Investment 

Foreign Direct Investment involves

●
This strategy is viable when
●

a company entering an overseas market

by making a substantial investment in
the demand or the size of
the country. Some of the modes of entry the market, or the growth
into international business using the potential of the market in
foreign direct investment strategy
includes mergers and acquisitions, joint the substantially large to
ventures and greenfield investments. justify the investment.
Advantages of Foreign Direct Investment

Leverage low-cost Many foreign

labour, cheaper companies can avail
You can retain your material etc. to for subsidies, tax
control over the reduce breaks and other
operations and other manufacturing cost concessions from the
aspects of your towards obtaining a local governments
business competitive for making an
advantage over investment in their
competitors country
Types of International Organization:
• Some international agreements create International
Organizations, which are institutions that set rules
for nations and provide venues for diplomacy. There
are two types of international
organizations: International Governmental
Organizations (IGOs) and International
Nongovernmental Organizations (INGOs or,
more commonly, NGOs). In recent
years, Multinational Corporations (MNCs) have
also had a significant impact on the international
system.
• International Governmental Organizations
• IGOs form when governments make an
agreement or band together. Only governments
belong to IGOs, which are sometimes also known
by the acronym IO (for international
organization). The United Nations (UN), the
North Atlantic Treaty Organization (NATO), the
World Trade Organization (WTO), and the
European Union (EU) are all examples of IGOs.
• Nongovernmental Organizations
• Unlike governmental organizations, NGOs are made up of
individuals, not businesses or governments. NGOs serve a
variety of functions and represent numerous interests.
Organizations that are not affiliated with governments but
that nevertheless play an important role in international
politics are called Nongovernmental Actors. 
• Not all NGOs have a positive impact on global politics.
Although Amnesty International has helped defend human
rights, for example, the international terrorist organization
al Qaeda has killed civilians in an effort to cripple
economies and topple governments. Since the end of World
War II, nongovernmental actors have become more
important in the global arena.
• Multinational Corporations
• MNCs, or businesses that operate in more than one
country, are another type of nongovernmental actor in
the international system. Although MNCs are
nongovernmental actors, they are not NGOs: As
businesses, MNCs cannot be considered NGOs. Their
primary aim is to make money. In the twenty-first
century, MNCs dominate the global economy:
According to the Coca-Cola corporation, for example,
more than 70 million Coke products are consumed
daily in Africa.
The Culture and IB
Dimensions of Culture
• Geert Hofstede identifies five cultural
dimensions, which assign mathematical scores
designating a particularcountry's beliefs about
each of the dimensions.
• The five cultural dimensions are power distance
(PDI), individualism (IDV), masculinity (MAS),
uncertainty avoidance index (UAI), and long-
term orientation (LTO).
• These ideas were first based on a large research project
into national culture differences across subsidiaries of
a multinational corporation (IBM) in 64 countries.
• Subsequent studies by others covered students in 23
countries, elites in 19 countries, commercial airline
pilots in 23 countries, up-market consumers in 15
countries, and civil service managers in 14 countries.
These studies together identified and validated five
independent dimensions of national culture
differences.
Cultural Collisions and Diversity:
• What is cultural awareness and diversity?
• Someone's cultural awareness is their
understanding of the differences between
themselves and people from other countries or
other backgrounds, especially differences in
attitudes and values.
Benefits of cultural diversity in the workplace

• Diverse cultural perspectives can inspire creativi

ty and drive innovation
• Local market knowledge and insight makes a bus
iness more competitive and profitable
• Cultural sensitivity, insight, and local knowledge
means higher quality, targeted marketing
• Drawing from a culturally diverse talent pool allo
ws an organization to attract and retain the best t
alent
• A diverse skills base allows an organization to off
er a broader and more adaptable range of produc
Challenges of cultural diversity in the workplace

• Colleagues from some cultures may be less likely

to let their voices be heard
• Integration across multicultural teams can be dif
ficult in the face of prejudice or negative cultural
stereotypes
• Professional communication can be misinterpret
ed or difficult to understand across languages an
d cultures
• Navigating visa requirements, employment laws,
and the cost of accommodating workplace requi
rements can be difficult
Idea of Nation – Delineating Cultures:
• What is the culture of a nation?
• Cultures are what make countries unique. Each
country has different cultural activities
and cultural rituals. Culture includes material
goods, the things the people use and
produce. Culture is also the beliefs and values
of the people and the ways they think about and
understand the world and their own lives.
THANK YOU