Topic 2

Globalization
 Introduction of Globalization
Peter Drucker In his book ‘Management Challenges for
the 21st century’ cautions:
“All institutions have to make global
competitiveness a strategic goal. No
institution, whether a business, a university or
a hospital can hope to survive, let alone to
succeed, unless it measures up to the standards
set by the leaders in its field, any place in the
world.”
 Definition of Globalization:
 The IMF (International Monetary Fund) defines
globalization as “the growing interdependence of the
countries worldwide through increasing volume and variety
of cross boarder transactions in the goods and services and
of international capital flows, and also through the more
rapid and widespread diffusion of technology.”

 “Globalizationis the process of increasing the connectivity

and interdependence of the world’s markets and businesses.”
 Meaning of Globalization
Globalization is a mind set which views the entire
world as a single market so that the corporate strategy
is based on the dynamics of globalization.
 Globalization is a term used to describe the process
of removal of restrictions on foreign trade,
investment innovations in communications and
transport systems. The changes have encouraged
nations to reduce the high level of protection between
countries and to adopt policies to liberalize their
economies in order to volume to trade.
People are linked together economically and socially
by trade, investments and governance.
Dismantling of trade barriers between nations and the
integration of the nations economies through
financial flow, trade in goods and services, and
corporate investments between nations.
 Dimensions of Globalization
Globalization can be considered at two
levels:

1. Globalization of the markets

2. Globalization of the business or firm
 1. Globalization of the markets
Globalization of markets refers to the fact that in
many industries historically distinct and separate
national markets are merging into one huge global
marketplace.
Globalization is a process of development of the
world into a single integrated economic unit i.e. A
Global or Transnational economy. The world
economy has been emerging as a global or
transnational economy.
A global or transnational economy is one which go
beyond the limits of national boarders without any
obstacles of artificial restrictions like Govt.
regulations on trade and factor economic unit.
 2. Globalization of production:

The globalization of production refers to

the tendency among many firms to
source goods and services from different
locations around the globe in an attempt
to take advantage of national differences
in the cost and quality of factors of
production. (labor, energy, land and
capital)
 Driving Forces of Globalization
Liberalization
Multi National Corporations
Technology Innovation
Transportation & Communication advancement
Competition
Rising wants
World Economic Trends
Regional Integration
World Economic Trends
Globalisation could
involve all these
things!
Aspects of globalization
Globalization has various aspects which affect the
world in several different ways
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.
International trade in manufactured goods
increased more than 100 times (from $95 billion
to $12 trillion) in the 50 years since 1955.[15]
China's trade with Africa rose sevenfold during
2000-07 alone.[16][17]
Financial - emergence of worldwide financial
markets and better access to external financing for
borrowers.
By the early part of the 21st century more than
$1.5 trillion in national currencies were traded
daily to support the expanded levels of trade and
investment.[18]
 As these worldwide structures grew more quickly
than any transnational regulatory regime, the
instability of the global financial infrastructure
dramatically increased, as evidenced by the
Financial crisis of 2007–2010.[19]
 Economic - realization of a global common market,
based on the freedom of exchange of goods and
capital.[23]
 The interconnectedness of these markets, however,
meant that an economic collapse in one area could
impact other areas.[citation needed]
 With globalization, companies can produce goods and
services in the lowest cost location. This may cause
jobs to be moved to locations that have the lowest
wages, least worker protection and lowest health
benefits.
 For Industrial activities this may cause production to
move to areas with the least pollution regulations or
worker safety regulations.
 Health Policy - On the global scale, health becomes a commodity.
In developing nations under the demands of Structural Adjustment
Programs, health systems are fragmented and privatized. Global
health policy makers have shifted during the 1990s from United
Nations players to financial institutions.
 The result of this power transition is an increase in privatization in
the health sector. This privatization fragments health policy by
crowding it with many players with many private interests. These
fragmented policy players emphasize partnerships and specific
interventions to combat specific problems (as opposed to
comprehensive health strategies). Influenced by global trade and
global economy, health policy is directed by technological
advances and innovative medical trade.
 Global priorities, in this situation, are sometimes at odds with
national priorities where increased health infrastructure and basic
primary care are of more value to the public than privatized care for
the wealthy.[26]
 Political - some use "globalization" to mean the creation of a
world government which regulates the relationships among
governments and guarantees the rights arising from social and
economic globalization.[27
 ] Politically, the United States has enjoyed a position of
power among the world powers, in part because of its strong
and wealthy economy. With the influence of globalization
and with the help of The United States’ own economy, the
People's Republic of China has experienced some tremendous
growth within the past decade.
 If China continues to grow at the rate projected by the trends,
then it is very likely that in the next twenty years, there will
be a major reallocation of power among the world leaders.
China will have enough wealth, industry, and technology to
rival the United States for the position of leading world
power.[28]
IMPACT
 India’s growth rate in the 1970’s was very low at 3%
and GDP growth in countries like Brazil, Indonesia,
Korea, and Mexico was more than twice that of India.

 Though India’s average annual growth rate almost

doubled in the eighties to 5.9%, it was still lower than
the growth rate in China, Korea and Indonesia. The pick
up in GDP growth has helped improve India’s global
position.

 India’s position in the global economy has improved

from the 8th position in 1991 to 4th place in 2001; when
GDP is calculated on a purchasing power parity basis.
 POSITIVE IMPACT OF
GLOBALIZATION
 Goods and people are transported with more easiness and
speed
 Free trade between countries increases
 Global mass media connects all the people in the world
 As the cultural barriers reduce, the global village dream
becomes more realistic there is a propagation of democratic
ideals
 The interdependence of the nation-states increases
 Outsourcing
 Access to the latest technology
 Promotion of healthy competition
 Improvement in human rights
Large Number of Multinationals Have Moved to India Post
Globalization (Strategy 100% Equity, Collaboration, Franchise,
Importing, Manufacturing)
 Beverages (Coke, Pepsi)
 Fast Foods (McDonalds, Pizza Hut, KFC)
 Coffee (Barista, Café Coffee Day)
 Sports Wear & Goods (Nike, Adidas)
 Apparels & Garments (Levis, Reid & Taylor)
 Cosmetics (Revlon, Oriflamme, Maybellene)
 Two/Four Wheelers (Honda, Toyota, Suzuki, Hyundai, General
Motors, Ford, Mercedes)
 Computers (Del, HP, IBM, Samsung, Sony, Compaq)
 White Goods (LG, Samsung, GE)
 Construction
 Engineering Companies
 Pharmaceuticals (US, Europe, Britain)
 Music (Sony, BMG, Warner)
 Entertainment Channels (Star, National Geographic, Discovery,
Sony)
 Sourcing (IKEA, Adidas, Nike, many others)
 Globalization of the Indian Industry took place in its various
sectors such as steel, pharmaceutical, petroleum, chemical,
textile, cement, retail, and BPO. 
 The various beneficial effects of globalization in Indian
Industry are that it brought in huge amounts of foreign
investments into the industry especially in the BPO,
pharmaceutical, petroleum, and manufacturing industries. As
huge amounts of foreign direct investments were coming to
the Indian Industry, they boosted the Indian economy quite
significantly.
 This helped reduce the level of unemployment and poverty in
the country. Also the benefit of the Effects of Globalization on
Indian Industry are that the foreign companies brought in
highly advanced technology with them and this helped to
make the Indian Industry more technologically advanced. 
 Itincreased competition in the Indian market between the
foreign companies and domestic companies. With the foreign
goods being better than the Indian goods, the consumer
preferred to buy the foreign goods.

 Thisreduced the amount of profit of the Indian Industry

companies.

 The effects of globalization on Indian Industry have proved to

be positive as well as negative. The government of India must
try to make such economic policies with regard to Indian
Industry's Globalization that are beneficial and not harmful.
 Negative Effects of Globalization:
 Increase in unemployment in local labor market
 Exploitation of labor
 Job insecurity
 Threat of terrorism
 Increase in population
 Uneven distribution of income
 Bad aspects of foreign cultures
 Foreign acquisitions
 Increase in prices
 Influence on local political decisions and affairs.