Globalisation

Unit- V

Globalisation
Definitional

Dimensions The term globalisation is often considered from different angles and these different perceptions reflect the different dimensions of globalisation Definition of globalisation from three angles economic, sociological and corporate.

Economic Definition

Globalisation may be defined as the process of integrated of economies across the world through cross-border flow of factors, production and information

Sociological Definition
Increasing social interaction across the globe is an important feature of globalisation. The term village epitomises the sociological definition of globalisation.

Corporate Definition
From a corporate perspective globalisation in its true sense is a way of corporate life necessitated, facilitated and nourished by the world economy and developed by corporate strategies.

Globalisation of World Economy

Globalisation of world economy is achieved, quite obviously by globalising the national economies A global or transnational economy is one which transcends the national borders unhindered by artificial restrictions like government restrictions on trade and factor movement

Cont
According to Drucker, the transnational economy is characterized by the following features: 1. The transnational economy is shaped mainly by money flows rather than by trade in goods and services 2. Transnational economy management has emerged as the decisive factor of production, land and labour have increasingly become secondary

Cont
3.

4.

5.

6.

The goal market maximization and not profit maximisation. Trade which increasingly follows investment is becoming a function of investment. The decision making power is shifting from the national state to the region. There is a genuine and almost autonomous world economy of money, credit and investment flows.

Globalisation of Business
Stages of Globalisation Typically the domestic firm starts its international business by exporting and Later it may establish joint ventures or subsidiaries abroad. Ohmae identifies five different stages in the development of a firm into a global corporation

Five different stages

1. The first stage is the arms length service activity of essentially domestic company which moves into new market overseas by linking up with local dealers and distributors 2. Second stage, the company takes over these activities on its own 3. Third stage, the domestic based company begin to carry out its own manufacturing and marketing

Five different stages

4. Stage four, the company moves to a full insider position in these market, supported by a complete business system including R&D and engineering. 5. Fifth stage, the company moves towards a genuinely global made of operation.

Essential conditions for Globalisation

Business freedom Facilities Government Support Resources Competitiveness Orientation

Advantages
Profit advantage Growth opportunities Domestic market Constraints Competition Monopoly power Strategic Vision

Implications and Impact

The global dominance of industries by MNCs is on the increase Many countries are indiscriminate in liberalising foreign investment.( Pepsi, coke and junk foods are allowed even in countries like china) A number of countries allow high foreign stake even in industries where that is not really required

Cont
Large number of cases of takeover of national firms by foreign firms. Replacement of traditional and indigenous product by modern products. Common criticism is that technology the MNCs bring in may not be the one suit to the host country.