Global Transformation of Organizations

In the 18th century Adam Smith pointed the

transformative effects of Division of Labour

In the 19th century, David Ricardo highlighted the

importance of International Trade

Michael Porter, in the 20th century made the case

for – Industrial Zones, Geographical diversity,
physical capital, training & business strategy.
 Global transformation of organizations
John Naisbitt’s Theory of Evolution from Mega Trends (7 waves of
evolution):
1. When people started leaving African Savannah around 40,000 BC.

2. Wave two propelled Agricultural Revolution during 5000 BC-1500 AD.

3. Wave three incubated Industrial Revolution – 1500 – 1850.

4. Wave four all about Transport & Telecom Revolution (1850 – 1940).

5. Wave five was the Computational & Electro-Chemical Revolution – 1940-

1975.
6. Wave six set the platform for the Network era – 1975-2002. (Accelerated
Globalization)
7. Wave seven is underway, about Knowledge & Collaboration – 2002 – till
date.
 Collaborative Environment

Second Renaissance for India & China

Interconnectivity - Encourage collaboration among:

1. Capital,
2. Knowledge &
3. Talent
 INDIA
• India’s GDP Growth Rate hovers around 5% with 58% population
in agriculture
• India is the 2nd largest producer of fruits & vegetables in the
world and accounts for 10% of world’s fruit products but, 43% is
wasted because of lack of cold storage facilities & energy
infrastructure
• Just 1.3% fruits & vegetables get processed in India as against
80% in US & Malaysia, 70% in France & 30% in Thailand.
 What is required to develop?

Collaborate corporate biggies with small entrepreneurs & farmers;

so far who were only transactional & not strategic

Small entrepreneurs need – conducive business environment, basic

infrastructure, sensible regulations, short & long-term funding at
reasonable rates, equity & venture capital, advisory assistance &
market knowledge.
Large corporations need to abandon the tightly knit safety net of
resource allocation & replace it with corporate philanthropy and
stewardship
 ILO Report

• If Asia continues to grow at 4.6 to 4.7%, It

would account for 30 to 31% in 2020 from
24.7% now.
• India’s share of region’s GDP is expected to
rise from 7.2% to 8.7% & even as high as 10%
by 2020.
• India’s short-run share of 2020 World GDP is
estimated at 3% & in long-run it is 2.7%
 ILO Report Continued
• China’s share of World GDP in 2020 will be 9.7%
(Short –run) and 8.7% in long-run
• Between 2006 & 2015, employment in agriculture
will decrease by 160 million.
• The services sector will provide (40.7%), the highest
employment of the region’s total employment.
• Challenges: Poverty and Distribution of Wealth
 India – a better place for Business, World
Bank – 2008 Edition ‘Doing Business’
India
Rank -134
Indian export administrative procedure
takes 18 days from 27 days earlier
Asia is 2nd fastest reforming region in the
world
Others
Singapore tops
China – 79 Rank
These ranks are based on 10 indicators of
business regulation – time, cost to meet
govt. requirements in business start up,
operation, trade, taxation & closure
Rankings do not reflect – macroeconomic
policy, quality of infrastructure, volatility,
investor perceptions, or crime rates.
Business Climate
 Globalization
What is globalization?

Is only trade & commerce

Webster’s dictionary – “Making worldwide in scope and

application”

When did globalization start?

Initially globalization of human beings took place

 Globalization
Major contributors to the globalizers:

• Traders
• Preachers
• Adventurers
• Warriors

All the above were in place in 6000 B.C.

Slowly empires & new settlements were formed

Arkikamedu in Tamilnadu was major trading centre for Romans from

1st century after Christ.
 Globalization
Malabar coast was the trading centre for Arabs,
Persians, Armenians & Jews.

Global trade momentum took place after 1300

A.D with improvements in ship design &
techniques. Introduction of steamship in 1780
gave major boost to trade.

Until industrial revolution, Indian made textiles

remained the biggest major manufacturing export
in the world.
 Globalization – share of World’s GDP
45 40
40 35
35 30
33
30 25
25 25
20
20
15 15
15
10 12 10
8
5 6 5
4 3 4
0 0
1 1500 1820 1870 1913 1950 1973 2001 2008
India China
USA Japan
Europe Rest of the World
2 per. Mov. Avg. (Rest of the World)
Globalization – share of World’s GDP
Rest of
India China Japan USA Europe
the World
1 33 27 1 0 14 25
1500 25 25 3 0 21 26
1820 15 33 3 2 27 20
1870 12 17 2 9 38 22
1913 8 8 4 21 39 20
1950 4 5 3 28 31 29
1973 3 5 8 23 29 32
2001 4 7 8 23 21 37
2008 6 13 7 21 19 34
 G8 countries share in World’s GDP
US, Japan, Germany, Britain, France, Italy, Canada & Russia
70
68 68 68.3
67 67
66 66 66
64 64
62
60 60
58 58.4

56
54
52
1992 1994 1996 1998 2000 2002 2004 2006 2008
 Emerging Markets share in world’s GDP

China, India, Mexico, Brazil, & South Africa

14

12

10

0
1992 1994 1996 1998 2000 2002 2004 2006 2008
 Globalization

India’s GDP was 25% of world GDP in 1700.

Portuguese trader, Tom Pires wrote that Malacca in 1512

represented 61 nations with 84 languages spoken at port.

The spread of major religions like Buddhism, Christianity,

& Islam gave another push to Globalization.
 Globalization

The religions were most appealing to

traders, who spread ideas, cultures,
foods & languages far & wide.

Religions also helped the growth of

languages & trade.
 Globalization
Modern globalizers apart from businesses:

NGOs like Amnesty International

Human Rights Watch – by creating global consciousness of human

suffering across nations

The ambition to control the whole world & greed have been giving birth
to so many empires throughout the history. (e.g. Sole super power, US
has 700 military installations world over)
 Globalization
• Now most of the things we use today from
pens, jeans, shirts, cars, etc. have some parts
designed in other country. Therefore, we are
all agents of globalization.

New group of Globalizers:

• Students
• Patients Adding speed to Globalization
• Doctors
 Globalization

Difference between the globalization in the past and

modern time:

Velocity with which ideas & products are transferred.

Ever growing volume of consumers, products & their

ideas, their variety & the resultant increase in the visibility
of process
 Globalization – Good or bad?
Top 1% of rich have more wealth than bottom 90%
combined – US Federal Reserve Survey
< .5 % of households hold > 60% of nation’s personal wealth
Glaring inequities between developed 7 developing countries
on NAMA & agricultural issues.
India has been battling for service export issues
INDIA has FTAs with several groups of countries with a focus
on Africa
• India – Australia FTA has come to feasibility study
Effect on Health – very seriously. This in turn has been
creating variety of health fitness businesses.
Globalization & unstable economies - Reasons
The social costs are worth the economic gains from foreign products,
technologies & investments.

The difference between the local & global is blurring and we are in the
grip of mysterious world-wide forces

If present economic trend continues, world’s middle class will expand 2

billions additionally by 2030 – Goldman Sachs.

As per Goldman Sachs middle class is people with incomes of $6k – $30k.

Disorderly global economy can reverse all good things.

Financial crisis, international crucial supplies, trade wars and violent

business cycles can damage increasingly interconnected world.
Globalization & unstable economies - Reasons

In the last 6 years foreigners held $5.7 trillion of US

stocks, & bonds.

Today global economy baffles everyone – corporate

executives, bankers, economists & ordinary people.

Countries are growing economically more

interdependent & politically more nationalistic

Countries are trying to maximize their own advantages

rather than make the system work for everyone
 Globalization of Services
• If international trade in finance, transport,
communications, & business services is reformed, the
benefits could be 5 times more than comparable trade in
goods (World Bank Hand Book on International Trade in
Services)
• Today service exports constitute more than 3rd of all
exports, exceptionally high share matched by few advanced
countries.
• India’s challenges in service exports are two-fold:
1. One - Social & Political concerns of importing country.
2. Two – Immigration regimes with little space for
flexibility
 Globalization of Services
• If developed countries just open 3% of
their workforce, it would result in gains
of $150 billions (> 3 times the
development assistance flows)

• India also loses, if all services are

opened. However, it has more to gain
from integration of services.
 Economic Systems
• Forbes magazine forecasts that by 2017, India will have most
billionaires in the world.

• India will be 3rd largest economy in the world.

• But to realize the democratic dividend India has to take care of

children, including malnourished & undereducated (who are >
than ½ the total).

• Two decades ago India thought to move towards capitalism. But

downtrodden and the poor will not give up the democracy

• Recent surveys show that Indians are happy with the opening of
markets.
 Economic Systems
• Which economic system is better?

• It is unfinished task which began 2400 years ago by an

Indian monarch.

• Kautilya, Chandragupta’s CM who wrote the Arthasastra

(science of wealth) in the 4th century B.C. is considered the
world’s first economist.

• He aid down detailed requirements for increasing GDP of

the state. On this foundation, Chandragupta’s grandson,
Emperor Ashoka , wish to construct a state that would
protect the rights of all living beings, human & animal, and
also protect the forests & rivers.
 Economic Systems
• In the lifetime of Ashoka did not realize his vision to
harmonize the science of wealth & power with ethics of
humanity and nature.

• Communism and free-market capitalism in its present form

have proven their abilities to destroy the earth and corrupt
democracies.

• So, what is required?

 Economic Systems
• A better ideology is required.
• History must move on.
• It is modern India’s destiny to carry on with Ashoka’s unfinished
task.
• Humanity and nature cannot be servants of the economy, to be
manipulated to make economies more efficient.
• Economies must serve the needs of humanity and nourish the
environment.

• Countries must determine the aspirations and principles and

accordingly devise the form of capitalism and economics
required and not import ideologies that even exporters are
unhappy.
• Not “go with drift of things” but listen to our hearts too (Frost)
 Black Market - Economy

Black market consists of :

Unaccounted assets – money, property etc.

Grey market has presence across all sectors starting from –

IT, FMCG, Pharmaceuticals, liquor, automobile, designer
labeled clothing, sports wear, music, films, vehicle
components, books, food products, currency, computer
software)
 Black Market – Counterfeit Products
5/6th of Yamaha bikes sold in the world
Major Hubs of counterfeit products
are fake

China, S.E. Asia, India, Turkey, middle

eastern countries like Syria, UAE, Russia,
10% of the personal care
Ukraine, Kazakhstan, Poland, Bulgaria
products Paraguay

Economic impact on US companies due to

10% of auto parts in UK counterfeit products is costing between
US 200 & 300 billion annually.

Globally, trade in counterfeit & pirated

goods cost economy $650 billion annually,
10% of global pharma market
representing about 9% of total world
has counterfeit drugs - WHO trade – Assocham Report.
 Black Market – Indian Economy
Estimated annual losses due to piracy is Rs.30,000 cr.

Random search reveals the following:

400 companies beginning with word Reliance, 136 – Tata, 217

– Intel, 60 – Nike
FMCG is alone facing losses of Rs.8000 cr. Annually (15% of
total market size)
Dabur India – seized 70,000 bottles of worth over 90 lakhs &
over 2 lakh labels in Kolkata.
 Black Market – Indian Economy
HLL & Coca-Cola also acknowledge the danger of spurious
drinks (10% drinks are fake)
Entertainment industry is worst hit: Piracy levels are 60-90%

Reason for high piracy – higher price difference

75% of the Rs.800 cr. car audio market is grey.

Fake medicines account for 25% of total market of Rs.35,000

cr.
 Black Market – Counterfeit Products
10-12% of all global sports wear are counterfeits.
Europe alone accounts has 11% of the clothing & footwear
counterfeit products
Over 65% of the watch market is unorganized & consist of majority
of fake watches
Smuggled cigarette in India worth Rs.1700 cr. Accounting for 5-7%
of total market.
10-30% of cosmetics & packaged foods are counterfeited

95%Memory cards are in the grey market

 Cure to Black Economy
Expansion of organized Retail Market

Strict regulatory mechanism

Severe penalty & punishments

Reasonably pricing of original products

The total tax package on car stereo, including, VAT, customs

duty, excise duty, works out around 66% - too steep to fight
grey market
 Black Market – Indian Economy
Lack of security & incentives to policy
implementers

Lack of adequate personnel to curb the menace

Lack of political will

Nexus between politician, bureaucrat & unethical

business person
 Cure to Black Economy
• Copyright is dealt by Human Resource
1 Ministry

• Trade marks & patents are covered by

2 Commerce Ministry

• Legal provisions of intellectual

3 property fall under Law Ministry