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GLOBALISATION


GLOBALISATION


Meaning :- Globalization is considered as a micro economic process. It is a process, in which there is integration of domestic economic with the world economy.
(1) Globalization is a process, which leads to an increase in interdependence, integration and links between the economies of various countries. It has been promoted by flows of foreign Direct Investment (FDI) and Transnational Corporations (TNCs).
(2)  Globalization is a process of internalization in which companies gradually and incrementally expand their international involvement. It is a process of increasing involvement in international business operations. e.g. Sony Corporation has its business operation in Malaysia. Thailand and India and not only in Japan.
(3)  Globalization is a new concept of international business and marketing. It refers to integration of national economy with global economy.
(4)  Globalization is a broader term than internationalization. In inter nationalization, there is market expansion through penetration of foreign markets. But, globalization indicates, increase in intensity of competition from foreign competitors.
(5)  Globalization means large-scale production-cum-marketing operation of the firms around the world.
Strategy of Globalization :- There are four strategies through which the process of globalization can be achieved :
(1)  Multinational Strategy :- It is defined as a strategy in which a foreign entrepreneur Invests, collaborates and participates (in business activities) with a domestic partner/firm. Here, a firm’s subsidiaries in the foreign countries enjoy grater autonomy in business decision marking. (In this case, the share of foreign entrepreneur is high in total investment).
(2)  Global Strategy :- Under this strategy, business is centrally governed in a strong manner, so as to get the benefits of economies of scale through global manufacturing, standardized procedure, etc. e.g. Sony of Japan has established its firms in a number of countries. Their business is centrally governed in a strong manner. So, they get the benefits of economies of scale.
(3)  International Strategy :- In this strategy, the parent company uses its innovations and invests its resources (capital & technology) in different countries through foreign direct investment. It can also adopt different strategies for different countries.
(4)  Transnational Strategy :- In this strategy, the multinational, global and international strategies are combined rationally. So, a firm is able to achieve local flexibility and it is able to local flexibility and it is able to absorb the parent company’s innovation. Thus, under this strategy, there is global integration, improvement in operational efficiency and performance on continuous basis.
[With the help of suitable strategy, a firm can locate its different operations. On the basis of market size, low cost labour supply, availability of raw materials & other resources, etc. e.g. a firm may prefer to locate its software and R & D work in India due to easy availability of low cost technical manpower.
There are certain high-investment industries where minimum efficiency scale is desirable. This requires worldwide operations. Further, globalization is also encouraged by the reduction of trade and tariff barriers.
Globalization also creates inter link and interdependent economies in the international business environment.
Q.1.     Explain the impact or globalization.
A.1.     Globalization leads to creation of world market as a single big market in the global economy. Following are the main impacts of globalization :-
(1)  Customers :-  In the globalization process, emphasis is given on the free capitalist economy, in which, customer is considered as a king of market. A global consumer always prefers to buy the best quality of product at the lowest possible price. He is not concerned with the place of its production. e.g. When a customer prefers to buy pentium-4 computer, he is not concerned with whether it is assembled in India or Thailand.
(2)  Competition :-  Globalization leads to increase in competition among many firms in the global market. So the firms may try to increase their competitive strength with the help of strategic alliances and joint ventures. Such strategy reduces risks and uncertainties and improves the market position and profitability. e.g. IBM has been successful in PC market due to its technological collaboration with Microsoft and Lotus. This is a part of its competitive strategy.
(3)  Company :- Due to globalization, every company has to improve its performance and efficiency. The each and every firm gives more importance to product development. Research & Development activities and market development.
(4)  Currency :- Due to globalization, the strength and dominance of US dollar (as a hard/key currency) is now declining. Now, there is use of multiple currencies (such as Japanese Yen, Deutsche Marks, Buro-dollar etc.) in international trade. Now people are also thinking of introducing ASEAN Common currency. In such situation, the global firms have to ‘currency  neutral’ for pricing of the products.
(5)  Country : For the better care of customers, country’s closeness is important. The country’s conseness means global localization of products through horizontal and vertical integration of FDI. Successful globalization depends upon market development system (which is based integrating different geographical locations).      

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