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5/2/2017 7 Factors Influencing Globalization – Discussed!

7 Factors Influencing
Globalization –
Discussed!
Article shared by 

Factors influencing Globalization are as follows: (1)


Historical (2) Economy (3) Resources and Markets (4)
Production Issues (5) Political (6) Industrial
Organisation (7) Technologies.

Globalisation though is basically an economic activity, is


influenced by many factors.

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The important factors are:

(1) Historical:
The trade routes were made over the years so that goods
from one kingdom or country moved to another. The
well known silk-route from east to west is an example of
historical factor.

(2) Economy:

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5/2/2017 7 Factors Influencing Globalization – Discussed!

The cost of goods and values to the end user determine


the movement of goods and value addition. The overall
economics of a particular industry or trade is an
important factor in globalisation.

(3) Resources and Markets:

The natural resources like minerals, coal, oil, gas, human


resources, water, etc. make an important contribution in
globalisation.

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Table 16.1: India’s Strengths and Weaknesses:

Strengths Scale Rank

Stock Market    

ADVERTISEMENTS: 5.42 13

   

5.27 16

   

6.37 1
Stock market is
important for new
   
financing
6.26 1

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5/2/2017 7 Factors Influencing Globalization – Discussed!

Science and    
Engineering
5.05 8
Schools excel in basic
   
science and maths
Country has a large pool
6.77 1
of competent scientists
and engineers 5.40 9

Engineering as a 5.37 14
profession greatly
5.56 19
attracts young talent

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Labour Force

Country has first-class


business schools to train
managers

Country has an
abundant labour force

Rate of Law

Judiciary is
independent of the
government

Compliance with court


ruling is high

Firms have recourse to


courts for challenging
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5/2/2017 7 Factors Influencing Globalization – Discussed!

government actions

Weakness    

Financial Markets    

Citizens prohibited 1.60 53


from investing in
2.74 43
foreign stocks, bonds
and bank accounts
2.63 50

Financial sector
sophistication is lower
than international
norms

Venture capital is scarce

Public Administration    

Administrative 2.90 47
regulations that
2.68 52
constrain business are
pervasive
2.65 43

Government subsidies
2.27 48
keep old industries alive
1.92 53
Civil Service is subject
to political pressures    

Tax evasion is rampant 1.85 53

Infrastructure 2.18 53

Overall infrastructure is 2.94 53


far worse than major
1.94 53
trading partners

   
Road infrastructure
constraints business
   
development

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Port facilities are    


underdeveloped
2.11 52
Direct dial phone
2.66 51
service is prohibitively
expensive
2.29 34

Country suffers from


   
severe power shortage
   
Research and
Development 2.94 51

The business sector 2.16 53


spends little on R & D
2.58 49
Firms fail to
   
commercialise
academic research
2.79 48

Companies are poorly


adopted to absorbing
new technologies

Labour Regulations

Average workers are


unproductive

Hiring and firing


practices are severely
restricted

Labour regulations
impede adjustment of
working hours to meet
changes in demand

Corruption and
Bribery

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Extra payment
connected with permits
and licenses are
common

The mineral based industries like steel, aluminium, coal


in Australia are examples. Few of these Australian
mining and metal companies are owned by European /
Japanese / American companies.

Near distance to end user or consumer also is an


important factor in globalisation. The large markets as
consumer bases in Asian countries have led many
European, Korean to Japanese manufacturing
conglomerates and shift their manufacturing and
trading bases in Asian countries.

That is going near the customer makes globalisation. The


Table 16.1 gives the strengths and weakness of India in
global level. The details are based on expert survey on
globalisation. As may be seen from the table low on scale
is lack or shortfall and hence, ranking is low.

(4) Production Issues:
Utilisation of built up capacities of production,
sluggishness in domestic market and over production
makes a manufacturing company look outward and go
global. The development of overseas markets and
manufacturing plants in autos, four wheelers and two
wheelers is a classical example.

(5) Political:

The political issues of a country make globalisation


channelised as per political bosses. The regional trade
understandings or agreements determine the scope of
globalization. Trading in European Union and special
agreement in the erstwhile Soviet block and SAARC are
examples.

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5/2/2017 7 Factors Influencing Globalization – Discussed!

(6) Industrial Organisation:
The technological development in the areas of
production, product mix and firms are helping
organisations to expand their operations. The hiring of
services and procurement of sub-assemblies and
components have a strong influence in the globalisation
process.

(7) Technologies:

The stage of technology in a particular field gives rise to


import or export of products or services from or to the
country. European countries like England and Germany
exported their chemical, electrical, mechanical plants in
50s and 60s and exports high tech (then) goods to under
developed countries. Today India is exporting computer
/ software related services to advanced counties like UK,
USA, etc.

Eight barriers in economic activities:
Many countries in Particular developing ones impose
restrictions to globalisations by:

i. Imposing high taxes and duties for capital goods,


spares and materials,

ii. Licensing restrictions,

iii. Foreign exchange restrictions,

iv. Investment restrictions,

v. Incentives and prioritisation to specific domestic


industries, and

vi. Banning / restricting products of foreign origin.

vii. Procedural hassles, bureaucracy

viii. Closed mind-set

The fears of the countries in that case may be:


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i. To provide local employment,

ii. To raise standard of living and GDP,

iii. To help in building up foreign exchange reserves,

iv. To channelise the resources of the country,

v. To develop new skills / markets and

vi. To mobilise capital.

Transport, communication and IT:
The technological revolution the world has witnessed in
the last two decades is overwhelming. Development has
immensely influenced world trade by bridging space
and time. IT has revolutionised the way the business
goes. E-money, e-banking, B2B business, B2C business
and internet have added to speed up globalisation.
Buying and selling of stocks and transfer of funds can
take place now instantly.

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