GLOBALIZATION

Submitted by Hira Iqtedar

Submitted to Sir Danish
Assignment #01
Semester Submitted by Hira Iqtedar

hirjunjuaah@gmail.com
University of Lahore Sargodha campus
 GLOBALIZATION ( CHAPTER # 01 )
GLOBALIZATION?
The process by which businesses or other organizations develop international influence or start
operating on an international scale.
DRIVERS OF GLOBALIZATION?

The media and almost every book on globalization and international business speak about
different drivers of globalization and they can basically be separated into five different groups:

1) Technological drivers

Technology shaped and set the foundation for modern globalization. Innovations in the
transportation technology revolutionized the industry. The most important developments
among these are the commercial jet aircraft and the concept of containerisation in the late
1970s and 1980s. Inventions in the area of microprocessors and telecommunications enabled
highly effective computing and communication at a low-cost level. Finally the rapid growth of
the Internet is the latest technological driver that created global e-business and e-commerce.

2) Political drivers

Liberalized trading rules and deregulated markets lead to lowered tariffs and allowed foreign
direct investments in almost all over the world. The institution of GATT (General Agreement on
Tariffs and Trade) 1947 and the WTO (World Trade Organization) 1995 as well as the ongoing
opening and privatization in Eastern Europe are only some examples of latest developments.

3) Market drivers

As domestic markets become more and more saturated, the opportunities for growth are
limited and global expanding is a way most organizations choose to overcome this situation.
Common customer needs and the opportunity to use global marketing channels and transfer
marketing to some extent are also incentives to choose internationalization. (Ferrier, 2004)

4) Cost drivers

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University of Lahore Sargodha campus
Sourcing efficiency and costs vary from country to country and global firms can take advantage
of this fact. Other cost drivers to globalization are the opportunity to build global scale
economies and the high product development costs nowadays. (Ferrier, 2004)

5) Competitive drivers

With the global market, global inter-firm competition increases and organizations are forced to
“play” international. Strong interdependences among countries and high two-way trades and
FDI actions also support this driver.

i. Globalisation is expected to promote efficiency, productivity and, hence, higher economic

growth rate. In a controlled and regulated economy, there is no inducement to the industries to
become efficient and self-reliant as these are protected from foreign competition through
import restrictions and from domestic competition through industrial licensing. Globalisation
has one pillar of liberalisation. Liberalisation and the market principles improve the allocative
efficiency of resources. This will increase export earnings, allow the inflow of foreign capital and
technology. Industries and farm sector, banking and financial sectors are then exposed to
international competition. Competition enhances efficiency, productivity and ultimately a
better economic growth rate is likely to be achieved.

ii. As far as consumers are concerned, quality goods at the right price will be delivered. This
helps to bring down prices. Quality improvement and price reduction will then be enjoyed.

iii. Foreign capital is attracted. It augurs the advent of multinational enterprises (MNEs) who
bring modern up-to-date technology in less developed countries. Not only MNCs bring with
them modern technology but also it brings investment funds, organisational structure,
managerial culture, distribution network, etc. All these create income and employment in the
country.

Arguments Against Globalisation:

Critics argue that globalisation cannot make any dent on poverty reduction, employment
generation, export promotion, foreign direct investment and growth rates of the economy.
Critics perceive threat of the global market manifested in terms of falling rate of growth,
industrial recession especially in America and some major industrial countries and poor rate of
growth of export.

i. It is feared that globalisation will promote fierce and unhealthy competition. Instead of
competition and cooperation, one may argue that MNCs will swallow the domestic producers

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University of Lahore Sargodha campus
of poor backward countries overtime. Ultimately, this will cause concentration of economic and
political power into the hands of the foreign business enterprises.

ii. Merely opening up the domestic economy without reaching out to foreign markets or helping
industries to meet the global challenges has limited the benefits of globalisation without
reducing its costs.

iii. The apparent increase in export earnings of the less developed countries as a consequence
of globalisation is not expected to provide great benefits, particularly those in the lower income
brackets. Further, modern technologies used by the MNCs have the potentiality of making the
unemployment situation worse.

This widens inequalities in the distribution of income and wealth. In India, food, employment
and health scenarios have been adversely affected for the poor people as a consequence of
new economic policy reforms introduced in the 1990s. Above all, integration of the domestic
economy into the world economy provides larger benefits to the developed countries than to
the LDCs.

iv. Foreign capital is not interested in producing goods that an underdeveloped country
requires. Globalisation then distorts production structure of an economy.

Benefits of Globalism for Business

Those in favor of globalization theorize that a wider array of products, services, technologies,
medicines, and knowledge will become available, and that these developments will have the
potential to reach significantly larger customer bases. This means larger volumes of sales and
exchange, larger growth rates in GDP, and more empowerment of individuals and political
systems through the acquisition of additional resources and capital. These benefits of
globalization are viewed as utilitarian, providing the best possible benefits for the largest
number of people.

For global companies, often referred to as multinational corporations (MNCs), common

benefits of expanding into developing markets include unsaturated demand for new products,
lower labor costs, less expensive natural resources, and other inputs to products. Technological
developments have made doing business internationally much more convenient than in the
past. MNCs seek to benefit from globalism by selling goods in multiple countries, as well as
sourcing production in areas that can produce goods more profitably. In other words,
organizations choose to operate internationally either because they can achieve higher levels of
revenue or because they can achieve a lower cost structure within their operations.

hirjunjuaah@gmail.com
University of Lahore Sargodha campus
hirjunjuaah@gmail.com
University of Lahore Sargodha campus