Globalisation

Rajat Bansal Chirag Dua Nitin Kaushik

The International Monetary Fund (IMF) define globalisation as the growing economic interdependence of countries world wide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology. Globalization (or globalisation) describes the process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. However, globalization is usually recognized as being driven by a combination of economic, technological, sociocultural, political, and biological factors.The term can also refer to the transnational circulation of ideas, languages, or popular culture.

Level of globalisation
There are two level of globalisation := 1. Macro Level (globalisation of the world economy) 2. Micro Level (globalisation of the business and the firm) Globalisation of world economy

A global or transnational economy is one which transcends the national borders unhindered by artificial restrictions like Government restrictions on trade and factor movements. Globalisation is a process of development of the world into a single integrated economic unit. The transnational economy is different from international economy. The international economy is characterised by the existence of different national economies the economic relations between them being regulated by the national Governments.

The transnational economy is a borderless world economy characterized by free flow of trade and factors of production across national borders. The transnational economy is characterised by :=

1. It is shaped mainly by money flows rather than by trade in goods and services. These money flows have their own dynamics. 2. In the transnational economy the goal is market maximisation and not profit maximisation. 3. Trade, is becoming a function of investment. 4. The decision making power is shifting from the national state to the region. 5. There is a genuine and almost autonomous world economy of money, credit and investment flows. It is organised by information which no longer knows national boundaries.

Globalisation of Business Globalisation in its true sense is a way of corporate life necessitated, facilitated and nourished by the transnationalisation of the world economy and developed by corporate strategies. Globalisation is an attitude of mind it is a mind-set which views the entire world as a single market so that the corporate strategy is based on the dynamics of the global business environment. International marketing or international investment does not amount to globalisation unless it is the result of such a global orientation. It do the following doing, or planning to expand, business globally. Giving up the distinction between the domestic market and foreign market and developing a global outlook of the business.

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the production and other physical facilities on a consideration of the global business dynamics, irrespective of national considerations. Global sourcing of factors of production i.e. raw material, componenets , machinery, technology, finance etc. are obtained from the best source anywhere in the world.

Positive effects of globalisation

Globalization has various aspects which affect the world in several different ways Industrial - emergence of worldwide production markets and broader access to a range of foreign products for consumers and companies. Particularly movement of material and goods between and within national boundaries. International trade in manufactured goods increased more than 100 times (from $95 billion to $12 trillion) in the 50 years since 1955. China's trade with Africa rose sevenfold during 2000-07 alone.

Financial - emergence of worldwide financial markets and better access to external financing for borrowers. By the early part of the 21st century more than $1.5 trillion in national currencies were traded daily to support the expanded levels of trade and investment. As these worldwide structures grew more quickly than any transnational regulatory regime, the instability of the global financial infrastructure dramatically increased, as evidenced by the Financial crisis of 20072010. Economic - realization of a global common market, based on the freedom of exchange of goods and capital.The interconnectedness of these markets, however, meant that an economic collapse in one area could impact other areas. With globalization, companies can produce goods and services in the lowest cost location. This may cause jobs to be moved to locations that have the lowest wages, least worker protection and lowest health benefits. For Industrial activities this may cause production to move to areas with the least pollution regulations or worker safety regulations.

Informational - increase in information flows between geographically remote locations. this is a technological change with the advent of fibre optic communications, satellites, and increased availability of telephone and Internet.

Language - the most popular first language is Mandarin (845 million speakers) followed by Spanish (329 million speakers) and English (328 million speakers). However the most popular second language is undoubtedly English, the "lingua franca" of globalization: About 35% of the world's mail, telexes, and cables are in English. Approximately 40% of the world's radio programs are in English. About 50% of all Internet traffic uses English.

Cultural - the desire to increase one's standard of living and enjoy foreign products and ideas, adopt new technology and practices, and participate in a "world culture". Technical - Development of a Global Information System, global telecommunications infrastructure and greater transborder data flow, using such technologies as the Internet, communication satellites, submarine fiber optic cable, and wireless telephones Increase in the number of standards applied globally; e.g., copyright laws, patents and world trade agreements.

Negative effects Globalization has generated significant international opposition over concerns that it has increased inequality and environmental degradation. In the Midwestern United States, globalization has eaten away at its competitive edge in industry and agriculture, lowering the quality of life.

Brain drain Opportunities in richer countries drives talent away from poorer countries, leading to brain drains. Brain drain has cost the African continent over $4.1 billion in the employment of 150,000 expatriate professionals annually. Indian students going abroad for their higher studies costs India a foreign exchange outflow of $10 billion annually.

Disease Globalization has also helped to spread some of the deadliest infectious diseases known to humans.Starting in Asia, the Black Death killed at least one-third of Europe's population in the 14th century. Even worse devastation was inflicted on the American supercontinent by European arrivals. 90% of the populations of the civilizations of the "New World" such as the Aztec, Maya, and Inca were killed by small pox brought by European colonization. Modern modes of transportation allow more people and products to travel around the world at a faster pace, but they also open the airways to the transcontinental movement of infectious disease vectors. One example of this occurring is AIDS/HIV. Due to immigration, approximately 500,000 people in the United States are believed to be infected with Chagas disease. In 2006, the tuberculosis (TB) rate among foreign-born persons in the United States was 9.5 times that of U.S.-born persons.

Drug and illicit goods trade The United Nations Office on Drugs and Crime (UNODC) issued a report that the global drug trade generates more than $320 billion a year in revenues.Worldwide, the UN estimates there are more than 50 million regular users of heroin, cocaine and synthetic drugs. The international trade of endangered species is second only to drug trafficking. Traditional Chinese medicine often incorporates ingredients from all parts of plants, the leaf, stem, flower, root, and also ingredients from animals and minerals. The use of parts of endangered species (such as seahorses, rhinoceros horns, saiga antelope horns, and tiger bones and claws) has created controversy and resulted in a black market of poachers who hunt restricted animals. In 2003, 29% of open sea fisheries were in a state of collapse.

Essentials conditions for Globalisation

There are some essential conditions to be satisfied on the part of the domestic economy as well as the firm for successful globalisation of the business. They are:= Business freedom := there should not be unnecessary Government restrictions which come in the way of globalisation, like import restriction, restrictions on sourcing finance and other factors from abroad, foreign investments etc. that is why the economic liberalisation is regarded as a first steps towards facilitating globalisation. Facilities := the extent to which an enterprise can develop globally from home country base depends on the facilities available like the infrastructural facilities.

Government Support := although unnecessary government interference is a hindrance to globalisation, government support can encourage Globalisation. Government support may take the form of policy and procedural reforms, development of common facilities like infrastructural facilities, R & D support, financial market and so on. Resources:= resources is one of the important factors which often decides the ability of a firm to globalise. Resourceful, companies may find it easier ti thrust ahead in the global market. Resources include finance, technology , R & D capabilities, managerial expretise, company and brand image, human resource etc. it should, be noted that many small firms have been very successful in international business because of one or other advantage they possess.

Competitiveness := the competitive advantage of the company is a very importance determinant of success in global business. A firm may derive competitive advantage from any one or more of the factors such as low costs and price , product quality, product differentiation ,technological superiority, after sales service, marketing strength etc. Sometimes small firms may have an edge over others in certain aspects or times of business.

Globalisation of Indian Business

Indias economic integration with the rest of the world was very limited because of the restrictive economic policies followed until 1991. Indian firms confined themselves, by and large, to the home market. Foreign investment by Indian firms was very insignificant. With the new economic policy ushered in 1991, there has, however, been a change. Globalisation has in fact become a buzz-word with Indian firms now, and many are expanding their overseas business by different strategies.