Glbalisation

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Glbalisation

  1. 1. Globalisation
  2. 2. Meaning  Globalisation is a way of corporate life necessitated, facilitated and nourished by the world economy.  Expansion of economic activities across political boundaries of the nation state.  It refers to the process of increasing economic integration and growing economic interdependence between countries in the world economy.  It encompasses the following      Doing, planning to expand business globally No distinction between domestic market and foreign market Planning product development on the global market consideration Global sourcing of factors of production from the best source anywhere in the world Global orientation of organisational structure and management culture.
  3. 3. Drivers of Globalisation  Growing economic interdependence of countries worldwide through      International Trade International Capital flows Technology advancement Communication Population mobility
  4. 4. Stages of Globalisation Domestic Firm / moves To new market overseas International Firm Joint Venture / Subsidiaries Set up there own manufacturing, marketing and sales in foreign land Multinational Firm Global Firm
  5. 5. Essential Conditions of Globalisation  Business Freedom / Economic Liberalisation: No unnecessary Govt restrictions  Facilities: Infrastructural facilities available in the home country.  Government support: Policy and procedural reforms, financial market reforms, R & D support .  Resources: Finance, technology, R& D capabilities, company brand image, human resources  Competitiveness: Competitive advantage of the company is an important determinant of success in global business.
  6. 6. Benefits of Globalisation 1) Promotes Foreign capital 2) Increase in competition would make companies more cost and quality conscious. 3) Global competition keeps a check on prices. 4) It improves standard of living 5) Enhances consumer choice and surplus 6) Better pay package 7) Gives encouragement to innovation 8) Opens up opportunities for firms in developing countries. 9) Capital flow gives the country access to foreign investment and keep the interest rate low.
  7. 7. Challenges of Globalisation Globalisation gives lot of challenges for the firms and nations. Like:  Attracting foreign investment  Globalisation may increases the economic inequality. Therefore globalisation should be accompanied by socio-economic reforms.  Merger and acquisition pose a challenge to government for ensuring fair competition. An effective policy to safeguard domestic companies is required.  Rise in domestic unemployment of unskilled labour, which needs to be absorbed  Increase competition worldwide, as only efficient firms can survive.
  8. 8. Challenges of Globalisation  Sometimes domestic- smaller / medium firms (domestic firms) have an edge over multinationals in respect of standardisation , adaptability, better knowledge of consumer taste and preferences. So domestic firms need to induce technology of MNCs.  Technology of MNCs may not suit the host country.  Dumping of obsolete technology.  Replacement of traditional and indigenous products by modern products resulting in ruin of traditional crafts and industries.  Globalisation could lead to serve the vested interest of certain sections.  Developed countries are putting more barriers to trade than developing countries. So countries to tackle the NTBs
  9. 9. India and Globalisation Obstacles  Govt Policy and Procedures:  High cost:  Poor infrastructure:  Obsolescence:  Resistance to change:  Poor quality Image:  Supply problem:  Small size:  Lack of experience  Limited R & D and marketing research  Trade barriers  Growing competition form developing countries.
  10. 10. India and Globalisation Advantages  Human Resources:  Wide Base:  Growing entrepreneurship:  Growing domestic Market  Competition  Niche Market  Competition
  11. 11. Regional Trade Agreements
  12. 12. RTA focus – not only true for India but it is a global reality 300 2007
  13. 13. Types of RTA’s
  14. 14.  Preferential Trade Agreement:  A grouping of countries where partial preference to trading partners are given. Central American Common Market (CACM)  Free Trade Area:  A grouping of countries to bring free trade between them.  North American Free Trade Area (NAFTA)  ASEAN Free Trade Area (AFTA)  EFTA ( European Free Trade Association)  LAFTA ( Latin america Free trade association)  Custom Union:  Eliminates all restrictions on Trade members but also adopts a uniform commercial policy against the non-member.  European Economic Community (EEC)
  15. 15.  Common Market:  It allows free movement of labour and capital in addition to having free movements of goods and having common commercial policy for non-members.  ECM ( European Common Market)  CACM ( Central American Common Market)  Economic Union:  Members countries have same economic policies, including monetary and fiscal policy.  EU ( European Union)

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