What is Globalisation?Globalised World - What does it mean?Does it mean the fast movement of people which results in greaterinteraction?Does it mean that because of IT revolution people can be in touch with eachother in any part of the world?Does it mean trade and economy of each country is open in Non-Intrusiveway so that all varieties are available to consumer of his choice?Does it mean that mankind has achieved emancipation to a level of wherewe can say it means a social, economic and political globalisation?
Globalisation is a process where an increased proportion ofeconomic, social and cultural activity is carried out across nationalborders. The process of globalisation has significant economic,business and social implications.International Monetary Fund said, “The process through which anincreasingly free flow of ideas, people, goods, services and capitalleads to the integration of economies and societies”OCED“The geographic dispersion of industrial and service activities, forexample research and development, sourcing of inputs, productionand distribution, and the cross-border networking of companies, forexample through joint ventures and the sharing of assets”
Globalisation is perhaps best thought of as a process that results in somesignificant changes for markets and businesses to address: for example• An expansion of trade in goods and services between countries• An increase in transfers of financial capital across national boundariesincluding foreign direct investment (FDI) by multi-national companies andthe investments by sovereign wealth funds• The internationalisation of products and services and the developmentof global brands• Shifts in production and consumption – e.g. the expansion ofoutsourcing and offshoring of production and support services• Increased levels of labour migration
India opened up the economy in the early nineties following a major crisis that ledby a foreign exchange crunch that dragged the economy close to defaulting onloans. The response was a slew of Domestic and external sector policy measurespartly prompted by the immediate needs and partly by the demand of themultilateral organisations.Major measures initiated as a part of the liberalisation and globalisation strategy inthe early nineties included scrapping of the industrial licensing regime, reduction inthe number of areas reserved for the public sector, amendment of the monopoliesand the restrictive trade practices act, start of the privatisation programme, reductionin tariff rates and change over to market determined exchange rates.Impact in India:-The Indian tariff rates reduced sharply over the decade from a weighted average of72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates went up slowly in the latenineties it touched 35.1% in 2001-02. India is committed to reduced tariff rates.Peak tariff rates are to be reduced to be reduced to the minimum with a peak rate of20%, in another 2 years most non-tariff barriers have been dismantled by march2002, including almost all quantitative restrictions.
Globalization offers businesses access to large newmarkets and new labor forces.A positive relationship between a business and society helps thebusiness grow and makes it more profitable. Globalization occurswhen a business, which has a headquarters in one country, sellsproducts or opens stores in another country, expanding its market andinvesting in foreign economies. Globalization has changed with theinvention of the Internet, and now businesses are becoming moresensitive to the benefits of relationships between them and societies
Benefits of Business Globalisation:-Accessibility of Necessities:-Business globalization opens new markets around the world, allowing abusiness to sell products to many different countries. Amongst these productsare valuable, necessary resources, such as medicines and food. The opening ofthese markets allows multiple societies to benefit from each medical advance.Spread Business Practices :-Globalization creates an environment of global awareness, where companiescan be held responsible for unethical business practices in foreign countries.The result is a heightened awareness about the necessity to provide consistentbusiness practices in different countries. As businesses expand investments toother countries, they create job opportunities and new markets in thesecountries. Similarly, they also spread their business practices.
Objection to Outsourcing :-The rising concern over outsourcing, and the potential domestic jobs lost,creates a hostile relationship between domestic society and businesses, whichoutsource some of their labor force. The impression is that foreign labor forcesare luring domestic businesses to open chains elsewhere at a time whendomestic unemployment is high. Whether this claim is true, the impact of thisis an increasingly hostile relationship and feelings of resentment.Internet Globalization:-Businesses began globalizing more than a century ago, but the recent inventionof the Internet changed the environment of this globalization. Today,businesses have a heightened impetus to utilize good business practiceselsewhere in the world, as businesses are held responsible to the increase incommunication between societies. As an example, if the Indian departmentchain chose to pay employees a shockingly low wage, the business runs therisk of Internet exposure due to the increased opportunities of employees fromeach chain talking to each other and the availability of the Internet to make thisclaim public.
The relationship between government and business is complex, with bothpositive and negative aspects in terms of what can be called the "public good."To make things even more complex, notions of the public good changedepending on a persons ideology.
An accurate and complete understanding of Business andGovernment relationship necessitates an examination of thethree main theories of political economy:-The Free MarketThe first theory of political economy revolves closely around the idea of"laissez faire" capitalism. Translated effectively as "let it be," this systemproposes that there be little or no formal relationship between business andgovernment.SocialismIn response to inequalities inherent in a system of open competition, socialismproposes action to ensure economic equality for the entire population..According to socialism, the public good is seen in terms of economic equalityand of checking the exploitative power of business. Therefore, the only remedywould be for the government, on behalf of the people, to take control ofbusiness and direct what goods would be produced at what prices.
The Third ApproachBusiness fully controlled by government would inherently lead to inefficiency and alowering of the standard of living, and a purely free market system would tend toundermine itself in the long run, and lead to an unstable social situation due toinequalities and contradictions. It was the role of the government to push the privatesector into socially desired outcomes, but to leave it alone in terms of how thoseoutcomes should be accomplished.Keynes and the DepressionMany of Keyness ideas featured prominently in the policies of the Rooseveltadministration during the Depression of the 1930s. Government infrastructure projectsand the "New Deal," for example, were seen as measures the government could take inorder to stabilize the economy and promote new growth when systemic issues could notbe resolved by the free market alone.The Current RelationshipCurrently, most developed countries use a variation of Keyness policies, allowing alarge degree of private business while maintaining strict regulation of certain aspects ofthe economy through the government. Todays relationship between government andbusiness is thus neither lassez faire nor socialist, but rather a combination of both,essentially what is called a "mixed economy."
Is Business and Government relation beneficial?Government entities purchase goods and services from the private sector, but they alsoform partnerships with businesses. The government provides financial stability to theproject while the business provides its expertise, technology and other assets such as landor manufacturing capacity.Financial CapacityThe enormous taxing authority of the federal government, as well as the states, allowsthese entities to allocate funds in the many millions and even billions of dollars to projectsand partnerships. Putting together financing packages this large is difficult for the privatesector to do alone.Funding Projects for the Public GoodWithout government involvement in the form of directly financing a project or providingloan guarantees or other assistance, certain projects that have a positive impact on societywould not get done -- or at the very least, they would get done more slowly.
PrestigeFor a business, participating in a high-profile partnership with thegovernment can add prestige and visibility, making it easier toobtain private-sector clients in the future. Being able to include thefederal, state or local government on a client list is a valuablemarketing tool.Low Financial RiskDepending on one customer for the majority of a companysrevenue is considered risky by most business owners. If thecustomer runs into financial difficulty, payments due to thecompany could be at risk. When partnering with the government,this risk is lessened because governments have ongoing revenuesfrom taxes collected and also have borrowing capacity to meet theirobligations.
Some Drawbacks:-Slow Pace of BureaucracyThe approval process from the businesss standpoint can be extremely slow, involvingmultiple meetings and presentations over a protracted period of time. Governmententities have formal bidding processes that require the submission of detailed proposalsthat are reviewed by multiple departments. For private companies used to acting quickly,building a relationship with a government entity can seem like an extremely slowprocess.Government Chooses Who WinsCritics of business and government partnerships say that they sometimes circumvent thefree enterprise system and allow the government to choose which companies are thewinners in the funding process, rather than the company having to be vetted by theprofessional investment community.Political Shifts Can Negate PartnershipsThe leadership in the federal, state and local government can change with each election.The new leaders might not be inclined to proceed with government and businesspartnerships established by their predecessors. In some cases, the terms of previous dealsmight be renegotiated because of budgetary concerns within the government entity.