1. UNIT-II
globalization AND
LIBERALIZATION

2. Globalization
• Globalization is a word that has several connotations
today. But broadly speaking, it is a process which
began around the late 1970s, by the shift in world
economy from an international to a more global
one. In the international economy, individuals and
firms from different countries traded goods and
services across national boundaries, and the trade
was closely regulated by nation-states. In the global
economy, goods and services are produced and
marketed by an oligopolistic web of global corporate
networks whose operations, although spanning
several national boundaries, are only loosely
regulated by nation-states.

3. •
•
•
•
•
Globalization is also called internationalisation.
globalization is
A set of fresh beleifs
Working methods
Economic, political and socio-cultural realities
in which the previous assumptions are no longer
valid.

4. For Developing countries
• It means integration with the world economy
• In economic terms Globalization refers to the
process of integration of the world into one huge
market. Such unification calls for the removal of
all trade barriers among countries. Even political
and Geographical barriers become irrelevant.

5. At the company level globalization
means two things:
• The company commits itself heavily with several
manufacturing locations around the world and
offers products in several diversified industries
and
• It also means the ability to compete in domestic
markets with foreign competitors.

6. Characteristics of a global company
• It is a conglomerate of multiple units.(located in
different parts of the globe)but all linked by
common ownership.
• Multiple units draw on acommon pool of
resources such as money, credit, information,
patents, trade names and control systems.
• The units respond to some common strategy.
• Product presence in different markets of the
world.

7. Characteristics of a global company
• Transactions involving intellectual properties
such as copyrights, patents, trade marks and
process technology across the globe.

8. Assessing corporate Globality
Globalization of
capital
Globalization
of corporate
mind set
Globalization
of supply
chain
Globalization
of market
presence

9. • Globalization of capital base refers to the extent
of which the company is accessing capital
markets for financial resources
• Globalization of mind set refers to the ability of
the company to understand and integrate
diversity across cultures and markets.
• Globalization of supply chain refers to the extent
to which the company is accessing the optimal
locations for the performance of various
activities in its supply chain.

10. • Globalization of market presence refers to the
extent to which company targets customers in all
major markets across the globe.

11. Levels of globalization
•
•
•
•
globalization at the World level
globalization at the level of a specific country
globalization at the level of a specific industry.
globalization at the level of a specific company.

12. Factors influencing Globalization
• Dismantling of barriers to international
economic transactions.
• Over-capacity and over production.
• Technological advances.
• Emerging forms of industrial organization.
• Political factors.
• The intellectual rationale.

13. globalization strategy for a company:
• Which product line or lines should be used as
the launch vehicle for globalization.
• Which markets should be entered first.
• What would be optimal mode of market entry.
• How rapidly should the company expand
globally

14. Consequences of globalization for
India
• Led to unequal competition giant MNC’s and
dwarf Indian companies.
• The globalization of the Indian economy is like
integrating a mouse into a herd of elephants.
• Opportunities for MNC’s to raid and takeover
Indian enterprises, inability to meet the
challenges from MNC’s due to weak economic
strength vis-à-vis MNC’s.
• Size disadvantages

15. Consequences of globalization for
India
• Up to 1991, operated in a protectionist
environment.
• The cost of capital for Indian business is much
higher than MNC’s.
• Immense financial strength of MNC’s they can
bear losses for more time in any line of business.
• They can buyout any Indian firm they like.
• Indian firms cannot reduce labour but MNC’s
can easily adopt modern technology nd reduce
labour requirements.

16. Consequences of globalization for
India
• High, multiple and indirect taxes at local level
are not applicable to foreign imports- making
Indian goods uncompetitive.
• In some areas, state has pursued policies that
have clearly discriminated in favour of
MNC’s.(power sector)
• Parlebrands(thumpsup, limca) to coca-cola.
• HLL( Brookebond, ponds, lakme, kissan, tomco,
dollops).

17. • Top 50 companies of the country hold 20% stake
by may 2004. FIIs now own 20% of top 50 of the
country.

18. Economic Reform Strategies
•
•
•
•
•
•
•
•
•
•
Open economy
Integrate with world markets
Market determined economic growth
Export oriented strategies
Deli censing, deregulation, de bureaucratization
Selective and effective state interactions
Market determined prices at large
Contain all kinds of deficits
Deflationary monetary and fiscal policies
Private investment as growth engine

19. Economic Reform Strategies
•
•
•
•
•
•
•
•
•
•
Withdrawal from the area of private interest
Minimize gap between public and private sector
Inducement to FDI and MNC’s.
Liberalization of restrictions.
Deregulation of interest rates
Credit policy terms
Reforms in capital market
Minimise public sector budgetary resources
Tax reforms

20. The main characteristics of new
Economic Policy 1991 are:
• 1. De licensing. Only six industries were kept
under Licensing scheme.
• 2. Entry to Private Sector. The role of public
sector was limited only to four industries; rest all
the industries were opened for private sector
also.
• 3. Disinvestment. Disinvestment was carried out
in many public sector enterprises.

21. • Liberalization of Foreign Policy. The limit of foreign
equity was raised to 100% in many activities, i.e.,
NRI and foreign investors were permitted to invest
in Indian companies.
• 5. Liberalization in Technical Area. Automatic
permission was given to Indian companies for
signing technology agreements with foreign
companies.
• 6. Setting up of Foreign Investment Promotion
Board (FIPB). This board was set up to promote and
bring foreign investment in India.
• 7. Setting up of Small Scale Industries. Various
benefits were offered to small scale industries.
•

22. Three Major Components or
Elements of New Economic Policy:
1. Liberalisation:
Liberalisation refers to end of licence, quota and many more
restrictions and controls which were put on industries before
1991. Indian companies got liberalisation in the following
way:
(a) Abolition of licence except in few.
(b) No restriction on expansion or contraction of business
activities.
(c) Freedom in fixing prices.
(d) Liberalisation in import and export.
(e) Easy and simplifying the procedure to attract foreign capital
in India.
(f) Freedom in movement of goods and services
(g) Freedom in fixing the prices of goods and services.

23. 2. Privatization:
• Privatization refers to giving greater role to private sector and
reducing the role of public sector. To execute policy of
privatization government took the following steps:
• (a) Disinvestment of public sector, i.e., transfer of public
sector enterprise to private sector
• (b) Setting up of Board of Industrial and Financial
Reconstruction (BIFR). This board was set up to revive sick
units in public sector enterprises suffering loss.
• (c) Dilution of Stake of the Government. If in the process of
disinvestments private sector acquires more than 51% shares
then it results in transfer of ownership and management to
the private sector.

24. 3.globalization:
It refers to integration of various economies of world.
Till 1991 Indian government was following strict policy
in regard to import and foreign investment in regard to
licensing of imports, tariff, restrictions, etc. but after
new policy government adopted policy of globalization
by taking following measures:
(i) Import Liberalisation. Government removed many
restrictions from import of capital goods.
(ii) Foreign Exchange Regulation Act (FERA) was
replaced by Foreign Exchange Management Act
(FEMA)
(iii) Rationalisation of Tariff structure

25. (iv)Abolition of Export duty.
(v) Reduction of Import duty.
As a result of globalization physical boundaries
and political boundaries remained no barriers
for business enterprise. Whole world becomes a
global village.
globalization involves greater interaction and
interdependence among the various nations of
global economy.

26. Impact of Changes in Economic Policy
on the Business or Effects
of Liberalization and globalization:
1. Increasing Competition
2. More Demanding Customers
3. Rapidly Changing Technological Environment
4. Necessity for Change
5. Need for Developing Human Resources
6. Market Orientation( from selling to marketing
concept)
7. Loss of Budgetary Support to Public Sector
8. Export a Matter of Survival

27. Thank you