International Business

Globalisation
Driving & Restraining forces

Globalization : Definitions Economic Definition Globalization may be defined as the process of integration of economies across the world through cross-border flow of factors, products and information.
Corporate Definition Globalization in its true sense is a way of corporate life necessitated, facilitated and nourished by the transnationalization of the world economy and developed by corporate strategies. Globalisation is an attitude of mind which views the entire world as a single market so that the corporate strategy is based on the dynamics of the global business environment.

Globalisation Globalisation is an attitude which looks at the world as one market and corporate strategy is based on the dynamics of global environment. Globalisation has the following characteristics features: 1. Operating and planning to expand business globally. 2. Renunciation of distinction between domestic and foreign markets and developing a global business attitude. 3. Establishing production and distribution facilities in various parts of the world based on global business dynamics. 4. Product development and production planning are based on global market environment.

5. 6.

Global sourcing of productive factors. Global orientation in organisational structure, culture, strategies and management techniques.

Approach towards Globalisation 1. Ethenocentric 2. Polycentric

3.
4.

Regiocentric
Geocentric

Driving and Restraining Forces of Globalisation There are number of forces which induce and propel globalisation and thereby expand the scope and importance of international business. On the other hand there are also forces which restrain globalisation. Driving Forces Liberalisation Universal economic policy of liberalisation fostering a seamless business world. GATT/WTO policies Revolutionary policy changes as in China (turn of the century), RPA countries(late 80s) LPG surge in M&A, FDI resulting in greater global economic integration

 MNCs
Linking resources and objectives with world market opportunities taking advantage of liberalisation Technology Powerful driving force Technological breakthroughs are substantially increasing the scale economies and the market scale required to break-even Transportation and Communication Revolution Reducing disadvantage of distance and cost Development in the field of air and sea cargo- containerisation, Referigeration (cryogenic tanks), LNG, LSWR, Perishable goods, Floral, Food stuff, quick changes in fashion and design. IT & Telecommunication Revolution

 Product Development cost and efforts Huge R&D and development cost/ investment - huge global market Fast technological changes- Risk of obsolescence-quick payback Quality and Cost The two most important determinants of demand. Can be better achieved when a firm is global in its operations Rising Aspirations and Wants Innovative ideas, breakthrough improvements-3 dimentions- bottom line, customer satisfaction, reduction in cycle time. Competition Exploring new markets, risk taking, diversification, new ownerships World Economic Trends Difference in growth rates developed and developing countries

Domestic rapid economic growth-large number of playersexploiting opportunities outside the country- China Regional Integration The proliferation of regional integration schemes European Union(EU), South Asian Association for Regional Cooperation(SAARC), North American Free Trade Agreement (NAFTA) Creates a borderless region between the members Financial flows Leverages A global company can leverage its experience to expand its global operations. According to Keegan Leverage is simply some type of advantage that a company enjoys by virtue of the fact that it conducts business in more than one country

Global company posses the following four important types of leverages. 1.Experience transfers 2.Scale economies 3.Resource utilisation 4.Global strategy
Keegan observes that the global companys greatest single advantage can be its global strategy. A global strategy built on an information system that scans the world business environment to identify opportunities, trends, threats and resources. When opportuninities are identified, the global company adheres to the three principles identified earlier. It leverages its skills and focuses its resources to creates superior perceived value for customers and achievecompetitive advantage. The global strategy is a design to create a winning offering on a global scale. This takes great discipline, much creativity, and constant effort. The reward is not just success it is survival and sustainance.

Restraining Forces. There are two types of factors, which hamper globalisation. External factors Government policies and controls Social and political opposition against foreign business etc Internal factors Factors within the organisation myopic approach-nearsightedness Organisational culture may hamper or pamper

Future of International Business

There are several trends that would make globalisation and international business more pronounced in future. 1. Globalisation of supply chain and operations management. 2. International Investments. 3. Information surge and consumer choice. 4. World growth 5. Domination of the world economy.(decline of the power of nations
like US to pressurise policies and behaviour of other nations)

6.

Trade cycle decision rule.(The old trade cycle model which implied
that as a product matures the location of production must shift to low wage countries. For any product in which labour is less than say 15 to 20 % of total costs, the location of production of mature products may be anywhere in the world. ex. Automobile industry.)

7. Pervasiveness of free markets. ( The fall of communism and socialism

and the resultant ubiquitous market economy and globalisation are stupendously expanding the scope of international marketing.)

8. Accelrating growth of Global markets. 9. The rise of the Internet and Information Technology.

International Business
Essential conditions for Globalisation Governments of various countries should provide the following conditions for smoothening the process of globalisation. 1. Liberalising the rules and regulations of control. 2. Removal of quotas and tariffs. 3. Providing freedom to the business and industry. 4. Providing infrastructural facilities. 5. Removal of bureaucratic hurdles. 6. Encouraging Research & Development. 7. Encouraging competitiveness based on quality, price, delivery, customer service, etc. 8. Providing autonomy to the public sector to compete with private sector companies.

International Business
9. Providing administrative and governmental support. 10. Developing money and capital markets.