Globalisation

Globalisation
 An economic phenomenon?
 A social phenomenon?
 A cultural phenomenon?
What Is Globalization?

 Globalization is a process of interaction and

integration among the people, companies, and
governments of different nations, a process driven
by international trade and investment
 The movement towards the expansion of economic
and social ties between countries through the
spread of corporate institutions and the capitalist
philosophy that leads to the shrinking of the world
in economic terms.
Globalization
 This process has effects on the environment, on culture, on
political systems, on economic development and prosperity,
and on human physical well-being.
 Globalization means adopting a global outlook for business to
enhance global competitiveness
 Global companies stop thinking of themselves as national
marketers but as global marketers
 Views the entire world as a single market; does not
differentiate between home market & international market
 E.g. Honda - Japan
 Corporate Expansion
 Multi-nationals
– businesses with
headquarters
in one country but
with business
operations in a
number of others.

No matter where you go in the world, certain

businesses will always have a presence.
Why go Global ?
 Pull factors : proactive reasons- those
forces of attraction which pull the
business to the foreign markets e.g.
profitability & growth
 Push factors: reactive reasons-
compulsions of the domestic market
which prompt the companies to go
global
Why go Global ?....
 Profit advantage: enables optimum
economies of scale & reduces cost of
production
 Growth opportunities: enormous
growth potential of many foreign
markets e.g. China & India. Population
& income growing fast in many
developing countries
Why go Global ?....
 Scale economies: Technological
development has increased the size of
optimum scale of operation making it
necessary to have a foreign market
 e.g. S. Korea- due to thrust given to exports it
could set up economic size plants
 If for a chemical plant minimum economic
size plant is 35000 tonnes but demand is
10000 then waste of resources
Why go Global ?....
 Domestic market constraints:
 Domestic demand constraints, saturated or
declining demand in home country
 Growth possible only by going global
 e.g. USA for consumer durables
 e.g. Nestle derives only 2% of its total sales
from home market in Switzerland
 e.g. Philips derives only 8% of its total sales
from home market in Netherlands
Why go Global ?....
 Competition: may be a driving force.
 e.g. With liberalization in India since 1991 markets
have opened
 Government policies & Regulations: incentives &
positive support
 Spin- off benefits: global business has spin off
benefits – improve its domestic business, improve its
image, import technology etc due to foreign
exchange earned
 Strategic vision: urge to grow, be competitive, to
diversify, gain strategic advantage
Globalization...
 Made possible by:
 Technology
 Communication networks
 Internet access
 Growth of economic cooperation – trading blocs
(EU, NAFTA, etc.)
 Collapse of ‘communism’
 Movement to free trade
Globalisation

Globalisation
could involve
all these
things!
Globalization controversies
 Proponents of globalization argue that it allows
poor countries to develop economically and
raise their standards of living
 Opponents claim that creation of an unfettered
international market has benefited multinational
corporations in the Western world at the
expense of local enterprises, local cultures, and
common people
Benefits of globalization/trade
 Integration of Economies
 The increasing reliance of economies on each other
 The opportunities to be able to buy and sell in any
country in the world
 The opportunities for labour and capital to locate
anywhere in the world
 The growth of global markets in finance
 Increases in cross-border trade, investment, and
migration
Benefits of globalization/trade
 Increased choice
 Trade has led to massive increases in wealth for many
countries.
 Greater potential for growth
 Increase international economies of scale
 Greater employment opportunities
 Incidence of poverty is falling
 The wealth gap is narrowing
 Gap between richest 20 percent and poorest 20
percent falls
Disadvantages
of globalization/trade
 Increase in gap between the rich and the poor
 Dominance of global trade by the rich countries
 Lack of opportunities for the poor to be able to
have access to markets
 Exploitation of workers and growers
 Damage to the environment?
 Exploitation of labour?
 Monopoly power
 Damage to cultures