Globalization Vau

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Globalization

INTRODUCTION


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Why study globalization1. As a consumer : To know about the products

2. As Managers: To broaden business knowledgehorizon and know international facts

3. Students : To prepare them for international

challenges

4. For relative competitiveness : Best practices

5. Government: For the nation to be a world player

6. Employment opportunities

7. To understand global business procedures


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We are moving away from self containedeconomies

ToBarrierless, trade restriction free, multi-cultural,

high tech, competitive business

All enterprises want to do business all over theglobe

What is globalization

Integration of world economies by reduction ofbarriers to the movement oftrade,capital,technology and people.


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Evolution of International business Ancient civilizations had trade across oceans

It is a vibrant economic force of globalization.

By late 18th century Industrial revolution inBritain made them the worlds traders

USA has assumed world leadership

Birth of multinational corporations MNC s ormultinational enterprises-MNEsmid 19th

century Birth of international institutions-Bretton

Woods Agreement,IMF,World Bank,WTO etc


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Indias early trade-history Since ancient times

Exports to West-spices, cloth, jewels,commodities like sugar, rice

Steel was known for purity

Balance of trade was favorable Export to China continued till early 20th

century

Export to Europe

In return India wanted gold


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Why and nature of globalization We get better quality,variety and price.

International business consists of all commercialtransactions including Sales,Investments andtransportation that take place between two ormore nations.

Why should a firm go abroad?

PROACTIVE REASONS

1. Organizational and environmental reasons

2. Monopolistic advantage

3. Cheaper sources of RM and labor and otherresources

4. Technical superiority,patents etc


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Reasons for MNE formation-contd Life cycle of its products

Stage 1 : Introduction and growth-Non MNEStage 2: Maturity :Novelty is lost,competitors

arrive

Firms look abroad for RM,export ,etcStage 3 :Standardization/Decline

Set up firms abroad to gain economic

advantage and also to sell there since theproduct is still new


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Reasons -continued

Internal organizational and industry reasons

a)Exploiting worldwide mkt imperfections

b)Exploiting opportunities arising from life cycle External and environmental reasons

a) Responding to macroeconomic imperitives

b) Exploiting competitive advantage of nations


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Process of globalization Propelled by

1. Globalization of capital markets(Includinggrowth and volatility of currency markets and

interest rates)

2. Declining costs of transportation andcommunication

3. Growth of regional and international trading

agreements


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MNE and competitive advantage of nations

Michael Porter

1. Factor conditions : Do the nations factors of

production help for competing successfully?

2. Demand conditions: Are the markets highly

demanding in terms of price, quality of the

product?

3. Related and supporting industries: Are they

nearby?

4. Firm structure, strategy and rivalry :


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Nature of international business1. Product presence in different world mkts

2. Production bases across globe3. Human resource to contain high diversity

4. Investment in International services likebanking,tourism,advertising,construction etc

5. Transaction involving IP, copyrights ,patentsetc

GLOBALIZATION IS SYNONYMOUSLY USED WITH

INTERNATIONAL BUSINESS AND THE TWOARE INTERCHANGEABLE


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Four major dimensions

GLOBALIZATIN OF CORPORATE MINDSET

GLOBALIZATION OFCAPITAL

GLOBALIZATION OF SUPPLY

CHAINGLOBALIZATION OF MARKET


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Explanation of four major dimensions1. Globalization of market presence

2. Internationalization of supply chain3. Globalization of capital base

4. Globalization of Corporate mindset

A true globalized enterprise scores high on allthese parameters

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Stages of globalization

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