Roll no. Name 226 Nasit Janak 236 Patel Vidur 237 Patel Vikas 238 Patel Vinay 239 Pathak Denish 252 Savani Jay TYBBA (Div-2) Group Members.
Globalization The term Globalization refers to processes of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Advances in transportation and Telecommunications, infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities. Drivers of Globalization The media and almost every book on globalization and international business speak about different drivers of globalization and they can basically be separated into five different groups:. 1) Technological drivers Technology shaped and set the foundation for modern globalization.
Innovations in the transportation technology revolutionized the industry. The most important developments among these are the commercial jet aircraft and the concept of containerization in the late 1970s and 1980s. Inventions in the area of microprocessors and telecommunications enabled highly effective computing and communication at a low-cost level.
Finally the rapid growth of the Internet is the latest technological driver that created global business and e-commerce. 2) Political drivers Liberalized trading rules and deregulated markets lead to lowered tariffs and allowed foreign direct investments in almost all over the world. The institution of GATT (General Agreement on Tariffs and Trade) 1947 and the WTO (World Trade Organization) 1995 as well as the ongoing opening and privatization in Eastern Europe are only some examples of latest developments. 3) Market driversAs domestic markets become more and more saturated, the opportunities for growth are limited and global expanding is a way most organizations choose to overcome this situation. Common customer needs and the opportunity to use global marketing channels and transfer marketing to some extent are also incentives to choose internationalization. 4) Cost drivers Sourcing efficiency and costs vary from country to country and global firms can take advantage of this fact. Other cost drivers to globalization are the opportunity to build global scale economies and the high product development costs nowadays.
5) Competitive drivers with the global market, global inter- firm competition increases and organizations are forced to “play” international. Strong interdependences among countries and high two-way trades and FDI actions also support this driver. Hurdles of Globalization 1)Technological Barriers Standards-related trade measures, known in WTO parlance as technical barriers to trade play a critical role in shaping global trade. Governments, market participants, and other entities can use standards-related measures as an effective and efficient means of achieving legitimate commercial. regulations and testing, certification, and other procedures are involved in determining whether or not products conform to standards and technical regulations. Significant foreign trade barriers in the form of product standards, technical regulations and testing, certification, and other procedures are involved in determining whether or not products conform to standards and technical regulations. 2) Cultural BarriersIt is typically more difficult to do business in a foreign country than in one’s home country due to cultural barriers.
With the process of globalization and increasing global trade, it is unavoidable that different cultures will meet, conflict, and blend together. People from different cultures find it is hard to communicate not only due to language barriers but also cultural differences. It is typically more difficult to do business in a foreign country than in one’s home country, especially in the early stages when a firm is considering either physical investment in or product expansion to another country. Expansion planning requires an in- depth knowledge of existing market channels and suppliers, of consumer preferences and current purchase behavior, and of domestic and foreign rules and regulations.
3) Ethical Barriers Despite international trading laws and declarations, countries continue to face challenges around ethical trading and business practices. Although some argue that the increasing integration of financial markets between countries leads to more consistent and seamless trading practices, others point out that capital flows tend to favor the capital owners more than any other group. With increased international trade and global capital flows, critics argue that income disparities between the rich and poor are exacerbated, and industrialized nations grow in power at the expense of under-capitalized countries. Anti-globalization groups continue to protest what they view as the unethical trading practices of multinational businesses and capitalist nations, often targeting groups such as the WTO and IMF. 4) Economics Barriers Trade barriers are government-induced restrictions on international trade, which generally decrease overall economic efficiency. Trade barriers cause a limited choice of products and, therefore, would force customers to pay higher prices and accept inferior quality.
Trade barriers generally favor rich countries because these countries tend to set international trade policies and standards. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, which can be explained by the theory of comparative advantage.
The famous author and cheerleader for globalization, Thomas Friedman, in his book The World is Flat identified some key drivers of globalization. He called these factors the flatteners to denote the premise of the book that these factors were responsible for the flattening of the world.
In other words, globalization has ensured that all countries with minimum infrastructure and educated workforces have the same entry level meaning that there are no walls or barriers to trade and hence the world is flat. These flatteners or drivers of globalization include the rapid spread of IT and communications across the world, the massive investment in broadband technologies or enablers like fiber optic cables and undersea cables in the wake of the dotcom bubble and the adoption of English as the medium of instruction in many countries across the world. If we take the first driver of globalization, the integration of the global economy has mainly been due to the rapid spread of IT and communications that enabled countries like India and China to circumvent hitherto aspects that were holding them back.
In other words, the increasing interconnectedness was driven by real time communication between the West and the East which enabled these countries to reach out to wider markets and audiences in the Western countries. The classic example in this regard is India that has managed to tap into the booming market for IT and process outsourcing. As the next paragraph points out, China leveraged the spread of IT and communications technologies in a different manner. Further, the fact that China became a manufacturing powerhouse is largely due to the fact that though the country is still lagging behind in English speaking populace, it has been able to leverage the shift in jobs from the West to the East. The point here is that with IT, Communications and English spreading rapidly, India was able to leapfrog the Industrialization phase of Globalization whereas China drew strength from its youthful population as well as the tendency for business leaders in the West to look for ways and means of cutting costs.
The way in which western businesses invested in physical infrastructure to support the communications revolution during the dotcom bubble made the process of integration of the world economy easier. The point here is that after the dotcom bubble burst, there was excess capacity in the broadband infrastructure which meant that communications costs came down drastically. This is also proved by the rapid spread of mobile technologies in Africa, India and China that attests to the trend described here. Finally, since a major proportion of the worlds population was fluent in English, many of these countries could communicate with the West effectively as well as ensure that they understand the technical and financial aspects of the Western form of capitalism. In the case of China, the managers and the upper levels of its industries and companies were conversant with the Western methods of doing business that helped its cause greatly.
There are many drivers to the political, social, economic,technological and linguistic phenomenon of globalization. Theseinclude the global standardization of business, products andconsumer expectations from multinational corporations. There havealso been the elimination of political borders and barriers such asthrough the European Union and liberalization of visa regimesthroughout the world. Also the internet, English language, andAmericanization altogether remains continuing forces behindglobalization. Exchange rates are a very important part of what is referred to as 'comprehensive income.' Firms are required to recognize exchange rate gains and losses in their financial statements both under Generally Accepted Accounting Principles and International Financial Reporting Standards.
In firms that do business in the multi-national arena, these gains and losses can have a significant on cash flow; perhaps more importantly, these gains and losses suggest how well a firm manages its foreign contracts, and how well it understands the economies in which it operates. As a practical matter, exchange rates impact the Cost of Goods Sold of a firm.
Assume for the sake of argument that a firm enters into a long term contract to buy raw materials from a foreign supplier at a fixed price; now assume that the value of the dollar erodes relative to the foreign currency by 10%. The net result is an erosion of the economic value of the contract of 10%. INTERNATIONAL FIRM - simply do import and export - operates in foreign countries through licensing and franchising - managed by nationals of home country - concentrates in some countries or regions. GLOBAL FIRM - invests and is present in many countries - has affiliates, subsidiaries and branches in many countries - draws resources such as labor,capital and materials from a global pool - pursues global business strategy. An International firm can become a global firm by pursuing global business strategy. There are two forces that are driving the outsourcing of goods,services, and target market demographics. The first regardsmacroeconomic industrial restructuring under globalization.
Political Drivers Of Globalization
Thishas involved the outsourcing from Western economies to thedeveloping and rising economies. Specifically these have been inthe context of the BRIC (Brazil, Russia, India and China) states.The second force has been seeking decreases in labor cost, throughshifting production to these economies for export. Marketing hascorresponded to these shifts by focusing on these new and emergingmarkets.
Globalization is a powerful result of the New World system. It represents one of the most influential forces in determining the future course of business. The term was first coined in the 1980’s. We define globalization as the democratizing of access to local market knowledge, customer information, services, products, and capital across national, cultural, and linguistic boundaries. As Thomas Friedman writes in The Lexus and the Olive Tree: Understanding Globalization, this new period of globalization started in 1989 with the falling of the Berlin Wall. Before the falling of the Berlin Wall globalization was based on Capitalism vs. Three Key Drivers For Globalization First driver is the commoditization of the Information and Communication Technology (ICT) infrastructure, computers, software, and Internet.
According to Friedman, “These technologies are able to weave the world together even tighter.” This deep global integration sets the stage for the second driver, the development of world trading systems and standards–leading to free trade, removal of barriers to trade, democratization of capital and investment barriers, and knowledge transfer. These two are now fueling the third driver, economic expansion of emerging markets and new business venturing.
Entrepreneurial Capitalism is expanding around the world. For example, The Global Entrepreneurship Monitor reports that there are more than 500 million adults actively involved in entrepreneurial activities around the world. China and India are two countries leading this pervasive adoption of free-market ideology and the introduction of free enterprise, entrepreneurial capitalism into their societies. In fact, there are more than 100 million entrepreneurs in each of these two countries.
But for this entrepreneurial activity to create any such value, these emerging markets need laws clearly defining ownership and protection for tangible and intangible property rights. Entrepreneurial activity and innovation require strong property rights and rules defining the protection of intellectual property. It is clear that without strong forms of protection for property rights, many useful products would never be developed at all.
We have witnessed that such laws that reduce risk also fuel private equity investments, which in turn elevate economic productivity.
ADVERTISEMENTS: Refers to one of the crucial factors of globalization. Since 1990s, enhancement in telecommunications and Information Technology (IT) has marked remarkable improvements in access of information and increase in economic activities.
This advancement in technologies has led to the growth of various sectors of economies throughout the world. Apart from this, the advancement in technology and improved communication network has facilitated the exchange of goods and services, resources, and ideas, irrespective of geographical location. In this way, advanced technologies have led to economic globalization. (b) Reduction in Cross-trade Barriers: Refer to one of the critical forces of globalization.
Every- country restricts the movement of goods and services across its border. It imposes tariffs and quotas on the goods and services imported in its country. In addition, the random changes in the regulations create a chaos in global business environment.
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Such practices impose limits on international business activities. However, gradual relief in the cross-border trade restrictions by most governments induces free trade, which, in turn, increases the growth rate of an economy.
(c) Increase in Consumer Demand: Acts as a main driver to facilitate globalization. Over the years, with increase in the level of income and standard of living, the demand of consumers for various products has also increased.
Apart from this, nowadays, consumers are well aware about products and services available in other countries, which impel many organizations to work in association with foreign players for catering to the needs of the domestic market. (d) High Competition: Constitutes an important driver for bringing about globalization. An organization generally strives hard to grain competitive edge in the market. Windows ce 7.0 download. The frequent increase in competition in the domestic market compels organizations to go global. Thus, various organizations enter other countries (for selling goods and services) to expand their market share.