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Globalization

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Globalization - Meaning

• Any activity, Economic/Non-economic, crossing the international borders and en-gulping whole of the world;

• From marketing point of view, Integration of whole of the world into a Huge single Global Market;

• Helping and boosting the overall economy at the world level.

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Components of Globalization

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4 Major components

• Globalization of Markets• Globalization of Labor/Production• Globalization of Finance/Investments• Globalization of Technology

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Globalization of Markets

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Integration of World Markets• To cater to the Have(Surplus) and Have Not(Shortage) needs of foreign country

markets;• To suffice the production load by overseas companies (MNCs) since in-house

markets might not be sufficient i.e. Saturation of Home Country markets;• Exploiting the Mass Markets (Emerging Markets);• Changing Tastes & Preferences of consumers world over;• To target and fulfill the needs of customers who look for better products and

services & consider that foreign market products would be able to meet their specific requirement in a better way;

• Dismantling the Trade Barriers and facilitating across border trade among all countries of the world;

• Emergence of Institutions at international level viz. World Trade Organization, International Monetary Fund, World Banks, etc to facilitate the Global Trade;

• Fulfilling the individual Corporate World’s need of growth and exposition through the Global Market.

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Globalization of Production/Labor

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Integration of all qualities of Labor & Production at world level

• Availability of Natural Resources/Human Resources in Developing Countries, in abundance and at cheap rates, and converting them into finished products;

• Skills acquired by specific labors for specific jobs, (Technocrats, Software/Hardware engineers, Super Specialty Doctors,etc) and cost of production;

• Facilities of EXIM provided/supported by the Governments of various countries

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Globalization of Finance

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Integration of Resources of Funds exploiting all the possible Financial

Markets at world level• While Developed Countries are bestowed with Capital and Capital

Goods, Developing Countries do not have them and hence need capital to convert their natural resources into finished goods;

• Foreign Direct Investment (FDI) – (Growth & Promotion);• By controlling the equilibrium of Foreign Trade;• Direction of FDIs is re-focused on the Developing Countries, since

they have tremendous growth potential compared to Developed Countries; GDP Growth Rate among different countries;

• Permission by the apex institutes of various countries to the Foreign Institutional Investors (FIIs) to invest in capital markets

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Globalization of Technology

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Integration of all possible Technologies from all over the world

• While Developed Countries possess Have Technologies, Developing ones lag behind due to Have Not Technologies. Hence Developed Countries have Competitive Advantages over their counter parts;

• Prevailing Cut Throat Competition in order to excel each other and the sense of competition for betterment and crucial advantage; MNCs, in the modern world, are successful due to Price Leadership. Quality Leadership and Superior Service Quality Leadership;

• Technological Collaboration of Have Technology Countries with Have Not Technologies countries;

• Heavy flow of Transfer of Technology (both – Internalized as well as Externalized)

• Joint Ventures (JVs) and Mergers & Acquisitions (M&As) have played a significant role for Globalization of Technology;

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Advantages - Disadvantages

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• Growth of Industrialization

• Increase in Production & Consumption

• Increase in Employment & Income

• Increased rate of Transfer of Technology ;

• Availability of Finances;• Higher standard of

living, Economic Development;

• Innovations in business

• Harms domestic business• Transfer of National

natural resources• Fear of foreign control

over domestic economy• Under-employment of

less skilled labor• Finance, labor and

technology of one country is shared by other nations

• Erosion of Cultural values.

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Effects of Globalization Indian Context

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Tremendous impact on Indian Business

• Indian Markets, Products, Currency and all related items have faced tough Foreign Competition;

• Emergence of highly competitive markets that have changed the determinants of success;

• Several indigenous production units have shut down;• Remarkable improvement in operational efficiency, quality, customer

service, etc;• Given a boost to GDP growth rate that has been increasing constantly;• Increased the demand in the Indian Market;• Employment opportunities have increased;• Adverse effect on Agricultural Sector• India Emerging as hub for many things viz.- Manufacturing, R&D,

Production, BPOs, etc;• Tremendous Economical Development of the country; BRICS are BEMS

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M N Cs

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Meaning

A company with HEADQUARTERS in one country and various Branches/Subsidiaries across the Globe for

business at international level.“A Corporation that controls Production facilities in more

than one country , such facilities having been acquired through the process of Foreign Direct Investment”

“The essential nature of the Multi National Enterprise lies in the fact that its Managerial Headquarters lies in one

country (Home Country) while the enterprise carries out operations in a number of countries.”

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Role of MNCs in

Economic Growth

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• Availability of Goods & Services of international standard;

• Improvement of overall quality of Goods & Services in the national market;

• Generation of Revenue through taxation;• They trigger the need for better and improved

infrastructure;• Employment Generation and Economic

Development.

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Approaches to INTERNATIONAL BUSINESS

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E P R G

EthnocentricPolycentric

RegiocentricGeocentric

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Ethnocentric

• As compared to the Domestic Business Operations, the Overseas Business Operations are considered to be secondary. OLD IS GOLD Philosophy;

• Usually happens when demand of goods in domestic market is less and companies look for demand in outside market to meet its supply

• There is no difference in the goods, marketing strategy & basic business operations for exports purpose.

Maintaining the in-house/domestic approach towards the exports market – Is called Ethnocentric Approach

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Polycentric

• As compared to Ethnocentric approach , this Philosophy believes that each and every market has its own typical/unique Tastes & Preferences that have to be addressed differently. Hence the company steps forward to opening up branches/ a subsidiary in the foreign market for varied operations;

• The key personnel in the foreign subsidiary company is appointed by and from the domestic country;

• The environment of the host country is considered for Marketing Mix

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Regiocentric

• The people in a Continent/Zone share common border, culture, language, buying habits, economic and political system. Hence different Regions of the world are considered as different markets.

• Hence, once the Polycentric approach is successful, the subsidiary company in the Host Country approaches and encroaches the neighboring country markets (in the same region) and hence applies a Regiocentric approach/strategy.

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Geocentric

• This approach considers the entire world as one huge single market or Global Market;

• Under this approach, the companies have a series of subsidiaries in multiple foreign countries

• They hire Human Resources from all over the world and their deployment is not limited to their home country

• They develop Marketing Mix at the international level, keeping in mind the business specific environment of the countries they do business with though GLOCALIZATION Strategy

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