There are a number of forces which
induce and propel globalisation forward.
On the other hand there are also forces which restrain
globalisation. These factors are
classified as
Driving factors
The important forces driving
globalisation are as follows:
1. Liberalisation: One
of the most important factors which have given a great forward thrust to
globalisation since the 1980’s is the formation of universal economic policy
resulting in liberalisation of economy in many countries. The immediate result of liberalisation in
globalisation of business. Now many
business firms can involve themselves is international trade as the
restrictions imposed by various countries is highly restricted under GATT/WTO.
2. MNC’s: The
companies which have taken a complete advantage of trade liberalisation caused
under GATT/WTO are MNC’s (Multi – National Companies). Sony, Philips, Coco Cola, Pepsi, Procter
& Gamble, etc are some famous examples for MNC’s. These companies combine their resources and
objectives to achieve profit in globel market.
According to the world Investment Report 1997, there were about 44,500
MNC’s in the world with nearly 2.77 lakhs foregin collaborations. Hence MNC’s is an important factor inducing
Globalisation.
3. Technology: Technology
in a powerful driving force of Globalisation.
Once a Technology is developed, it soon becomes available every where in
the world. (for example) A hospital in
the USA performs the required diagnostics on patients say an X – ray or MRI or
C.T Scan. These diagnostic tests
represent technology in medical field.
In the next three minutes, a radiologists in Bangolore, India receives
the scanned images from USA. He then
sends his report to USA. This is called
as teleradiology. The entire process,
from the time the patient was admitted, has taken Just 20 minutes. The cost of this work is 30% lower in India
compared to the USA. In short, long
distance on – line services made possible by the technological developments
have given a forward thrust to globalisation.
4. Transportation and
Communication revolutions: Technological
revolution in several spheres, like transport and Communication, has given a
great impetus to globalisation. The
Microprocessor in computers has created the flow of information from one part
of the globe to another not only fast but also cost effective. It has played a pivotal role in reducing
space and time. It has made world in to
a global village. Microprocessors
coupled with satellite, optical fibre, wireless technologies, world wide web
have made this ‘World in to a global village.
The consumers/ customers has become more global. By sitting in front of the computer and
logging on to world wide web the consumer can download any type of information
from any part of the world. Flow of
information is business. It determines
profit. Hence technology is a strong driving
force for Globalisation.
5. Product development
and efforts: The immediate impact of increase of
Technology is the growth of new products due to innovation. The fast technology hastens product
obsolescence. This has made many firms
to invest heavily on R&D activities with cross – border alliances . These companies have to stay in business and
survive competition. In order to achieve
this, many companies have crossed their borders and have tie – ups to update
their products through research and development with foreign companies. This causes globalisation.
6. Rising aspirations
and wants: Because of the increasing levels of education
and exposure to the media, aspirations of people around the world are
rising. They aspire for everything that
can make life more comfortable and satisfying.
If domestic firms are not able to meet the wants, they would naturally
turn to the foreign firms to satisfy
their aspirations. This promotes
Globalisation.
7. World economic
trends: The world economic conditions are changing
fast. There, is a great difference in
the growth rates of economies/ markets between developing nations and developed
nations. In developed nations the
economies have become stagnant, due to saturation on the otherhand, the
developing nations are experiencing tremendous growth rate in various business
sector. Cheap labour, high investment in
research and development, improvements in technology are some of the factors
which have driven the developing nations towards achieving high growth rate in
business. Hence it is very common for
the developing nations to have a strong international trade links with
developed nations. Thus difference in
world economies between nation causes gobalisation.
8. Regional Integration: Nowadays many
countries are joining hands together to promote free and fair international
trade across the borders. They are
forming separate trade blocks. European
Union and North American Free Trade Agreements are two such classical
examples. This promotes globalisation.
9. Leverages: Leverage
is simply some type of advantage that a company enjoys by conducting business
in more than one country. A global
company can experience three important types of leverages.
a. Experience transfers: The experience that a company gains by doing
business in one country can be effectively transferred to some other country if
the particular company does business on global scale. This is called experience transfer (For
example) Cocacola first developed a strong marketing strategy to tap tea and
coffee market in India. In 2002 it
became a success. From this experience,
it then joined hands with Mc Donald’s for marketing hot beverages. The Georgia Gold brand was thus born and it
was first launched in Delhi and Mumbai.
This brand is now available in all Mc Donald’s outlets throughout the
country. The success of this business in
hot beverages with Mc Donald’s promoted Coca-cola to enter into ice-tea and
cold coffee Marketing business in 2003.
Another
classical example of experience transfer is provided by Hindustan Lever
Limited.(HLL). The occurrence of Iodine
Deficiency Diseases (IDD) is very common in developing countries. This disease can be easily prevented by
taking micro quantities of iodine along with salt. The salt thus produced is called as iodised
Salt. This new concept of iodised salt
was produced by HLL in India. HLL has
now successfully introduced the concept of iodised salt to other countries like
Kenya and Tanzania. The experience
gained by HLL in marketing iodised salt in India has made the company to
successfully market the same product in other African countries.
b. Scale economies: The art of
cutting down the cost of production is called as scale economies. One major cause for scale economies is
technology breakthroughs. Many companies
are now heavily infesting in R&D in an attempt to reduce the cost of
production. They are attempting to
produce cheaper and more reliable products. (For example). The replacement of vaccum tubes by
transistors and subsequent development of printed circuit boards greatly
reduced the labour cost required to assemble radios, T.V’S and tape
recorders. By these technological
changes the cost of production of T.V sets greatly reduced and production of TV
sets greatly increased. Philips are producing more than 3 billion TV sets now
in order to stay in business. So to
market such huge volume of production of T.V sets, Philips needs global
application of business.
c. Resource Utilisation: Another
strength of global company is its resource utilisation. It can now successfully outsource its
resources globally thereby making better utilisation of resources.
Restraining forces On Globalisation
There are also several factors which
restrain Globalisation trend. They are
1. External Factors
2. Internal Factors
1.
External
Factors: These are government policies and controls
which prevents cross-border business.
2.
Internal Factors: These are collection of factors that exists
within the organisation that prevents Globalisation. One such factor is called as management
myopia or near sightedness. The company
with an aim to make immediate profit engage itself in short-term plan and
target local markets for business. This
is called as management myopia.
This acts against Globalisation of business.
