Definition
Globalisation is defined as the
process of integration of economics across the world through cross-border flow
of factors, products and information.
It is a way of turning world space
into a global village. A village
represents a closely knit community, characterised by a great amount of
communication and interaction between the members of the community. The members of the village usually has a
common sense of tastes, preferences, needs, views etc. The technological and communication
revolution which happened in early 1980’s have converted this world into a
global village. These two factors
greatly dismantle/ reduce the barriers of distance and time across the globe
causing a steep fall in costs of all products across the globe causing
globalisation. Because of globalisation
there is also diffusion, assimilation and cross-border transmission of cultures
across the globe.
The main aim of globalisation is to
bring about transnational or global economy.
Transnational economy is achieved by globalising national
economies. The transnational or global
economy greatly differs from international economy. Transnational economy goes beyond nations
unhindered by Government restrictions on trade, technology, finance etc. It is free of trade across national
borders. On the other hand,
International economy in characterised by the existence of different national
economies. The relation between these
national economics is regulated by the national governments.
Hence globalisation causes global
economy or transnational economy.
Mazda’s sports car Mx-5 Miata can be
cited here as typical example of Global economy. Mazda’s sports car, Mx-5 Miata, was designed
in California, had its Prototype created in England, was assembled in Michigan
and Mexico, using advanced electronic components invented in New Jersey and
fabricated in Japan, financed from Tokyo and New York and marketed globally.
Stages of Globalisation:
A firm normally passes through different stages of development before it
becomes a truly global corporation. To
start with, a domestic firm starts its international business by
exporting. Later it establishes joint
ventures, subsidiaries abroad. Later
from international company it may develop into multi – national firm and
finally into a global one.
Ohmae identifies five different
stages in the development of a firm into a global corporation.
First Stage: Domestic
company
The Company starts itself as a
domestic company. Domestic company has a
ethnocentric, orientation which has plans of selling its sorplus of production
to foreign Countries. At this stage, the
company does not have any focus on international market. The company at this stage heavily relies on
export agent to do international business.
Stage two:
The company starts to conduct
international business of its own.
Stage three: International Company
The domestic based company begins to
carry out its own manufacturing, marketing and sales in the key foreign markets.
It how becomes an international company.
Stage four: Multi - national or Global company
The company now establishes its own
R and D unit and engineering units abroad. It now has its own complete business
system starting from R and D to final marketing of products. At this stage the
company has become a Multi-national company.
Stage five: Transnational company
The
company at this stage move completely towards global mode of operation. At this
stage the company has to de nationalise its operations and create a new system
of values shared by global managers around the globe. True global corporations
serve the interests of local customers, not governments. They do not exploit
local situations and pump off all the profits gained from business to their
home country leaving each local area poorer than before. Instead they invest,
they train, they pay taxes, they build up infrastructure and they provide good
value to customers in all the countries where they do business. (e. g) IBM
Japan, for instance, has provided employment to about 20,000 Japanese and in
the 1980’s, has provided three times more tax revenue to the Japanese
government than has the Japanese company Fujitsu.
Essential conditions for Globalisation
There are a number of environmental
and organizational pre-requisites for globalisation. They are as follows
1. Business
freedom:
There should not be unnecessary
government restrictions which come in the way of globalisation. The government
should permit and encourage free flow of trade across the boundaries. This is
why the economic liberalisation is regarded as a first step towards
facilitating globalisation.
2. Facilities:
The availability of facilities like
finance, technology, finance are very much essential conditions for the growth
of a company from domestic to transnational company.
3. Government support:
Government support encourages
globalisation. The government support can manifest in many forms like: removal
of unwanted government restrictions, policy and procedural reforms, R and D support,
financial support etc.
4. Resources:
A company if it wants to thrust
forward in global market should be resourceful. Resources includes finance,
technology, R and D capabilities, managerial expertise, brand image, good will,
human resources etc.
5.
Competitiveness:
The competitive advantage of the
company is a very important determinant of success in global business. A firm
may derive competitive advantage from any one of the following: low costs and
price, product quality, product differentiation, technological superiority,
after sales service, marketing strength etc.
6.
Orientation:
A global orientation on the part of
the business firms and globalisation strategies are essential for
globalisation.
