/ .

,/
• . G~baliza\~n and \ntamatiooal Businef ~ '
economic integration · Th em · b r t' "-- are ·
significantly higher than b aJor concerns about present-day glo a iza ion.
What is striking about ~ver efore because of the nature and speed of transformation.
th
enormous impact of n e ~urrent globalization is not only its rapid pace but also e
ew inform r l · market
integration, efficiency a d . a ion and communication techno ogies on
' n induSlrial organization.4

1,3 CONCEPT OF GLOBALIZATION

'Globalization' has beco •
world in a vari ty f me the buzzword that has changed human lives around the
has been amo e ; ways. The growing integration of societies and national economies
ng e moSt fervently discussed topics during recent years. Globalization
re fers to the free cross-b d . . ~ - - -0 er .,.
e~ le.ICTsfue •--__ or_ er movement of goods, se~c~s,. <:~P_!_~l, mfonnau~~-' .- t-,f
~tiP,____ tal di process of creating networks ·orco"ilnections among actors at miilli-
con .nen
d stances
. ' me diate d through a variety of flows including people, !-' uuonnation .
and 1 eas, capital, and goods.s
The breakthroughs m · th e means of transport and commumcation · · teehnol O'l:f m ·
the last few decades h ave a1so made international commumcation, • · transpo rt, and
travel much ~heaper, faster, and more frequent. Globalization is the closer in~~ation
~~~Pl:.s of the world, brought about by the enormous red~~~
m the costs oftransportat·10n and communications
----:---;-------_anur :r
me-·c-·- ,;:-.:;.'··--:r_..,..--~
ureaiu.ug uown OI arwt:cial
1

E"~ rriers to...theflow·ofgoods"ancfservices, capital, knowledge, ancf(toalesser·extent)

P; ple a_cro~s t ~ ~ers.~With the acival of the Internet, th; tran,.:ac~on .c?~ts of
1
fra sfemng ideas. ~ m.fo~!-ti<?..n _~~~~~~..;1:9rmously. Global villag~ 1~ th~
e used to descnlie tfif c ! e of space and tim ~barriers in human commumcati.on,
1

esp ially by using lhe Wo d de Web, enablin~ people to interact O? a global sc~e .
. Moreover, a number~ _· te!eiting terms to signify the variou~ aspects of globaliza-
tion, such as Westemiz ·on, .Americanization, Walmartization, McDonaldization,

Globalization tends to err•

Disneyfication, Coca~Col · ation, etc., have also emergfd, as given in Exhibit 1.2.
national boundaries and uttegrate national economies, _
cultures, technologies, an governance, leading to complex relations _of mutual
interdependence.~~,- ~ -·- · . · · _ '. · · · · · · ·
Globalization refers to the intensificatio~ of cross-national econo~ic, political,
_cultural, social, and technological interactions that leads· to the establishment of
transnational structures and the integration of economic, political, and social processes
. 7 . .
on a global ~cale. , . , . _. , . ·

4 Rangarajan, C., 'Globalization and Its Imp~t• in Indian &o~omy since Independence, edited by Uma Kapila, 15th edn, Academic
Foundation,NewDelhi,2003,pp. 728-33. ·
5 Clark, William C., Robert 0. Keohane,Joshep S. Nye, and Neal M. Rosendrof, inJoshep S. Nye andjohn D. Donahue leds),
Governance in a Globaliz;ing Wor~ Brooking Institution Press, Washington DC, 2000, pp. 1-44, 86-108, 109-34.
6 McLuhan, Marshal, The Gutenberg Galaxy: Making of Typographic Man, University of Toronto Press, Toronto ll962); Wyndh~,
Lewis, America and Cosmic Man, Nicholson & Watson, London, 1948, pp. 1-19.
7 Dreher, Axel, Noel Gaston, and Pim Marten, 'Measuring Globalization and Its Consequences', Globaliztition and the Labour
Market, Department of Business Enterprise and Regulatory Reforms, 13 December 2007.
r 8 lntemaUonal Business

.c • ..,,__._,,,_.~..... .. - · .

Westernizat'' 0 "
.. Exhibit 1.2 OlolMlldon'I
• · ··-.. ·-- .-.,IJlc8'
· - ..,,,_
Th e process' of influence of the Calculability ObJet
· - h uld be c1uanrifrable
5 0
· ·tivessubjective ( i.e., tast
'
. e)·
We~tern culture on non-western socier i·n term"' (1',. sc1les) rather th•~f~c"'nce over qual1_1y as
of life stye,
/ va_/ue ~ystem, language, technology,
Y " •"""' '
Quantify gains s,g_ ,v1ac, not the Quality or
· n1 ' ..
etc. We~tern1zat1on is sometimes equaled, McDonald's sells a,g
although inaccurately, with modernization. Superior M,1c, rd
. ed and uniform ser-
A · · · p d' tab,·J,·ry Standa :: production process .
. mer,camzaflon A term mostly used pejora- re ,c d by t, ,e
t1vely for the influence of the US of America on vices are guarantee b t;tution of more
other cultures that leads to a phenomenon of sub- I includes the s~ s /ogies for human-
stituting indigenous cultures with the US culture. preCo~~r:ble
ic non-human tee no. has also been
Walmartization Refers to business practices labour. · ·on the
The Mcoonald1zatlof of society · w h'ic h
'iron cage , ,n
followed by the American retail chain Wal-Mart, • d to as a system d ,..,,inated by the same
which includes optimization concepts from re,erre . nutions come to . .be O f Mc Dona Id'1za fron
o,,,
ogistics, purchasing, finance, and stores manage- aII. in~ 1 The criticism •
I 1
ment,.contributing to its maintaining 'Always low pnncip es. ·
prices, Always'. Charles Fishman in his book The includes . Workers are exp ected
. h. to perform
h a
Wal-Mart Effect sheds light on the power ofthe /rrationaltty _ . a/ized task, w 1c spawns
retail giant to affect everyone's life. The economic single and highly ratdiontO workers' burnout.
a t o f Wa I-M art inc
e11ec · sma II er com - 1•rrat1ona
· Iude •,orcing · 1·ty
1 and /ea s · · d to perform
·
petitors to keep out of business and driving down W 0 kers are suppose
wages, but helping to keep inflation low and pro- Oeski//ing · ~ · tasks with minimum level
. ·r h' h simple and repet1t'.vel ds· to quick and cheap
d uc t1v1 y 1g . ,
Although Wal-Mart brings cheaper products of _c~mp f
/exity. This ea .
rkers who can be easrly rep ace ·
I d
· · training o wo ' · ·
to consumers in advanced countries, it epitomizes . , •: McDon~id's is criticized as •'
the conservative model that a company muS t cut Consumer wo~kers . nsumers its unpaid ·
costs to remain competitive, or a co~ntry muSr ,being '~ri~ky' 1~ ma½ing ;it 'the · work usually
cut taxes and the welfare state to continue to be · employees by carrying vice restaurant;
. f,'or .ms t ance,
d b
globally competitive. · · . food Y aaser
performe or -
drive-through .
service.
McDonaldization The term was used by · · serving _ .. .. , .
sociologist. George Ritzer in his book The . Dis,;eyfication . A.term used to describe ~nd
Mcdonaldization of Society (1995) to ~escrrbe . denigrate ' a s?ciety that has ·an ' rncreasrng
the principles of the fast food restaurant l1ke~y to similarity to the Disney theme_ parks. Th~ term
dominate more and more sectors of the Amem:an has been used by Sharon Zukm (1996) m The
societyaswe/lastherestoftheworld.According Culture of the Cities whereas _the term
to Ritzer, the four dimensions of McDonaldization 'Disneyization' wa·s· popularized by A. Bryman
are (2004) in The Disneyization of Society.
Efficiency Refers to the optimal method for 'Disneyfication' is used metaphorically to de-
1ccomplishing a task, that is, · the rational scribe a society dedicated to themes, merchan-
1etermination of the best mode of production dising, huge consumption, and emotion-based
·ith little scope for Individuality. · · labour. It also signifies a diluted or simplified
_, , ,. . . version of an original form.

Contd
 9
GIOOOlllatlon and lntematiOOal 8usineSS
£,xhfhit 1.2 Contd

Coca -Col ani zatio

derived from aC . n_ p o rtman teau wo rd considered as dangerous to inchgenous cultures.
ornbm at, on of the words coca- The term Coca-Col ani zation was used by Arthur
co Ia an d co lon · • .
W estern . izat, on to imply the in va sion of Koestl er ( 196 1} to refer to Americanizati on i n his
' pa rtic ul arly Am eri can, cultural va lues book Th e Lotus a nd the Robot
Source: Ch arles p·151 T7r •
the Am-'ca E ' . lman , e Wal-Mart Effect: /low the Worlti'J Mrul P,nvtT"•l Compom1 RetJI'" Work, 11nd Jlow ll'J Trrnuformmg
"" n •conomy Pe 11 • p 200 JR .., ·, 6 n ,1:z.
George Th M D ' gum ress, .'i, PP· 1- 1;\; French Hlslorlcal Studies 17( I) Spring (1!)19). pp. 96- 1\ ·, "' er,
Com ' N e c ona1 d lz?tion of Society, Pinc Forge Press, 2004 , pp . 1- 19; Kooslle:, Arthur, Tltd.JJtw arul I.ha Robot, Macmillan
1948-pany,
53. ewYork (196 1)' Pl>· 1- 34··, K uisc
· 1, Ri ch arcI F'., 'Co ca Cola and the Cold War: •!"he French Face n" menc.~
· n~•-tion'
,1- •

waFurther, globalization is widely understood to unply e~ ~_globalization by

Y of free movem~~t of inputs (both labour and capita\) as well as o~ tput
c{J between
• --~ countri s. It · 1 · • integration
on y ~ e ~conomic ·- - -· -• b-ut,al_so .vano?,~
of countries · V
o~ er_aspects such as financial, cultural ·and nolitical inteF;!ation across the world, as
depictecl in Fig. 1~3. - --- i: - - - - u

Therefore, globalization may be defined as the process of integration and

convergence of economic, financial, cultural, and political systems across the world.

l .3.1 Economic Globalization

The term 'globalization' is widely used in business circles and economics to describe
the in_~~!.~K}~mation.~ zation of markets for goods and services, the financial
system, corporations .and industries, technology, and competition. l ~ e w b a}~z~d
economy, distances and national boundaries have substantially diminished with
the removal 2! obsticies tomarket-~c~es~-:-B; ~des,-th~~ h ave be~~··; eductioi:s u1-·
transaction cos~-;_;; :rz;m pressi;;t ~ftI~"and distance in international transactions .

. ' Economic Financial

'globali~tion · globalization -

-. '
. Giobaiization

Political
"- Cultu.ral. __ --- - - - - - --~
globalization . - globalization

Fig. 1.3 Globalization: Aholistic approach

 '10 frnernaoonal BU!Nr 0999
'Th h d t _, ...,-.srer cor t.echne>f
ogy h e c a.nges incfuc:ed b Y t h e cfynami c:!'9 e>r trade. c a.pit• J fl~-'""'- ...,.. ri.,..,..
;nccea.9•- 8.!Y
0
I •
•nte-rde- -
- - d - av-_~ ---:::.-._acfe n-.arke~ a n d , ~.-.r.>efuc:tion fn d i f f e r e n t cc,_ai~t.0 J-.e,$ ancrea.sed t.he n ~ -
p e n c n t · b a n e c.· <>W-Wng
,- - •
1ntc-nsity <>£ internatic,nal cc,rnP eir.auc:>.,.,., e nterpra- ses t c, C>rgacatze
0 r crc,s s - <>refer .s Lrate...,,.,;c i r-.t eracli<>n.!J necessitating 1:>u-'"in~-racterized b y t.he g:re>.....,_
-._h e m- s e 1 v-cs I · nto ~snaU =· o n a l net_works • . CJfc,bali~uon - i. "" c••~0 ;.-ect. ;n-v-~ t.m ~ n t: - ( .,_..._,IJ)s
P
i n g .__n _t e~«:!_~~-e n d e n c e <>f" v-ari<>us £a cet.s. I-or instance. £c,rc•8"'1~on8 ~ t . h . tche mc_"....,ernent
a~co~pa_n1ec:T----i:.y translCr o f t e c h n o l o g y a.nd knc:>W he:>"°', Fit.5 ~ t e r e s t . , cc,ya_laes., etc.)
<> ca.pH:.~) (e quit.y~ _ internationa.l Joa.ns. ~
g e n e r a t in g ex-port:s o £ cf a-- _
t:riatiC>O _c,£
£ r c:> rrl ,ch e . n -v-es fi m
P'::, ..
c:~u.vi t::rieS-_
,ch e • .-. c: r e cLS e
-
:1TI1 t.he
'In e - g o o s a.n serv-1ces - is e-v-i clent rC> m 3 2 .3 r , e r c:e:a:t -
g r ow t h I n g l o b a.J e c o n o m ic i .nte gra.tac:>n Jcl o~P ftc, r- t: •n
p e r c e.n t a g e s h a re o £ w o r Jd m e r c ha.ndis e t ra.cl e i.n ,che w<:>;es g r e w f t c , m ?:B
p e r c:er:at t o
to 4 7. 3 p e r c en t i n 2005 w h er ea.s tra.cle i..n serV":1 ;t;a..l flc,WS ra.p:adly rc,se f r o m
1 9 90
1 I p e r c e n t duri.ng t h e sa.me p ~ r i o d T h e grc:>ss priv-ate c ~ t ; ;:ci 200S- £-Iere a.re se>rne
4
I 0 . .3 p e r c e n t 0£ t h e -worJd G ~ P ;;. J.990 tc:> .32- p e r c:
defiJ1itioris 0£ e c o n o m i c globruiza.tior>. - eh z"n z-neernczez"onczZ er.ade,
77z_ • . _ . ,en-z..s ehrough groz.o
e zncre,a.szng zneegraezon o f naezonaf econornzc syse
znvesen-zene and ca,.z·eaffloz.vs. _ _ 0 -r :zr,ade _poZz"cy 7er77ZS, WT<::>
er-- _ _Dzcezon.LZTY
_ _ e ·on z.ohereby nczez·onczZ resources
A _.r nornzc zneegra z _ b - _
aynan-zzc and n-zufez·dzrne:nsz·onaf process q, . ,_ eco h z k naezonae- . r econo:rnzes eco:rne zncreczszngf...,
_J_ •

:..r
b
b eco77Z.e n-zore and 77Z.ore zneernai!z·onaffy ,no z,c.e z.o
z·neerdependene _8 - <:=> .E ~I>
. - f econo7nz·es £n.&o z"n;,&§ r:?ZLZ,ez·onczZ eco:no 772 y
.Econon-zz·c Zobafzz-.a;ez·on co:nsezeuees z·nee. aezon ° na~zon:nd 7nuZez·nae£onczLs.,), shore-eerTTZ9 cczpz"e.aZ

!ff-
l
ehroug~ Jtrade, ~z·receforezgn z·nvesenzeni! ('by corpor~ezons
floz.os, zneernaezona oz.vs o r z.oor.kers and hunzanzry gener.
aZZ-
ry,
a n d +Toz.os ef_ee::-hnoZogy _
· - J a.gcl" :1.s..1..a.
.._ .i.>..1...1.a.gwa.ti
-o .._

'1- -
:Ine acezvzezes efnzufez·naez·onaZ eneerprzses engaged z·n_forezgn dz"rece z·:nvese:rnene ,and :&he deveZopn-ze:ne
L
I
o fbusz·ness neez.vor.ks eo creai!e vaZue across naez·onaZ borders. 1.o - .A..Ia.ri .R.~g:rr:i.a.r:i

F o r t:he pu.rposes o f t;his book, globa.liza.ti~ is - d ef!:E!-.~ ~ ~ j:r.1._c .!:_~2I?-g _ e c ~ :r.1.c:>mic

irit:egra.tioro. a.ru:~. i ~ ~
rdepe:n.de:n.ce o f'.'_- ? ~o:n.a.l oriomie~ - ~~-!:_C>_:'>~--~ - e ~~~ c:>r2_ cl~
ca.pita.1·,:---
a. _ t:er~gJ.!~
r a p i d :1:n.crea.se m cross-bord e r mov-eme:n. coT g o oa s, se.rv-ice, t;ech:r.i.c:>lc:>gy, a.:r.i.d ·--··-,,. . ....... ---"'-"•·

Flncanclc:., G;lol::>callzca'flon
~he_ libera.liza.tio:n. o f c a._pit:al mov-eme:n.t:s a.n.d cJ. ~ r_:.egul_~tiC>T.1._;!, especia.lly c:>£ fi:r.i.a.:r.i.cia.1
_ _ _ _ __ _ _ i_c_e_s, led t:o a. spu.rt: m
_ _Z""' cross-border ca.pi ~ flows. T h e glc:>ba.liza.tic:>:r.i. c,£ f"~~cia.l

9
8 0.EG.D _Ffa~book
Hha.g,,,va.t:i J · GI.o b a z,.~ez·orz
di h onJi.E'.co-rzornzc - Indz"caeors,, 2005,. P- _J_ --i__
J. O " a.g s "' n .D¢ence efGLobp L~ez·on, < : ) ~ d LT - -
.Rug::n::i~ .. .:z7ze .End efGLobaLk.a,Lz*orz, A . m e r i ~ _l_\,,:[" m"Ve.rs.Io/ .Press,.. .N"ew I>el.hi, PP- .I-.IZ
a..i::ia.ge.me.IIt. .A...s:s<>c:::i..a.ti<>x..., .r-Jew "Y<>r.k., 200.l, P - .J _i_
 Globalization and International Business 11

m~ rkets ~~gg~r_e_~ gr_o~~~_il_l investment portfolio _and a__\arg~ move~!!~~-

of short-~<:_rm capital borrowers and investors interacting through an increasingly unified
market The growing_~!l.!_~atfon of financial markets has greatly influenced th~~onduct
of business_and_!_ven the ·pe.r fo~;~;~r ·thein<lustrial sector. t f i ~ significan~y
en~ancecf the VE,ltf~a?_ H~y~r~~foi::ks tfi at were hitherto considered impervi ous.
A liquidity crunch in the US makes stock markets across the world go berserk.
Globalization of financial markets makes them inherently volatile with few options to
control left with the national governments.

1.3.3 Cultural Globallzatlon

The converg_~ of cultures across the world may be termed as cultural globalization.
I~ dia's rich culturafhe ntligenasagtcrrt~ ofgroEalization (Exhibit 1.3), which
is evident even today by Tts profound impact on people and their lives. Globalization

. . . . . Exhibit 1.3 India's cultural globalization

..t,i.4,,-,__...,._~:,r,\'~~.1 * ~ - -·. . : i/Jt,;i~"i.4'iJ.'i.~lt......... ·--!1-' ' ~ ~ ~~ ~ ~ . , , . . .. ..'A~~~:..._~~ ~ -- - - .. - ~~i:..

- .
In the sixteenth century, at a time when the North-· Ramayana and the Mahabharata. A.t the site,
em part of India was reeling under the waves of Cambodian guides earnestly explain the signifi-
conquests and cultural stagnation, people from cance of the symbols protecting the shrine-the
South India were exporting lndianness to South- naga, the shimha, and the garuda, correspond-
east Asia. It was an anonymous task carried out ing to the present-day navy, army, and air force.
not by warrior-heroes blazing across land bearing The marvel of the epic scale of the Hindu temp\e,
swords 0f conquest, but by individuals who had as impressive as the finest cathedra\ or mosque
come in peace, to trade, to teach, and to per- anywhere in the world, is a\so a marve\ at the
suade. Their impact was profound. Even to this extraordinary reach of the \ndian cu\ture beyond
day, the kings of Thailand are only crowned in . its own shores. . .
the presence of Brahmin priests; Muslims in Java Hinduism was brought to Cambodia by
sti 11 sport Sanskrit names, ·despite their conver- merchants and trave\\ers more than a mi\\ennium
sion to Islam, a faith whose· adherents ~ormally ago, and has \ong since disappeared, supp\anted
bear names -originating in Arabia; Garuda is by a Buddhism that was a\so an \ndian _export.
Indonesia's best-selling airline, and Ramayana But, at its peak, Hinduism inf\uenced the cu\ture,
its best-selling brand of clove cigars; and even music, dance, and mytho\ogy of the Cambodian
the Philippines has produced_ pop-dance people. ·· . . a :
ballet about Rama's . quest for his kidnapped The \ndian culture can be characterized by it~
queen Sita. Right at the entrance of Thailand's exceptional capability to imbibe a\ign cu\turei
Suwarnabhoomi International Airport in Bangkok . · and this feature distinguishes it from the rest <
is a fascinating sculpture depicting the Hindu the wor\d. \ndia's present-day civi\ization dra~
mythological story of the 'Churning of the -lfeav1\y from \s\am and Christianity, conseqm
Oceans' (samudra-manthan) between the de- to Muslim invasions and British co\onia\ ru\es
·mons and the gods (Fig. 1 .4). Hindu bridegroom invariab\y puts on a sherw
Angkor Wat, perhaps the :greatest Hindu · during the wedding ceremony, a
temple ever built in the world, is in Cambodia, did not exist before the Mus\im invasion of \n
not in India. The exquisite sculptures in the temple The once-a\ien cricket is \ndia' s virtua\ nat\
recount tales from the great Indian epics-th_e sport. In selecting the seven new wonders c
 I-\ gra~d1ose sculpture at the entrance of Bangkok's Suwarnabhoomi International Airport, depicti;
Htndu mythological story of the 'Churning of the Oceans' (s~mu_dra-manthan) between th~
mons a nd the gods, evidences India's deep-rooted cultural globahzat,on.
world , lndi ans vote d c v n ical Iv f th T . M h I Keeping ·its g Ionous
· It
cu__J!!a I- h.
__ ,st o ~y_!n
· rninr1
constru t d .:;;;;.L_ ./.. or e a a, ___ '-.t,
a na c :_ Y the Mu gb_~J _ki n g S hah- Jahan ·- Ind ~ ne.~~ ~:~n-~~ _mo~-~ -~;2. ~rc~!5:> ~a,n i':_?ll"I
st 0

arch ~o t for A ng~ or W at, the most· magnifice'nT -·t§_g_~o~~l_1_zat,~n °!. ~~~ C}~~-!~<!:~g n_byway <:>i c."ut::--•-.
tect of the H mdu religion a fact that testifies tural diplomacy rather than merely focussing a\\
th
to e uniqueness of the lndia'n culture. its efforts on economic and political diplornac.y.
-------
Source: Based on Tharoor Shashi 'Let's Promote the Great Indic Civilisation', Times of India, New Delhi, 21 October 2.()07.
http·// . , , '
· WWW.a.irportsuvarnabhumi.com.

has led to the development of global pop culture. Coca-2 ola is sold iE- ~~::.._countrh
than the Umtect Nations ·11as as m eiiibers:-'Col<e,..Ts-claimed to be the seconcl-=-inc
universally u naerstoocl -word after OK~ McDonald's has -~~.!e ~han 30,000 lo<
-
:esta~ra~ts _s~rv~_g_§.~ m~lli?n .P~?ple e~ryd~_y in_~o:_e tha~ ~00 c~untries.
---
Jeans are sold in more than 110 countries. Ronald McDonald is second only to Sa
C l a u . s i n ~itionfor-most school children.
 Ql,;t.1'i: l')r)n and ln!ijrl'cJ';onJI 8,;s.rc;s IJ
134
· · Polltlcal Globalization
1
\\0 , 1~«mvtwnce i,f i'"li'b ll)!l,rn, and prnm,r, around th, world i,r~crrcd In"
,J J'.'.".r~~ol §lohnlizalii,n, lnterrr:rtionul hosincs, i, inma,ingly crrnduct,d "'"" th,
0?' {tilic,a·J, Socio (tllttiral, and ph)'Sital Lorclm or !Ovrrrign st;1tc!. After World W.1r II,
f'rI te" '." .
, st 1 been a proliferati onof savereign stat,,. fn 1911 the re wrre 61 scpamte
\ cf ates, 4 Ill W4G, _1,_rn in l!l78, WJ In 1991,11 and 209 in 2007.1l The adn11n1strative
~J
1
tJ . SCI·op, and thedcttsronmaking1rroce,sc, In rnoltilatcrn/ organi,ationsand UN forum,
, / / have consldcral,ly innucnccd tire !"'crnnncc within sovereign state,. Democratic
' p· < I>, procc,,c,
•• of' ldecision making and gnvcrnancc to a varying extrnt are increasingly
Jr' rccc1vmg w1c er acceptance in most countries.

1.3.5 Dimensions of Economic Globalization

The rapid growth in integration and interdependence of cwnomics can be explained
by the interconnectedness of the various dimensions of economic globalization, as
depicted in Fig. 1.5, such as the globalization of production, markets, competition,
technology, and corporations and industries.

Globalization of production
Th,increased mobility ofthe facto, ofproduction, especially the m<Wonent of capita\
has'chruigedcountries' t;:i~;~f~eaallianon rolessigiiificaiitli Consequently,many
- --
firms·ificlevelopfng~coiiiimesseek
.
io strengthen
-
their competitive advantage by

Globalization
Globalization
of
of
production
markets

Economic
globalization ,

Globalization
of
technology

F19,
. 1'5 Dimensions of economic globalization

li. , 17it &onomir~ 31July 1999.

II 'A Survey of the New Ge~po tic~ ti.bank' World Ban~July 2007.
12 'World Development Indicators a '
 ,. lr!l~~Y-..11 B.ttr.t~,

• . . . . I f,ugr rrdinologfral
ti"'' 111111111,: ,n il1ffru·nli111t'Cf pwd1" 11 ",rh nr1111rrr.,.~111 H Y 1 . 1 . con tr
· 1 I
~111 1 ~pt·< i11l1111tm11 1.u
· I
~n rn ri(r 10 inrrn 111< u<tr} r:H
I le fl('I\\ r<'n Ic ('\ r oping .
co UntrjI'll
. . I i. rt r firrn, In• II ,r ,a• me •ndu ,try !'1 ·
,\ l>tincfnnrd 111 Ii, ilit•, Ari' flflrn tir1111rrr< 1.1y O '"
, , in 1111 ,nc. us1fl(' S nnd d·rr 1
strrn,-.'flu·n thrir pmilioni. ,h II
·
rt'"'
I r. man)' (j,m · · . r
loJJI stratcg1r, o ml'rg
I l:'tl" Cl
l'lt
t·o11n1rir,. rst11hlish ro o prrntiH' ng1rrrnrn1, or n< · I crs a ...
. I f f 1111ibutcc lo a .'!Urge In FDr f ·•d
nt·qui,ilinru and nl'lwork orgrmi1ntio11s. " Inr I ins r J • h c Ufin
rrc<'nl rI <'rndc,. Mort'O\Tr, tht• p1frnliz11 tw11 . f I lie cnlcrpnscs across l e Wo rId hasg
o P11 J
aim nffdcrntrd noss border i11H•stmr11ts. . I . .
1·1It' g /o b a 1·11.a twn
• of producl1on . I111s Iecf to mult ina .
twnaI IIorigin
b .of proctll
- - -- · -· -· - -
componc111s, S<'n-icc.9, and capital as a rcsu I o
I ( transnat1 ona 'cl co a orations arn ct
0
· ·
b usmcs.'I cnlc1pnscs. fin11s cva.lualc vanous ocau 0 . I ,: ns world -wtti e .fo r manuf. a~~lJ.rinrig
acti,·itif'S so as to take advantage of local resources and op mtze manufactur' g
c~m pf'titi\-cncss. Compan ies from th e US, the EV, andJap~ manufacture at overs~ng
locations more than three times of their exports produc_ed 10 th e _h~me co~ntry. Intr~
firm expo,t -import transactions constitute about one-third of their mtemationa} trad
e.
Globallzaflon of markets
Marketing gurus in the last two decades have extensively argued over custorniz
marketing strategies in the globalization of markets. Theodore Levitt, in his pa~~
breaking paper 'Globalization of Markets', 13 views ~e recent emergence of global
markets on a previously unimagined scale of magmtude. Technology as the rn
powerful force has driven the world towards converging commonaJ·ty 'J1
1 • echnologicaI
Ost
strides in telecommunication, transport, and travel have created new consurne
segments in the isolated places of the world. Kenichi Ohmae also advocates the concep:
of a borderless world and the need for universal products for global markets. 14
Standardized products are increasingly finding_ markets across 0 - ! ~e. Such
gTooa11zation of markets ha.§.....Q!L9.P.~- 1).andj gfr§,. CJ,S~.<L th.e 0]?.~ rtu~i!}' !_~r marketing
in"'1eriiationally while on the other has increased the competitive mtensi~
6rands in the market.
The simultaneous competition in markets between the numerous new competitors
across the world is intensifying. This offers tremendous challenge to the existing business
competitiveness of firms, compelling them to globalize and make rapid structural
changes.

Globalization of competition
This refers to the intensification of competition am?~g business ente!"p!"is~~ _global
scale. Such globalization of competition nas
resulted in the emergence of new stri~'2'
traiisnatwna1a 11iancesamoiigconip~~s~ across ·the~ rJcf lncreasfngiy:more~fimis
n;:d t~ comp_et~ wi~1::~playersrromaroundthiglobe ~eir own m ~ e n
------
1
Levitt, Theodore, 'Globalization of Markets', Harvard Business R.eview, May/June, 1983, pp. 92-102.
Ohmae, Kenichi, 'Managing in the Borderless World', Harvard Business R.eview, vol. 53, May/June 1989, pp. 152-62.
 Globafization and lntemallonal BusineSS 15

: f~reis:11 ones. To cope with global competition, firms ne~~_to sim°-_l_~eQ.lJ.Slmarness

ei~ -~kills and generate synergy by a broad range of specialized skills, ~uch as •

V techii~ogica.1;·nnancial, industrial, commercial, cultural, and administrative skills,

located-r;-ailferent
_..__.
countrie
-------- ... sor
___
even different continents.-- -
-- --- - - -- - -----~ -
Globallzatlon of technology
~e rapid pace of innovations with international networks and convergence of
standards across countries has contributed to lliegfooalizatfon of technology. This
rapid dissemination of technology internationally and the simultaneous shortening of
the cycles of production has led to the globalization of technology.
?>untries with advanced technologies are best placed to innovate further. Moreover,
unhke m the past when mventions and irriiovations were considered breakthroughs,
toda~ they are a regular occurrence. This implies that the transformation process is
continuous and thus has important consequences both for the overall organization
of firms and for policy making. Global firms rely on technological innovations to
enhance their capabilities. Thus, technology is both driven 6y and is a driver of
globalization. Moreover, it has led to the emergence of new 'technologically driven
-
-"tnaracter'o r the global economy. 15

Globalization of corporations and industries -

The worldwide economic liberalization led to the ra id owth in FD Is and the
relocation of usiness enterprises heavily driven by the various forms ~f internation
strategic alliances ancf mergers ana acguisitions across the world. As a result, there
liasbeeriWIOesprea a rise
T;"th~·fragmen;_ti~ ~d~o"n processes, whereof
different stages of production for a given product are carriea out in d.ifferent countries.
_, fr - .........~ - - " ' ... - - - - ~ . . . . . . _..... ~--•,. _ ••,,.,,, ..............,_... ~-.... 4 ~ , ; - , . ~...._..._.,,_.... .:;--,_r"r,r'..- , . 'f'..,---~--~~· " ' . . -~. . .,. _;,.-
1.4 FACTORS INFLUENCING GLOBALIZATION
The process of globalization is characterized by the interplay of dynamic forces that
act as movers and restraining factors, as shown in Fig. 1.6, which offers significant
challenges to traditionally established ways of doing businesses. Since the driving
forces of globalization ~re ·consid~rably stronger than the · restrain}ng ·factors,
globalization of business assumes much higher significance. · ·
, ' .

1.4.1 Movers of Globalization

Economic liberalization
Economic liberalization, both in terms of regulations and tariff structure, has greatly
contribut~d to the globalization of trade and inv~stment. The emergence of the
multilateral trade regime under the WTO has facilitated the reduction of tar.ill's and
. . ,

15 Asian Development Bank, 'Drivers ~f Change: Globalization, Technology and Competition', Asian Development Outl.ook, Oxford
University Press, Hong Kong, 2003, p. 208.
 16 International Busriess

lntemattonal
ec;onorntc RislngR&O
Integration costs
I ,

l
{

Regulatory Managernerit
controls myopia
Emerging
new trade
barriers
Cultural
Nationalism
factors

r1g
~· . 1.6 Globalization: Movers vs restraining factors .

non-tariff trade barriers. In the coming years, the . tariffs are expected to decline
considerably further. ,.. , ,,: , . . ,
1
· · Technological breakthroughs _ . ·. .: • _ _. _

t' ;;The b~eakthroughs in· scien~e ~nd tech~olc;,gy have transformed the world.virtually
. . ' 1nto· a global village, .espe~ially 'm~~f~cturrng,' transportati~n, .and information and
communication technologies,·as discussed here.
Manufacturing technology Technological advancements transformed manufac-
turing processes and made mass production possible, w~ch l~d to the industrial
revolution; The production efficiency resulte~ in cost-effective production of uniform
, I·. . . ; . , '. . . ' tl .

goods on a large scale. In order to achieve the scale economies to sustain large-scale
productio.n, niar~ets beyo~d national boundruies need to be explored.
1 - • • • • , ... I'- • ·• • • .. t • : r

'fransportation technology The advents in all means of transports by ro~ds, rail-

ways, air, ~d sea have considerably increased the speed and brought down the costs
 Olbballzifl0n 11'\dl k1ltmatlonll f7

incun-ed. Air travel has become not onfy speedier but chea~. 'flti, hn! boo.!itcd the
movernenL of people and goods aero" countries.

Information and communJcaUon technology The advent of Jnformation and

communication technology and the fn.,t developmen~ in the means of tran~rt havt
con~iderably undermined the s.igniflcance of distance in country selection fo r eX'panding
busmess. There has been a considerable reduction in intematlonaJ telecommunica-
tion costs due to improved technology and increased com petition. This has ~ven rise
to new business models, such as the off-shore delivery of services lo global lncations
and electronic business transactions.

~ult/lateral Institutions
A number of multilat~ral institutions under the UN framework, set up during the
P0st:World War_ II e_r~ have facilitated exchanges among c~untries ancfbecame
promment forces in present-day globalization. Multilateral organizations such as the
~AIT and WT? co~ ute_~ to th~ Jlro~ ess of ~p~ization_3!1j ~ e oy~~ng u~ of
arkets by consistently reducing tariffs and increasing market access through vanous
r~ of multil8:teral .f:a§'e n~g26ations. The evolving rruii'tilateral framework under
the ~ ' such as Trade-Related Investment Measures (TRIMS), Trade-Related
Aspects of Intellectual Property Rights (TRIPS), General Agreement on Trade in
Services (GATS), dispute settlement mechanis~, anti-dumping measures, etc., has
facilitated international trade and investment. Besides, the International Monetary
Fund has contributed to ensuring the smooth functioning of the intei:national monetary
system.

International economic Integrations

Consequent to World War II, a number of countries across the world collaborated to
form ~~0~5>mi.£ &:2~-ings s;-~to promote tr'ade ~din~-;;stment amongthemembers.
TheTreaty of Rome in1957 led to the c~eation ofthe European Economic Cqmmuruty
(EEC) that graduated to the European Union (EU) so as to form a stronger Economic
Union. The US, Canada, and Mexico collaborated to form the North American Free
Trade Agreement (NAFTA}in 1994. fherecfu~ -~ftrad~barrie;; a'7n~the member
comi"'tries under the ;-onomic integratioris'arou'rui"th'e :;~d has"'ii~t-only
corit:ributec:f th-;-accele;;t~\rtli 'in trade ahcf" investmenfl.mt alsoaffectecl-the
international trade pattems c~nsiderably. . ~-- * . ~·-·~ \
f"' ,....._, ..... .

Move towards free marketing systems

The demise of centrally planned economies in Eastern Europe, the former USSR,
and China has also contri6uted to the process of globalization as these countries··
gradually integrated themselves with the world economy. The Commonwealth of
Independent States (CIS) countries-all former Soviet Republics-and China have
opened up and are moving towards market-driven economic systems at a fast pace.
 RWttg r@Jtarch and m,v,,topnlent cosfs
th
1ht r:t ,iii ·1111, th in rn.u krt t "111pftlllOll all d c c, tr incrrasi ng i
I . . · h· ~<'Jihi~tir:llnl go<.Kh and~ .' ns~tja.1
t!rm.,rnl (Pr r.n, rr n.m 1,nrn ,t(lf~ , • , <'r\ IC('s 'l:.ll~
, , h anti tlcHlopmcnl (H&D) I Cotti tr1
hl 111, .-~, l11a:t· nnwunt~ tlll n ~c;,Jt . cconor ·· n ore) c-r t,~, 1i;il1 ti,. 1\
1
· . · IU I) and ad11r,•c
(1)tl-' {)f mnt~iH' 11n r~ln1t·11l, Ill . _. . n,c Via.bi!· Qr~ '•n .1
. tile' l)tJ\inr~, 1111cratiom. I or mstance 1 soft 1t,., . t{J,. , .,
m·u·~~1n- hJ Itl lJ:t I111' • • • \Va.re ''It b .'.'\
, . ' r: , . ,f 1 Or:idr ro1111nrrnal nirnafi ma1rnfactu Cotti 1l ·
n~ ., 1,rro~od. ,, oH • ar1u · • GI S . I 1 rers I''- ~il,.... . 'r ·~
. • I · 1 ·1 a• l'fizcr axu. m11 1KJ ·ne,Johns'"'"" %
,\nbm. ph,11marrutirn s1an s Slll 1 '" · '
b ·• •~ ' \
~- \ 1,,
,i' rn.r..
t 1 , . • - rte can hardly be connncrc1ally viable u I
:mu ,., o, :u 1,s, ., • ' on •· •ri 111 u
n ess l0 "(Jo i:i •1
1
oprrnlions arc adoptrd. g b.tl S~M ~ti\~It)
'II~ I
t1
Global expansion of business operations
Gro"i ng market access and movement . of capitals·acrossthcountries have [ .
rapid expansion of business operations .globally. mce
. Of e comparau
I. ve adatditq_ 4!q
coun tries strongly influence the location strategies mu tinationa} "ari~
companies tend to expand their businesses overseas . .col'J>orilt1_e,0 1:ir
with. the gro Wing
liberalization • As a result, multinationa
. I corporations constitute the Ina.in ec 0"'I() lls, 1
1
economic globalization. "ect0tslliOft

Advents In /og/st/C$ management

Besides these, the greater availability of speedier and increasingly cost-ett .
of transport, breakthroughs in logistics management such as multimo~Ctive Ille
technology, and third-party logistics management contributed to the faster al ~an.;:"
movement of goods internationally. · and eflieie;

Emergence of the global customer segment

Customers around the world are fast exhibiting convergence of tastes and
in tenns of their product likin~ and buying habits. Automobiles, fast-r:t:ence,
music systems, and even fash10n goods are becommg amazingly simil Utlets,
countries. The proliferation of transnational satellite television and telecomffilJ.nicati
ar _across
0
has accelerated the process of cultural convergence. Tra · ditionally, cultural
· valuesw n
transmitted through generations by parents or grandparents or other family m bere
However, with the emergence of unit families that have both parents working teelm· ~rs.
h b . u1 . nl . , eVlSion
as ecome the promment source of ace turation not o y m Western countne b
in oriental countries as well. Besides, advances in the modes of transport and incre~=
mternational travel have greatly contributed to the growing.similarity of customer
preferences across countries. Thus, the process of globalization has encouraged finns
to tap the global markets with increased product standardization. This has also given
rise to rapid increase in global brands.
 GlobarlZatioo and lntematiooal Business 19
; .4.2 Factors Restraining Globallzaflon
egu/otory contrOls
The restrictions imposed b .
their trade ind trial Ynational government! by way of regulatory measures in
' us , monetary and fi I 1· •
expansion R t . . ' tsca po 1c1es restrain companies from global
. . es nctions on portfol'10 d f . d' . .
mfluenc . an ore1gn trect investment cons1derably
e monetary and capital fl b
duties mak • ows across orders. The high incidence of import
es imported goods uncom titi dd
markets. pe ve an eters them from entering domestic

Emerging trade barriers

The integration of national .
count · f . economies under the WTO framework has restrained
nes rom mcreasing ta 'ff d · ·
H owever, countries. are n. s an
l irnposmg
l . . explicit non-tariff trade barriers.
consistent y evo vmg mnovative marketing barriers that
are WTO compatible S h b · • .
. · uc arners me1ude quality and technical specifications
enVIronmental issues gu1 ti l d '
t I . 're a ons re ate to human exploitation such as child labour,
e c. nnovative technic I . d . tifi . ,
. a Jargons an JUS cations are often evolved by developed
countries to impose s h t . .
. uc res nctions over goods from developing countries who find
It very hard to defend against such measures. '

Cultural factors
Cultural factors can restrain the benefits of globalization. For instance, France's
collective national' c. h . .
Ism 1avours ome-grown agnculture and the US fear of terronsm
has ·made foreign management of its ports difficult and restrained the entry of the
Dubai Port World. ·

Nationalism
The feeling of nationalism often aroused by local trade and industry, trade unions,
political parties, and other nationalistic interest groups exerts considerable pressure
against globalization. The increased availability of quality goods at comparatively
lower prices generally benefits the mass consumers in the importing country but hurts
the interests of the domestic industry. .
On one hand, consumers in general are hardly organized to exert any influence on
policy making, while on the other, trade and industry have considerable clout through
their associations and unions to use pressure tactics on national governments against
economic liberalization.

War and civil disturbances

The inability to maintain conducive business environment with sufficient freedom of
operations restricts foreign companies from investing. Companies often prefer to
expand their business operations in countries that offer peace and security. Countries
engaged in prolonged war and civil disturbances are generally avoided for international
trade and investment.