globalization in detail and international business

Yashraj Tahilramani (38-A)Naina Sharma (31-A)

Globalization

Flow of Presentation1) International Business

2) What is Globalization

3) Types of Globalization

4) Benefits of Globalization

5) Challenges of Globalization

6) Causes of Globalization

7) Effects of Globalization

8) Global Institution

9) Global Manager

10) Stages in Globalization

11) Ways to Sell Internationally

12) Global India

International Business

International Business Players

Business that has direct investments abroad in multiple countries

Small companies and individuals becoming increasingly active in international trade and investment

Adopts a global perspective and engages in international business from or near its inception

MultinationalCorporation

Small Businessesand Entrepreneurs

Born Global Firm

Globalization

Trend toward greater economic, cultural, political and technological interdependence among national institutions and economies

Globalization of markets

Convergence in buyer preferences in markets around the world

Globalization of production

Dispersal of production activities worldwide to minimize costs or maximize quality

Globalization Involves Us All

We experience internationaltransactions daily

Imports and exports reacheven remote areas

Technology and e-bizpromote trade

Consumers and companiespull markets closer

Globalization of Markets

• “Merging of historically distinct and separate national markets into one huge global marketplace.”

– Facilitated by offering standardized products:• Citicorp• Coca-Cola• Sony PlayStation• McDonalds

– Does not have to be a big company to participate:• Over 200,00 U.S. companies with less than 100

employees had foreign sales in 2000.

Globalization of Production• “The sourcing of goods and services

from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor,energy, land and capital).”

• Companies hope to lower their overall cost structure and/or improve the quality or functionality of their product offering - increasing their competitiveness.

“Global Products”

Benefits of Globalization

Globalizationof markets

Globalizationof production

• Reduces marketing costs

• New market opportunities

• Levels income stream

• Reduces marketing costs

• New market opportunities

• Levels income stream

• Access lower-cost labor

• Access technical expertise

• Access production inputs

• Access lower-cost labor

• Access technical expertise

• Access production inputs

Challenges to Business

Physicalsecurity

Digitalsecurity

Reputationalrisk

Examine companyvulnerability andcreate a disasterrecovery plan

Guard proprietaryinformation andconfidentialcommunications

Require ethical andlawful behavior fromall employees andbusiness partners

Causes of Globalisation:1. Improved Communications

• The development of communication technologies such as internet, email and mobile phones have been vital to the growth of globalisation because they help MNCs to operate throughout the world.

• The development of satellite TV channels such as Sky and CNN have also provided worldwide marketing avenues for the concept and products of globalisation.

Causes of Globalisation2. Improved Transport

• The development of refrigerated and container transport, bulk shipping and improved air transport has allowed the easy mass movement of goods throughout the world. This assists globalisation.

Causes of Globalisation:3. Free Trade Agreements

• MNCs and rich capitalist countries have always promoted global free trade as a way of increasing their own wealth and influence.

• International organisations such as the World Trade Organisation and the IMF also promote free trade.

Causes of Globalisation:4. Global Banking

• Modern communication technologies allow vast amounts of capital to flow freely and instantly throughout the world.

• The equivalent of up to $US1.3 trillion is traded each day through international stock exchanges in cities such as New York, London and Tokyo.

Causes of Globalisation:5. The Growth of MNCs

• The rapid growth of big MNCs such as Microsoft, McDonalds and Nike is a cause as well as a consequence of globalisation.

• The investment of MNCs in farms, mines and factories across the world is a major part of globalisation.

• Globalisation allows MNCs to produce goods and services and to sell products on a massive scale throughout the world.

The Effects of Globalisation:1. Changed Food Supply

• Food supply is no longer tied to the seasons. We can buy food anywhere in the world at any time of the year.

The Effects of Globalisation:2. Division of Labour

• Because MNCs search for the cheapest locations to manufacture and assemble components, production processes may be moved from developed to developing countries where costs are lower.

The Effects of Globalisation:3. Less Job Security

• In the global economy jobs are becoming more temporary and insecure.

• A survey of Indian workers showed that people now hold 5 to 7 jobs over their working life.

The Effects of Globalisation:4. Damage to the Environment

• More trade means more transport which uses more fossil fuels and causes pollution.

• Climate change is a serious threat to our future.

The Effects of Globalisation:5. Cultural Impact

• Websites such as YouTube connect people across the planet. As the world becomes more unified, diverse cultures are being ignored. MNCs can create a monoculture as they remove local competition and thereby force local firms to close.

Replacing

The Effects of Globalisation6. Increase in anti-Globalisation Protests

• There is a growing awareness of the negative impacts of globalisation. People have begun to realise that globalisation can be challenged by communities supporting each other in business and society and through public protest and political lobbying.

Global InstitutionsInstitutions are needed to

– help manage, regulate, and police the global marketplace

– promote the establishment of multinational treaties to govern the global business system

Examples include– General Agreement on Tariffs and Trade (GATT)– World Trade Organization (WTO)– International Monetary Fund (IMF)– World Bank– United Nations (UN)

Global Institutions The World Trade Organization (WTO)

(like its predecessor GATT) – polices the world trading system– makes sure that nation-states adhere to the

rules laid down in trade treaties – promotes lower barriers to trade and

investment– As of 2009, 153 member nations collectively

accounted for 97% of world trade The International Monetary Fund (IMF)

(1944) maintains order in the international monetary system

Global Manager

• The global manager has to play multidimensional role by combining his technical skill, people skill and soft skill. The manager must have combination of hard as well as soft skills. He must be able to organize, analyze and motivate people at international level.

Roles of Global Manager• IN THE CAPACITY OF COUNTRY MANAGER.

The global manager has to deal with clients, legal bodies, immigration authorities on behalf of his office.

• IN THE CAPACITY OF FUNCTIONAL MANAGER. The global manager has to select right technique, right resources, software projects to compete at international level.

• IN THE CAPACITY OF BUSINESS LEADER. The global manager has to make changes in the organization keeping in mind the trend of World and requirement of outsourcing.

Roles of Global Manager

Decision-maker

InnovatorNegotiator

STAGES IN GLOBALISATION

Contacting dealers and distributors Replicate domestic market activity

Ways to sell in International market

Direct Export Indirect Export Licensing Franchising

Contracting Manufacturing Joint Venture

Ways to sell in International market

• Bill Gates, Chairman and Chief Software Architect Microsoft Corporation

• (b-1955):

• “…after the Chinese, South Indians are the smartest people in the world.”

Indians abroadA snapshot of Indians leading Global businesses

The Co-founder of Sun Microsystems (Vinod Khosla), Creator of Pentium Chip (Vinod Dahm),

Founder and creator of Hotmail (Sabeer Bhatia), Chief Executive of McKinsey & Co. (Rajat Gupta)

President and CFO of Pepsi Cola (Indra Nooyi) President of United Airlines (Rono Dutta)

GM of Hewlett Packard (Rajiv Gupta) President and CEO of US Airways (Rakesh Gangwal)

Chief Executive of CitiBank (Victor Menezes),Chief Executives of Standard Chartered Bank (Rana Talwar)

Chief Executive officer of Vodafone (Arun Sarin) President of AT & T-Bell Labs (Arun Netravali)

Vice-Chairman and founder of Juniper Networks (Pradeep Sindhu) Founder of Bose Audio (Amar Bose)

Founder, chip designer Cirrus Logic (Suhas Patil ) Chairman and CEO of Computer Associates (Sanjay Kumar)Head of (HPC WorldWide) of Unilever Plc. (Keki Dadiseth)

Chief Executive Officer of HSBC (Aman Mehta)Director and member of Executive Board of Goldman Sachs (Girish Reddy)Chief Economist of the International Monetary Fund (Raghuram Rajan)

Former CTO of Novell Networks (Kanwal Rekhi)

Indians in the USA

Statistics that show:

38% of doctors in the USA,12% of scientists in the USA,36% of NASA scientists,34% of Microsoft employees,28% of IBM employees,17% of INTEL scientists,13% of XEROX employees,

… are Indians.

Attractive location across all broad sectors

Manganese2nd largest reserves (160 Mn T)

Chromium 3rd largest reserves (57 Mn T)

Coal 4th largest reserves (248 Bn T)

Bauxite 4th largest reserves (2.4 Bn T)

Iron Ore 5th largest reserves (13 Bn T)

MilkLargest producer at 91 Mn T p.a.

Sugarcane Largest producer at 234 Mn T p.a.

Tea Largest producer at 850 Mn Kgs. p.a.

Fruit Second largest producer at 47.5 Mn T p.a.

Vegetables Second largest producer at 90 Mn T p.a.

Wheat Second largest producer at 72 Mn T p.a.

Rice Second largest producer at 85 Mn T p.a.

Natural Factor Endowment

Leading the Pack

Series1

7

7.5

7.8

10.5

11.5

11.5

11.8

12

18India

Australia

Malaysia

China

Korea

Taiwan

Singapore

Philippines

Japan

Return on Equity (%)Source: JP Morgan