7/31/2019 IBM M1

1/26

Module-1

7/31/2019 IBM M1

2/26

Introduction Meaning and definition Features of globalization Stages of globalization Process of globalization Modes of international business

Globalization of market Globalization of production, investment

&technology Advantages & disadvantages of

globalization Essential conditions of globalization

7/31/2019 IBM M1

3/26

Merchant has no nation .it means thata businessman can view the entire

world as one country for hisoperation. the entire globe is just likeone country for a business. so

erasing national and politicalboundaries for the purpose ofbusiness in may be termed asglobalization.

7/31/2019 IBM M1

4/26

Comprises a large & growing portion of theworlds total business.

Today global events & competition affectsalmost all companies-large/small because

most sell output to & secure supplies fromforeign countries.

Many companies also compete againstproducts & services that come from abroad.

A company operating internationally willengage in modes of business such asexporting & importing, that differs from

those it is accustomed to domestically.

7/31/2019 IBM M1

5/26

When operating internationally, a companyshould consider its mission, objectives,

strategy. 1.Expand sales, productivity& profits

2.Acquire resources

3.Diversify source of sales & supplies

4.Minimize competitive risk

5.Severe competition in home country

6.Technology

7/31/2019 IBM M1

6/26

Expansion of technology

Liberalization of cross border

movements Development of

infrastructure/supporting facilities

Increase in global competition

7/31/2019 IBM M1

7/26

Modes of IBExports/Imports Investments

Merchandise Services Direct Portfolio Part/100% share

Tourism Transportation Performance of services Use of assets

Fees Turnkey operations Royalties

7/31/2019 IBM M1

8/26

Exporting- Indirect & Direct exporting

Licensing

Franchising Contract manufacturing

Management contract

Mergers,acquisitions,joint ventures Subsidiary/green field strategy

7/31/2019 IBM M1

9/26

Domestic company

International company

Multinational company Trans-national company

Decision factors of internalization

Ownership advantage Location advantage

Internationalization advantage

7/31/2019 IBM M1

10/26

{Fully Ownedsubsidiary

J. V. / M.V.

Franchising

Licensing

Export/import

Domestic

FDI

7/31/2019 IBM M1

11/26

Defined as a shift toward a more integrated& interdependent world economy (or) atrend away from distinct national economicunits & toward one huge global market.

It has 2 main components. They are

Globalization of markets

Globalization of production

7/31/2019 IBM M1

12/26

Globalization implies integration of the

economy and opening up of economy for FDIby liberalizing the rules and regulations and bycreating favorable socio economic and politicalclimate for global business

IMF defines globalization as growing economy,economic independence of countriesworldwide through increasing volume andvariety of cross border transactions of goods &services and of international capital flow and

also through the more rapid & widespreaddiffusion of technology. Charles W .L. Hill defines globalization as a

shift towards a more integrated andinterdependent world economy .

7/31/2019 IBM M1

13/26

Globalization encompasses the followingfeatures.

Operating and planning to expand business

through out the world Erasing the difference between domestic

market & foreign market. Buying & selling goods & services from any

country in the world Establishing manufacturing & distribution

facilities in any part of the world based onfeasibility and viability rather than national

considerations. Product planning and development are

based on market considerations of entireworld.

Global orientation in strategies,organizational culture and managerial

7/31/2019 IBM M1

14/26

Decline in trade & investment barriers-barriers to free flow of goods, services,capital.

Technological factor-technologicalchange,communication,information,transportation.

7/31/2019 IBM M1

15/26

Exporting directly

Exporting indirectly

Licensing and franchising

Contract manufacturing

Establishing full marketing facilities

Establishing manufacturing facility

Joint venture

Strategic alliance

Merger

7/31/2019 IBM M1

16/26

Domestic company exports to foreigncountries through the dealers ordistributors of the home country

In the second stage ,the domestic companyexports to the foreign country directly on itsown

In third stage ,the domestic company

becomes an international company byestablishing the production and marketingoperation sin various key foreign countries.

In the fourth stage ,the company replicatesa foreign company by having all the

facilities including R&D full fledged human

7/31/2019 IBM M1

17/26

Free flow of capital and increase in the totalcapital employed.

Free flow of technology.

Increase in industrialization .

Spread of production facilities throughout theglobe.

Balanced development of world economies. Increase in production and consumption.

Commodities at lower prices with high quality.

Cultural exchange and demand for a variety of

products. Increases in Jobs and Income.

Higher standards of living.

Balanced Human Development.

Increase in Welfare and Prosperity.

7/31/2019 IBM M1

18/26

Globalization kills domestic business.

Exploits Human Resource.

Leads to unemployment andunderemployment.

Decline in demand for domestic products.

Decline in income.

Widening gap between rich and poor.

Transfer of Natural Resources.

National sovereignty at stake.

7/31/2019 IBM M1

19/26

7/31/2019 IBM M1

20/26

Attractiveness-costs, risks, benefits(first turnover advantages, late

turnover advantages) Over all attractiveness

Ethics & regulations-human rights,

regulations, corruption.

7/31/2019 IBM M1

21/26

Regiocentric

Ethnocentric

Geocentric

polycentric

7/31/2019 IBM M1

22/26

High living standards

Reduced risks

Increased socio economic welfare Wider market

Division of Labour & specialization

Economic growth of the world

Utilization of world resources Cultural transformation

Opportunity & challenge to domestic

business

7/31/2019 IBM M1

23/26

Political factors

Huge foreign indebtedness

Entry requirements Exchange instability

Tariffs, quotas & trade barriers

Corruption

Bureaucratic practices of government Technology pirating

High cost

7/31/2019 IBM M1

24/26

Liberalization of the rules, regulation &control

Removal of quotas & tariffs Providing freedom to business & industry

Providing infrastructural facilities

Encouraging R&D

Autonomy to public sector to compete withprivate sector

Providing administrative & governmental

support

7/31/2019 IBM M1

25/26

Managing an international business is different frommanaging a domestic business for at least fourreasons.

1.Countries are different

2.The range of problems confronted by a manager inan international business in wider and the problemsthemselves more complex than these confronted bya managers in domestic business

3.Managers must find the ways within the limits

imposed by govt. intervention in the internationaltrade & investment system

4. International transactionsinvolve converting moneyinto different currencies.

7/31/2019 IBM M1

26/26

Companys physical & societal environments

1.political policies & legal practices2.cultural factors3.economic forces4.geographical influences

Competitive environment1.price2.marketing

3.innovation4.number of competitors