 Economic liberalization is a very broad term

that usually refers to fewer government

regulations and restrictions in the economy in
exchange for greater participation of private
entities.
Privatization
 Privatization is the incidence or process of
transferring ownership of a business, enterprise,
agency or public service from the government to the
private sector. In a broader sense, privatization refers
to transfer of any government function to the private
sector including governmental functions like revenue
collection and law enforcement.
Globalization
 Globalization describes an ongoing process by which
regional economies, societies, and cultures have
become integrated through a globe-spanning network
of exchange. The term is sometimes used to refer
specifically to economic globalization: the integration
of national economies into the international economy
through trade, foreign direct investment, capital
flows, migration, and the spread of technology.
The process of integration and convergence of

economic, financial, cultural and political

systems across the world.

Reasons Companies go Global to:
 Make profits in overseas markets.
 With rapid technological changes and faster communication methods
there is viability in having foreign affiliates and subsidiaries. Domestic
markets are no longer adequate.
 Raymond Vernon propounded the Product Cycle theory: Companies
that develop attractive new products sell them in their home markets.
As soon as there is awareness of this new product in the foreign
market, producers begin to export the product. As demand increases in
the foreign market, it might be more viable for the producer to
establish a unit in the foreign market for the production of the same
commodity.
 Raw materials, labor etc. could be cheaper and more reliable in other
markets.
 Prefer to operate business in countries which have a stable political
environment.
 To reduce high transportation costs. The company could produce high
value added components in a few centralised facilities and produce the
less critical components and assemble the final product in it major
markets. Be closer to the market or alternatively to their location of raw
material.
Drivers of globalization
 Economic globalization
 Financial globalization
 Political globalization
 Cultural globalization
Strategies in Globalisation

Globalisation involves decision making on the

following lines:
 Deciding whether to go global
 Deciding which markets to enter
 Deciding how to enter the market
 Learning how to handle differences.
 Adjusting the management process
 Selecting a managerial approach
 Deciding organisation structure.
Measures adopted for
globalization.
 Increase the foreign investment.
 Partial convertibility of Indian rupee.
 Foreign trade policy.
 Reduction tariffs.
 Export promotion.
 Freedom to repatriate.
Movers of Globalization
 Economic liberalization

 Technological breakthrough

 Multilateral institutions

 International economic integrations

 Move towards free marketing systems

 Rising research & development costs

 Global expansion of business operations

 Advents in logistics management

 Emergence of the global customer segment

Dimensions of Economic Globalization

 Globalization of production
 Globalization of markets
 Globalization of competition
 Globalization of technology
 Globalization of corporations and industries
Factors Restraining Globalization
 Regulatory controls

 Emerging trade barriers

 Cultural factors

 Nationalism

 War and civil disturbances

 Management myopia
Positive Effects of globalization.
 Increase in foreign trade.
 Increase in foreign investment.
 Foreign direct investment(FDI).
 Increase in foreign collaboration.
 Increase in foreign exchange reserves.
 Expansion of market.
 Technological development.
 Brand development.
 Development of services sectors.
 Development of capital market.
 Increase in employment.
 Reduction in brain drain.
 Improvement in standard of living.
Negative effects of globalization.
 Loss of domestic industries.
 Unemployment.
 Exploitation of labour.
 Demonstration effect
 Increase in inequalities.
 Dominance of foreign institutions.
Measuring Globalization
 Trade Openness

 KOF Index of Globalization

 A.T. Kearney/ Foreign Policy Globalization Index

Reasons for Support of Globalization
 Maximization of Economic Efficiencies

 Enhancing Trade

 Increased Cross-border Capital Movement

 Improves Efficiency of Local Firms

 Increases Consumer Welfare

Criticism of Globalization
 Developed versus Developing Countries: Unequal Players in
Globalization:
 Widening Gap between the Rich and the Poor
 Wipes out Domestic Industry
 Leads to Unemployment and Mass Lay-offs
 Brings in Balance of Payments Problems
 Increased Volatility of Markets
 Diminishing Power of Nation States
 Loss of Cultural Identity
 Shift of Power to Multinationals
•
Response Strategies to Globalization Forces for
Emerging Market Companies

Competitive Assets
Pressure from Industry

 Defender

 Extender

 Dodger

 Contender
Globalisation of Indian Business
 India’s economic integration was very limited due to the restrictive policies
till 1991. With the new economic policy in 1991, there has been a change.
Factors favoring Globalisation:
1. Human resources: Alongwith low cost of labor, India has been one of the
largest pool of scientific, managerial and technical manpower.
2. Wide base: India has been a broad resource and industrial base which can
support a variety of businesses.
3. Growing entrepreneurship: While many of the existing industries are
planning to go international, there is also considerable growth of new and
dynamic entrepreneurs.
4. Growing domestic market:
5. Transnationalisation of World Economy: World is a single market.
6. NRIs: There are a large number of NRIs who are resourceful – in terms of
capital, skill, experience, exposure, ideas etc.
7. Economic liberalisation: Delicensing of industries, removal of restrictions
on growth, opening up of industries has encouraged globalisation of the
Indian economy.
 2015
2010
GDP – USD 1.36
GDP – USD 1.16
trillion
trillion
GDP growth rate –
2006 GDP growth rate –
9%
GDP – USD 590 billion 9.5%
Services
GDP growth rate – Services
contribution –
9% contribution – 60%
60-65%
Services Balance of Trade –
Balance of Trade –
contribution – 54% Negative
Negative
Balance of Trade – balance should increase
balance should
USD (-)46.2 billion with
increase with
Investment goal – surging imports versus
surging imports versus
USD 250 billion exports
exports
Investment goal –
Investment goal –
USD 305 billion
USD 370 billion
 Impact of globalization on business in India
 India has a consumer base of 1.14 billion people.
 India is the 3rd largest global telecom market. The
mobile subscriber base has grown from 0.3 Million in
1996 to over 250 million currently.
 India is the world’s:
 • 2nd largest two-wheeler market,
 • 4th largest commercial vehicle market
 • 11th largest passenger car market.
 Expected to be the 7th largest automobile market by
2016.
Globalisation of Indian Business
Obstacles to Globalisation:
1. Government Policy and Procedures: Indian government policies and
procedures are still most complex, confusing and cumbersome.
Government policy and the bureaucratic culture in India are not that
encouraging.
2. High cost: High cost of many vital inputs and other factors like raw
materials, power, finance infrastructural facilities tend to reduce the growth
as well as competitiveness.
3. Obsolescence: Technology employed, mode and style of operations are in
general obsolete.
4. Resistance to change: Several socio political factors resist change and this
comes in the path of modernisation.
5. Poor Quality image: Quality of many Indian products is poor which has
become a handicap for items of good quality.
6. Supply Problems: Low production capacity, shortages of raw materials and
infrastructures like power and port facilities, Indian companies are not able
to accept orders or to keep up delivery schedules.
7. Small size and lack of experience: Due to small size and lack of experience
in managing international business, Indian entrepreneurs face challenges.
8. Limited R & D: Expenditure on R&D in India is less than 1% of GNP while it
is 2-3% in most of the developed countries.
9. Trade barriers: Although tariff barriers to trade have been reduced, the non
tariff barriers are increasing particularly in the developed countries.