Globalisation

Trade and investment barriers are disappearing. Perceived distances are shrinking due to advances in transportation and telecommunications. Material culture is beginning to look similar. National economies merging into an interdependent global economic system. No Comprehensive Definition Available Current conjecture through liberalisation and rapid technological progress is new Neo-Liberalism in 1980s and 1990s. Tendency of prescribing same policies throughout However, global challenges are not solved.

Growth, Openness and Poverty

Poverty level has come down but not equally. In some cases, it has increased. Growth and openness has a positive impact on poverty reduction in general. More globalised countries have experienced higher growth and also witnessed declining poverty In general inequality across the world shows a decline but within countries it is rising. Poor management of globalisation could lead to further marginalisation and impoverishment
World Trade growth is more than world GDP growth. Globalising developing countries have shifted to manufactured goods exports from primary product exports The relationship between trade liberalization and growth is debatable The impact of trade liberalization and poverty alleviation is indirect. Empirical evidence of trade and reduction in wage inequality is mixed.

Volume of world trade and production,

1950-2002
Fig: 1.1

Globalisation: Some Issues

Transport and ICT

Transport and Communication cost is coming down but digital divide is increasing. Reduction in transportation cost and accessibility of modern communication technology has a positive impact on trade and growth.

It has also increased the efficiency with which goods, services, capital, ideas and people move around the world.

Globalisation: Some Issues

Issues in Finance Financial crisis leads to depreciation of currency and wide scale unemployment
Handling financial crisis is difficult as it is contagious, driven by market mechanism and there are presence of moral hazards and financial scams Poorer countries receive very less FDI. They remain underdeveloped and can not attract further FDI. The situation needs attention as ODA has also slowed down. Many developing countries are hesitating to globalise their economies due to insufficient domestic resources, lack of efficient financial system and institutions and low level of investment

The Changing World Order

The fall of Communism in Eastern Europe and the former Soviet Union. Czechoslovakia has divided itself into two states. Yugoslavia has divided into 5 (often warring) successor states. Pro-democracy movement (suppressed) in China. Latin America has seen both democracy and free market reforms.

Changing demographics of the world economy World output and trade

Changing foreign direct investment Changing nature of multinationals
Mini multinationals Non US multinationals

 Globalization does not mean the advance of a homogeneous civilization and uniform business system. Growing interaction makes people more aware of the differences among them.

Globalization and International Business

What is International Business

The business activities that involve the transfer of resources, goods, services knowledge, skills or information across national boundaries. May involve
Individuals Companies Government bodies International institutions

 International business is the outgrowth of domestic business. Most major corporations started their operations in the domestic market. International entrepreneurs
Individuals or companies that invest and operate in another country without a home base

International versus Domestic Business

 Firms expand internationally for various motives:

Market motives Economic motives Strategic motives

Why Do Firms Expand Internationally?

Motives vary from one business activity to another.

Modes of International Business

Importing and exporting Tourism and transportation Licensing and franchising Turnkey operations Management contracts Direct and portfolio investment

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