LEARNING BUSINESS ENVIRONMENT Page No.

MANAGEMENT QUICK REVISION GUIDE

Bangalore Chapter 2 - Globalization 1

GLOBALIZATION
- It is the integration process of the world, into one huge market.
- It is the Internationalization
- This means removal of trade barriers; even political and geographical barriers.

MNC
- A company that has become Global
- It operates from more than one country.
- Gains R&D / Marketing / Production / Financial advantages
- Efficient use of Global resources for Business growth.

4 INDIAN MNCs
TATA Motors – Daewoo Motors Korea
Ranbaxy – RPG aventis
Ambanis – Flag International
Hindalco – Mount gardon Australia

CHARCTERSTICKS OF GLOBALISATION
1. Multiple Units at different locations of the world with one common ownership.
2. Multiple units with common pool of resources – Money, Credit, Information,
Patents, trade names and control systems
3. Has some common strategy
4. Products presence in different parts of the world.
5. Highly diversified Human resource.
6. Transactions across the globe – Intellectual properties

WHY GLOBALIZATION?
1. Several regional developments
Emergence of NAFTA, EU, GATT, ASEAN etc.
Economic progress of underdeveloped countries
Removal of barriers and controls
New economy demanding trading across the globe
2. Surplus money in overseas, want to invest in other countries.

Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com

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3. Limited domestic market.

4. To reduce high transport costs
5. Balance out expenses
6. Incentives offered by local Govt.
7. Removal of Trade barriers
8. To access resources unavailable or expensive

MANIFESTATIONS OF GLOBALISATION
(How you see and feel the effects of globalisation)
1. Operations anywhere in the world. (Presence of MNCs in India)
2. Interlinked and independent economics.
3. Lowering of Trading and tariff barriers
4. Effect on related Industries and ancillaries
5. Infrastructural Inputs at International Prices
6. Increase towards Privatization (Engg. Colleges / Courier)
7. Entrepreneurship rewards
8. Mobility of Skilled resources.
9. Market side efficiency
10. Formation of regional blocs

BENEFITS OF MNCs
It can be seen in two ways. One is from the foreign companies - Host. Another one is,
for our own country – Home.
HOST benefits
1. Transfer of: Technology, Capital, Management style, Entrepreneurship
2. Improvement of Balance of Payments (Increase in Dollar deposits in our Banks)
3. Creation of local jobs & career.
4. Improved competition & better utilization of resources
5. Greater availability of products to the locals
6. Access to high quality of managerial / technical talents.
7. Encouragement to world economic unity leading to world harmony & peace.

Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com

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HOME benefits
8. Import of raw materials at low cost, better quality & steady supply.
9. Expertise acquired in Management & Technology
10. Export of components, products and their distribution in Foreign countries.
11. Inflow of income from overseas in profits, royalties, licensing fees , management
contracts etc.
12. Overseas Job & Career opportunities.

PROBLEMS OF MNCs (why opposing MNCs)

There are potential problems that comes along with the benefits of MNCs. Some of
them are:
1. Loss of economic sovereignty. MNCs act like another powerful Govt. in
operations and negotiations. Remember East India Company came for trading
eventually taken over India.
2. Loss of control over our own economy. MNCs decide their business operations ,
investments, flowing back profits that may seriously affect our own economy.
Imagine sudden closure of all MNC Malls all over country.
3. Acquisition of domestic company by MNCs. This is the end of local companies
growth.
4. Exploitation of cheap local labour. Paying 1 dollar to locals while paying 100
dollars to the foreign national.
5. Social upheaval or Govt. Control. A social revolution can cause huge losses and
change of Govt. that do not support MNCs.
6. Inability to cope up with domestic opinion. Locals feel that junk foods cause
health problems. Therefore MNCs have to get out of the country.
7. Economic issues. High interest rates, (US stocks and shares affecting Indian
Stocks and shares), Capital shortage, export obligations, sending back huge
profits, sudden withdrawal of investments.
8. Cultural difference. New age youth are sporting western out fits, hugging, kissing
in streets & malls. Openly drinking and smoking etc., affect our social & moral
values.
9. Loss of culture and heritage
10. Difficult to allay the fears of locals and patriots.
11. Objections from Home country citizens.

Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com

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CHALLANGES OF INTERNATIONAL BUSINESS

Globalization poses its own challenges to the trading countries. Five major areas are:
1. Maintaining Competitiveness
Factor conditions: Land, labor, capital advantages
Demand Conditions: Able to meet local demands first, then exports.
Related & supporting Industries: This will strengthen business
Environment: Both internal & External
2. Govt. & Trade regulations
Favorable conditions for one will be unfavorable for the other. Metro rail over local
residences.
3. Developing International perspective
Focus / Experience / Attitude
4. Managing Diversity
There are so many products flooded in the market than the takers. The growth of
Dining, Dress material and Foot wear has increased by 10,000 fold leaving slump
in the market. Same with Real estate & construction – many To lets boards are
hanging around. Where the rent was a 1 lac of rupees is now at 30,000.
5. Maintaining a good Image (quality, Social responsibility).
Videocon an Indian MNC is not enjoying the same image as that of SONY.

NOTES
Process of Globalization
Check the domestic market demand for quality & low cost goods. Import it or
assemble it or make it locally.
Check overseas market for domestic products, then go & sell it there.
Check the market anywhere in the world and supply it from anywhere in the world.

Impact on culture
India enjoy a 5000 year old culture with diversified language, culture, religion, caste,
creed trades, technology etc. With this we do have a good harmony among
ourselves. Culture is prominently a human factor and Business is a profit factor. They
don’t mix well unless Business make an all out support for culture.

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Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com