Globalisation & some policies

1. Global business environment
GLOBALISATION-
Globalization describes a process by which
national and regional economies, societies, and
cultures have become integrated through the
global network of trade, communication and
transportation.
It helps to integrate a business with world
economy or market, also with outsourcing of
your strengths.

2. Challenges in Globalization.
i-Continuous efforts to maintain
competitiveness
Market will always be full of
competitors, so you’ll always have to
be upgraded with latest trend, designs
& styles otherwise you’ll lose
consumer base.
At the same time you’ll have to maintain
your price level & quality level
accordingly because change in either
of factors may shift the consumer to
competitors.

3.  ii) local mindset needs to be converted
into global outlook-
Most of the business enterprise consider
the local market for generation of a
customer base which will give them a
steady profit later on.
But in globalization market base increases,
& you need to consider both domestic &
foreign markets for operations.
Ex- Lever Ayush

4.  iii) Manage diversity in a global
canvas.
Diversities are highest when we cross a
national boundary.
Diversity can be of culture, social
values, beliefs, tradition etc.
Setting up a business market abroad
means operating according to the
demand, taste & choice of foreign
consumers.

5.  Iv)Good image, Quality products &
accountability.
Company has to maintain the quality of
the products on a long run to gain
good image in the market.
But when your market base is large
enough it becomes tedious to provide
good price-quality all the time.

6.  v)Government & Trade Regulations
 Even though you’ve a global opportunity
but in some countries Govt. do not allow
foreign traders in order to protect the
local producers.
Ex- Japan is allowed to automobile
business inside US but US is not allowed
to do such in Japan.
 Sometimes the regulations, laws &
policies change from time to time, which
put up a trading bar between borders of
countries.

7. Opportunities in Globalization
 i) Job creation-
Expansion of business beyond a
territory creates many opportunities for
the youth to get employed in various
departments.
Expansion in employees increases
consumer interactions with a certain
business which gathers valuable
suggestions, ideas & feedbacks.

8.  ii) Market creations-
Globalization helps a business to exploit
various marketing opportunities
available in the both domestic &
foreign market.
Whenever a business expands over to
other country it occupies certain share
of its market to start its operations, if it
proves successful then it continues to
expand over other markets.

9.  iii) Exposure to various trends &
cultures.
Facing various trends around world will
help a business to add values to its
core product.
New cultures & new tradition will
challenge a business to add some
new or innovative idea to its business
operations.

10.  Iv) Wages & Salary-
Whenever a business expands the
sales increases which adds increment
to revenue/ profit level.
That extra income of a business gets
evenly distributed among all the
employees & owners working inside
that organizations.

11.  V) Platform for women & their
empowerment.-
MNCs, globalized companies are
successfully providing safe working
places for women with flexible working
hours.
Some sectors like airlines/ aviation,
Retail, telecom/ IT are inviting woman to
be a part of their pervasive economy.

12. Strategies for going global
 i) Deciding whether to go global-
Generally businessmen decide to stay
at local market & enjoys vast market
share, uniform sales, market
concentration etc.
But opportunities, global flow of capital,
revolution of IT & loose trade barriers
invites them to join globalization.

13.  Most companies do not act until some
situation or event thrusts them into the
global scene.
Ex- Over capacity
Demand from abroad
Joint venture.

14. ii) Deciding which markets to enter-
-volume of foreign sales
-number of countries to market in
-types of countries to enter
Most globalised company believe in
deeper market penetration than
spreading branches in various
countries.

15.  The globalised company generally
creates an offspring to conduct
business in a foreign company, which
generally remains smaller than parent.
 The lucrative market potentials can be
judged by-
Purchase power, economic fluctuations,
demographic variance etc.

16. iii) Entry strategies-

17. 1.
 European communities are the world’s
largest trading unit, followed by Asia &
North America.
 This helps a business to produce in
one country and market in another
country.
 This is the preliminary step for a
business to go global.

18. 2.
 These are the routes for industries like
shipping, airlines, hotel & travel
agency.
 Norway & Greece depend on
international tourism & transportation
for employment, profits & foreign
earnings.

19. 3)
 This can be applied on banking,
insurance, rentals, management
services, etc.
 Turnkey projects are very popular in
earnings.

20. 4)
 It includes patents, trade marks, copy
rights, technology/ technical know-
how, business skills etc.
 Licensing & franchising are the modes
which facilitate companies to allow
others to use their assets.

21. 5)
 Franchising, leasing, joint
investments, direct invest can be
named under joint ventures.
 It shows partnership between two
firms of two various areas or
countries.
 It enables them to share their
resources to create common
marketing oriented efforts.

22. iv) Learning to handle
differences-
This shows the nature of cultural
differences, social life, work life &
consumer category across countries.
Managers should see them as a part of
globalized world not as a part of one
country.
Manager’s strategies should be
supported by huge investments by
their company.

23. v) Adjusting the management
process.
 It generally includes
-planning
-organizing
-staffing
-controlling

24. vi) Selecting a managerial
approach
 Includes span of employment, nature
of business growth, control
mechanisms, decision making &
responsibility.

26. vii)Deciding an organizational
structure.

27. Foreign Direct Investment
Nature-
It refers to the purchase of a significant
number of shares in a foreign
company in order to gain a certain
degree of management control.
An investment that does not involve
obtaining a degree of control in a
foreign company is called portfolio
investment.

28. Why FDI ?
 If domestic savings are inadequate to
generate enough savings &
investments, foreign capital is
expected to fill the gap between
targeted or desired investment &
locally mobilized savings.
 To give a necessary boost to the
investments
 Fasters competition
 Generate employments
 Stabilize economy

29. Factors influencing FDI
Supply Factors
It includes production costs, logistics,
resource availability & access to
technology.
It covers all kind of input factors without
those a business will be unsuitable
to sought FDI

30.  ii) Production Costs-
If the production costs are high for a
company then it choose other cheap
production functions like labor &
capital in other geographical area.
This happens due to variability in costs
in different places.

31.  iii) Logistics-
It includes cost of storing, shipping, raw
material, transportation etc.
Coke & pepsi have set up bottling
plants in India as the cost of
transporting water from US is
considerably high.
This cost also varies from location to
location.

32.  iv)Natural Resources-
Access to the natural resources
critically affects FDI.
If you have a hold on resources then
many investors will try to extend their
offer because of potential profits in
business ventures.

33.  V) Key Technologies-
Last but not the least, technologies can
not be discarded while considering
FDI, innovations in equipments or IT
brings a revolutionary change in
business.
It exists as intertwined & integrated
structure.

34. WTO & India
The WTO was established on 1st January
1995.
It has a large membership of 159, also has
25 observer governments.
India is one of the founder member of
WTO.
The WTO is the only global international
organization dealing with the rules of
trade between nations.
The goal is to help producers of goods &
services , exporters & importers conduct
their business.

35. Principles of WTO
 1) MFN treatment-
No discrimination should be present in
trade. All member countries are
granted ‘MFN’ status.
So that when a member country lowers
a trade barrier, all trading partners
avail the benefit.

36.  ii) National treatment-
This principle avoids any
discriminations between the nations,
also it implies that imported & locally
produced should be treated equally.

37.  iii) Free trade principle-
It shows optimal utilization of
resources.
It says that each & every country are
capable of offering something towards
trade.
They are doing business, at the same
time they are filling up missing links in
the.
Liberal trade policies that allow
unrestricted flow of goods to meet

38.  iv)Dismantling trade barriers-
Lowering or increasing the trade barrier
will show the strength of a member
country.
Developed countries focus on exports &
revenue generations keeping the
trading bar high.
But under developed & developing
countries keep their trading bar low to
attract foreign investors.

39.  V) Rule-based trading system-
WTO sets & enforces rules necessary
for conducting world trade fairly.
It also adjudicates on disputes between
members.

40.  vi) Treatment for LDCs-
WTO recognizes the need for positive
efforts to help least developed
countries reap benefits of trade
liberalizations.
It also helps them to run across whole
range of agreements covered by
WTO.
It also adds concession in the means of
waiver or technology transfer

41.  vii) Competition Principle-
The system is designed to promote
open & fair competition, but it
shouldn’t add local producers in it.
It also seeks to protect consumer
interest by promoting competition
among trading members.

42.  viii) Environment Protection-
The last principle of WTO relates to the
protection of environment.
Each and every business actions
mentioned by WTO do not harm the
environment in any means.
Also it prevents spread of a disease
associated with any infected products.

43. Objective of WTO
 Raising standard of living & income,
promoting employment & optimum
utilization of world resources.
 Introduce sustainable development.
 Giving a fare share of growth to LDCs
 Promote incremental trade flows.
 Establish procedures for solving trade
disputes among members.

45. Fiscal policy & its impact
Fiscal policy is the use of
government revenue collection
(mainly taxes)
and expenditure (spending) to influence
the economy.
According to Keynesian economics,
when the government changes the
levels of taxation and government
spending, it influences aggregate
demand.
It is often administered by an executive
under laws of a legislature.

46. Fiscal policy influences growth
performance of an economy mainly in
2 ways-
-It affects growth by influencing the
mobilization of resources for
development.
-Improving the efficiency of resource
allocation.

47. Impact-
i) Public & Private savings-
- The resources can be mobilized by
reducing govt. expenditure &
increasing surpluses of PSE.
- Private sectors & households can
contribute to savings by ways of
treasury bills, loans from domestic &
foreign parties & by proper financing.

48.  ii) Reduction in inequalities of income
& wealth-
It aims at achieving equity or social
justice by reducing income inequalities
among different sections of the
society.
The taxes are charged more on the rich
peoples as compared to lower income
groups. The earned tax is used for
development of poor sectors.

49.  iii) Price stability & control of inflation-
it is one of the main objectives of fiscal
policy.
It controls by reducing fiscal deficits, tax
saving schemes, productive use of
financial resources etc.

50.  iv) Employment generation-
This can mainly be done by public
sector enterprises by investing in
infrastructure, lowering taxes & duties
on SSI, rural employment programs
etc.
This enables public to spend more on
services, which will increase money
circulation in market.

51.  V) Balanced regional development-
It focuses on strengthening the weak
economical sectors.
It can be done by developing
infrastructure, managing taxable
incomes, getting concession on
business schemes.

52. Monetary policy
 It is the process by which a monetary
authority of a country, generally central
bank controls the supply of money in
the economy by its control over interest
rates in order to maintain high
economic growth & price stability.
 It contribute to the stability of GDP,
achieve and maintain
low unemployment, and to maintain
predictable exchange rates with other
currencies.

53. Impact
 Interest rate
 Lending amount
 Money supply
 Repo rate
 Reverse repo rate

54. EXIM policy
 It was announced under the foreign
trade (development & regulation act)
1992, shows the extent of
liberalization of foreign trade &
indicate the measures for export
promotion.
 Licensing, quantitative restrictions,
other regulatory & discretionary
controls have been substantially
eliminated.

55. Impact
 It enables India to import three fourth of
its crude oil requirements.
 Profitable agricultural sector because
international food grain prices are high.
 In 2009-2014 26 new markets have been
created in various areas of operation.
UAE China
IND USA IND UAE
China