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Globalization

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What is Globalization? Earlier, globalization just meant exchange of goods and services between countries. Globalization and trade were used interchangeably. But globalization is a much wider term than just exchange of goods and services. It means integration with the world’s economy. It means doing away with the national borders and boundaries and making the movement of not only goods and services but, people, ideas, work, and almost everything easy. Globalization impacts the culture, environme
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  What is Globalization? Earlier, globalization just meant exchange of goods and services betweencountries. Globalization and trade were used interchangeably. But globalization is amuch wider term than just exchange of goods and services. It means integrationwith the world’s economy. It means doing away with the national borders andboundaries and making the movement of not only goods and services but, people,ideas, work, and almost everything easy. Globalization impacts the culture,environment, thinking, political environment of the countries. Is Globalization a new phenomenon? Globalization is not a new phenomenon. There has been a long history regardingexchange of goods between people of different countries. Some connect it rightfrom the third millennium B.C., there have been traces of trade between Sumer (Aregion and civilization in southern Mesopotamia) and the Indus Valley Civilization (Northwestern region of Indian Subcontinent) Importance of Globalization- needs and wants Globalization is important because every country is has some advantages and disadvantages incomparison to others. Globalization gives a chance to each country to improvise upon its advantages andproduce those goods or services on which the country is comparatively efficient, and import the productsin which it is not. It leads to proper utilization of resources in the world.Secondly, it allows technology, goods and services to be available from one country to another which maynot be possible otherwise. This also creates competition, which further leads to innovation and at the endthe consumers are better off Also, globalization creates employment. When companies travel from one place to another they need toemploy workforce, which they select from the general public of the country they operate in. Factors responsible for Globalization. What drives globalization? Govt. Policies- This is the most important factor. Government decides policies on behalf of the wholecountry to decide the extent of globalization. If a government is decides to follow an inward lookingstrategy where it discourages imports and exports, then it is following a strategy against globalizationComparative advantage factor- Countries produce goods that they are efficient at producing, at whichthey are better than others. They sell those goods in the exchange markets and with the incomegenerated they buy products that they are not able to produce better than othersExpansion needs- Individual companies require to tap markets away from their own countries when thepotential of their own country has been exhausted. Once a company gets established in the domesticmarket, and finds the scope of further growth minimal, then it becomes important for the company to gobeyond the national barriersCost Factors- Some companies outsource part of their activities from other countries where, because theyfind the cost of getting it done from other countries much lower than in their own country. Due to this therecomes a need for globalization  Technology- Technology is another important factor which has increased the speed through which theinformation or any other thing can be transferred from one place to another, thus contributing heavily toglobalization Components of Gloablization Globalization of Production- Production can occur not only in home country but inother countries as wellGlobalization of Markets- The target market is not just the domestic market butother countries as wellGlobalization of Investments- Possibility of investment in other parts of the world aswellGlobalization of Technology- Technology transferring from one country to another Impact/Affects of globalization  The impacts can be both negative as well as positiveNegative-Sometimes the domestic industry is not able to survive the competition and getskilled This can lead to unemployment.Unemployment creates lack of availability of income in hands of people, which inturn creates lack of demand for other products as well, and in the end the country’seconomy suffers The gap between the rich and the poor widens. Thus inequality risesPositive-Consumer benefits through high quality products at same or lower prices thanbeforeCompetition leads to innovation, which is better for the marketsCreation of job opportunities due to increase in demand Technological advancement through tradeCapital moves from one country to another. That is, from where it is not needed towhere it is needed. Policy of a Firm  Policy of a firm towards globalization would reflect how open or closed it is towardsexternal environment, other than its own country. Whether it operates branches orsubsidiaries in other countries, whether it imports raw materials, whether it exportsits products etc Policy of an Industry Policy of an industry towards globalization reflects the amount of competition that itis willing to face from global competitors. Some industries are closed and do notallow the imported product companies to operate and compete with them. This canbe for various reasons like development of domestic industry etc. Differentindustries in the same country may follow different policies towards globalization Policy of a country Different countries follow different strategies towards globalization. Some countriesare more open and some are less. Overtime countries evolve and follow policieswhich they feel are better for their growth and development. If a country feels thatit needs to follow a closed kind of policy wherein exports and imports should not beemphasized much so that the domestic industry gets developed, it does not lookforward to globalization. On the other hand a country may be open to globalizationif it feels that globalization would be beneficial. Who have contributed towards globalization? What is the role of MNC’s init? MNC’s contribute greatly towards globalization. They get benefit from themovements of goods from one country to another and on the other hand when theirgoods reach the new country, they reshape the culture over there. MNC’s alsocreate job opportunities for the people living in the country where it opens a newbranch. When a large company opens a factory, it is most likely that it hires laborsfrom the country where it has opened the factory and not from the parent/homecountry. In today’s scenario, MNC’s are changed by TNC’s which mean transnationalcorporations. Where MNC’s have a home country as headquarters and usually allthe top executives belong to that home country and branches in other countriesare more or less subsidiaries, TNC’s have a headquarters as location, but their topexecutives are a mix batch from many countries and reflect their nationalities inorder to take a more global decision. Is India Globalized? India has been a country which has gone through many phases of developmentbefore finally adopting globalization and liberalization policies. After 1991 thoughIndia adopted a strategy to integrate with the world economy but still as comparedto other countries it is felt that India is still lagging far behind. For instance, still FDIregulations in many sectors are stringent due to which investment in those sectors  is not to the extent that should have been. But on the other hand, some people saythat India was able to survive better than other developing countries during theprevious global recession because of its stringent laws. Therefore it is very difficultto say whether India is globalized as compared to peer countries and whether moreglobalization and liberalization policies are required or not.
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