Globalization

To day, almost every company, large or small, is impacted in someway or other by global competition. The markets are becoming increasingly international in nature. Domestic markets are increasingly attacked by international players; the survival of the fittest has become the order of the day. The emergence of a more open world economy; the globalization of consumer tastes and preferences; advances in technology, communication and transportations have all led to a new reality- the emergence of global markets. Globalization and Domestic industries: The MNCs from advanced countries utilize the opportunities created by globalization; establish marketing facilities in developing countries. The domestic businesses of the developing countries fail to compete with the MNCs on the technology and quality front. This leads to the closing down of the domestic companies. In India, dumping from China, USA, Malaysia, Taiwan, South Korea etc have killed some of the small scale industries. The globalization resulted in the entry of multinational companies into India through exports, joint ventures, technology collaborations, contract manufacturing, greenfield ventures etc. Malaysia dumped cooking oil, China dumped steel, toys, electronic goods etc. Consequently the demand for the domestic goods came down significantly. China, South Korea, Thailand and other Asian countries could produce the goods at comparatively cheaper cost than that of India. Indian consumers tend to buy better quality but low priced foreign goods. The President of Indian Chamber of Commerce criticized that globalization could kill domestic industries and government should protect the domestic industries through anti-dumping and import restriction measures. Some industry experts feel that the domestic industry should learn to compete with the international players by enhancing the quality of the products through technology and reduce cost through good management practices like lean management techniques, six sigma etc. Indian industry should consider globalization as an advantage to market their products overseas, which opens up a huge market, through product innovation, world class quality and cost minimization.

Globalization and cultural impact: American McDonalds now serves 52 million customers daily in 31,600 restaurants worldwidesome 65% of its revenue coming from outside USA. Nike markets in more than 160 countries, with non-USA sales accounting for 53% of its worldwide sales. Coca-Cola is sold in more countries than the USA and the word Coke is claimed to be the second-most universally understood word after OK. Many youngsters in several countries consume Coke, which they consider as the symbol of modernization. In China, most people never drank coffee before Starbucks entered the market. Now Chinese consumers, rush to Starbucks Stores because they consider drinking coffee is a symbol of a new kind of life style. In China, where McDonalds operates 80 restaurants in Beijing alone, nearly half of all children identify McDonalds as a domestic brand. Teens and youth in India watch MTV and acquire American pop culture and values. Critics worry that under globalization, countries around the globe are losing their individual cultural identities. Though some of the industry experts are skeptical about globalization due to its negative consequences, the supporters of globalization argue that the negative consequences will be only a short-term phenomenon. They argue that, in the long run the phenomenon of globalization will result in the overall development of all the nations- developed, developing and underdeveloped, which is the ultimate goal of WTO. The supporters feel that globalization is inevitable and necessary for the development of all nations. The views of Peter Drucker also indicate the same. He feels, Globalization for better or worse has changed the way the world does business. The challenge that individuals and businesses face is learning how to live with it, manage it, and take the advantages of the benefits it offers. In order to survive in the present globalized world: 1. 2. 3. 4. All institutions have to make global competitiveness as a strategic goal No institution can survive with government support alone All institutions should match up with global standards set up by global leaders. Quality product at competitive price shall be the strategy for survival.

Impact of globalization: Globalization has mixed impacts. India has embarked on liberalization and economic reforms for more than two decades. Globalization has not significantly helped in poverty elimination. As per Planning Commissions data, a sizeable 37% Indians are still poor. Unemployment in South Korea increased fourfold soon after the launch of liberalization strategy. Even in USA, liberalization and globalization resulted in increasing the unemployment from 4% to well above 10%. However, China has reaped a rich economic harvest from its meticulous globalization programme. An estimated 400 million people in China have been redeemed from poverty. The number of people living below the poverty line, in the worlds most populous country, came down significantly from 358 million in 1990 to 208 million in 1997. China has succeeded in its globalization programme because it embarked on economic reforms right from the early 1980s. It has been able to implement well thought about programmes as quickly as possible, with least delay. (Source: Compiled by Prof. C K Sreedharan through various sources, mainly from newspaper articles). Concepts that can be learnt from this case study: 1. 2. 3. 4. 5. 6. 7. What is globalization? Drivers of globalization Various modes of entry into international market Effect of globalization on domestic industries Impact on culture How to survive in the globalized world? Impact of globalization