Monday, June 4, 2012

Globalization Explained

What is Globalization?
In simple Globalization means opening up of national boundaries for foreigner to start their business. For developing countries, globalization means integration with the world economy. Globalization is cross border economic transaction.

Globalization encompasses the following:
Doing or planning to expand, business globally.
Global orientation of organizational structure and management culture

Globalization involves following:
Free flow of technology, expertise and intelligence
Free flow of capital among different countries
Free flow of Human resource among different countries
Increase in Foreign direct investment
Increase in international financial investments and transactions

Why go International?
The factors which motivate or provoke firms to go international may be broadly divided into two groups:-
Pull factor
Push factor

Most of push factors are reactive reasons
Profit advantage: An important incentive for international business is the profit advantage.
Growth Opportunities: The enormous growth potential of many foreign markets is a very strong attraction for foreign companies.
Domestic Market Constraints: Domestic demand constraints
Drive many companies to expanding the market beyond the national border.
Government Policies and Regulations
Spin-off benefits
Strategic vision: Company wants to gain the strategic advantages of internationalization.

Factors hindering Globalization are:
Government policies and procedures because some nations are still not ready to open their borders for foreign companies
Those which are resistant to change their already adopted practices and incorporate new one
Lack of Experience
Trade barriers
Increasing complexity and competitiveness for home companies

Factors facilitating Globalization are:
Low cost of labor
Large and growing local markets
Increasing Entrepreneurship nature
Adaptability to newest technology

Essential conditions for Globalization:
Business freedom
Government support
Orientation: A global Orientation on the part of the business firms and suitable globalization strategies are essential for globalization

Effects of Globalization:
The foreign currency reserves of government increases
Exports have increased and become competitive
Brings in latest technologies
Introduction of latest technologies changes the lifestyle.
Exchange of Information increases knowledge
Growth in economy

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