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7 Factors Influencing
Globalization – Discussed!
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Factors influencing Globalization are as follows: (1) Historical

(2) Economy (3) Resources and Markets (4) Production Issues
(5) Political (6) Industrial Organisation (7) Technologies.

Globalisation though is basically an economic activity, is

influenced by many factors.

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The important factors are:

(1) Historical:

The trade routes were made over the years so that goods from
one kingdom or country moved to another. The well known silk-
route from east to west is an example of historical factor.

(2) Economy:

The cost of goods and values to the end user determine the
movement of goods and value addition. The overall economics of
a particular industry or trade is an important factor in
globalisation.

(3) Resources and Markets:

The natural resources like minerals, coal, oil, gas, human

resources, water, etc. make an important contribution in
globalisation.

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Table 16.1: India’s Strengths and Weaknesses:

Strengths Scale Rank

Stock Market    
Stock market is 5.42 13
important for new
financing    

Science and 5.27 16

Engineering
   

Schools excel in basic

6.37 1
science and maths
Country has a large    
pool of competent
scientists and 6.26 1
engineers
   
Engineering as a
profession greatly 5.05 8

attracts young talent

   
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6.77 1

5.40 9

5.37 14

Labour Force 5.56 19

Country has first-

class business schools
to train managers

Country has an
abundant labour
force

Rate of Law

Judiciary is
independent of the
government

Compliance with
court ruling is high

Firms have recourse

to courts for
challenging
government actions

Weakness    

Financial Markets    

Citizens prohibited 1.60 53

from investing in
foreign stocks, bonds 2.74 43

and bank accounts

2.63 50

Financial sector
sophistication is
lower than
international norms

Venture capital is
scarce
Public    
Administration
2.90 47
Administrative
regulations that 2.68 52

constrain business
2.65 43
are pervasive

2.27 48
Government
subsidies keep old 1.92 53
industries alive
   
Civil Service is
subject to political 1.85 53
pressures
2.18 53
Tax evasion is
rampant 2.94 53

Infrastructure 1.94 53

Overall    

infrastructure is far
   
worse than major
trading partners    

Road infrastructure 2.11 52

constraints business
development 2.66 51

2.29 34
Port facilities are    
underdeveloped
   
Direct dial phone
service is 2.94 51

prohibitively
2.16 53
expensive

2.58 49
Country suffers from
severe power    
shortage
2.79 48
Research and
Development

The business sector

spends little on R & D

Firms fail to
commercialise
academic research

Companies are
poorly adopted to
absorbing new
technologies

Labour Regulations

Average workers are

unproductive
 Hiring and firing
practices are severely
restricted

Labour regulations
impede adjustment of
working hours to
meet changes in
demand

Corruption and
Bribery

Extra payment
connected with
permits and licenses
are common

The mineral based industries like steel, aluminium, coal in

Australia are examples. Few of these Australian mining and metal
companies are owned by European / Japanese / American
companies.

Near distance to end user or consumer also is an important factor

in globalisation. The large markets as consumer bases in Asian
countries have led many European, Korean to Japanese
manufacturing conglomerates and shift their manufacturing and
trading bases in Asian countries.

That is going near the customer makes globalisation. The Table

16.1 gives the strengths and weakness of India in global level. The
details are based on expert survey on globalisation. As may be
seen from the table low on scale is lack or shortfall and hence,
ranking is low.

(4) Production Issues:

Utilisation of built up capacities of production, sluggishness in

domestic market and over production makes a manufacturing
company look outward and go global. The development of
overseas markets and manufacturing plants in autos, four
wheelers and two wheelers is a classical example.

(5) Political:

The political issues of a country make globalisation channelised

as per political bosses. The regional trade understandings or
agreements determine the scope of globalization. Trading in
European Union and special agreement in the erstwhile Soviet
block and SAARC are examples.

(6) Industrial Organisation:

The technological development in the areas of production,

product mix and firms are helping organisations to expand their
operations. The hiring of services and procurement of sub-
assemblies and components have a strong influence in the
globalisation process.

(7) Technologies:

The stage of technology in a particular field gives rise to import

or export of products or services from or to the country.
European countries like England and Germany exported their
chemical, electrical, mechanical plants in 50s and 60s and exports
high tech (then) goods to under developed countries. Today India
is exporting computer / software related services to advanced
counties like UK, USA, etc.

Eight barriers in economic activities:

Many countries in Particular developing ones impose

restrictions to globalisations by:

i. Imposing high taxes and duties for capital goods, spares and
materials,

ii. Licensing restrictions,

iii. Foreign exchange restrictions,

iv. Investment restrictions,

v. Incentives and prioritisation to specific domestic industries,

and

vi. Banning / restricting products of foreign origin.

vii. Procedural hassles, bureaucracy

viii. Closed mind-set

The fears of the countries in that case may be:

i. To provide local employment,

ii. To raise standard of living and GDP,

iii. To help in building up foreign exchange reserves,

iv. To channelise the resources of the country,

v. To develop new skills / markets and

vi. To mobilise capital.

Transport, communication and IT:

The technological revolution the world has witnessed in the last

two decades is overwhelming. Development has immensely
influenced world trade by bridging space and time. IT has
revolutionised the way the business goes. E-money, e-banking,
B2B business, B2C business and internet have added to speed up
globalisation. Buying and selling of stocks and transfer of funds
can take place now instantly.

Related Articles:
1. Factors Influencing the Choice of Techniques in Economics
2. 8 Factors Influencing the Value of a Country’s Exports and
Imports

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