Impact of Globalisation on Developing Countries and India Impact of

Globalisation on Developing Countries and India by Chandrasekaran Balakrishnan Chandrasekaran Balakrishnan for The 2004 Moffatt Prize in Economics Introduction: Globalisation is the new buzzword that has come to dominate the world since the nineties of the last century with the end of the cold war and the break-up of the former Soviet Union and the global trend towards the rolling ball. The frontiers of the state with increased reliance on the market economy and renewed faith in the private capital and resources, a process of structural adjustment spurred by the studies and influences of the World Bank and other International organisations have started in many of the developing countries. Also Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalisation is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation

Impact of Globalisation and Libralisation on Indian Companies

t the outset, I will like to convey my sincere thanks to Mr.Nayak & Club leaders for inviting me and giving me an opportunity to be able to share my thoughts with you all, on an important subject like "Impact of Globalisation & Libralisation on Indian Companies." I understand from Mr. Nayak that, College of Club Leaders and other audience here comprises of people from different walks of life, like Industrialists from large & medium size companies, as well as Entrepreneurs from small enterprises. They also represent independent professionals like, Chartered Accountants, doctors, lawyers etc. Therefore I will try to make my talk quite broad-based so that it will be possible for each one of you to relate to it. In next 30 minutes I will try & cover the following : 1. How is our world Changing 2. What does Globalisation and Libralisation mean, in simple terms. 3. What's happening at Customer level, Producer level as well as at Supplier Level in Globalisation 4. What is the ecnomic model that is emerging 5. What are the drivers of Globalisation 6. Some trends internationally as well in India 7. What Challenges Globalisation & Libralisation are posing for Indian Companies 8. Some Suggestions for Companies, for Professionals, for Industry Leaders, MDs / CEOs 9. India's opportunity - in knowledge economy At the end I will be glad to answer a few questions if you have any How is our world Changing ? There are two major drivers of Globalisation :

Internet & Mobile communication The Convergence of these two Technologies has created two Powerful Paradigms 1. Any time Any where you can conduct your business Any time Any where, Customers can have access to products & services Any time Any where) 2. Virtualisation of the corporations Business reach has widened without having huge physical infrastructure Some Trends of Changing world
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Democratisation of Knowledge from elite to masses Shift from natural resources to intellectual resources Growing component of knowledge in all products and services (eg. Hightech Car steel V/s Techn) Reduced gap between 'generation of ideas' and their 'implementation'

Having discussed How is our world Changing ? Let me now discuss with you what does Globalisation and Libralisation mean All of you present here regardless of whether you are in business or profession, are offering either Products Services or Ideas You are offering these products, services or ideas either by Manufacturing Trading or Providing Service You offer these products, services and ideas to "Customers". Thus, let us understand what's happening at Customer level as well as Producer level Globalisation at customer level means .the
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Customers have easy access to information on Brands & services therefore they have become more aware Tastes of customers are converging Whole world has become 'one single market' Customers have become more discerning & assertive They want better & better products & Services, at lesser & lesser cost They Demand greater 'Value for money'

Globalisation at Manufacturing level means There is global sourcing Integrated manufacturing Scales have become huge

Customers - Manufacturers - & Suppliers are linked completely Eg. HLL (supply chain for soap-Palm Oil in Malaysia) At the Trading level with the advent of WTO
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Trade barriers are falling Tariffs are reducing Good commercial practices are emerging

At the People level

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Skill sets are changing Free movement of people There is virtual war for talent

The New economic model that is emerging Capital markets are Globalising Capital flows where maximisation of shareholders value is provided. Free movement of
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Capital Goods People

Governments of emerging markets are Liberalising

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Less intervention in business by Govts

Some world Trends

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World economy will grow @ 4.2 % in 2001 American economy will grow @ 3%. Europe will expand faster than US (first time in 9 years.) Developing world will grow @ 6 %.

Certainties in the next 12 months

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Arrival of Third generation mobile phone Broad band technology (Broad band availability in Europe will double in 2001) Interactive television Intelligent internet Europe (EU) will expand it's wealth at the fastest rate for a decade. As US President George Bush settles into the white house, he will face a gently slowing economy

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Billion people of India & China will organise their societies so as to double their prosperity every 10 years. China will be accessed by WTO therefore likely to become more democratic & transparent country in terms of it's trade. The race to get bigger, quicker will push firms in all Industries to merge & acquire. (M&A)

Look at the mind boggling trends In Internet

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1.5 Lac new users of internet per day 20 Lac web pages a day 84 thousand dot.coms a day 37% of US population has access to internet 1% of population in Asia has access to internet

Mobile
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1996 180 Million users 2000 500 Million 2002 2 Billion (1Bn. With Internet access) India growing @ 1.6 Lac Mobile users per month

Total e-commerce Revenue Year 1998 1999 2000 2002 2003 2004 Global v/s India's Potential World India $ 50 bn. $ 100 bn $ 200 bn $ 700 bn. 500 mn. US$ 500 mn. US$ $ 1000 bn. (15%) $ 1300 bn 4500 mn.US$

MYTH about New economy & Old Economy Companies There is nothing like New economy & Old Economy Companies "Clicks & Mortar" "Bricks & Mortar" are misnomers which are being used Internet and Web are enablers of businesses they are excellent medium for improving the reach of business world wide. The +Ve impacts of Globalisation. It will will raise standards of

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Human rights Law Ethics Corporate Governance

Impact of Globalisation on Indian Companies If I were to summarise in one word as to what is Globalisation & Liberalisation is leading to ..I will say 'Competition' Since there are quite a few entrepreneurs from Small & medium enterprises here, let me take you through some stark realities of SMALL SCALE INDUSTRY despite all the good work this sector is doing. What is the Primary Cause For Slow Export Growth ? India Competitive in Low Tech Goods. Most industries that are Reserved for SSI are :
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Clothing Knitting Toys Shoes Leather Goods Plastic Items

But world Trade pattern is changing : World wide products & Services can be classified in 5 categories 1. High tech 2. Mediumtech 3. Lowtech 4. Resource based 5. Primary World trade is growing in "High -Tech" Products & Services Thus SMEs are Competing only on Price Cannot Build Cash Cows Reality of Domestic & World Market : We are squeezed between
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Employees who know exactly how much they are worth Customers who know what exactly they want Share holders who know exactly how much return they want on their investment Competition is becoming 'FIERCE" by the day

Therefore The Challenges for SMEs : To

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Achieve 'Cost' Efficiency Produce 'Quality' comparable to the best Make Efficient 'Delivery' of the "goods & services" to the consumer.

This means the challenges of becoming 'World Class' The MYTH about being World class Most people mistake being 'World class' with "World Scale" For being 'World Class' you do not necessarily have to be 'world scale'. Being world class is a 'mindset' Do everything in your company comparable to the best in the world, no matter at what scale your business is. Suggestions for Indian Companies :
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If you don't get the best talent, get the best out of the talent you have High remuneration may motivate but not always Focus on intangibles, respect, pride, membership of a winning team... Share the gains of performance Pay for performance, not position Reward teamwork Leverage on the 'agility' of SMEs Response time can be quick in SMEs Achieve operational excellence - produce a quality product, on time and at the cheapest possible cost Change the current mindset

Enhance Competitiveness Through Innovation

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SMEs should find their "niche" & Innovate Network innovatively across the value chain Innovation could be in any of the areas like ; Re-engineering products or services. Creating new products or services. New processes to improve productivity. Developing new marketing techniques to expand sales. New forms of management systems and techniques to improve operational efficiency

Some Suggestions for Professionals, Professionals will have to work on three fronts 1. Attitude 2. Skills 3. Knowledge Attitude : Attitude Meaning Mind set, to become world class DRs : Will have to treat their patients in the same manner as they are treated internationally Lawyers : Will have to treat their clients in the same manner as they are treated internationally

DRs : Keep Patients delight in mind Lawyers : Keep Clients delight in mind Skills : Develop interpersonal Skills DRs : Skill to handle Patients / Skill to handle GPs & other specialty DRs Lawyers : Skill to handle Clients / Skill to handle other specialty lawers & Judges in the court Knowledge : Upgrade your Knowledge, Train & retrain yourself DRs : Attend national as well as international Conferences / roundtables/ Seminars, relevant to their practice eg Cardiology or Oncology. Subscribe and read journals like Lancet, JAMA & Scrip etc. Lawyers : Attend national as well as international Conferences, roundtables / Seminars, relevant to their practice eg criminal Law or Civil Law. Websurf and update yourself with the latest developments in your area of practice Use web technology creatively eg Drs can use web based demonstrations to patients on Anatomy, Physiology of human body. Suggestions for Companies of all size :
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Indian companies must 'align' with the global trends Identify desired 'skill sets' and competencies', classify HR as "Real Talent" and 'must keep' categories and strategies to motivate them, excite them and retain them. To manage talent - first build a databank of employee evolution. Start with employee's current strength and his value for organisation, potential future role, gap in skills, coaching and mentoring requirements. Development policies and compensation systems should be put in place. Build leaders within organisation, within this talent pool.

Suggestions for Industry Leaders/ CEOs / MDs

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Think Big, Embrace change Anticipates opportunities, Creates a shared vision Become customer Focussed & Customer driven Create proper "Corporate Ecology, communication channels, mentoring methods, to retain 'Real Talent' Develops and empower people, Appreciates cultural diversity Build teamwork and partnerships Develop a competitive advantage through people Create an organisation culture and consistently nourish and nurture "Talent Pool", to attract and retain the best talent it is necessary for CEOs to adopt and create youthfulness of spirit both in the organisation and themselves. CEOs must set the vision and the culture for Talent to flourish. The role of the HR will be then to develop processes to 'mesh' that culture within the organisation.

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Demonstrate exemplary leadership Live the values & maintain Ethics in business

Finally, Let us remember that Despite all the problem at Governments level as well as huge population & inadequate infrastructure & the competition, India has produced some Islands of excellence.
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Infosys / Wipro / TCS Ranbaxy / Dr. Reddy's Lab. Bharti Televentures Reliance Industries Ltd. / Reliance Petroleum Ltd. Sundaram Fasteners / Sundaram Clayton Hindustan Lever Ltd. / Marico / Tata Tea A.V. Birla Group / Hindalco Zee Telefilms.

India's opportunity - in knowledge economy

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India is emerging as preferred global destination for off shore software development and remote business processing. About 258 of the Fortune 500 companies source some of their IT requirements from India. Worldwide 38 IT Companies have level 5 SEI-CMM Certification of which 19 (50%) are Indian. In terms of location attractiveness and people strength India is preferred.

Let Us Make The Most Out Of This Opportunity Let us Make India A Noticable Player In Global Economy Let us Re-create a history "Make India Sone ki Chiriya once again" Amen .Thank you. Copyright 2005 Mahendra & Young Knowledge Foundation

The macro level changes due to the New Economic Policy have had a direct impact in the field of agricultural marketing. So the impact of globalization has been highlighted here. As a result of globalization substantial investments in new ventures are being made by national as well as international corporations. A number of foreign companies are slated to enter the Indian market through collaborations with the well known Indian companies like Eagle Agro-farms, Maxworth Orchards, etc. It is clear that the wholesaler in the fresh products market as well as the processor will prefer contract marketing tie-ups with the farmers for sourcing his supply requirements. The concept of contract farming is not new to India. Several years back, contract marketing was

successfully tried in respect of "Hima peas". 'MARKFED' of Punjab also operated a scheme of contract marketing for green peas, Agrecotec proposes to setup country-wide retail network of shops for fresh fruit vegetable marketing. ,Direct marketing to consumer is already being done by the Mother Dairy through its outlets in Delhi. The successful integration of production and marketing under Apni mandi' scheme in Punjab and the marketing managements of 'FRESH' in Hyderabad are clear signs that contract marketing is going to be increasingly resorted to in the years to come. Pepsi Foods" also an another example of contract farming of potatoes and tomatoes. Under this farming farmers will be producing specific varieties or qualities tailored to meet the requirements of the processor or the fresh produce market. The potential benefits of the contract farming are:- producers can reduce the market risk, post harvest losses can be reduced, technology can be transferred to the producers, contract serve as a security for increased access to credit by both producers and processors, contract may create a greater sense of common interest among the producers and induce greater involvement in group activities etc.

Common problems may be volatility in market price, there is risk that the processors may manipulate the quality standards, coordination problems may be there regarding delivery of inputs or produce, processors may lack the competence or capacity to deliver the require technical assistance, producers may become tied to a contract relationship by virtue of debt, specialization, or the disappearance of other markets and may be unable to adjust their production activities to changing conditions etc. Many of these problems of contract farming will not arise where goodwill and credibility exist between the farmers and the concerned company. VI. Major Areas of Concern in the Rural Marketing Sector 1. Government should assume a more dynamic role in the field of agricultural marketing that of a strong buffer between global forces and local needs. 2. Emphasize value addition by giving a thrust to agro-processing industries at farm level so that the benefit of value addition is transferred to the producer. 3. There is a need for professionalizing agricultural marketing as a subject of great practical application. 4. Creation of an effective market intelligence network, right from the importer in the global market to the producer in the remote corner of the rural India. 5. Institutional linkages should be emphasized upon to integrate the markets, for easy movement of goods and also to facilitate the inter-state trade.

6. Regular surveys and analytical studies on agricultural marketing should be conducted, so that appropriate policy adjustments and refinements whenever necessary. 7. Decentralization in the marketing system. 8. To introduce social marketing for bringing about a change in the behaviour and attitude through social advertising and social communication. Some fertilizer companies and commercial banks are taking up Village Adoption Programme under the social marketing. 9. A design frame work for information technology based Agricultural Marketing Network is essential. Computer installations at State as well as district marketing boards enhances the availability of trade information. 10. Economic incentives should be offered to the farmers to encourage them during low economic conditions.

VII. Conclusion The vital role rural marketing have to play in the economic development of a developing country, is beyond doubt at present. The most glaring deficiency in rural economy is evident, is in giving the farmers a better deal in terms of institutional and advisory services and practical training. Intensive efforts to provide these basic facilities is the need of the hour. Indian agricultural marketing system should be made much more competitive by infusing competition within the country and preventing the external system equation from interfering with the local markets in the larger interests of the nation. Next : Rural Marketing