Globalization and Indian Business Environment

Meaning
It refers to the process of integration of the world into huge market. Such unification calls for the removal of all trade barriers among countries. Even political and geographical location become irrelevant.

According to Charles Hill, Globalization is the shift towards a more integrated and interdependent economy having two Main components- globalization of markets and globalization of production.

At company level globalization means two things: 1. Company commits itself heavily with several manufacturing locations and offer products in several manufacturing locations. 2. Ability to compete in domestic markets with foreign competitors.

Phases of Globalization
Early history of globalization. Globalization in the Medieval Age. Globalization between pre modern periods to modern periods Globalization in modern periods.

Early history of globalization

The trade links between the Sumerian and Indus valley Civilization in third millennium B.C. Alexander forges eastward links with Chandragupta for overland routes between the Mediterranean, Persia, Indian and central Asia. Under Han Dynasty the trans world trade makes first appearance when trade relation was established between Asia and European counties. The period from 650- 850 AD records the expansion of Islam and trade relations with west Mediterranean and Indian sub continent. The rise of Genghis Khan during 1100 AD gave rise to integration of overland routes across Eurasia. The 1650s marks the expansion of slave trade and it sustained the expansion of Atlantic Economy, giving birth to integrated across the ocean.

Globalization in the Medieval Age

Muslims and Jewish started going to various parts of the world to sell various items. In china postal service has started which led to starting of postal service and better knowledge of sharing. Explores contributed towards development of new routes and development of colony. Colonization led to deep impact on agriculture, trade, ecology and culture on a global scale.

Globalization between pre modern periods to modern periods

The industrial revolution of 19th century was one of the important phenomena in this phase. Due to Industrial revolution there was a significant increase in the quantity and quality of products. This led to higher export and better colonization. Lots of countries across the world became the consumers of European markets. This phase came to an end after the world war 1st was fought. The war put a significant adverse affect on the economic scenario, and it led to Great Depression and gold standard crisis in the later part of 1920s and early 1930s.

Globalization in modern periods

This phase started with the end of 2nd world war. Here the world leader planned to break down the borders for fostering trade relations with nations. Many countries got independence and started integrating their own economy with rest of world. The establishment of UNO was a major step in this regard.

Factors having the positive impact in modern phase:

Promotions of free commerce and trade. Abolition of various double taxes, tariffs and capital controls. Reduction of transport cost and development of Infrastructure. Creation of global culture.
the creation of WTO which led to the growth of Uniform platform to settle trade and commercial dispute.

Implication of Globalization on IBE

Positive Implications: Huge amounts of Foreign Investments. Provides Employments. Updated technology Goods and services Free flow of capital Increase in Industrialization Balanced development of world economies Lower prices with high quality. Balanced Human Development

Negative Implications: Reduced Jobs and Income. Poor labour practices and environmental policies. Globalization and the worlds poor. Reluctance of Developed countries Reluctance of developing countries Factors mobility : finance & Immigration Social security Risks and uncertainties.

Impact of Globalization on Indian Economy Across Sectors

Telecom Sector.
a. Wireless Telephony from zero subscriber a decade ago to 359 million subscriber by 2009 and adding 10 million every month. b. Setting operations of International Companies- international companies are setting operations in India. Like Vodafone- Essar, Idea Cellular ( Joint venture with Aditya Birla, AT & T, TTS). Companies like Huawei (China), Cisco (California) and Lucent that provides network component to India. c. 3G Spectrum- recently impending auction will provide a huge leap in Telecom sector by paving the way for new players. d. Increased Competition & Declining Tariffs. e. Disappearing Demarcation

Insurance sector
a. b. c. d. Improved Capital Structure Creation of diversified opportunities and challenges Improved Service Quality . Momentum to mobilization of savings.

Banking and Financial Sector FMCG Sector a. Tough Competition- entries of MNCs and cheaper import have made the situation difficult . Every companies has to spend a large portion of money on promotional mix. b. Expanding Horizons- to overseas markets and several regional markets. c. Product innovations d. Huge Investments- for developing rural infrastructure. e. New market strategies- for expanding customer base.

Agriculture Sector
a. Integration of National Economy b. Better use of climate and soil conditions c. Raises efficiency of labour d. Access to abundant capital Negative Impact a. Increase in competition.- (patents) b. Negligible capital formation. c. Development in Backward areas.

Chemical Sectora. the chemical industry in India is at par with the world standards. The Asian , African and even Arabs they use to buy Indian product because of high standards.

Pharmaceutical Sector a. Impact on drug prices. b. Impact on Jobs c. Impact on private sector. d. Mergers and Acquisitions IT sector
a. b. c. The contribution of IT services in total GDP has gone up and is expected to contribute 62% in 2012. The export market has gone up. Because of the recession in 2008-09 the IT companies have decided to reduce the employee numbers.

Automobile Sector
Wider Scope Flow of Investment Overcome Cultural Barriers Technological Development.

Entry Modes and Techniques

Exporting (Direct and Indirect Exporting): Exporting represents the least commitment on the part of the firm entering a foreign market. Exporting is that which allows manufacturing operations to be concentrated in a single location, which may lead to scale economies. Licensing: Under a licensing agreement, a company (the licensor) grants rights to intangible property to another company (the licensee) for a specified period; in exchange, the licensee ordinarily pays a royalty to the licensor. Licensing agreements are most common on the use of patents, trademarks, copyrights and unpatented technology. Franchising: it is a means of marketing goods and services in which the franchiser grants the legal right to use branding, trademarks and products and the method of operation is transferred to third party - the franchisee - in return for a franchise fee. The franchiser provides assistance, training and help with sourcing components and exercises significant control over the franchisee's method of operation. It is considered to be relatively less risky business start-up for the franchisee but still harnesses the motivation, time and energy of the people who are investing their own capital in the business.

 Contract Manufacturer: A firm which markets and sells products into international markets might arrange for a local manufacturer to produce the product for them under contract. Examples include Nike and Gap, both of whom use contract clothing and shoe manufacturers in lower labourcost countries. Turnkey Projects: A turnkey project is a contract under 'which a firm agrees to fully design, construct and equip a manufacturing/business/service facility and turn the project over to the purchaser when it is ready for operation for remuneration. oil refineries, steel mills, cement and fertilizer plants, etc Management contracts: A management contract is an agreement between two companies, whereby one company provides managerial assistance, technical expertise and specialized services to the second company of the argument for a certain agreed period in return for monetary compensation. Management contracts emphasize the growing importance of services, business skills and management expertise as saleable commodities in international trade.

 Joint Ventures: A joint venture is any kind of cooperative arrangement between two or more independent companies which leads to the establishment of a third entity organizationally separate from the "parent" companies. Strategic Alliances:A Strategic International Alliance (SIA) is a business relationship established by two or more companies to co-operate out of mutual need and to share risk in achieving a common objective. Strategic alliances grew in importance over the last few decades as a competitive strategy in global marketing management. Merger and Acquisitions Wholly owned subsidiary