Globalization Business

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The last decade of the 20th century witnessed many hindrances in international trade which resulted in its massive dip and thereafter a series of companies started practicing global policies to achieve competitive benefit.

For achieving 'business globalization' phenomenon, business players have laid strategies keeping the global economies in mind rather than thinking in context of national markets.

Causes of speedy growth of global business:

  • Increasing real living standards
  • Liberalization of trade supported by World Trade Organisation, growth and expansion of the European Union
  • Switch to market structures in Eastern Europe
  • Speedy growth of the Asian Tigers and also in China and India
  • Privatization and liberalization of national economies
  • Deregulation of worldwide capital economies
  • Dip in transport charges
  • Enhancement in global communications

The Impact of Globalization on Business:

Expanding the geographic footprint of any business in the era of globalization is not at all a perilous and costly job as it has been in the past. To remain competitive in today's scenario aggressive measures should be implemented to expand business. Starting business internationally is as defensive as an offensive play. Going by the global demands and considering the total size of international economies would reveal that in comparison with the size of national market the potential buyers generally reside in international markets.

In comparison, if a business does not aim international market and the international customers then the company will not only be lagging behind taking the first mover's benefit of preserving customer dependability, but would also lose on collaborations with key partners and distribution pacts. With increase in consumers' demands and flattening of global market the international business is expected to assist several markets in a faultless manner. Changing slowly to economic alterations in today's world could ultimately harm the business.

Examining the alleviating factor that globalization had on the world business would reveal that trade shortage, petroleum costing, dip in equity markets, housing calamity, restricted influx of funds, and total cost of living is defying us than ever before. With so many negative traits in world economy, conservative economic theory recommends that the interest rate today hold similarity with that of 1980 than the low interest rates we are witnessing today. In comparison with the financial scenario of 1980, the contemporary market is the outcome of a worldwide economy which is performing the role of an alleviating factor.

By considering the following, it is estimated that by 2015, the developing economies will account for 50% of world GDP.

  • Growing economies – Over the last few years China and India has witnessed 9% and 7% of annual growth respectively. Demographics – Economies now characterize younger populations, increasing number of well-qualified population, growing middle class populations, elevating incomes and urbanization.

  • Commercial need – The financial growth, as well as the existence of worldwide firms that accompanies job opportunities focused around intellectual capital is generating need for marketable real estate infrastructure.

  • Infrastructure development – Communications, utilities, and well-organized transportation has steadily improved over the past few years as compared to what it was few decades ago.

  • Opening up of closed market structures – Most flourishing developing economies have been occupied in methodical reorganization of basic community norms ignored in the developed economies. The factors which trigger growth and monetary infusions incorporate property privileges, legal procedure, published guideline, privatization of state owned firms, removal of capital management, and liberalization of norms related foreign direct investment.

Factors accounting for the growth of multinational companies:

  • Exploration of developing markets
  • Globalization of economies
  • Need to minimize manufacturing expenses
  • Need to switch production to nations with cheap labor
  • Need to avert transportation charges
  • Need to avert tax and non tax hindrances
  • Promote vertical incorporation
  • Expansion of product life cycles
  • Deregulation of capital economies
Last Updated on 5/18/2011