INTRODUCTION: Historical Background of Globalisation

For developing countries, globalization means integration with the world economy. In simple economic terms, globalization refers to the process of integration of the world into one huge market. Such unification calls for the removal of all trade barriers among countries. Even political and geographical barriers become irrelevant.

At the company level, globalization means two things: (a) the company commits itself heavily with several manufacturing locations around the world and offers products in several diversified industries and (b) it also means the ability to compete in domestic markets with foreign competitors. In the popular sense, globalization refers mainly to multi-plant operations.

International Monetary Fund defines globalization as “the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology”.

Charles Hill defines globalization as, “the shift towards a more integrated and interdependent world economy. Globalization has two main components- the globalization of market and the globalization of production”.

Interdependency and Integration of individual countries of the world may be called as globalization. Thus globalization integrates not only economies but also societies. The globalization process includes globalization of markets, globalization of production, globalization of technology and globalization of investment.

Globalization encompasses the following:

1. Doing or planning to expand, business globally.
2. Giving up the distinction between the domestic facilities on a consideration of the global outlook of the business.
3. Locating the production and other physical facilities on a consideration of the global business dynamics, irrespective of national considerations.
4. Basing product development and production planning on the global market considerations.
5. Global sourcing of factors of production, i.e., raw materials, components, machinery/technology, finance etc., are obtained from the best source anywhere in the world.
6. Global orientation of organizational structure and management culture.

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A company, which has gone global, is called a Multinational (MNC) or a transnational (TNC). An MNC is, therefore, one that, by operating in more than one country, gains through Research and Development (R&D), leading to substantial production, marketing and financial advantages in its cost and reputation that are not available to purely domestic competitors. The global economy views the world as one market, minimize the importance of national boundaries, raised capital and market wherever it can do the job best.

To be specific, a global company has three characteristics:

i) It is a conglomerate of gathering multiple units (located in different parts of the globe) but all linked by common ownership.

ii) Multiple units draw on a common pool of resources such as money, credit, information, patents, trade names and control system

iii) The units respond to some common strategy.

Nestle International is an example of an enterprise that has become multinational. It sells its products in most countries and manufactures in many. Besides, its manager and shareholders are from many nations. The other MNCs whose names can be mentioned here are IBM, GE, McDonald, Ford, Shell, Philips, Sony, and Uniliver.