Globalisation & Liberalisation

Introduction: Evolution of business refers to origin and growth of business activities over a period of time. Business activities began when people started to exchange goods for goods (barter) since the days of early civilization. Any business generally starts its activities at the local level. However, even though the start of a business is small scale the business owner may aspire to expand and diversify his business operations globally. Com Business Environment, Business Evolution

Evolution of Business from Local to Global Level: Local Business – Local business covers a small local area like a village/town. The business is conducted at shop/retail level. Local Business was popular during the barter & village economy stages. Regional Business – Regional Business covers a specific region which may be a state/group of villages/towns/one geographical area. Regional Business helped mobility of people & goods within the region. Rural markets have gathered higher importance during this stage. National Business – National level business covers the entire country. At this stage, there was business growth both in volume & space. Large sized companies can survive National Level Business as it requires considerable finance. International Business – International Business covers many countries. Revolution in the fields of Transport, Communication & IT has made the world a small place to live in. Countries are not economically self sufficient & thus benefit from International Trade. This interdependency makes it essential for countries to use their production capacity fully. Global Business – All countries & regions are covered by the Global Business & all countries have to participate in it for their survival & growth. Global state of Business does not take place overnight it passes through several stages of internationalization. Although developed countries reap more benefits at the cost of developing countries at this stage. Com Business Environment, Business Evolution

Com Business Environment, Business Evolution

Meaning: The world economic scene is changing at a rapid pace. The world is opening its frontiers and getting closer. There has been a rapid growth in world trade and investment. India and other inward looking economies have opened the doors to liberalisation. The countries of the world are coming closer to form the so-called “Global Village”. The terms ‘international trade’ & ‘global trade’ are often used as synonymous terms. International trade may be confined to one or more foreign countries, whereas, globalisation of trade means reaching out for the entire world market. Globalisation is a process of integrating a country’s economy with the world economy, with a view to exploit global opportunities for local growth. Com Business Environment, Business Evolution

Features of Globalisation: Growth in World Trade International Forums Specialised Financial Institutions Trading Blocs Growth of Global Corporations Acquisitions & Mergers Information Revolution Competition Inter-linking of Economies Open Market Com Business Environment, Business Evolution

Factors Responsible for Globalisation of Business: International Forums Technological Developments Political Developments Trading Blocs Limitations of Domestic Market Change in Government’s Philosophy Growing Consumer Expectations Information & Media Revolution Interdependence Among Nations Growth of Multi-national Corporations Com Business Environment, Business Evolution

Impact of Globalisation: Advantages of Globalisation: 1. Borderless World 2. Powerful Corporations 3. Global Citizens 4. Interlinked Economies 5. Changes in Laws 6. Deregulation 7. Privatisation 8. Efficient Technological Innovations Disadvantages of Globalisation: 1. Huge Disparity 2. Company Closures 3. Unemployment 4. Corporation Backed Government Policies 5. Human Rights Violation Com Business Environment, Business Evolution

Com Business Environment, Business Evolution

Meaning: Liberalisation is the internal process of reforms and removal of controls to facilitate the existence of a free market, which would positively impact the economy of the state. Liberalisation Suggests: An internal process of reforms for progress and growth. Privatisation of government managed enterprises and sectors. Enactment of laws to attract foreign investors. Removal of controls of all kinds i.e. deregulation. Freedom of entry and exit for businesses, with free flows of foreign funds to be ensured. Creation of free market discipline for building up of state strength and economy. Transparency and accountability of the various sectors of the economy. Com Business Environment, Business Evolution

Liberalisation & India: Liberalisation means the opening up of closed doors for Indian businesses. In the Indian context economic liberalisation specifically means and includes the following: Removal of the industrial licensing system built over past four decades. Reduction in physical restrictions on imports and import duties. Reduction in controls on foreign exchange, both current and capital account. Reform of financial system. Reduction in levels of personal and corporate taxation. Reduction in restrictions on foreign direct and portfolio investments. Opening up public sector domains like power, transport, banking, etc. Partial privatisation of public sector units. Change in approach towards industrial sickness. Softening of MRTP regulations, which has now been replaced by the Competition Act Planned devaluation of the rupee which has helped Indian exports. Com Business Environment, Business Evolution

Impact of Liberalisation: Positive Impact: 1. Increase in economic growth 2. Increase in industrial turnover 3. Increase in private investment 4. Increase in FDI 5. Increase in foreign exchange reserves 6. Increase in competition 7. Increase in standards Negative impact: 1. Unemployment 2. Closure 3. Demand for foreign goods 4. Monopolies 5. Recessionary trends Com Business Environment, Business Evolution

Taruna R. Shroff