Unit II-(Globalization and Cultural Issues)

Globalization

Globalization helps in growing interconnectedness and interdependence of the world's

economies, cultures, and populations, facilitated by cross-border trade in goods and services,
technology, and flows of investment, people, and information. It depicts a way that has been
accelerated by advancements in technology, transportation, and communication over the past few
decades, leading to a more integrated and interlinked global society.

Drivers of Globalization

Globalization is driven by a complex array of factors that work together to increase the
interconnectedness and interdependence among nations, economies, and cultures. Understanding
these drivers provides insight into how globalization evolves and the diverse ways it impacts the
world. Here are the main drivers of globalization in detail:

Technological Advancements

Technological advancements have been pivotal in driving globalization, reshaping the way
individuals, businesses, and governments interact and operate on a global scale.

o Information and Communication Technology (ICT): The internet, mobile phones,

social media, and other communication technologies have revolutionized how we
connect, share information, and conduct business. These technologies enable instant
communication across the globe, making it easier for businesses to operate
internationally.
o Transportation Technology: Innovations in transportation, such as container shipping,
better logistics, and faster and cheaper air travel, have drastically reduced the cost and
time required to move goods and people across borders.
o Automation and Robotics: Advanced manufacturing technologies, including automation
and robotics, allow companies to produce goods more efficiently and compete in global
markets.

Economic Policies

Economic policies play a fundamental role in driving globalization by shaping the rules and
frameworks within which international trade and investment occur. These policies facilitate the
movement of goods, services, capital, and labor across borders, thereby integrating economies
globally. Here is a detailed examination of how various economic policies contribute to
globalization:

o Trade Liberalization: Governments around the world have reduced tariffs, quotas, and
other trade barriers, enabling freer flow of goods and services. Trade agreements like
NAFTA, the EU Single Market, and various bilateral free trade agreements have played
significant roles. Countries reduce or eliminate tariffs (taxes on imports) and quotas
 (limits on the quantity of goods that can be imported). This makes it cheaper and easier to
trade goods internationally, encouraging businesses to expand their markets beyond
domestic borders.
o Economic Deregulation: Many countries have deregulated their economies, opening up
to foreign investment and influencing global markets. This includes the privatization of
state-owned enterprises and the reduction of state intervention in the economy.
Governments privatize state-owned industries, opening them up to private investment and
competition. This often leads to increased efficiency and integration into global markets.
o Global Financial Systems: The liberalization of financial markets and the increase in
cross-border capital flows have integrated global financial systems. Institutions like
the International Monetary Fund (IMF) and World Bank support global economic
stability and development.

Multinational Corporations (MNCs)

Multinational Corporations (MNCs) are pivotal drivers of globalization, operating across

multiple countries and facilitating economic, cultural, and technological integration. Their
activities help weave economies, societies, and industries into a global fabric, influencing
various dimensions of globalization. Here is a detailed exploration of how MNCs drive
globalization:

o Global Reach: MNCs establish subsidiaries, branches, or joint ventures in multiple

countries, producing and marketing goods and services on a global scale. This boosts
global trade and investment, spreading technologies and business practices
internationally.
o Global Supply Chains: MNCs optimize their production processes by sourcing materials
and components from various countries where they can be produced most efficiently.
This creates complex, interconnected global supply chains. MNCs create complex global
supply chains that integrate multiple countries and regions into their production
processes. This interconnectedness makes economies more interdependent and resilient.
o Cultural Exchange: MNCs promote the global spread of consumer culture and lifestyle.
Brands like McDonald's, Starbucks, and Apple influence consumer preferences and
create a shared global identity. MNCs often bring their corporate culture and
management practices to their overseas operations, blending different cultural elements
and fostering a multicultural workplace environment.

Sociocultural Factors

Sociocultural factors play a significant role in driving globalization by influencing the ways in
which people, ideas, and cultures interact and integrate on a global scale. These factors
encompass various dimensions, including communication, migration, education, popular culture,
and values. Here's a detailed examination of how sociocultural factors contribute to
globalization:
 o Cultural Exchange: Globalization fosters the exchange of cultural ideas, values, and
lifestyles. Mass media, entertainment, and internet platforms allow people to experience
and adopt practices from different cultures, promoting global cultural integration.
o Migration: The movement of people across borders for employment, education, or
refuge not only supports economic growth but also leads to cultural exchanges and the
formation of diverse, multicultural societies. Labor migration enables people to work and
live in different countries, bringing diverse skills, perspectives, and cultural practices.
Migrant communities often serve as cultural bridges, introducing their traditions,
cuisines, and languages to host countries.
o Language and Linguistic Exchange: The widespread use of English as an international
language facilitates communication and exchange across different linguistic and cultural
backgrounds. Other languages, like Spanish, Mandarin, French, and Arabic, also play
significant roles in regional and global communication. The growing interest in learning
foreign languages enhances cross-cultural understanding and business opportunities.

Political Factors

Political factors significantly drive globalization by shaping the framework within which
countries interact, trade, and cooperate. These factors ensure the reduction of barriers, the
establishment of international norms and agreements, and the promotion of stability and
cooperation globally. Here's a detailed examination of how political factors contribute to
globalization:

o Global Governance: International organizations and agreements, such as the United

Nations (UN), the World Trade Organization (WTO), and various regional bodies, help
establish norms and regulations that facilitate international cooperation and stability.
o End of the Cold War: The dissolution of the Soviet Union and the end of the Cold War
created new opportunities for political and economic integration, especially in Eastern
Europe and former Soviet states.
o Political Stability and Security: Countries with stable political environments attract
foreign investment and trade, fostering economic integration. Political stability assures
investors and businesses of a predictable and secure operating environment. International
efforts to maintain peace and security, such as those by the United Nations (UN) and
regional organizations, create a conducive environment for global cooperation and
economic activities.

Environmental and Geographical Factors

Environmental and geographical factors play a fundamental role in facilitating and shaping
globalization. These factors influence everything from the location of economic activities to the
patterns of trade, migration, and cultural exchange. Here’s a detailed look at how environmental
and geographical factors act as drivers of globalization:

o Resource Distribution: The uneven geographic distribution of natural resources propels

countries to engage in global trade to access necessary materials not available
domestically.
 o Climate Change and Environmental Policies: Global challenges like climate change
require countries to work together, fostering international partnerships and agreements
aimed at sustainable development.
o Geographical Location: Countries located along major trade routes or with access to key
maritime chokepoints, such as the Suez Canal, Panama Canal, and the Strait of Malacca,
have a strategic advantage in global trade. Proximity to major markets like North
America, Europe, and East Asia can reduce transportation costs and time, making
countries in these regions more attractive for trade and investment.

Consumer Demand

Consumer demand plays a vital role in driving globalization by influencing the production,
distribution, and consumption of goods and services on a global scale. When consumers seek
diverse products and services, it creates opportunities for businesses to expand their markets
beyond national borders, thus fostering economic integration and cultural exchange. Here’s a
detailed examination of how consumer demand drives globalization:

o Global Consumer Markets: There is a growing demand for a wider variety of goods and
services, including those not available locally. Global branding and marketing by
international companies cater to diverse consumer preferences and create a homogeneous
global market.
o Increased Demand for Diverse Products: Consumers desire for a wide range of
products, including those not produced domestically, fuels international trade. Access to
unique, high-quality, or cost-effective products from different regions—such as French
wines, Japanese electronics, or Swiss watches—encourages the import and export of
goods. The global appetite for diverse culinary experiences drives the demand for exotic
foods and beverages, leading to the worldwide trade of items like tropical fruits, spices,
coffee, and seafood.

Legal and Regulatory Frameworks

Legal and regulatory frameworks are critical drivers of globalization because they establish the
rules, standards, and procedures that govern international trade, investment, and cooperation.
These frameworks provide stability, predictability, and fairness, which are essential for global
economic interactions. Here’s a detailed discussion on how legal and regulatory frameworks
drive globalization:

o Intellectual Property Rights: International agreements on intellectual property rights

protect innovations and encourage companies to expand their operations globally. The
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) under the
WTO establishes minimum standards for the protection and enforcement of intellectual
property rights globally. Strong IPR protection encourages innovation, technology
transfer, and international business expansion.
o Harmonization of Standards: The alignment of standards and regulations (e.g., product
safety, quality norms) across countries reduces trade barriers and facilitates smoother
international transactions. Organizations such as the International Organization for
 Standardization (ISO), the International Electrotechnical Commission (IEC), and the
Codex Alimentarius Commission develop international standards for products, services,
and systems. Harmonized standards facilitate global trade by ensuring products meet
consistent quality and safety requirements worldwide.

What are the benefits of globalization?

Globalization impacts businesses in many different ways.

Economic Growth and Development

One of the most significant positive impacts of globalization is the boost to economic growth
and development. Globalization has facilitated the flow of goods, services, capital, and labor
across borders, leading to increased trade and investment. Developing countries, in particular,
have benefited from access to international markets, foreign direct investment (FDI), and
technology transfer. This has spurred industrialization, job creation, and poverty reduction in
many regions.

In countries like China and India, globalization has played a pivotal role in transforming their
economies. By opening up to foreign trade and investment, these countries have experienced
rapid economic growth, lifting millions out of poverty. The integration into global supply chains
has allowed these nations to specialize in specific industries, leading to economies of scale and
increased productivity.

Access to new cultures

Globalization makes it easier than ever to access foreign cultures, including food, movies, music,
and art. This free flow of people, goods, art, and information is the reason you can have Thai
food delivered to your apartment.

The spread of technology and innovation

Many countries around the world remain constantly connected, so knowledge and technological
advances travel quickly. Because knowledge also transfers so fast, this means that scientific
advances made in Asia can be at work in the United States in a matter of days.

Lower costs for products

Globalization allows companies to find lower-cost ways to produce their products. It also
increases global competition, which drives prices down and creates a larger variety of choices for
consumers. Lowered costs help people in both developing and already-developed countries live
better on less money.

Higher standards of living across the globe

Developing nations experience an improved standard of living—thanks to

globalization. According to the World Bank, extreme poverty decreased by 35% since 1990.

The target of the first Millennium Development Goal was to cut the 1990 poverty rate in half by
2015. This was achieved five years ahead of schedule in 2010. Across the globe, nearly 1.1
billion people have moved out of extreme poverty since that time.

In many developing countries, globalization has facilitated access to essential goods and services
that were previously unavailable. Improved infrastructure, such as roads, ports, and
telecommunications, has connected remote areas to national and global markets, boosting
economic opportunities and improving living conditions.

Access to new markets

Businesses gain a great deal from globalization, including new customers and diverse revenue
streams. Companies interested in these benefits look for flexible and innovative ways to grow
their business overseas.

A global employer of record (EOR) makes it easier than ever to employ workers in other
countries quickly and compliantly. This means that, for many companies, there is no longer the
need to establish a foreign entity to expand overseas.

Access to new talent

In addition to new markets, globalization allows companies to find new, specialized talent that is
not available in their current market. For example, globalization gives companies the opportunity
to explore tech talent in booming markets such as Berlin or Stockholm rather than Silicon
Valley.

A global EOR allows companies to compliantly (submissively) employ talent overseas without
establishing an entity, making global hiring easier than ever.

Negative Impacts of Globalization

1. Economic Inequality

Despite its many benefits, globalization has also aggravated economic inequality both within and
between countries. While some regions and individuals have flourished, others have been left
behind. The benefits of globalization have not been evenly distributed, leading to a widening gap
between the rich and the poor. This economic disparity can result in social and political
instability, undermining the positive impacts of globalization.
In many cases, wealth generated through globalization has concentrated in the hands of a few,
particularly in developed countries. This concentration of wealth has led to the marginalization
(downgrading) of vulnerable populations, fuelling discontent (dissatisfaction) and social unrest.
Addressing this inequality requires targeted policies and international cooperation to ensure that
the benefits of globalization are more equitably shared.

2. Cultural Homogenization

While cultural exchange is a positive aspect of globalization, it can also lead to cultural
homogenization. The dominance of certain cultures, particularly Western culture, can
overshadow and erode local traditions and identities. This loss of cultural diversity can diminish
the richness of the global cultural tapestry (textile, wall hanging, embroidery…) and lead to the
marginalization of minority cultures.

For example, the global proliferation of Western fast food chains, fashion brands, and
entertainment has sometimes overshadowed local culinary traditions, clothing styles, and artistic
expressions. Preserving cultural diversity in the face of globalization requires conscious efforts
to promote and protect local heritage and traditions.

3. Environmental Degradation

The rapid economic growth and industrialization driven by globalization have taken a toll on the
environment. Increased production and consumption have led to higher levels of pollution,
deforestation, and depletion of natural resources. The global nature of environmental issues
requires coordinated efforts to mitigate the negative impacts of globalization on the planet.

Industrial activities and the global transportation of goods contribute significantly to carbon
emissions, exacerbating climate change. Additionally, the demand for raw materials has led to
deforestation and habitat destruction, threatening biodiversity. Sustainable development practices
and international environmental agreements are essential to addressing these challenges.

4. Labor Exploitation

Globalization has created a competitive global labor market, which has sometimes resulted in
labor exploitation. In the quest for lower production costs, some multinational corporations have
outsourced manufacturing to countries with lax(slack) labor laws and poor working conditions.
This has led to the exploitation of workers, including low wages, long working hours, and unsafe
working environments.

The apparel and electronics industries are often cited as examples where labor exploitation is
prevalent. Sweatshops and factories with poor working conditions have drawn international
criticism, highlighting the need for stronger labor regulations and corporate accountability to
protect workers’ rights.
5. Threat to National Sovereignty

The increased interconnectedness of economies and the influence of multinational corporations

can pose a threat to national sovereignty. Governments may find it challenging to implement
policies that protect their citizens’ interests without facing pressure from international
organizations and foreign investors. This erosion of sovereignty can undermine a country’s
ability to regulate its own economy and safeguard its social and environmental standards.

For instance, trade agreements and investment treaties often include clauses that limit the
regulatory autonomy of governments. These agreements can constrain the ability of nations to
implement policies that prioritize public health, environmental protection, and social welfare.
Balancing the benefits of globalization with the preservation of national sovereignty requires
careful negotiation and policy-making.

What are the measures taken for globalization of Indian economy?

The measures taken for the globalization of the Indian economy include:

Liberalization: India initiated economic liberalization measures in 1991, which involved

reducing government regulations, removing trade barriers, and opening up the economy to
foreign investment. This included deregulation of industries, simplification of trade policies, and
encouragement of foreign direct investment (FDI).

Privatization: The Indian government embarked on a privatization program to reduce the state's
involvement in various sectors of the economy. This involved selling off state-owned enterprises,
promoting private sector participation in infrastructure development, and encouraging
competition in previously monopolized industries.

Global Trade Agreements: India has actively participated in global trade agreements and
organizations such as the World Trade Organization (WTO), aiming to increase its integration
into the global economy. This has involved reducing tariffs, quotas, and other trade barriers to
facilitate international trade.

Foreign Direct Investment (FDI): India has liberalized its policies regarding foreign direct
investment, allowing greater participation of foreign companies in various sectors of the
economy. This includes relaxing restrictions on foreign ownership, streamlining approval
processes, and offering incentives to attract FDI inflows.

Export Promotion: The Indian government has implemented various policies and initiatives to
promote exports and increase India's participation in global markets. This includes providing
export subsidies, improving infrastructure and logistics, enhancing access to export finance, and
facilitating market access through trade agreements.
Technology Transfer: India has actively sought to attract foreign technology and expertise
through collaborations, joint ventures, and technology transfer agreements with multinational
corporations. This has helped in upgrading domestic industries, enhancing competitiveness, and
promoting innovation and technological advancement.

Financial Sector Reforms: India has undertaken significant reforms in its financial sector to
align with global best practices and attract foreign investment. This includes liberalizing the
banking and insurance sectors, allowing greater foreign participation, and strengthening
regulatory frameworks to enhance investor confidence.

Overall, these measures have played a crucial role in integrating the Indian economy into the
global marketplace, fostering economic growth, increasing competitiveness, and attracting
foreign investment and technology.

Globalization of markets

Globalization of markets is the process of connecting markets, businesses, and governments

across the world through economic, political, cultural, and technological links. It's driven
by advancements in transportation, communication, and information technologies.

Economic, Cultural, and Political Impacts of Globalization

Globalization has significant and diverse effects on economic, cultural, and social aspects
across globe. This trend encourages connectivity and reliance, transforming sectors, economies,
and ways of life. While it offers chances for development and creativity, it also presents
obstacles like cultural standardization and economic inequalities, requiring a thorough
and nuanced comprehension of its effects.
Political Consequences of Globalization
Erosion of State Capacity
 Erosion of State Functions: One evident impact of globalization is diminishing
capacity of states to perform traditional functions.
 Decline of Welfare State: The historical ‘welfare state’, responsible for economic and
social welfare of its citizens, is receding.
 Shift in State Priorities: It is giving way to a more streamlined state focusing on core
responsibilities such as maintaining law and order and ensuring national security.
 Market Dominance: The market, instead of state, now significantly influences economic
and social decisions.
 Reduction in state Autonomy: The growing influence and presence of multinational
companies globally reduced autonomy of governments in decision-making.

Capacity Enhancement of State

 Capacity Enhancement: In certain respects, globalization has augmented state
capacities.
 Technological Empowerment: Advanced technologies provide states with extensive
data on their citizens, empowering them further.
 o This technological edge makes states more competent in governance and control than
before.
Economic Consequences of Globalization
Positive Impact
 Increased Global Interconnectedness: It led to increased economic flows between
countries, including commodities, capital, people, and ideas.
o Has seen an increase in global trade as many countries reduce import restrictions.
o Capital Movement: The capital movement has become more fluid, allowing investors
from developed nations to seek better returns in developing countries.
 Exchange of Knowledge and Trade: It led to the spread of Internet and computer-
related services exemplifying the flow of ideas.
 Protectionism Tendency: However, the people’s movement hasn’t seen the same
increase, especially in developed nations that have stringent visa policies.
o It led to the adoption of similar economic policies that have been adopted worldwide,
their outcomes vary greatly depending on regional contexts.

Negative Impact
 Economic Inequality: Economic globalization has polarized viewpoints.
o Critics argue it may only benefit a small portion of the population, neglecting those
reliant on government jobs and welfare.
 They advocate for ‘social safety nets’ to mitigate the adverse effects.
 Neo-Colonialism: Some movements worldwide have labelled economic globalization as
a form of recolonization, believing it’s detrimental, especially to the poorer nations.
Cultural Consequences of Globalization
Globalization has profound effects on our daily lives, influencing our food, clothing, and even
our preferences.
Negative impacts
 Rise of Homogenization: Globalization sparks fears of leading to a singular global
culture, termed cultural homogenization.
 Westernization: Instead of a genuine global culture, there’s a perceived imposition of
Western culture on other societies, notably seen as the soft power of US hegemony.
o For Examples such as the global popularity of burgers or blue jeans are tied to the
influence of the American lifestyle.
 McDonaldisation: Critics argue this dominant cultural influence is detrimental as it
erodes diverse cultural heritages, terming the phenomenon as the ‘McDonaldisation’ of
the world.
Positive Impacts
 Cultural Evolution: Cultures have always evolved, absorbing outside influences.
Some external influences can enhance and diversify a culture without overshadowing it.
 Cultural Fusion: For instance, while a burger may coexist with traditional Indian
foods like masala dosa, blue jeans paired with a homespun khadi kurta can result in a
unique cultural blend.
o This blend has even made its way back to Western countries, with Americans donning
kurtas and jeans.

Conclusion
Globalization has significant and diverse effects on economic, cultural, and social aspects
across the globe. This trend encourages connectivity and reliance, transforming
sectors, economies, and ways of life. While it offers opportunities for development and
innovation, it also presents challenges like cultural homogenization and economic
inequalities, requiring a thorough and nuanced understanding of its consequences.
Difference between Globalization and Glocalization
Globalization refers to the process of increasing interconnectedness and interdependence
among countries through the exchange of goods, services, and ideas.
Glocalization refers to the adaptation of global products and strategies to local markets
and cultures.
You may be familiar with the term globalization. When a business wants its services or products
to reach a multi-market audience, it’ll contact a language translator to help translate brochures,
advertising taglines, and other marketing tools. The top-down approach of simply translating
content and throwing it to the target market depicts globalization.

However, glocalization takes a different marketing approach. It starts by understanding the local
culture and language of the target audience, and then designing a marketing translation strategy
around the local particularities. When comparing glocalization vs globalization, the former is
more effective in winning over the local market. But what do these terms mean?

What Is Glocalization?
Glocalization is a blend of terms derived from ‘globalization’ and ‘localization’ used in reference
to items developed and distributed internationally but adjusted to meet the unique needs of
consumers in the local markets. In other words, it reflects the need to customize globally
generated products and services to satisfy a local population based on their culture, behavior,
laws, or consumer preference.

Why is Glocalization Important?

When products are adapted to the local communities’ tastes and preferences, it allows
multinational companies to acquire trust and grow in those particular regions. Adopting a
glocal strategy is crucial if a business is under high pressure for local responsiveness, but the
opportunities for leveraging the company’s skills are available.

As more communities adopt glocalized products, the company increases global scale of its
revenue collection. Foreign revenue helps the firm to decongest local competitors and release
pressure on the source as it opens more branches in newer geographical locations.

What Are Some Examples of Glocalization?

Glocalization assumes many forms and degrees. For example, a car model sold globally might be
customized to fit particular requirements in the local market, including emission standards and
steering wheel position. Instead of the common left-sided steering wheels, car manufacturers in
the UK build steering wheels on the right according to local laws.

The food and beverage industry is another field leveraging glocalization to expand and enhance
revenue. McDonald’s Corporation and Coca-Cola have employed a glocal strategy in penetrating
the local markets in different regions, including China and Europe. Instead of the all-
familiar Ronald McDonald mascot, the fast-food giant uses Asterix in France as part of its
glocalization strategy. On the other hand, Coca-Cola customizes packaging and distribution to
identify with the local market while maintaining its global authenticity.

What Is the Differences Between Globalization and Glocalization?

Globalization vs Glocalization

Globalization refers to the distribution and spread of ideas, products, or services across
international borders by economic, political, or social entities. While globalization entails
distributing an item globally without considering any regional differences, glocalization ensures
that a product distributed is customized to suit the needs, culture, and laws of the local
population.

Thus globalization protects the form of a product assigned by the source to maintain its ‘global’
status, while glocalization allows tweaking the item to develop a local
entity. Globalization promotes the homogenization of consumers and cultures worldwide,
whereas glocalization recognizes the uniqueness of traditions, customs, and behavior and focuses
on developing products to fulfill unique needs of local customers.

Multinational Corporation

MNCs refers to the corporate giant business firm having extended its productive activity
in many nations besides its home country.

Generally, a multinational company has offices, factories, or other facilities in different

countries around the world as well as a centralized headquarters which coordinates global
management.

 Some consider a multinational company to be one that generates 25% or more of its
revenue outside the home country.
 An MNC can have a positive economic effect on the countries in which it operates.
 Investing in a multinational corporation is a way to add international exposure to a
portfolio.
Characteristics of a Multinational Corporation

Some of the characteristics common to various types of multinational corporations include:

 A worldwide business presence (Mncs have managerial headquarters in home countries

and also carry out their business in other [Link]-USA , Nestle (switerland)
 large and powerful organizations-Giant size-(the assets and sales of MNCs are quite
large)
 Business conducted in various languages
 A complicated business model and structure
 Multinational companies can make direct investments in foreign countries. Many are
based in developed nations. Advocates say they create high-paying jobs and technologically
advanced goods in countries that otherwise would not have access to such opportunities or
goodsJobs created in foreign countries, potentially with higher wages than found locally
 Seeks improved efficiencies, lower production costs, larger market share
 Has substantial expenses associated with navigating (directing) the rules and regulations
of foreign countries
 Pays taxes in countries in which it operates

Factors to consider when evaluating if global expansion makes sense (why MNCs go

Global)
Investment required
Globalization takes a significant commitment of resources. It’s important to carefully estimate
the investment of both time and money needed for international expansion in order to determine
if it’s truly the right move for your organization
Human resources
Doing business in a new market means directing differences in employment regulations, as well
as cultural norms. Making sure you have the right human resources processes and procedures in
place is crucial for your success
Market opportunities
Choosing the right markets is key for maximizing the benefits of global expansion. Consider
which international markets offer the greatest potential for new customers and revenue, where
your company already has some grip in the marketplace, and how difficult it will be to adapt
your current offerings to fit local needs
Legislative and regulatory compliance
Laws vary widely from one country to the next, so it’s important to understand the regulatory
environment in each new market you’re considering entering and to evaluate whether doing
business in that market makes sense given local regulations
Local culture, trends, and norms
Business is shaped by culture and customs as much as it is by local laws. For your global
expansion to succeed, you’ll need to consider how your organization can do business in overseas
markets in a way that feels culturally relevant to local customers.

Benefits of international business (benefits to go global)

Access top talent on a global scale

Globalization expands your company’s talent pool worldwide, allowing your business to hire the

very best employees and to reap the benefits of a more diverse workforce.
Improve cost efficiency

When your company expands internationally, you increase the market for your offerings and can

boost production, which allows you to enjoy even greater economies of scale. Access to new

labor markets, resources, and technologies can also help you increase efficiency and lower costs .
Leverage financial incentives for entering new foreign markets
Expanding into overseas markets increases opportunities for foreign investment in your business,
which brings with it a wide range of benefits, including spurring (encouraging) innovation,
opening up access to new technologies and business models, and increasing connections to
global supply chains

Expand your customer base

Taking your business global is one of the best ways to expand your customer base. In turn,
expanding your customer base can help increase sales and revenues, as well as generate higher
profits
Additionally, diversifying your markets and customer base helps to create greater stability for
your business. If there is an economic downturn or some other unforeseen circumstances that
disrupt sales and revenues in one of your markets, you have other markets that can help to
balance your company’s finances

Increase consumer trust within overseas markets

Investing in new global markets gives your company the opportunity to win the trust of new
local customers, and doing that successfully is good for business. I

Cultivate competitive advantages

Moving into overseas markets expands your options for potential suppliers, increasing
competition for your business, which can lower costs and ultimately improve the quality of your
products.
Role of MNCs in Developing countries

 Multinational corporations are known for their ability to generate substantial employment
opportunities in both developed and developing countries. By establishing subsidiaries,
branches, and factories in different regions, they create jobs that provide income and
economic stability for individuals and communities.

 MNCs accelerate the growth process in the host country through rapid industrialization
and allied activities.
 MNCs integrate national and international markets. this will influence economic,
industrial and social environment.
 MNCs bring ideas and help in exchange of cultural values.

Role of Multinational Corporations in the India Economy:

Prior to 1991, multinational companies did not play much role in the Indian economy. In the
pre-reform period the Indian economy was dominated by public enterprises. To prevent
concentration of economic power the Industrial Policy 1956 did not allow the private firms
to grow in size beyond a point. By definition multinational companies are quite big and
operate in several countries. While multinational companies played a significant role in the
promotion of growth and trade in South- East Asian countries they did not play much role in
the Indian economy where import-substitution development strategy was followed.

Since 1991 with the adoption of industrial policy of liberalisation and privatisation role of
private foreign capital has been recognised as important for rapid growth of the Indian
economy. Since source of bulk of foreign capital and investment are multinational
corporations, they have been allowed to operate in the Indian economy subject to some
regulations.

The following are the important reasons for this change in policy towards
multinational companies in the post-reform period: ( also role of Mncs in developing
Countries)

1. Promotion of Foreign Investment:

The liberalised foreign investment pursued since 1991 allows MNCs to make investment in
India subject to different ceilings fixed for different industries or projects.

However, in some industries 100 per cent export-oriented units (EOUs) can be set up. It
may be noted, like domestic investment, foreign investment has also a multiplier effect on
income and employment in a country. For example, the effect of Suzuki firm’s investment
in Maruti Udyog manufacturing cars is not confined to income and employment for the
workers and employees of Maruti Udyog but goes beyond that. Many workers are employed
in dealer firms who sell Maruti cars. Moreover, many intermediate goods are supplied by
Indian suppliers to Maruti Udyog and for this many workers are employed by them to
manufacture various parts and components used in Maruti cars. Thus their incomes also go
up by investment by a Japanese multinational in Maruti Udyog Limited in India.

2. Non-Debt Creating Capital Inflows:

In pre-reform period in India when foreign direct investment by MNCs was discouraged, we
relied heavily on external commercial borrowing (ECB) which was of debt-creating capital
inflows. This raised the burden of external debt and debt service payments reached the
alarming figure of 35 per cent of our current account receipts and this resulted in balance of
payments crisis in 1991.

As direct foreign investment by multinational corporations represents non-debt creating

capital inflows we can avoid the liability of debt-servicing payments. Thus, MNCs can play
an important role in reducing stress and strains on India’s balance of payments (BOP).

3. Technology Transfer:

Another important role of multinational corporations is that they transfer high sophisticated
technology to developing countries which are essential for raising productivity of working
class and enable them to start new productive ventures requiring high technology.
Whenever, multinational firms set up their subsidiary production units or joint-venture
units, they not only import new equipment and machinery embodying new technology but
also skills and technical know-how to use the new equipment and machinery.

As a result, the Indian workers and engineers come to know of new superior technology and
the way to use it. In India, the corporate sector spends only few resources on Research and
Development (R&D). It is the giant multinational corporate firms (MNCs) which spend a lot
on the development of new technologies which can greatly benefit the developing countries
by transferring the new technology developed by them. Therefore, MNCs can play an
important role in the technological up-gradation of the Indian economy.

4. Promotion of Exports:

With extensive links all over the world and producing products efficiently and therefore
with lower costs multinationals can play a significant role in promoting exports of a country
in which they invest.

[Link] in Infrastructure:

Multinational corporations could invest in infrastructure such as power projects,

modernisation of airports and ports, telecommunication. The investment in infrastructure
will give a boost to industrial growth and help in creating income and employment in the
Indian economy. The external economies generated by investment in infrastructure by
MNCs will therefore crowd in investment by the indigenous private sector and will
therefore stimulate economic growth.

Criticisms against multinational corporations:

1. Capturing Markets:First, it is suspected that multinational corporations invest their

capital and locate their manufacturing units on their own or in collaboration with local firms
in order to sell their products and capture the domestic markets of the countries where they
invest and operate. With their vast resources and competitive strength, they can weed out
their competitive firms. For example, in India if corporate multinational firms are allowed to
sell or produce the products presently produced by small and medium enterprises, the latter
would not be able to compete and therefore would be thrown out of business. This will lead
to reduction in employment opportunities in the country.

2. Use of Capital-Intensive Techniques:It has been seen that increasing capital intensity in
modern manufacturing sector is responsible for slow growth of employment opportunities in
India’s industrial sector.

3. Encouragement to Inessential Consumption:The investment by multinational

companies leads to overall increase in investment in India but it is alleged that they
encourage conspicuous consumption in the economy. These companies cater to the wants of
the already well-to-do people. For example, in India very expensive cars (such as City
Honda, Hyundai’s Accent, Mercedes, Audi, etc.), the air conditioners, costly laptops,
washing machines, expensive fridges, and Plasma TVs are being produced/sold by
multinational companies. Such goods are quite inappropriate for a poor country or
developing economy. Besides, their consumption has a demonstration effect on the
consumption of others. This tends to raise the propensity to consume and adversely affects
the increase in savings of the country.

4. Import of Obsolete Technology:Another criticism of MNCs is based on the ground that

they import obsolete machines and technology. Some of the imported technologies are
inappropriate to the conditions of Indian economy. It is alleged that India has been made a
dumping ground for obsolete technology. Moreover, the multinational corporations do not
undertake Research and Development (R&D) in India to promote local technologies suited
to the Indian factor-endowment conditions. Instead, they concentrate R&D activity at their
headquarters.

5. Setting up Environment-Polluting Industries:It has been found that investment by

multinational corporations in developing countries such as India is usually made for
capturing domestic markets rather than for export promotion. Moreover, in order to evade
strict environment control measures in their home countries they set up polluting industrial
units in India. A classic example of this is a highly polluting chemical plant set up in Bhopal
resulting in gas tragedy when thousands of people were either killed or made handicapped
due to severe ailments.
6. Volatility in Exchange Rate:Foreign capital inflows affect the foreign exchange rate of
the Indian rupee. A large capital inflow through foreign investment brings about increase in
the supply of foreign exchange, say, of US dollars. With demand for foreign exchange being
given, increase in supply of foreign exchange will lead to the appreciation of exchange rate
of rupee. This appreciation of the Indian rupee will discourage exports and encourage
imports causing deficit in balance of trade.

Top Multinational Companies In India

COMPANY
INDUSTRY HEADQUARTERS
NAME
Tata Group Conglomerate Mumbai, India
Aditya Birla Group Conglomerate Mumbai, India
Infosys Information Technology Bangalore, India
HCL Technologies Information Technology Noida, India
Wipro Information Technology Bangalore, India
Google India Technology Bangalore, India
Amazon India Retail/E-commerce Bangalore, India
Apple India Technology Bangalore, India
Microsoft India Technology Hyderabad, India
Nestle India Food and Beverage Mumbai, India
Information Technology, Consumer
IBM Mumbai, India
Hardware
Coca Cola Consumer Goods Gurgaon, India

Culture

“…when in Rome, do as the Romans do…”

Cultures are made up of a set of attitudes, behaviors and symbols shared by a large group of
people, usually communicated from one generation to the next.
Why is culture influential in international business?

Culture is essential in international business because it influences how multinational and cross-
cultural teams interact and collaborate. It dictates the business world's values, etiquettes, thinking
patterns, decision-making, practices, and processes.

In a business context ,What may be acceptable business practice in one country , may be
different from the approach that is used by businesses overseas.

What are the major cultural factors that affect international business?
The major socio-cultural factors that significantly impact international businesses are culture,
etiquette, religion, language, customer preferences, education level, customs and taboos, and
attitude towards foreign goods and services.

Elements of culture:

elements of the culture of international operations managers should be aware;

Languages : Knowledge of the local language can help because-

It permits a clearer understanding of the situation.

It provides direct access to local people.

Understanding of implied meanings.

Etiquette: Asian countries such as China seem to prefer the titles and surnames, whereas
Americans usually use first names.

Symbols

Values

Attitude: Scandinavian countries such as Sweden emphasise social equality and therefore they
tend to have a relatively flat organisational hierarchy. This relates to their informal approach to
communication and cooperation normally at the heart of their organisations. In Japan, their
traditional values of relative status and respect for seniority are reflected in their organisations
and there is a very clear organisational structure.

Rituals

Customs and Manners

Education : Education gives us the knowledge of the environment that surrounds us. It gives us a
perspective of looking at life. Education is the basis of culture and civilization. It is instrumental
in the development of our values and virtues. Education cultivates us into mature individuals,
individuals capable of planning for our futures and taking the right decisions.

Physical Artifacts: Artifacts are physical objects created and used by humans. Artifacts may
include such items as eating utensils, tools, clothing, and coins.

Language, Jargon, and Metaphors : Language barrier, customs, mannerisms and gestures -
In US or Germany, it is common for people to speak loudly and be more assertive when sharing
ideas amongst colleagues. However, in countries like Japan people typically speak more softly
and have a more passive tone when making suggestions to colleagues.

Stories, Myths, and Legends

Ceremonies and Celebrations

DISCUSSION: Do you think we are moving toward a monoculture – a situation where the
world could be viewed as a single society where all share similar values and ways of
thinking such that our needs (for products and services) are becoming more similar world
wide?

What is McDonald's culture like?

Things move quickly at McDonald's, whether we’re serving our customers delicious food or
helping our own people to build their futures. In our workplace, we promote flexibility,
opportunity, equality and development. McDonald's employees come from all walks of life, but
share a common approach: positivity. We know that happy employees help to make happy
customers, so we want you to enjoy your work. And we're certain you will.

Netflix Culture

Entertainment, like friendship, is a fundamental human need; it changes how we feel and gives
us common ground. We want to entertain the world. If we succeed, there is more laughter, more
empathy, and more joy. To get there, we have an amazing and unusual employee culture. This
document is about that culture.

Like all great companies, we strive to hire the best and we value integrity, excellence, respect,
inclusion, and collaboration. What is special about Netflix, though, is how much we:

 encourage independent decision-making by employees

 share information openly, broadly, and deliberately

 are extraordinarily candid with each other

 keep only our highly effective people

 avoid rules

Our core philosophy is people over process. More specifically, we have great people working
together as a dream team. With this approach, we are a more flexible, fun, stimulating, creative,
collaborative and successful organization.

EPRG FRAMEWORK

A firm having a presence in the global market has to decide the manner in which it will enter and
operate there. Firms in the international market have a different orientation and operating
strategy. EPRG Framework helps the company to decide the way in which strategic decisions are
being made and how the company manages operations between headquarter and its subsidiaries.

1. ETHNOCENTRIC ORIENTATION (Home country orientation)

In this approach, A firm employs home market strategies to the international market. Plans for
overseas market are developed in the home office of the company. Personnel is hired from home
country. Also, promotion and distribution strategies are similar to that employed in the home
country. E.g. Hitachi, Sony.

2. POLYCENTRIC APPROACH (Host country orientation)

In this approach, marketing strategies are framed out as per the situation of the host country ( the
country where subsidiary is situated). Decisions can be altered as per the economic, political and
cultural disparities in the country. This provides a firm to manage its operations independently,
without much interference from its headquartered. E.g., Ford, Nissan.

3. REGIOCENTRIC ORIENTATION

In this approach, a firm treats a group of countries with similar characteristics as a single market
and accordingly designs a marketing strategy. Countries like India, Pakistan and Bangladesh
possess similar characteristic and can be served well with a single marketing strategy. E.g.,
Coca-Cola.

4. GEOCENTRIC APPROACH

This approach maintains a balance between home and host market. Marketing strategies are not
influenced by the home or host country preferences. A firm tries to adopt globalized marketing,
formulates an integrated marketing strategy for across the globe. this enables a firm to enjoy
economies of scale. E.g., Microsoft.
 Hofstede’s Cultural Dimensions Theory

Key Points

 Hofstede’s Cultural Dimensions Theory, developed by Geert Hofstede, is a framework used to

understand the differences in culture across countries.

 Hofstede’s initial six key dimensions include power distance, uncertainty avoidance,
individualism-collectivism, masculinity-femininity, and short vs. long-term orientation. Later,
researchers added restraint vs. indulgence to this list.

 The extent to which individual countries share key dimensions depends on a number of
factors, such as shared language and geographical location.

 Hofstede’s cultural dimensions are widely used to understand etiquette and facilitate
communication across cultures in areas ranging from business to diplomacy.

Cultural Dimensions
Geert Hofstede’s cultural dimensions theory (1980) examined people’s values in the workplace
and created differentiation along three dimensions: small/large power distance, strong/weak
uncertainty avoidance, masculinity/femininity, and individualism/collectivism.

Power-Distance Index

The power distance index describes the extent to which the less powerful members of an
organization or institution — such as a family — accept and expect that power is distributed
unequally.

Although there is a certain degree of inequality in all societies, Hofstede notes that there is
relatively more equality in some societies than in others.

Individuals in societies that have a high degree of power distance accept hierarchies where
everyone has a place in a ranking without the need for justification.

Meanwhile, societies with low power distance seek to have an equal distribution of power. The
implication of this is that cultures endorse and expect relations that are more consultative,
democratic, or egalitarian.

In countries with low power distance index values, there tends to be more equality between
parents and children, with parents more likely to accept it if children argue or “talk back” to
authority.

In low power distance index workplaces, employers and managers are more likely to ask
employees for input; in fact, those at the lower ends of the hierarchy expect to be asked for their
input (Hofstede, 1980).

Meanwhile, in countries with high power distance, parents may expect children to obey without
questioning their authority. Those of higher status may also regularly experience obvious
displays of subordination and respect from subordinates.

Superiors and subordinates are unlikely to see each other as equals in the workplace, and
employees assume that higher-ups will make decisions without asking them for input.

These major differences in how institutions operate make status more important in high power
distance countries than low power distance ones (Hofstede, 1980).

Collectivism vs. Individualism

Individualism and collectivism, respectively, refer to the integration of individuals into groups.
Individualistic societies stress achievement and individual rights, focusing on the needs of
oneself and one’s immediate family.

A person’s self-image in this category is defined as “I.”

In contrast, collectivist societies place greater importance on the goals and well-being of the
group, with a person’s self-image in this category being more similar to a “We.”

Those from collectivist cultures tend to emphasize relationships and loyalty more than those
from individualistic cultures.

They tend to belong to fewer groups but are defined more by their membership in them. Lastly,
communication tends to be more direct in individualistic societies but more indirect in
collectivistic ones (Hofstede, 1980).

Uncertainty Avoidance Index

The uncertainty avoidance dimension of Hofstede’s cultural dimensions addresses a society’s

tolerance for uncertainty and ambiguity.

This dimension reflects the extent to which members of a society attempt to cope with their
anxiety by minimizing uncertainty. In its most simplified form, uncertainty avoidance refers to
how threatening change is to a culture (Hofstede, 1980).

A high uncertainty avoidance index indicates a low tolerance for uncertainty, ambiguity, and
risk-taking. Both the institutions and individuals within these societies seek to minimize the
unknown through strict rules, regulations, and so forth.

People within these cultures also tend to be more emotional.

In contrast, those in low uncertainty avoidance cultures accept and feel comfortable in
unstructured situations or changeable environments and try to have as few rules as possible. This
means that people within these cultures tend to be more tolerant of change.

The unknown is more openly accepted, and less strict rules and regulations may ensue.

For example, a student may be more accepting of a teacher saying they do not know the answer
to a question in a low uncertainty avoidance culture than in a high uncertainty avoidance one
(Hofstede, 1980).
Femininity vs. Masculinity

Femininity vs. masculinity, also known as gender role differentiation, is yet another one of
Hofstede’s six dimensions of national culture. This dimension looks at how much a society
values traditional masculine and feminine roles.

A masculine society values assertiveness, courage, strength, and competition; a feminine society
values cooperation, nurturing, and quality of life (Hofstede, 1980).

A high femininity score indicates that traditionally feminine gender roles are more important in
that society; a low femininity score indicates that those roles are less important.

For example, a country with a high femininity score is likely to have better maternity leave
policies and more affordable child care.

Meanwhile, a country with a low femininity score is likely to have more women in leadership
positions and higher rates of female entrepreneurship (Hofstede, 1980).

Short-Term vs. Long-Term Orientation

The long-term and short-term orientation dimension refers to the degree to which cultures
encourage delaying gratification or the material, social, and emotional needs of their members
(Hofstede, 1980).

Societies with long-term orientations tend to focus on the future in a way that delays short-term
success in favor of success in the long term.

These societies emphasize traits such as persistence, perseverance, thrift, saving, long-term
growth, and the capacity for adaptation.

Short-term orientation in a society, in contrast, indicates a focus on the near future, involves
delivering short-term success or gratification, and places a stronger emphasis on the present than
the future.

The end result of this is an emphasis on quick results and respect for tradition. The values of a
short-term society are related to the past and the present and can result in unrestrained spending,
often in response to social or ecological pressure (Hofstede, 1980).

Restraint vs. Indulgence

Finally, the restraint and indulgence dimension considers the extent and tendency of a society to
fulfill its desires.
That is to say, this dimension is a measure of societal impulse and desire control. High levels of
indulgence indicate that society allows relatively free gratification and high levels of bon de
vivre.

Meanwhile, restraint indicates that society tends to suppress the gratification of needs and
regulate them through social norms.

For example, in a highly indulgent society, people may tend to spend more money on luxuries
and enjoy more freedom when it comes to leisure time activities. In a restrained society, people
are more likely to save money and focus on practical needs (Hofstede, 2011).
Ease of Doing business

 The Doing Business Report is the flagship publication of the World Bank Group that
benchmarks business regulations in 191 economies. The Doing Business Report
measures regulations that enhance business activity and those that constrain it.

 The Ease of Doing Business (EoDB) index is a ranking system established by the
World Bank Group wherein the ‘higher rankings’ (a lower numerical value)
indicate better, usually simpler, regulations for businesses and stronger protections
of property rights.

 The Ease Of Doing Business Score shows an economy’s absolute position relative to
the best regulatory performance, whereas the ease of doing business ranking is an
indication of an economy’s position relative to that of other economies.

 In India, these indicators relate to business regulations for small and medium sized
firms located in Delhi and Mumbai based on standardized case scenarios.

 The indicators are from 10 areas of business regulation such as:

Starting a Business, Dealing with Construction Permits, Getting Electricity,
Registering Property, Getting Credit, Protecting Minority Investors, Paying Taxes,
Trading across Borders, Enforcing Contracts, and Resolving Insolvency.
 Among the chosen 190 countries, India ranked 63rd in Doing Business 2020: World
Bank Report. In 2014, the Government of India launched an ambitious program of
regulatory reforms aimed at making it easier to do business in India. The program
represents a great deal of effort to create a more business-friendly environment.
India as one of the top 10 improvers, for the 3rd time in a row, with an
improvement of 67 ranks in 3 years.

 India has emerged as one of the most attractive destinations not only for
investments but also for doing business. India jumps 79 positions from 142nd (2014)
to 63rd (2019) in 'World Bank's Ease of Doing Business Ranking 2020'.

 With the aim to improve the ease of living and the ease of doing business in India,
more than 25,000 compliances have been reduced by the GOI. Positive changes have
led to this impressive improvement in India’s ranking in the EoDB index. India’s
major achievement is summarised here:

 Construction Permits: India’s ranking on this parameter has improved from 184 in
2014 to 27 in 2019. This improvement has been mainly on the account of a decrease
 in the number of procedures and time taken for obtaining construction permits in
India.

 Getting Electricity: India’s ranking on this parameter has improved from 137 in
2014 to 22 in 2019. It takes just 53 days and 4 procedures for a business to get an
electricity connection in India.

 Apart from these significant improvements, among the 190 economies, India ranks
13th in Protecting Minority Investors and 25th in Getting Credit

Registering Property

 All sub-registrar offices have been digitized and its records have been integrated
with the Land Records Department, in both Delhi and Mumbai.

 In Mumbai, all property tax records have been digitized. Property is mutated
automatically after registration. The digitization of property records ensures
transparency and allows citizens to ascertain the history of transactions in digital
mode.

 Online service for charges search at Registrar of Companies reduces the time taken
for this procedure significantly.

 Statistics regarding the number of land disputes at Revenue Courts are available
online in both Delhi and Mumbai.