GLOBALIZATION
INTRODUCTION AND
OVERVIEW
GLOBALIZATION
• Globalization refers to a shift to a more integrated and
interdependent world economy
• Globalization the growing economic interdependence of
countries worldwide through increasing volume and variety of
cross-border transactions in goods and services, free
international capital flows, and more rapid and widespread
diffusion of technology-
GLOBALIZATION OF
MARKETING
Refers to the merging of historically
distinct and separate national markets
into one huge global marketplace
AD COPY
• I have 20 minutes, could you get me (a) a North Atlantic smoked
salmon salad from The Verandah (b) a table for two at Hip Asia (c) a
sushi roll
• Because I'd like (a) a choice of Malaysian, Vietnamese and Thai
cuisine (b) to try Nick's special muddles at the Distil (c) some coffee
from my in-room French press
• And it's important (a)I'm booked in one of your newly renovated
rooms (b) I have Wi-Fi access at the health club (c) the French
windows open onto the poolside
• So please arrange for (a) a local connection for my hand phone (b) a
goose-down pillow from the pillow menu (c) my favourite Piedmont
Chardonnay.
• Baseline: Because business can be demanding.
• Headline: "To me,
business isn't about
wearing suits or
pleasing
stockholders. It's
about being true to
yourself, your idea
and focusing on the
essentials."
Richard Branson,
Chairman of Virgin
and inspired world
traveller.
• Subhead: The new
business collection
by Samsonite
• Headline: Remember when
your favourite place to bring in
the New Year, was in her arms?
• Subhead: -
• Bodycopy: Was it years ago?
Or was it just last year?
But when there was a time when
New Year's was the eve of
tucking away little surprises for
her.
When your sole new resolution
was to find a new way of telling
her how much you love her.
You know there was a time when
the joy on her face that one night
was enough to make you smile
through the coming year.
Remember those nights?
Remember those stars?
Remember that passion? If you
do, show her that passion again.
Show it with a diamond.
• Glocalization is a term that was invented in
order to emphasize that the globalization
of a product is more likely to succeed
when the product or service is adapted
specifically to each locality or culture it is
marketed in. The term combines the word
globalization with localization
INDIAN GLOBAL ICONS
GLOBALIZATION OF
PRODUCTION
Sourcing of goods and services from
around the world to take advantages of
the national differences in cost and
quality of production (labor, energy,
land and capital)
BOEING 777 has1,32,500 parts
produced by 545 suppliers
DRIVERS OF GLOBILIZATION
• 1) Declining trade barriers
• HOW DOES IT HELP?
• Removal of trade barriers enabled free flow of goods,
services and capital between nations
• From 1950 to 2000 world trade expanded almost 20 fold
outstripping world output which grew by 6.5 times
• 2) The role of technological change
• - Microprocessors and telecommunication
• -Internet:
• 1990 < 1 million users
• 1995 50 million
• 2001 490 million
• 2005 1.2 billion
• HOW DOES IT HELP?
• 3)Transportation technology
• How does it help?
DECLINING TRADE BARRIERS
1500-1840 best avg speed of horse drawn carriages and sailing ships 10mph
1850-1930 Steam locomotives avg 65 mph, steamships avg 36mph
1950’s propeller aircraft 300-400 mph
1960’s jet passenger aircraft 500-700 mph
THE CHANGING WORLD
ORDER
THE CHANGING WORLD ORDER
• Emerging countries are looming
larger in the world economy by a
wide range of measures
• Their share of world exports has
jumped to 43%, from 20% in
1970.
• They consume over half of the
world's energy and have
accounted for four-fifths of the
growth in oil demand in the past
five years.
• They also hold 70% of the
world's foreign-exchange
reserves.
FORECAST
• In the past five years, their annual growth has
averaged almost 7%, its fastest pace in recorded
history and well above the 2.3% growth in rich
economies.
• The International Monetary Fund forecasts that
in the next five years emerging economies will
grow at an average of 6.8% a year, whereas the
developed economies will notch up only 2.7%
• If both groups continued in this way, in 20 years'
time emerging economies would account for
two-thirds of global output
RE-EMERGING ECONOMIES
• Until the late 19th century, China and India
were the world's two biggest economies.
• Before the steam engine and the power
loom gave Britain its industrial lead,
today's emerging economies dominated
world output.
• But they were left behind by Europe's
technological revolution and the first wave
of globalisation.
• By 1950 their share had fallen to 40%.
RE-EMERGING ECONOMIES
•
CHANGING FOREIGN DIRECT INVESTMENT
• Throughout the 1990’s the amount of FDI
in both developing and developed
countries increased dramatically
• -Reflecting increasing internationalization
of business
• -Between 1983 and 2000 FDI in China
increased from $2billion to $40billion
WORLD BANK ESTIMATES
• -By 2020 Chinese economy will be greater than
the US economy while India’s economy will be
equivalent to the economy of Germany
• -Today’s Developed nations which account for
55% of world economic activity will account for
only 38% of the world economic activity by 2020
• China will be the world’s largest exporter by the
year 2010
BRIC BY BRIC HOW THE
WORLD WILL CHANGE
• BRAZIL
• RUSSIA
• INDIA
• CHINA
DREAMING WITH BRICs:
THE PATH TO 2050
• Title of an economic research paper
released by Goldman Sachs
• Analyses the Economic growth of the
leading emerging market economies (Bric
-- Brazil, Russia, India and China) and
compares and contrasts this with the
prospects of the G-6 (US,UK, France,
Germany, Italy and Japan).
BRIC ECONOMIES
• Brazil, Russia, India and China are the four
biggest emerging economies, grouped together
under the acronym BRICs, created by Goldman
Sachs in 2001
• . These four economies will be the dominating
economies by 2050
• Goldman's economists predict that if
governments stick to policies that support
growth, by 2040 China will be the world's biggest
economy
• BRIC economies' share of world growth could
rise from 20 % in 2003 to more than 40 % in
2025
INDIA
HOW THE ELEPHANT LEARNED
TO DANCE
• The crisis in the economy is both acute and
deep. We have not experienced anything
similar in the history of independent India"
Finance Minister Manmohan Singh on the floor of the
House, presenting the Budget on July 24, 1991
• "Today, when I look back, I am even more
convinced that I was correct to observe in my
first Budget speech in 1991 that the idea of the
emergence of India as a front-ranking economic
power house of the world economy was an idea
whose time has indeed come"
Prime Minister Manmohan Singh's speech at the
World Economic Forum, November 2005
INDIA AND & REFORMS
SCENARIO 1991
• Back in 1991, on what appeared to be calm seas, the Indian
economy hit a near fatal iceberg. The trigger: A 70 per cent
jump in crude import bill and a drop in remittances from West
Asia
• Tottering on the brink of sovereign default, the country
borrowed from international lenders and pledged its gold
HOW THE ELPHANT LEARNED
TO DANCE
• It did not take long to put out the fire. Foreign exchange
reserves rose from an all-time low of $1.1 billion to $5.4
billion by March 1992,
• But the crisis provided a momentum for reforms that the
Congress government seized upon. In 1991, licensing
was done away with in 80 per cent of the industries. The
next year, licensing needs for imports were removed,
save a few restrictions.
• A volley of policy measures followed to attract foreign
direct investment, portfolio capital and decontrol
industries like textiles.
HOW THE ELPHANT LEARNED
TO DANCE
• Foreign institutional investors opened the floodgates
to investments in 2003, pumping in nearly $34 billion
by the end of 2006.
• Between 1993 and 2002, FII investment had been half
of that ($15 billion).
• Foreign direct investment surged, too, rising from
$6.01 billion in 2002-03 to $6.1 billion in April-October
2006. India, it seems, is the flavour of the decade.
• Current foreign exchange reserves end of Nov 2007
are $ 272 billion.
INDIA INC.
• 3rd largest economy after China and The U.S.
• 6th largest holder of foreign exchange in the world
• 50% of the Fortune 500 companies outsource to India
• Among the only 6 nations to launch satellites
• Among the only 3 to build supercomputers
• Maximum no of companies listed on the BSE stock
exchange
• Largest cotton yarn exporter in the world
• Largest manufacturer of motorcycles and two-wheelers,
• The lowest-cost producer of steel, aluminum, cement
and CDs
INDIA INC.
Strengths Weakness
GDP rate of 8%-9% p.a. Inflexibility of labor laws
Large reservoir of skilled Education
manpower with 700 million
Indians in the younger age
Emphasis on Knowledge Government
economy
Sensex on an all time high
A boy bathes in the Yamuna unaware of its toxicity
A day in the life of Delhi
COMPARISION WITH OTHER BRIC
ECONOMIES
Country Ease of Human Dev Global Perception of
Business Index Competitiveness corruption
Top NZ Norway Finland Iceland
Country
Brazil 119 63 57 62
Russsia 79 62 70 126
India 116 127 55 88
China 91 85 46 78
WORLD STATUS OF M&A
• $186 billion worth deals
• 1,878 deals global
• India ranks 23rd on that list with 0.7%
• As a target for cross border M&A India has
made it to the top 20
INDIAN MNC
Company Acquisition Country
Aditya Birla Group Straits (NIFTY) Pty Australia
group Ltd
CS2 plant Indonesia
Carbon black plant China
Novelis US
ONGC Sakhalin Russia
Asian Paints Berger International Singapore
INDIAN MNC
Company Acquisition Country
ONGC Videsh 15% stake in Brazilian Oil Brazil
Field BC-10 block(ONGC and
Shell will have a 50% stake)
Tata Tea 30% stake in US based USA
Energy brands
Videocon PENDING Daewoo [Link]
Thompson Electronics Color
picture tube
Electrolux Indian operations
Tata Corus UK
EYEING THE NEXT BIG SLOT IN THE
GLOBAL MARKETPLACE
Name of Company Global Rank Next immediate
rival
Tata Steel 5th largest in terms of JFE(Japanese co)
steel production of 4th largest with a
23 million tonnes production of
p.a. 25million tonnes p.a.
Asian Paints Claims to be among UK’s ICI world’s
top 10 largest decorative
paint manufacturer
Videocon 3rd largest color Phillips 2nd largest
Industries television picture with 35 million units
tube manufacturer,
22million units
Tata Motors 5th largest manufacturer No credible ranking
of medium to heavy availble but big
vehciles in terms of players are Paccar,
production Isuzu and Navistar
Bharat Forge 2nd largest forging Germany’s Thyssen
company by a marginal
difference
Tata Tea 2nd largest in the Europe’s Unilever
branded tea operation bigger 2-3 times
with a presence in 40
countries
Ranbaxy 9th largest generic Germany’s Stada-
company with sales of Hemofram 8th largest
Rs 7000 cr with sales of
Rs8000cr
Suzlon Energy 5th largest wind energy Germany’s Enrcon
player 6% market share 10% market share
NEW IMPROVED INDIAN CONSUMER
• Income growth
• The liberalization children grow up
• The morphing of rural India
beyond agriculture
• Environmental changes drive
aspiration
• Striving " I can":
• "The rise of the women":
• Education- and health-driven
• Entertainment
• Comfort with borrowing,
consumption, technology
NEW IMPROVED INDIAN CONSUMER
Televised access across the globe
Hundreds access the net
PENETRATION LEVELS
100 92%
77% 83%
90
80 76%
70
60
50
Smaller cities
40
19% Metroes
30
13%
20 4% 3%
10 3% 2%
0
Hi-fi CD Home 4 2nd
player MP3 theatre wheelers homes
HOME LOANS
60,000 60,000
50,000
35,000
40,000
25,000
30,000
20,000
10,000
0
Total Top 20 Rest
Market cities
OPPORTUNITY LEVELS IN SMALL TOWNS
Company % Type of city
Zenith Computers 100 % growth Small towns
LG mobile phones 70% of sales Non-metro
[Link] 42% of sales Small towns
ICICI Bank 1549% Hubli
Credit cards 832% Vijaywada
CONSUMER BOOM THEN & NOW
1996 2006
PC penetration 0.7% 18%
Telecom 0.03 m 100m
mobile
Internet Users 1.4 mn 37mn
Cable and 30 mn 68 mn
Satellite (Year 2000) (Year 2006)
Some Statistics of Indian
Consumers
• Of the total 1.1 billion population, only 8-10 million
comprise India's richie rich with a household income in
excess of $100,000 (Rs 45,00,000)
• 50-60 million consumers, living mainly in the metros,
whose average annual household income hovers
between Rs 3 lakh and Rs 10 lakh GOING TO DOUBLE
• Even with 100-150 million population in these categories,
India will be a bigger market than Canada and Australia
put together and hence, its attraction for marketers
• Following them is a group of some 250 million
consumers with an annual household income of around
Rs 45,000-2 lakh; this group represents India's real
middle class that mostly lives in the country's top 27
cities
Rationale for change
• National Council of Applied Economic Research (NCAER),
India's middle class constituted less than 10 per cent of its
population in mid-80s
• Ground-level data on their status were never available and
secondly, their purchasing power was kept on a leash by
decades of socialistic planning and strict government control
over production
• But liberalisation changed the landscape of the Indian market.
Thanks to increased level of industrialisation and the
subsequent rise of services sector, opportunities for employment
increased and income levels also went up.
• The result was that the size of middle class grew more than
three times and today it comprises over 30 per cent of the total
population
Mindset change
• Population, which was financially
independent at a much earlier age, the
rise of nuclear families and an increased
media exposure have given rise to a new
consumption culture in the country
VIEWS
• GURCHARAN DAS
• Economy grows over 7 per cent annually
in the foreseeable future and the
population increases by 1.5 per cent and
literacy rate keeps rising, then half of India
will turn middle class between 2020 and
2040.
WHY DOES THE WORLD LOVE
INDIA?
• India's population isn't just growing, but getting richer.»
According to a Deutsche Bank report, India is likely to be the world's
third richest economy by 2020, with a GDP of Rs 64 lakh crore
• 544 million Indians will likely join the consuming middle class between
2006 and 2015; current size estimated at 250-300 million
• Total consumption estimated around $550 billion in 2006 as against
$300-340 billion in 2002
• FMCG industry will grow to Rs 1,06,300 crore by 2012 compared to
Rs 60,000 crore now
• 21 million Indians have a home loan today compared with only 2.6
million 10 years ago; this is likely to double in the next 3 years
• Market for luxury products in India is estimated at $444 million today;
it was almost non-existent a decade ago
POOR STILL, SO WHAT?
• 200 million people in India are still poor
(subsisting on an income of $1-2 per day)
and an equal number lives below the
poverty line,
• Besides some 400 million who belong to
the lower middle income group (annual
household incomes of less than Rs
90,000).
So are the rich getting richer and
the poor getting poorer?
• This is happening because the sectors in which
a majority of the middle class is employed are
growing faster than the deprived section that is
still dependent on agriculture, which is growing
only at 2-3 per cent every year."
• As sectors like manufacturing develop and
people move away from agriculture to seek their
livelihood from industry and services, their
economic levels will only improve and they will
eventually add to the middle class
23rd India Economic Summit
2-4 December
• What will make India a Global Economic
Power?
• Improving Governance
• Reducing Corruption
• Skilling the Workforce
• Upgrading Education
• Checking environmental degradation and
water scarcity
INDIAN ELEPHANT IN
FULL CHARGE