DRIVERS AND RESTRAINERS OF GLOBALISATION

            There are a number of forces which induce and propel globalisation forward.  On the other
hand there are also forces which restrain globalisation.  These factors are classified as

Driving factors

            The important forces driving globalisation are as follows:

1.    Liberalisation:  One of the most important factors which have given a great forward thrust
to globalisation since the 1980’s is the formation of universal economic policy resulting in
liberalisation of economy in many countries.  The immediate result of liberalisation in
globalisation of business.  Now many business firms can involve themselves is international
trade as the restrictions imposed by various countries is highly restricted under
GATT/WTO.

2.    MNC’s:  The companies which have taken a complete advantage of trade liberalisation

caused under GATT/WTO are MNC’s (Multi – National Companies).  Sony, Philips, Coco
Cola, Pepsi, Procter & Gamble, etc are some famous examples for MNC’s.  These companies
combine their resources and objectives to achieve profit in globel market.  According to the
world Investment Report 1997, there were about 44,500 MNC’s in the world with nearly
2.77 lakhs foregin collaborations.  Hence MNC’s is an important factor inducing
Globalisation.
3.    Technology:  Technology in a powerful driving force of Globalisation.  Once a Technology is
developed, it soon becomes available every where in the world.  (for example) A hospital in
the USA performs the required diagnostics on patients say an X – ray or MRI or C.T
Scan.  These diagnostic tests represent technology in medical field.  In the next three
minutes, a radiologists in Bangolore, India receives the scanned images from USA.  He then
sends his report to USA.  This is called as teleradiology.  The entire process, from the time
the patient was admitted, has taken Just 20 minutes.  The cost of this work is 30% lower in
India compared to the USA.  In short, long distance on – line services made possible by the
technological developments have given a forward thrust to globalisation.
4.    Transportation and Communication revolutions: Technological revolution in several
spheres, like transport and Communication, has given a great impetus to
globalisation.  The Microprocessor in computers has created the flow of information from
one part of the globe to another not only fast but also cost effective.  It has played a pivotal
role in reducing space and time.  It has made world in to a global village.  Microprocessors
coupled with satellite, optical fibre, wireless technologies, world wide web have made this
‘World in to a global village.  The consumers/ customers has become more global.  By
sitting in front of the computer and logging on to world wide web the consumer can
download any type of information from any part of the world.  Flow of information is
business.  It determines profit.  Hence technology is a strong driving force for Globalisation.
5.    Product development and efforts:  The immediate impact of increase of Technology is the
growth of new products due to innovation.  The fast technology hastens product
obsolescence.  This has made many firms to invest heavily on R&D activities with cross –
border alliances .  These companies have to stay in business and survive competition.  In
order to achieve this, many companies have crossed their borders and have tie – ups to
update their products through research and development with foreign companies.  This
causes globalisation.
6.    Rising aspirations and wants:  Because of the increasing levels of education and exposure
to the media, aspirations of people around the world are rising.  They aspire for everything
that can make life more comfortable and satisfying.  If domestic firms are not able to meet
the wants, they would naturally turn to the foreign firms  to satisfy their aspirations.  This
promotes Globalisation.
 7.    World economic trends:  The world economic conditions are changing fast.  There, is a
great difference in the growth rates of economies/ markets between developing nations and
developed nations.  In developed nations the economies have become stagnant, due to
saturation on the otherhand, the developing nations are experiencing tremendous growth
rate in various business sector.  Cheap labour, high investment in research and
development, improvements in technology are some of the factors which have driven the
developing nations towards achieving high growth rate in business.  Hence it is very
common for the developing nations to have a strong international trade links with developed
nations.  Thus difference in world economies between nation causes gobalisation.
8.    Regional Integration: Nowadays many countries are joining hands together to promote free and fair
international trade across the borders.  They are forming separate trade blocks.  European Union and
North American Free Trade Agreements are two such classical examples.  This promotes
globalisation.
9.    Leverages:  Leverage is simply some type of advantage that a company enjoys by
conducting business in more than one country.  A global company can experience three
important types of leverages.
a.  Experience transfers:  The experience that a company gains by doing business in one country
can be effectively transferred to some other country if the particular company does business on global
scale.  This is called experience transfer (For example) Cocacola first developed a strong marketing
strategy to tap tea and coffee market in India.   In 2002 it became a success.  From this experience, it
then joined hands with Mc Donald’s for marketing hot beverages.  The Georgia Gold brand was thus
born and it was first launched in Delhi and Mumbai.  This brand is now available in all Mc Donald’s
outlets throughout the country.  The success of this business in hot beverages with Mc Donald’s
promoted Coca-cola to enter into ice-tea and cold coffee Marketing business in 2003.
            Another classical example of experience transfer is provided by Hindustan Lever
Limited. (HLL).  The occurrence of Iodine Deficiency Diseases (IDD) is very common in
developing countries.  This disease can be easily prevented by taking micro quantities of
iodine along with salt.  The salt thus produced is called as iodised Salt.  This new concept
of iodised salt was produced by HLL in India.  HLL has now successfully introduced the
concept of iodised salt to other countries like Kenya and Tanzania.  The experience gained
by HLL in marketing iodised salt in India has made the company to successfully market the
same product in other African countries.
b. Scale economies:  The art of cutting down the cost of production is called as scale
economies.  One major cause for scale economies is technology breakthroughs.  Many
companies are now heavily infesting in R&D in an attempt to reduce the cost of
production.  They are attempting to produce cheaper and more reliable products. (For
example).  The replacement of vaccum tubes by transistors and subsequent development of
printed circuit boards greatly reduced the labour cost required to assemble radios, T.V’S
and tape recorders.  By these technological changes the cost of production of T.V sets
greatly reduced and production of TV sets greatly increased. Philips are producing more
than 3 billion TV sets now in order to stay in business.  So to market such huge volume of
production of T.V sets, Philips needs global application of business.
c. Resource Utilisation:  Another strength of global company is its resource utilisation.  It
can now successfully outsource its resources globally thereby making better utilisation of
resources.
Restraining forces On Globalisation
            There are also several factors which restrain Globalisation trend.  They are
1.      External Factors
2.      Internal Factors
1.        External Factors:  These are government policies and controls which prevents cross-border
business.
2.        Internal Factors:  These are collection of factors that exists within the organisation that prevents
Globalisation.  One such factor is called as management myopia or near sightedness.  The company
with an aim to make immediate profit engage itself in short-term plan and target local markets for
business.  This is called as management myopia.  This acts against Globalisation of business.