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Globalisation
anoop Koshy
IV Sem MBA
Marian International Institute ofManagement (MIIM)
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Globalisation
Globalisation is the process of international integrationarising from the interchange of world views, products,ideas, and other aspects of culture. Globalizationdescribes the interplay across cultures of macro-social
forces. These forces include religion, politics, andeconomics. Globalization can erode and universalizethe characteristics of a local group. Advancesin transportation and
telecommunications infrastructure, including the rise ofthe Internet, are major factors in globalization,generating further interdependence of economic andcultural activities
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International trade - lower trade barriers and
more competition Integrated production and consumption
systems.
Technological advances in transportation,electronics and related fields.
Financial flows (eg:FDI)
Communication (traditional media and
internet)
Population mobility, especially of labour
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Trends and Developments
New Markets
Growing global market in service - banking,
insurance, transport.
New financial marketsglobally linked,
working around the clock, with new
instruments.
Proliferation of mergers and acquisitions.
Global consumer markets with global brands.
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New Actors
MNCs integrating their production and marketing.
The World Trade Organisation - the first multilateral
organisation with authority to enforce national
governments compliance with rules.
A booming international network of NGOs.
More policy coordination groupsG-8, G-77,
OECD, etc.
Regional blocs gaining importanceEuropeanUnion, Association of South-East Asian Nations,
Southern African Development Community, etc.
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New Rules and Norms
Market economic policies spreading around the world,
with greater privatisation and liberalisation than in earlierdecades.
Human rights conventions and instruments building up inboth coverage and number of signatoriesand growing
awareness among people around the world. Conventions and agreements on the global environment
biodiversity, ozone layer, disposal of hazardous wastes,climate change, etc.
Multilateral agreements in trade, taking on such newagendas as environmental and social conditions.
New multilateral agreementsfor services, intellectualproperty, communication, etc.
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New (Faster & Cheaper) Tools of
Communication
Internet and electronic communications linking
many people simultaneously.
Cellular phones.
Fax machines.
Faster and cheaper transport by air, rail and
road. Computer
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Advantages Access to larger markets, means that firms may experience higher demand
for their products, as well as benefit from economies of scale, which leads toa reduction in average production costs.
Globalisation enables worldwide access to sources of cheap raw materials,
and this enables firms to be cost competitive in their own markets and in
overseas markets.
Avoidance of regulation by locating production in countries with less strictregulatory regimes, such as in those in many Less Developed
Countries (LCDs).
Globalisation has led to increased flows of inward investment between
countries, which has created benefits for recipient countries. These benefits
include the sharing of knowledge and technology between countries. In the long term, increased trade is likely to lead to the creation of more
employment in all countries that are involved.
Outsourcing
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Emergence of Globalisation in
Financial Market
Foreign Exchange Market
International Banking
Eurocurrency Market Currency Exchange Risks and their
Management
Internationalization of stock market.
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Foreign Exchange Market
It is a market in which foreign exchange
transactions take place.
It is the market in which national currencies
are bought and sold against one another.
Functions
Transfer of purchasing power
Provision of credit
Provision of Hedging Facilities
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International BankingInternational banks are banks which accept
foreign currency deposits, finance international
business and provide associated and ancillary
services like hedging and advisory services
and operate internationally. Correspondent banks
Representative offices
Foreign Branches
Subsidiaries and Affiliates
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Eurocurrency Market A Eurocurrency Market is a money market that
provides banking services to a variety of customersby using foreign currencies located outside of thedomestic marketplace.
The Eurocurrency Market represents any deposit offoreign currencies into a domestic bank.
For example, if Japanese yen is deposited into abank in the United States, it is considered to be
operating under the auspices of theEurocurrency Market.
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Currency Exchange Risks and their
Management
The company will unable to adjust prices and
costs to offset changes in the exchange rate.
Fluctuations in the currency may cause a loss
or profit to the firm.
Management:
Exchange Risk Avoidance Change/ Diversify Sourcing
Currency Diversification
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Internationalisation of stock marketImportant Factors
Diversification of investments.
Liberalization of international portfolioinvestments, particularly by emerging markets.
Attractive returns on investments in the emergingmarkets.
The realization by companies of the benefits ofglobal sourcing of finance.
The development in communication technologythat enhanced the ease and efficiency ofconducting transactions.
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Thank You
