IGNOU : M.COM : IBO 1 : UNIT 5 : Q - 1. What do you mean by Globalization ? Describe various forces of globalization.

 

Ans. Globalization is the process by which an activity or undertaking becomes worldwide in scope. It refers to the absence of borders and barriers to trade between nations. Globalization is defined as increased permeability of traditional boundaries of almost every kind, including physical borders such as time and space, nation states and economies, industries and organizations and less tangible borders such as cultural norms. As a consequence of increased global operation, the global economy is becoming more integrated than ever before. This gradual integration leads to the emergence of global village.

MAJOR FORCES OF GLOBALIZATION

1. International Trade and Globalization

International trade has grown substantially over the years. The growth experienced is in the range of 4-10 per cent per annum. In fact, international trade has grown more faster than the world economy in recent years. For developing countries, trade is the primary vehicle for realizing the benefits of globalization. Growing trade has contributed to the ongoing shift of some manufacturing and service activities from industrial to developing countries, which further accelerates the process of globalization. The creation of World Trade Organization in 1995 is another step toward creating an environment conducive to the exchange of goods and services. Another significant and more important indicator of globalization is the rate of Gross Domestic Product (GDP) of the world. The world merchandise trade and the world GDP have been steadily growing since 1990. The rate of growth in merchandise exports is faster than the rate of growth in the world GDP. The world merchandise trade has been also growing faster than the world merchandise production. Of course, world merchandise trade, world merchandise production and world GDP have decelerated sharply in the year 1998 due to oil crisis, fall in prices of international trade of goods and services and several other factors.

The world merchandise exports, world merchandise production, world GDP and international trade in services have Witness substantial growth as a result of the globalization.

2. International Capital Flows

Apart from expansion of international trade, the massive capital flows among countries has further strengthened globalization of capital by a large number of countries. The catalyst for globalization in the late eighties and nineties is not international trade, but cross border international finance flows. World inflow and outflow of FDI have been growing significantly. The inflow of FDI has increased from 359 billion dollar in the year 1996 to 644 billion dollars in the year 1998. Likewise the outflow of FDI has also increased from 380 billion dollar to 649 billion dollar. These levels were reached despite the unfavourable conditions in the world economy. FDI flows grew in 1998 by 39% in case of inflows and 37% in case of outflows. This is the highest growth rate attained in FDI since 1987

3. Globalization and Technology

Technological revolutions in transport and communications over the last three centuries , have integrated the world economy. The advances of technology in transport and communication have also brought peoples of the world nearer.

The revolution of technology that has taken place in transport, communication and information is of qualitative difference during the last ten years from that of previous-generation of technology. It is not only integrating but also bringing into existence a common culture, common political system etc. It has also led experts like Ohame think that there is not concept of national consumer. Consumer preference can be global and regional.

Technological revolution has been rapidly transforming all productive systems and facilitating the process of globalization. Technology has become one of the most important element of the competitiveness. In modern production activities, competitiveness entails new, more rapid product innovation, flexible response, greater networking and closely integrated production systems across firms and regions. The leaders of technological change are evolving new strategies in response. Apart from investing heavily in innovation they are moving their technological assets around the world to match them to immobile factors, entering new alliances and reorganizing production relations. This has further facilitated the process of globalization.