Short Essay on Globalisation and Micro-Economics

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Globalisation essentially is a micro-economic process. It is driven by the growing significance of transnational corporations (TNCs) in global economy. A TNC refers to an enterprise having a significant degree of control over value adding activities in two or more nations.

Globalisation has become one of the “buzzwords” in the discussion on International Business these days.

Globalisation leads to an expanding global economy. It is a process, which tends to increase the interdependence, integration and links between the economies of various nations.

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FDI flows over the years have contributed to the increased economic integration, globalisation process on a worldwide level. During 1983-1990 FDI outflows have grown at the rate of 29% per annum on an average as against the rate of world output (4%) and exports (6%) In the Asia Pacific Region, South East Asian nations have been major beneficiaries of the globalisation process. For instance, Malaysia’s trade/ GDP ratio was estimated to be 152% in 1991, which is among the highest in the world. World economic integration can be attributed to trade, investment flows and increasing globalisation process of the MNCs.

Globalisation implies a process of internalisation in which companies gradually and incrementally expand their international involvement. Globalisation is an evolutionary process of increasing involvement in international business operations.

Under globalisation the business firms undertake coordinated activities as single entities operating in a single, global market economy, rather than a host country basis. For example, subsidiaries of Sony operating in Malaysia and Thailand imply globalisation business of Sony, Ohmae mentions about “global signposts” of gloablisation as follows:

Innovation and extensions of Information and Communication Technology (ICT). ICT has made business communication across the world quick and instantaneous.

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1. Globalisation is a new evolving paradigm of international business and marketing. It is a process of integration of the world into a single huge market, in the sense. It implies unification of national markets in evolving a global economy.

2. Globalisation is a broader term than internationalisation.

3. Internationalisation implies market expression through penetration of foreign markets.

4. Globalisation implies greater intensity of domestic competition from foreign competitors. It indicates a two-sided increase in competition as globalisation also implies the scale and diversity of commitments in foreign markets.

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5.. Globalisation means having large-scale production-cum-marketing operations of the firms around the world.

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