Globalisation Book Review Essay

The world economy is becoming more global in its format. People may not be able to realize the correct depth of this globalization trend and the complexities it creates for the state. International businesses have a huge impact on our daily lives. Right from morning till night we are in the habit of using variety of goods and services made by different countries of the world. The globalization trend started after World War II. U. S. economy became the strongest economy at that time and U. S made their dominance worldwide in almost all major industries. Businesses were forced to build new plants and other facilities, and citizens turned to their work as a source of economic security. Gradually the economy developed and each country developed a competitive advantage in those circumstances. With the passing of time those advantages are being exploited to their maximum. ENVIRONMENT OF GLOBALISATION Environment refers to the totality of all the factors which are external to and beyond the control of individual global business enterprises. Environment furnishes the macro-context, the business firm is the micro-unit. The environmental factors are essentially the givens within which firms and their managements must operate. The value system of society, the rules and regulations laid down by the Government, the monetary policies of the central bank, the institutional set-up of the country, the ideological beliefs of the leaders, the attitude towards foreign capital and enterprise, etc. , all constitute the environment system within which a global firms operate. These environmental factors are many in numbers and various in form. Some of these factors are totally static, some are relatively static and some are very dynamic — they are changing every now and then. Some of these factors can be conceptualized and quantified, while others can be only referred to in qualitative terms. The environmental factors generally vary from country to country. The environment that is typical of Germany may not be found in other countries like the USA, the UK, and Japan. There may be some factors in common, but the order and intensity of the environmental factors do differ between nations. The magnitude and direction of environmental factors differ over regions within a country, and over localities within a region. The environment differs not only over space but also over time from country to country. We can talk of temporal patterns of environment, i. e. , past, present and future environment. Sometimes the environment may be classified into market environment and non-market environment depending upon whether a global firm’s environment is influenced by market forces like demand, supply, number of other firms and the resulting price competition, or non-price competition, etc. , or by non-market forces like Government laws, social traditions, etc. Further, we may classify the environment into economic and non-economic. Non-economic environment refers to social, political, legal, educational and cultural factors that affect state functioning. Economic environment, on the other hand, is given shape and form by factors like the fiscal policy, the monetary policy, the industrial policy resolutions, physical limits on output, the price and income trends, the nature of the economic system at work, the tempo of economic development, the national economic plan, etc. The non-economic environment has economic implications just as the economic environment may have non-economic implications. Since the environment is the sum total of the history, geography, culture, sociology, politics and economics of a nation, the interaction between economic and non-economic forces is bound to take place affecting the society functioning. ECONOMIC& FINANCIAL FACTORS Analysis of the business environment in any economy, we may examine the basic propositions as: 1. Business is an economic activity. 2. A business firm is an economic unit. 3. Business decision-making is an economic process. These propositions may be examined separately or jointly to justify the study of the economic environment of global business. Business is an economic activity An economic activity involves the task of adjusting the resources to the targets, or the targets to the resources. An economic activity may assume different forms such as consumption, production, distribution, and exchange. The nature of business differs, depending upon the form of economic activity being undertaken and organized. The manufacturer is primarily concerned with production; the stock exchange business is mainly concerned with the buying and selling of shares and debentures; the business of Government is to run the administration. The Government may also own, control and manage enterprises. These examples can be easily multiplied. The point is that each business has a target to achieve, and for this purpose each business has some resources at its disposal. Sometimes the target has to be matched with the given resources, and sometimes the resources have to be matched with the given target. Either way, the task of business is to optimize the outcome of economic activities. A business enterprise is an economic unit A business firm is essentially a transformation unit. It transforms inputs into outputs of goods or services, or a combination of both. The nature of input requirements and the type of output flows are determined by the size, structure, location and efficiency of the business firm under consideration. Business firms may be of different sizes and forms. They may undertake different types of activities such as mining, manufacture, farming, trading, transport, banking, etc. The motivational objective underlying all these activities is the same viz. , profit maximization in the long run. Profit is essentially a surplus value — the value of outputs in excess of the values of inputs or the surplus of revenue over the cost. A business firm undertakes the transformational process to generate this surplus value. The firm can grow further if the surplus value is productively invested. The firm, therefore, carefully plans the optimum allocation of resources (i. e. , men, money, materials, machines, time, energy, etc. ) to get optimum production. The entire process of creating, mobilization and utilization of the surplus constitutes the economic activity of the business firm, Business decision-making is an economic process Decision-making involves making a choice from a set of alternative courses of action. Choice is at the root of all economic activity. The question of choice and evaluation arises because of the relative scarcity of resources. If the resources had not been scarce, an unlimited amount of ends could have been met. But the situation of resource constraint is very real. A business firm thinks seriously about the optimum allocation of resources because resources are limited in supply and most resources have alternative uses. The firm, therefore, intends to get the best out of given resources or to minimize the use of resources for achieving a specific target. In other words, when input is the constraining factor, the firm’s decision variable is the output. And when output is the constraining factor, the firm’s decision variable is the input. Whatever may be the decision variable, procurement or production, distribution or sale, input or output, decision-making is invariably the process of selecting the best available alternative. That is what makes it an economic pursuit. Since business is an economic activity, a business firm an economic unit, and business decision-making an economic process, it is the economics environment of business which is the primary consideration in evaluating the business policies, business strategies and business tactics of a corporate entity in any global economy.