Page 195 - DECO303_INDIAN_ECONOMY_ENGLISH

Indian Economy

Notes investment and financial flows initiated in the nineties has progressively lowered the
barriers to competition and hastened the pace of globalisation.

Self Assessment

Fill in the blanks:

7. …………………… is working as a catalyst to multiply the pace of globalisation.
8. …………………… has brought significant changes in the way business is conducted.
9. Because of communication technology, …………………… are fragmenting their operations
all over the world.
10. The end of the …………………… and a paradigm shift in erstwhile socialist countries also
brought significant changes to the world.

11.3 Impact of Globalisation on the Functions of Corporations

In this section, let us now discuss the impact of globalisation on the functions of corporations.
Corporations are today altering their strategies and are reorganising their operations to cope
up with the altered scenario whether it is their production process or location, Finance, Product
strategy, Marketing, HR policies, etc. Organisations have included the following changes:

Designing in Global Environment: It is important to note that in case managing product
development processes was a challenge earlier, it is not getting any easier as companies
continue to accept global design strategies. Global designing has cost benefits that are
very appealing to today’s manufacturer, but it also adds latest Product Lifecycle
Management (PLM) challenges and intensifies prevailing problem areas like that of
safeguarding intellectual property.
Production Location Selection: Jeffrey Immelt of GE Medical Systems (GEMS), pressed for
acquisitions to build up scale as for top global competitors, an R&D-to-sales ratio of at
least 8 per cent depicts a vital source of scale economies. But he also executed a production
strategy that was intended to arbitrage cost differences by focusing on manufacturing
operations—and, finally, other activities—wherever in the world they could be conducted
most cost effectively. By 2001, GEMS attained 15 per cent of its direct material purchases
from, and had placed 40% of its own manufacturing activities in, low-cost countries.

Rationalised Production: Essentially, you should understand that the companies generate
different components or varied portions of their product line in different portions of the
world to take benefit of low labour costs, capital, and raw materials. This is rationalised
production. In a latest, global world, rationalised production is simpler. Now organisations
can outsource or can set up their own production units in those regions where it is more
economical.

Example: GE used Mexico as a manufacture base for labour-intensive operations. Today,
Japanese are selling their cars made in America to the American consumers, while Americans
are selling American cars made in Japan. Not only this, British firms are selling English cricket
bats which are made in India. Asia manufactures sports shoes for almost all the major shoe
manufacturers. Much of the production of motherboards for PCs is located in Taiwan. Japanese
brands have less than a 50% share of the US market for microwave ovens but over 70% of the
manufacturing is done by Japanese companies. After liberalisation in the economies of India
and China, a great shift in location is going on as more and more organisations are shifting their
labour-intensive operations to these locations.

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