Globalisation may be defined as the integration of countries into world economy or one global market. Such integration involves removal of all trade barriers between countries. It is the process of internationalisation of products, markets, technologies, capital, human resources, information and cultures. It is characterised by growing interdependence between the countries of the world. Globalisation refers to the free flow of goods and services, capital, technology and labour among different countries.
In the words of Charles Hill (International Business – Competing in the Global Market Place. McGraw Hill, Boston, 1999), globalization has two main components – the globalisation of markets and the globalization of production.
According to International Monetary Fund, globalisation is “the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transaction in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology”.
The main features of globalisation are as follows :
(i) Globalisation involves expansion of business operations throughout the world.
(ii) It leads to integration of individual countries of the world into one global market thereby erasing difference between domestic market and foreign market.
(iii) It creates interdependency between nations.
(iv) Buying and selling of goods and services takes place from/to any country in the world.
(v) Manufacturing and marketing facilities are set up anywhere in the world on the basis of their feasibility and viability rather than on national considerations.
(vi) Products are planned and developed for the world market.
(vii)Factors of production like raw materials, labour, finance, technology and managerial skills are sourced from the entire globe.
(viii) Corporate strategies, organisational structures, managerial practices have a global orientation. The entire globe is viewed as a single market.
(ix) Globalisation does not take place overnight. It proceeds gradually through several stages of internationalisation. According to Kenichi Ohame, there are five stages of globalisation :
(a) Domestic company exports to foreign countries through the dealers or distributors of the home country.
(b) In the second stage, the domestic company exports to foreign countries directly on its own. It may create a separate export department for this purpose.
(c) In the third stage, the domestic company establishes production and marketing operations in key foreign countries.
(d) In the fourth stage, the company sets up a full-fledged company in the foreign country with all the facilities.
(e) In the fifth stage, the company becomes a true transnational company by serving the needs of foreign customers just like the host country’s company serves.