Globalization of Multinational Companies in India

S.Ismail Basha, Assistant Professor, K.M.M.Institute of Post Graduate Studies,Department of Management Studies, Tirupati-517502,Mobile:9949081913,Email:sib.comp2011@gmail.com

Dr.M.S.Vasu, Associate Professor, KMM Institute of Postgraduate Studies,Department of Management Studies, Tirupati-517502,Mobile: 8688252290 , Email: drvasums999@gmail.com

KMM Institute of Postgraduate Studies, Rami Reddy Palli,Department of Management Studies, Tirupati-517502,

Abstract

Globalization is a powerful real aspect of the new world system, and it represents one of

the most influential forces in determining the future course of the planet. It has manifold

dimensions: economic, political, security, environmental, health, social, cultural, and others. The

focus here is on the concept of "globalization" as applied to the world economy. The greatest

challenge we face today is to ensure that globalization becomes a positive force for the entire

world's people, instead of leaving billions of them behind in squalor. Inclusive globalization

must be built on the great enabling force of the market, but market forces alone will not achieve

it. It requires a broader effort to create a shared future, based upon our common humanity in all

its diversity.

Doing business around the world for multinational companies has implications for

marketing to and communicating with consumers in different countries. Of course, the issue of

culture has long been a factor. “Communication and culture are inseparable”. This has not been

lost on those who are involved in international business, in which communicating to business

partners, clients and potential customers can be a complicated task. The digital revolution has

truly changed the way the world does business. It allows companies to provide customized

service to consumers, by actually enabling their customers to “serve themselves in their own

way…according to their own tastes”. There are companies who provide the infrastructure and

hardware for this new technology, but there are also those companies that thrive on the very

bonds that the Internet creates with every other part of the world.

Keyword: Concept, Development, History, Impacts of Globalization, New Economic Policy , New Economic Policy

History

The term was coined in the 1980s, but the concept is an old one that has different

interpretations to different people. Partly as a result of these different interpretations, there are

very different reactions to "globalization," with some policymakers, scholars, and activists seeing

it as a force for advancing the world economy while others, again all three, seeing it as a serious

danger to the world economic system. (For the former, see Friedman, 2000; Micklethwait and

Wooldridge, 2000; and World Bank, 2002. For the latter, see Greider, 1997; Rodrik, 1997;

Bauman, 2000; Gray, 2000; Giddens, 2000; Hutton and Giddens, 2000; Hertz, 2001; Bhagwati,

2002; Stiglitz, 2002; and Sullivan, 2002)

Friedman (2005) describes this period of time as “Globalization ” when the units of interaction were primarily these countries. More recently, following the industrial revolution and innovations in transportation and communication, the units of international interaction became multinational corporations who were finding materials, labor, as well as clients in countries outside their own. Friedman calls this period “Globalization”. This has been the period most familiar to people today, although in just the last several years, we have entered “Globalization” where interaction across nations can exist at the individual level and occur instantaneously (this will be addressed later). There are two types of theories on the effect that globalization has had on the world. The first is that of convergence, in which some degree of “universalization and homogeneity” results, as the differences that do exist are overshadowed by the similarities that are growing among countries. Globalization, liberalization and privatization started in Indiaduring1991.

New Economic Policy

In t e rna t iona l M one ta ryF und ( IM F ) andWor ld Ba nk (WB) .A f t e r t ha t so m any cha nges ha ve been m ade i n Ind i an economy. Governmentof India had opened Indian market for the multinational companies to carry on their trade, business with their Indian counter parts. Before starting globalization in India, IMF and WB had imposed some vital conditions on Indian Govt. to follow that. One of them is to withdraw subsidy from Indian agriculture. Thus, successive Indian Governments have been following the instructions of those agencies and subsequently withdrawing the subsidies f rom the a g r i cu l tu r a l s ec to r . A s a r e su l t , t he cos t o f p roduc t ion o f cu l t i va t i on has i nc r ea s ed in manifolds, making traditional farming an unprofitable option for the Indian farmers. On the other hand land acquisitions in the name of various developmental projects have rendered many peasants landless and jobless. Now days, Indian farmers are in deep trouble.The NSSO (59 th round) Report ,which was held in 2003,revealedthat 27 percent of farmers did not like farming beca use i t wa s no t p ro f i t a b l eand40 pe rcen t o f t he f a rm er s have exp re ss ed t he i r de s i r e t o qu i t farming and would take up some other profession. As a result, many marginal and poor peasants have been forced to migrate to urban areas for their livelihood. The report of National Commission for Enterprises in the Unorganized Sector says 77 percent of Indian population live on rupees 20/-or less per day. At this juncture multinational companies and big Indian corporate have entered the Indian rural market which no doubt would have long lasting effect on the rural economy and the livelihood of the rural people. Rural Market in India. The globalization of the Indian economy has given an added advantage to sophisticated production, proliferation and mass distribution of goods and services. With the rapid pace of technological improvement and increase in peoples buying capacity, more and better goods and services now are in continuous demand. Rural India is the real India. The bulk of India population live in villages. Today rural market is the largest potential market in India. At present about 70 percent of Indian population livein rural areas and the rural market scenario is changing rapidly most every day. Now a days, rural consumers spend about USD 9 billion per annum on ‘FMCG’ ( Fast

Moving Consumers Goods) and these consumption are growing much faster than urban areas. The reasons why companies are going rural are manifold. Higher rural incomes driven by agricultural growth, increasing enrolment in primary schools, high penetration of TV and other mass media have increased the propensity to consume branded and value added p roduc t s i n ru r a l a r ea s . M os t Fast Moving Consumer Goods Companies (FMCG) in India are introducing customized products especially for rural areas. Thus, the sales of FMCG products in rural markets is growing at a fast pace. Marketers and manufacturers are increasingly aware of t he pu rchas ing pow er s , va s t s i z e and dema nd bas e o f t he on c eneg le c t e d Ind i an h in t e r l a nd . A survey by the National Council for Applied Economic Research revealed that the rural middleclass is growing at 12 percent against the 13 percent growth of urban parts. Over 70 percent sales of total products are made to middle class households today and over 50 percent of the middle class is in rural India. According to a study by Chennai based Francis Kanoi Marketing Planning Services Pvt. Ltd. , the FMCGs market in rural India is now worth Rs.45,000 core and in addition to that the tractor and agri-inputs is worth Rs.45,000 crore and two to four wheelers rural markets is of 8000 crore today.

Development Programmers by Governments.

The five-year plans have witnessed massive investments in rural areas in terms of number of deve l opmen t a l p rog ramm ers im p lem en ted by t he c en t r a l and s t a t e G ove rnmen t . Thes e programmers have generated incomes to realties and helped them. Some of these programmers are:

Intensive Agricultural District Programme (IAD P - P a c k a g e P r o g r a m m e ) Intensive Agricultural Area Programme (IAAP) High Yielding Varieties Programme (HYVP-Green Revolution) Drought Prone Areas Programme (DPAP)• Small Farmers Development Agency

(SFDA). Hill Area Development Programme Operation Flood I, II and III (White Revolution) Fisheries Development (Blue Revolution) Integrated Rural Development Programme (IRDP) Jawahar Rojgar Yojna (JRY).

After the beginning of economic reforms in 1991, the Government has been giving special attention to the rural India by providing certain developmental schemes for these areas. Some announcements were made by the finance minister in the Union Budget to enrich the existing programmers and to initiate some new schemes for the rural areas like Kisan Credit Cards , Micro Finance and Parham Mantra Gramodyog Yojna e t c . The l a t e s t budge t i s f ocuse d on ag r i c u l tu r e and rural development.

Concept

Some people think that the concept of globalization is the free movement of trade, investment, services and exchange of culture world over. But according to some experts, globalization is integration of nation’s economic system with the international market forces. Ironically, some o t h e r d e s c r i b e g l o b a l i z a t i o n s a strategy of the imperialist forces to loot the ‘Third World countries. For us , globalization is the mobility of finance capital across the world, particularly of the poor countries. The unprecedented technological progress has enabled the easy flow of finance capital at the fastest speed to any countr. In the process of globalization, the three International Institutions namely, International Monetary Fund (IMF), World Bank (WB) and World Trade Organization (WTO) play a major role. These three organizations in a close collaboration function as the “Intelligence Agencies” on the economic policies of the underdeveloped countries. Trade-Related Intellectual Property Rights System(TRIPS) appears to have the greatest impact. And lastly, some feel that Globalization stands for the ultimate rights of multinational companies to allocate resources according to their own criteria.

Impacts of Globalization on National Economies

Globalization has had significant impacts on all economies of the world, with manifold effects. It affects their production of goods and services. It also affects the employment of labor and other inputs into the production process. In addition, it affects investment, both in physical capital and in human capital. It affects technology and results in the diffusion of technology from initiating nations to other nations. It also has major effects on efficiency, productivity and competitiveness.

Several impacts of globalization on national economies deserve particular mention. One is the growth of foreign direct investment (FDI) at a prodigious rate, one that is much greater than the growth in world trade. Such investment plays a key role in technology transfer, in industrial restructuring and in the formation of global enterprises, all of which have major impacts at the national level. A second is the impact of globalization on technological innovation. New technologies, as already noted, have been a factor in globalization, but globalization and the spur of competition have also stimulated further advances in technology and speeded up its diffusion within nations through foreign direct investment. A third is the growth of trade in services, including financial, legal, managerial, and information services and intangibles of all types that have become mainstays of international commerce. In 1970, less than a third of foreign direct investment related to the export of services, but today that has risen to half and it is expected to rise even further, making intellectual capital the most important commodity on world markets. As a result of the growth of services both nationally and internationally, some have called this "the age of competence," underscoring the importance of lifelong education and training and the investment in human capital in every national economy.

Globalization, liberalization and privatization have brought many changes in the Indian economy. Since 1991, the New Economic Policy has been implemented in India and that policyiscl early associated with Globalization. As a result, many multinational companies (MNCs)along with indigenous products have entered into Indian Market.

The rural market is the biggest market in India because two third of the Indian consumers live in rural areas. Most consumers of t he s e r a g l io s , w h ich i s a r ound 70 pe rcen t , a r e engage d in ag r i cu l tu r e and i t s a l l i ed works fo r t he i r l i ve l i hood . O ve r 70 pe rce n t o f s a l e s a r e made to t hem id l e c l a s s house ho lds t oday o f which over 50 percent of the middle class belong to rural India. Thus the rural market has been growing to the Fast Moving Consumer Goods (FMCG) and is now bigger than the urban market. According to a study by Chennai-based Francis Kanoi Marketing Planning Services Pvt. Ltd. t oday t he ru r a l marke t i n Ind i a i s w or th Rs .1 ,23 ,000 co re s , am ongwhi chRs .45 ,000 crores are agri-inputs market. To capture this lucrative market, many producers including multinationals have been developing their marketing strategies. It is afact that due to ignorance and low awareness, most of the rural consumers are helpless against the unethical marketing practices of these greedy marketers. This paper aims to examine whether the purchasing power o f t he ru r a l pe op le ha s r ea l l y change d a f t e r t he imp l emen t a t i on o f t he New Economic Policy in India. Ifit has increased then which section of the rural people have been benefited and finally some suggestions for preventive measures to protect the rural consumers from the dubious traders. The methodology of the research work would be used mainly from secondary sources.

Conclusion

As a final note, although globalization may be bringing about a divergence effect,

cultures will be just as imprudent as businesses if they refuse to allow their interactions on the

world stage to bring about a modicum of change. As the digital age continues to advance, and

nascent economies join in with the rest of the world, that world will only shrink further. Great

will be those companies that take advantage of this, who are flexible enough to appeal to the

various markets now just a mouse click away. Even greater still, however, will be those

companies that reflect the needs and values of these markets’ individual cultures, not simply

existing alongside them, but finding ways to merge with and become a part of them.

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