The Hindu Business Line : The grammar of globalisation

THE term globalisation was first used by Theodore Levitt in an article he wrote 20 years ago in the Harvard Business Review. He used it in a limited sense — as a synonym for standardisation of a brand for international markets. In terms of quality, appearance, and every other factor governing the product, it will correspond to identical standards in whichever part of the world it may be manufactured or marketed by the parent company, or its franchisee.

Today, the word has acquired a much wider connotation and significance. The International Monetary Fund has defined globalisation as "the growing interdependence of countries worldwide through the increasing volume and variety of cross-border transactions in goods and services, and of international capital flows, and also, through the more rapid and widespread diffusion of technology."

To understand the structure and grammar of globalisation, at least in respect of its impact on economic governance, it is essential to examine the critical driving forces and key building blocks behind the process. The growing interdependence has taken place only because of the increasing acceptance and enthronement of economic liberalism as the preferred method of managing the market forces.

In fact, this, in the context of a liberal approach, is a paradox and self-contradiction. Liberal economics demands little politics. The role of the political rulers must be confined to the provision of an enabling environment and a conducive climate, in which trade and commerce will feel free, and find their own way to the fulfilment of their target.

The logic of globalisation suggests that the world is on the threshold of an era, in which there may not be any national business enterprise, or national corporation, not any more. No single company can manage to service the whole world. Globalise or perish is the slogan for survival and success in the corporate sector in the current commercial context. It is this imperative for growth which finds an echo in the phenomenon of mergers and acquisitions (M&A).

Merger with, or acquisition of, a company overseas is a short circuit to enter into the global market. Immediate access to the plant, ready-made equipment, trained personnel, existing goodwill, and established distribution/procurement network are some of the salient advantages in this route. Alongside M&A, greenfield investment is another avenue for globalisation.

The choice of greenfield investment over M&A in a specific situation may be advisable, either due to some inherent advantages in the latter proposal, or simply because there may be no purchase candidate available. Unlike M&A, greenfield investment offers a clean slate to an entrepreneur. There will be no inherited handicaps such as financial mismanagement, demoralised workforce, deserted supply chain, dissatisfied customer base, and so on. Most modern equipment, up-to-date manufacturing technology, fresh and zealous employees — such and similar factors will provide and promote a sense of involvement and commitment in the minds of all the stakeholders.

The market in India will witness more and more alliances, joint ventures, and networks, thanks to the LPG syndrome — an acronym popular with the financial analysts to describe the process of liberalisation, privatisation, and globalisation — which has been predominant since 1991.

We are into the millennium: Already the third year is nearly coming to an end. Change is the name of the game in this new epoch. "You cannot step into the same river twice," wrote Heraclitus. In this whirlwind of change, only such organisations will thrive and survive — which stick their necks out, and which are proactive and not reactive.

It is possible and probable that such changes may usher in a new world order, and spell a different dimension to the global economic environment. Already Europe has a new currency (the euro), and a closely collaborating comity of nations. China and the US, which were till sometime back, poles apart politically and economically, are now hand-in-glove in respect of trade pacts and partnerships. The WTO, which has emerged as a worthy successor to the GATT, has brought sunshine into the field of economic cooperation between countries. All these are harbingers of a cataclysm in commerce, and a revolution in international trade, which are already on the cards.

The spectre of a shift to a global level of governance, on a number of erstwhile local and domestic issues, has further reinforced the trend and thinking towards obliterating national boundaries, and countenancing in cross-border transactions. The world seems to be progressing clearly on the path of a multi-level system of national management, in which regional and global interests will operate in tandem and transcend all other parochial parameters.

The establishment of a totally integrated global economy, however, has a long way to go. It is a protracted process, and in the current scenario of a clear emphasis on regional cooperation and concepts such as the European Union, SAARC, Asean, and so on, globalisation appears to be a pipe-dream.

While the regional organisations may want to exclude third-party nations from their conglomerate, it is also possible that they may serve as a stepping stone to eventual globalisation on a full-fledged scale. The range and spectrum may extend from the locus of a country to a region, and then from a region to the globe; this way, the growth will be gradual and logical. Unity in diversity may be the idiom and grammar of globalisation.

The growth of trade and investment in sequel to globalisation warrants parallel movements of capital and finance. Traditional and orthodox public finance, however, has always been highly regimented and regulated; and hence, a localised and fragmented phenomenon. Therefore, the advocates of integrated financial markets claim and clamour that creating a global resource base is sine qua non for fostering international trade and commerce.

Globalisation adds an incremental dimension to the cultural issues inside a company. All organisations cultivate over a period of time, their own institutional behaviour, norms, culture, code of conduct, ethics, and values. This psyche becomes more pronounced, when the corporate extends its presence to other countries.

The tendency to preserve, protect, and persevere with one's own value system is accentuated, when it is in competition with an alien ethos. The confluence of corporate and country culture brings about a social synergy par excellence. In fact, such a synthesis is a condition precedent for globalisation. It is a virtuous circle.

Nevertheless, the depth and roots of the philosophy of diverse cultures across the world are intensive and extensive; they are almost immune to any external influence. On the other hand, if at all any cultural convergence is possible, it can transpire only when there shall be no clash with such profoundly professed and practised indigenous beliefs and faiths such as religion, ethnic tradition etc.

The ability to respect, inhabit, and coexist with the local milieu is crucial for any success in this regard.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Bringing price stability to futures

Illusory concessions

Running ahead of reality

The grammar of globalisation

Chimera of economic pre-eminence

Safe chemical zones, a paradox?

Investors should consider risk-adjusted returns

Embedded or in bed?

Insurance consultants

Minimum support price

Credit policy