Globalization the business mantra.

As I look around in my house, I find US TV, Swiss watch, German washing machine, Belgium chocolates, Korean fridge, Japanese car, Italian designer clothes, Spanish sanitary ware, etc. All this is an offshoot of globalization, with which our lives are positively impacted and we are in interesting times. This was cleverly forecasted by Adam Smith in his classic “The Wealth of Nations” wherein he speaks about “absolute advantage.” This is inevitable in today’s world where every economy strives to its best efforts to produce goods and services and thus an exchange of trade happens. Of course, we have seen the ugly side of it in case of Monsanto seeds, consumerist society without values, and agricultural subsidies by the western countries which push the third world countries on the back foot. Globalization has to be cleverly managed to reap the benefits.

Is there a trend towards global innovation or it is a few countries that represent global innovation?

Yes. We see more number of countries contributing to ideas impacting society. However, we find the maximum number of ideas still come from the United States (US). There could be some good reasons for this. In my opinion it seems there exist a certain conditions prevailing in the US. Like- the quality of academics is top class, abundance of qualified people, a more diverse culture (US is known as the land of the immigrants), research funding are good from government as well as corporate, innovation-ecosystem already exists risk, talent is well rewarded, people from other countries feel welcome to develop their intellectual capacity. Einstein’s story is a good example. He fled from Germany which was Nazi dominated to avoid prosecution and went to US. He took to US citizenship for the love of his work that he could nurture better in US than in Germany. These are good inputs for many aspiring countries if they want to become a nation known for innovation and also if we need to make innovations a global phenomena.

Globalization - every coin has two sides

Our domestic demand for products and services is still there while the demand from foreign countries has decreased. In the past (before 2006) we have expanded our businesses based on demand mostly from the outside our own country and foreign direct investments has been fuelling the success story of India. 2006 onwards we saw the demand from outside decreasing due to slowdown in economy globally. This has led to the fixed capital which we have incurred to increase our production in the form of manpower and machine is not getting fully utilized. In this situation the government policies try to support internal companies to use the unutilized resources on domestic market, while it tries to isolate various sectors from bidding for the domestic market by outside players. In one way this is disadvantage to globalization. So here is a situation of advantages and disadvantages of globalization. By the way I am not supporter of the left policies.

Some more views on globalization

Whenever I look for the definition of Globalization I always find many different views. They use the positive and negative impact of globalization to bring out the meaning of the word globalization. One may say globalization can be the reduction and removal of barriers between nations. Globalization is existing and will continue to exist. It is believed that after world war II, globalization has been promoted to reduce the possibility of a war again. Globalization has brought in many wonders of comfort, opportunities, and knowledge. The fast economic growth in many nations using technology has been possible due to understanding globalization. In the midwestern US, globalization has eaten away at its competitive edge, lowering the quality of life in locations that have not adapted to the change. Globalization can help overcome recession if people are willing to look for change. Globalization need not be considered as “one man's loss is another man's gain.”

India’s situation in the global setting

Why every politicians and business people wants foreign direct investment should come to India to partner with local companies in the sectors of- banking and insurance, information technology, automobile, pharmaceuticals, etc? The answer is India has currently the right setting in terms of- natural resources and eco-system. It seems it has an ever increasing talent pool. India is craving to get its talent pool tested. It is looking in all directions to seek how the people can get gainfully working. India is the second biggest market after china, so we have big demand for everything. It seems we know how to fulfill the demands, but it seems initial capital is what is needed to get the ball rolling. The foreign direct investment can fuel the Indian growth, combined with the development minded politicians, bureaucrats, and growth friendly policies will put India on track to becoming a very strong global player.

Has the global-network business increase spreading of recession?

I would say yes. The idea of value chain helps in explaining this. Let try to explain this at the level of companies. Companies that are connected globally and doing business by extracting the value of the network has to be careful. The connected has many obvious advantages as well some disadvantages. In the network the problem can arise at the node or in its links.
Just to emphasize the point I would like to create an analogy to the virus attack (I can’t help thinking of this analogy, with so many types of virus attacks in the last decade). Let me call this virus the recession virus. The recession virus as all other in my opinion is very infectious. The probability that one gets affected depends on the link strength between node already affected by recession and other nodes in the network.
A classic example is the IT industry here in Bangalore, where I live and work. The dominance of IT business in Bangalore has been undoubtedly because of our strong partnership with companies in the US. As the US economy slowed down and got into recession the IT companies in Bangalore have started to feel the heat. IT companies in Bangalore need to find ways to keep the temperature at a comfortable level, else these companies will soon end up as hard boiled eggs.
So, in doing global business it is very important to clearly understand the impact of the network. There is a clear need for provisioning risk mitigation to insulate from the recession virus.

Will globalization benefit India?

In some sense, everyone benefits out of globalization, as it lifts the level of competition forcing everyone to deliver at a certain minimum level, below which the service or product will not survive. When this happens there is an automatic course correction and improved quality of the services and products.
For India to derive maximum out of the globalization, the Government needs to start promoting their work horses (90% of the population) and thinkers (10% of the population). Provide more opportunities for entrepreneurship by coming up with friendly policies and anti-corruption.

Who will benefit maximum out of globalization?

Clearly the developed countries are at an advantage from globalization. They have been able to hold to the advantageous positions. However, in the last 10 years countries from Asia seem to be catching up at a very fast rate with regard to economic growth. Some of these countries are well on their way to dislodge from higher positions the not well performing European countries. China, India, Korea have done extremely well to bridge some the gaps of product and service quality.
In all these, the leading beneficiaries of globalization have to recognize that in the era of globalization, we will either succeed together in building a more prosperous world, or we will suffer together as we each lose ground.

Why benchmark?

In a global world for companies to succeed in business they need to have the necessary infrastructure and people to be able to scale and sustain. Having this seems to be the key drivers for growth. But this is not good enough, as one need to qualify the kind of infrastructure and people the company has. Hence, the companies need to benchmark. They need to benchmark with regard to growth and performance with the rest of the world and keep in pace with it, so as to be not left behind.
A word of caution benchmarking helps to know where you are in relation with others, however to lead there is always something more and different one needs to do.