CU-MBA-SEM-III-Globalization and Trade Agreements

Fig12.5Mixed Organizational Structures Transnational Network Structures Multinational structural arrangement combining elements of function, product, geographic design, while relying on network arrangement to link worldwide subsidiaries a. At centre of transnational network structures are nodes, units charged with coordinating product, functional, and geographic information b. Different product line units and geographic area units have different structures depending on what is best for their particular operation 251 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig12.6Transnational Network Structures 12.5 MULTINATIONAL CORPORATION IN INDIA Every student or an educated person dreams to work in an MNC India. It gives you the experience to move internationally. Also, here you get experience, credibility, and confidence to move ahead in the career. India derives a lot of benefits from MNC’s such as higher levels of investment, reduction in a technological gap, optimum utilization of natural resources, and a boost to a basic economic structure. Due to India’s growing economy, Globalization, and its potential in the market, many multinational companies are coming to India to extend their business. Reasons for Multinational Companies in India Following are the reasons for Multinational Companies to consider India as a preferred destination for business in Future: Huge Market Potential: India is a developing economy. Per capita income is increasing due to high growth rate in gross domestic product. Levels of saving, investment and employ-ment opportunities are 252 CU IDOL SELF LEARNING MATERIAL (SLM)

increasing at a faster rate. Rate of literacy is also improving. Life style is also under change.Due to these factors, MNCs are considering India as an emerging market for their products and services. Drugs and pharmaceuticals, capital goods, white goods automobiles, banking and financial services, food products and beverages are the major sectors where MNCs are playing their important roles. FDI Attractiveness: For quite a long time, India had a restrictive policy in terms of foreign direct investment. As a result, there was lesser number of companies that showed interest in investing in Indian market. However, the scenario changed during the financial liberalization of the country, especially after 1991. Government, nowadays, makes con-tinuous efforts to attract foreign investments by relaxing many of its policies. As a result, a number of multinational companies have shown interest in Indian market. Since 1991 Government of India has started the economic reform process in the economy. Liberalization, privatization and Globalization have created conducive environment for foreign investment especially foreign direct investment. Several sectors have been opened for FDI investment in terms of different scales. It has given favourable opportunities to multinational companies to invest huge fund under direct investment programme. The India as destination for FDI has been attracting huge amount for accelerating the pace of economic development. Labour Competitiveness: Developing economy especially India is quite labour competitive in comparison to developed economies like USA. Availability of knowledge workers have also motivated MNCs to select India as an investment destination. With the result MNCs are quite motivated to set up their production and service base in India in place of their host countries. Since labour is quite cheap here, MNCs are able to reduce their overall cost of production. Suzuki Motors Corporation is best example which is quite successful in producing more motor car than in Japan. It is also successful in its export efforts of Suzuki Motor Car to developed nations. Macro-Economic Stability: Socio economic and political culture of India is quite harmo-nious and stable. Political stability of the country is good enough for attracting FDI. Availability of raw materials, labour, demand for products, capital formation, saving, investment ratio etc., are quite favourable. Economic policies are suitable and favourable for MNCs Continuous evaluation; monitoring and consequential adjustments in economic reforms process actually encourage the MNCs to treat India as their best investment destination. 253 CU IDOL SELF LEARNING MATERIAL (SLM)

12.6 SUMMARY Multinational Corporation can be defined as a corporation that produces goods or services in several countries and manages its global activities from organizational headquarter located in one country.  Multinational Corporation develop expertise in understanding the culture, politics, economy and legal aspects of the country that they are planning to enter.  Due to India’s growing economy, Globalization, and its potential in the market, many multinational companies are coming to India to extend their business.  MNCs are considering India as an emerging market for their products and services.  MNCs are able to reduce their overall cost of production.  MNCs often use their economic power to influence government policies in directions unfavourable to development. 12.7 KEYWORDS  Regional Trading Agreements: Regional trading agreements refer to a treaty that is signed by two or more countries to encourage free movement of goods and services across the borders of its members.  Resource Based Companies:It is the second category of multinationals. These companies purchase raw resources from several countries.  Preferential Trade Areas: A preferential trade area is a trading bloc that gives preferential access to certain products from the participating countries. 12.8 LEARNING ACTIVITES 1. What is International Division Structure of MNCs? ___________________________________________________________________________ ___________________________________________________________________________ 2. What is Global Functional Division Structure? ___________________________________________________________________________ _____________________________________________________________________ 3. What is mixed organisation Structure? ___________________________________________________________________________ _____________________________________________________________________ 254 CU IDOL SELF LEARNING MATERIAL (SLM)

12.9 UNIT END QUESTIONS 255 A. Descriptive Questions Short Questions 1. Define Multinational Corporations? 2. What are Colonial Companies? 3. What are Public Utility Companies? 4. What is meant by turnkey project? 5. State the reasons for growth of MNCs? Long Questions 5. What are the different types of Multinational Corporations? 5. Explain the structure of Multinational Corporations? 5. Explain the reasons for MNCs in India? 5. Discuss the role of MNCs in India? 5. What are Transnational Network Structures? B. Multiple Choice Questions 1. Which is not an Indian Multinational Company? a. Unilever b. Asian Paints c. Piramal d. Wipro 2. A national company becomes an MNC when it a. Makes a foreign direct investment b. Takes out a foreign loan c. Imports a foreign product d. Exports a foreign product 3. A multinational is a firm that controls and manages production facilities in a. Both developed and developing countries CU IDOL SELF LEARNING MATERIAL (SLM)

b. At least two countries c. One country but relies on multiple markets for the consumption of goods it produces d. At least two developed countries and one developing country 4. Which of the following is a definition of multinational enterprises? a. A company employing foreign nationals. b. A company headquartered in one country but having operations in other countries. c. A company operating in emerging economies. d. None of these 5. The main reason behind MNCs investments is a. To benefit foreign countries b. To provide financial support to the country’s government c. For the welfare of underprivileged people. d. To increase the assets and earn profits. Answers 1-a, 2-a, 3-b. 4-b, 5-d 12.10 REFERENCES References books  Paz Estrella Tolentino, Multinational Corporations, Emergence and Evolution, Taylor & Francis, 2003  Pawan Kumar Oberoi, International Trade, Global Academic Publishers & Distributors (2nd Edition), 2015 Textbook references  Robert J. Carbaugh, International Economics, Thomson – Southwestern, 9th Edition, 2004  B O Sodersten and Geoffrey Reed, International Economics, Macmillan Press, 3rd Edition,1994 256 CU IDOL SELF LEARNING MATERIAL (SLM)

 Jessie Poon and David L Rigby, International Trade: The Basics, Routledge, 2017 Websites  https://www.businessmanagementideas.com/management/multinational- corporation/multinational-corporation/21253  http://www.svtuition.org/2010/05/international-capital market.html  https://datahelpdesk.worldbank.org/knowledgebase/articles/114954  https://is.muni.cz/th/da0m0/Diploma_thesis_Nikolaos_Chaliamantas.pdf 257 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 13: INDIAN MULTINATIONAL CORPORATIONS STRUCTURE 13.0 Learning Objectives 13.1 Introduction 13.2 Trends of MNC’s In India 13.3 Indian MNC’s – Code of Conduct 13.4 Other Agreements 13.5 Concerns of Stakeholders 13.6 Multinational in India – Case Studies 13.7 Summary 13.8 Keywords 13.9 Learning Activity 13.10 Unit End Questions 13.11 References 13.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  State the Recent Trends of MNCs in India  Explain the Code of Conduct for MNCs  The Case Studies of MNCs 13.1 INTRODUCTION Recent trends in Multinational Corporations in India Recently there has been a change in the attitude towards the multinationals. These are not subject to severe criticism as they were in the past. Even communist countries have developed some favourable attitude to them. Paul Streeten points out that there are five recent trends that point out the changes: Shift in Bargaining Power:

There has been a shift in bargaining power between multinational and the host countries. There is some evidence that it has become the policy of multinational companies to shift from equity investment ownership of capital and managerial control of overseas facilities to the sale of technology, management services and marketing as a means of earning returns on corporate assets, at least in those countries that have policies against inflows of packaged technology. Dealings with a Greater Number of Foreign Companies: Not only do the host countries deal with a greater variety of foreign companies, comparing them and weighing them against one another, but the large MNCs are being replaced by smaller and more flexible firms. Competition among the MNCs: Many more nations are now competing with US multinationals in setting up foreign activities. Japanese and European firms figure prominently among the new MNCs. Establishment of MNCs by the Developing Countries: In addition to the companies from the organisation of Petroleum Exporting Countries (OPEC) and firms established in tax haven countries, the leading countries where MNCs are being established are Argentina, Brazil, Colombia, Hong-Kong, India, Korea, Paris, Philippines, Singapore and Taiwan. Fifthly,some multinationals from the developed countries have accommodated themselves to the needs of the developing countries. 13.2 TRENDS OF MNC’S IN INDIA First MNC in INDIA was DUTCH EAST INDIA Co. in 1600. MNC in India represent a diversified portfolio of companies representing different nations. American companies account for around 37% of the turnover of the top 20 firms operating in India. The scenario for MNC in India has changed a lot in recent years, since more and more firms from European Union like Britain, Italy, France, Germany, Netherlands, Finland, Belgium etc have outsourced their work to India. Finnish mobile handset manufacturing giant Nokia is the largest Multinational Corporation in India. A host of automobile companies like Fiat Motors, from Italy have opened shop in India with R&D wing attached. Oil companies, Infrastructure builders from Middle East are also flocking in India to catch the boom. 259 CU IDOL SELF LEARNING MATERIAL (SLM)

South Korean electronics giants Samsung and LG Electronics and small and mid-segment car major Hyundai Motors are doing excellent business and using India as a hub for global delivery. Also insurance companies like AIG and Max New York Life Insurance doing business in India. 13.3 INDIAN MNC’S – CODE OF CONDUCT Over the last decade, international flows of capital have skyrocketed and now total over $6 trillion per day, or more than the total annual amount of U.S. exports and imports of goods and services. These flows are the prime mover behind exchange rates and global flows of goods and services. One part of these flows is foreign direct investment, or investment in businesses and real estate. On a cumulative basis, direct investment in 2011 totaled over $20 trillion world-wide, about 20% of which is associated with the overseas investment of U.S. firms, the largest share held by the firms of any nation. Preliminary data for 2012 indicate that foreign investment flows both into and out of the United States slowed in 2012, reflecting a similar trend in world-wide investment data. In addition to foreign direct investment in which firms take a direct equity stake in an investment project, multinational corporations are engaging in a broad array of activities, referred to as non- equity modes (NEM) of investment, that include partial ownership, joint ventures, contract manufacturing, services outsourcing, contract farming, franchising and licensing, and other forms of contractual relationships through which firms coordinate and control the activities of partner firms. The United Nations estimates that NEM investment generated $2 trillion in sales in 2010. While NEM investments can enhance the productive capacities of developing countries through integration into global value chains, employment in the affected industries can be highly cyclical and easily displaced. Foreign investment spans all countries, industrial sectors, industries, and economic activities and has become a major conduit for goods, capital, and technology between the developed and the developing economies. Foreign direct investment has become a much- needed source of funds for capital formation in developing countries and foreign investment accounts for important shares of employment, sales, income, and R&D spending in developing countries. The United States is the largest recipient of foreign direct investment and is the largest overseas investor in the world, owning about $4.5 trillion in direct investment abroad, or more than twice as much abroad as British investors, the next-most active overseas investors. This international expansion of business activity and overseas presence, however, often leads to a clash of cultures and values. In addition, conflicts are rising within the United States and within other developed countries over what role these global corporations should play in their respective home countries and over whose interests the corporations should serve. Traditionally, corporations have served the economic interests of a narrow group of 260 CU IDOL SELF LEARNING MATERIAL (SLM)

shareholders by maximizing the return to the shareholders, or by maximizing the overall profits of the firm. Now, a broader group of “stakeholders,” including customers, employees, financiers, suppliers, communities, and society at large, is pressing for comprehensive codes of conduct that recognize their interests. Defining codes of conduct is difficult, because such codes encompass a broad range of issues and myriad types of official and corporate activities that have defied attempts to reach a common agreement on the composition and nature of the codes. 1. One way to view codes of conduct is by grouping them into three main categories: 2. Externally generated codes of conduct that are developed by governments or international organizations, 3. Corporate codes of conduct that represent individual companies’ ethical standards, and 4. Industry-specific codes. These categories often overlap and some codes that initially were adopted voluntarily by companies or industries have been incorporated into law by governments. In other areas, there are notable gaps in the coverage of codes of conduct. Since congressional activities relate most specifically to the first type of codes, or externally generated codes of conduct, they receive the greatest emphasis in this report. External Codes of Conduct Since the 1970s, public and private expectations of multinational corporate behavior have grown commensurate with the boom in foreign investment. This change in expectations, however, has not resulted in a clear-cut set of directions for governments or businesses to follow in developing codes of conduct. At times, purely voluntary codes evolved into codes that subsequently were adopted as national legislation. For instance, in 1977, the United States adopted the Sullivan Principles and the Foreign Corrupt Practices Act (FCPA). Initially, the Sullivan Principles provided a voluntary set of standards for firms to follow to pressure the apartheid government of South Africa to improve the living conditions of black workers, their families, and their communities. In 1986, Congress adopted the Sullivan Principles as law. The FCPA followed a series of congressional hearings and legal actions against numerous U.S. corporations and specified legal standards and penalties that were meant to prevent U.S. firms from bribing foreign officials in order to gain economic advantages. Following the financial crisis of 2008-2009, the United States adopted the Dodd- Frank Wall Street Reform and Consumer Protection Act to address issues of governance and regulation of the financial sector, and the European Union has similarly adopted wide- ranging directives to improve oversight of the financial sector and to provide guidance on executive compensation. Also, as the United Nations has noted, “codes of conduct have become increasingly significant for international investment, since they typically focus on the 261 CU IDOL SELF LEARNING MATERIAL (SLM)

operations of large multinational corporations which, through their foreign investment and global value chains, can influence the social and environmental practices of businesses worldwide.” While there appears to be a general consensus in the United States and abroad that favors international standards governing corporate business practices, attempts to reach an agreement on specific standards have proven to be less promising. In some cases, these efforts have fostered competition among countries for investment projects, have highlighted the remaining differences in national policies regarding foreign investment, and have created differences in the goals and objectives of negotiations between the developed and the developing nations. Most developed economies favor international rules, or codes of conduct, that could promote a “level playing field,” or an environment in which investment decisions are based solely on competitive market factors. Developing economies, however, often view such efforts as attempts by the developed countries to promote rules and codes of conduct that effectively allow them to hoard foreign investments for themselves and to deny the developing countries the means to compete internationally for new investment projects. These and other differences have spurred nations and international organizations to adopt various approaches in order to promote international rules on foreign investment. One approach has been to negotiate legally binding agreements, whether they are narrowly or broadly cast, that impose a set of standards on multinational firms and that bring a large number of countries into compliance simultaneously. For example, after the United States adopted the FCPA, it supported efforts within the OECD to adopt the Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions (Convention on Bribery), which focuses on a narrow set of issues related to bribing public officials. Since the convention entered into force on February 15, 1999, 40 countries, including the United States, have passed national legislation implementing the convention. A similar approach that failed to gain agreement was a comprehensive agreement on foreign investment, known as the Multilateral Agreement on Investment (MAI). The MAI was expected to be a broad, legally binding, multi-faceted agreement that would have established an international set of rules on a wide range of foreign investment issues. Support for the agreement 13.4 OTHER AGREEMENTS Some nations have used other types of multilateral treaties to promote codes of conduct for multinational firms. One type of agreement attempts to bring greater conformity in the treatment of foreign investment by prescribing changes in national laws governing foreign investment as one component of a broader arrangement that is geared toward economic cooperation and integration, such as the treaties that established the European Community and the North American Free Trade Agreement. There are other, legally non-binding, 262 CU IDOL SELF LEARNING MATERIAL (SLM)

arrangements which cover foreign investment, the most prominent of which are: the OECD Guidelines for Multinational Enterprises; the OECD Principles of Corporate Governance; OECD Guidelines on Corporate Governance of State-Owned Enterprises; Code of Liberalization of Capital Movements (covering both long- and short-term capital movements); and the Code of Liberalization of Current Invisible Operations (covering cross- border trade in services). The OECD Guidelines comprise a set of voluntary recommendations in all the major areas of corporate citizenship, including employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation. The 2011 update of the Guidelines included new recommendations on human rights and corporate responsibility for their supply chains, the first such agreement in this area. The United Nations lists ten major principles that are recognized by international declarations and agreements that have been developed by the three main organizations, the UN, the ILO, and the OECD. These main principles comprise the UN Global Compact which covers four main areas: 1. Human rights. 2. Labour standards. 3. Environment; and 4. Anti-corruption. The ten principles of the UN Global Compact are: 1. Businesses should support and respect the protection of internationally proclaimed human rights. 2. Businesses should make sure that they are not complicit in human rights abuses. 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. 4. Businesses should uphold the elimination of all forms of forced and compulsory labour. 5. Businesses should uphold the effective abolition of child labour. 6. Businesses should uphold the elimination of discrimination in respect of employment and occupation. 7. Businesses should support a precautionary approach to environmental challenges. 8. Businesses should undertake initiatives to promote greater environmental responsibility. 263 CU IDOL SELF LEARNING MATERIAL (SLM)

9. Businesses should encourage the development and diffusion of environmentally friendly techniques. 10. Businesses should work against corruption in all its terms, including extortion and bribery. As part of the 1994 Uruguay Round on multilateral trade negotiations, the WTO adopted the agreement on Trade-Related Investment Measures (TRIMs), which recognized that certain investment measures restrict and distort trade; required signatory countries to apply national treatment; and required countries to provide a framework for reducing restrictions on foreign investment. In 1996, the WTO established a working group on investment, which has been studying the issue of investment rules, including technical regulations and standards that govern trade and investment. The Doha Declaration set out the goal of addressing foreign investment issues following the conclusion of the Fifth Ministerial in Cancun in September 2003. So far, these efforts have not succeeded in achieving the stated goal of developing a “multilateral framework to secure transparent, stable and predictable conditions for long-term cross-border investment, particularly foreign direct investment.” G-20 Investment Measures During the early stages of the 2008-2009 financial crisis, national leaders, generally political heads of state, met as the Group of Twenty, or G-20, to address the crisis and to develop a reform agenda. As part of that agenda, the leaders committed to keeping markets open and liberalizing trade and investment. In addition, the G-20 leaders tasked the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD) and the United Nations Council on Trade and Development (UNCTAD) to monitor developments and report to the G-20 on a semi-annual basis on the progress in maintaining open markets. At the G-20 meeting in Los Cabos, Mexico on June 19, 2012, the G-20 leaders indicated that they had grown “concerned about rising instances of protectionism around the world,” and that they viewed regional and global “value chains” as relevant to world trade and that recognized “their role in fostering economic growth, employment and development” and the need to enhance the participation of developing countries in value chains. The latest joint OECD-UNCTAD report on investment measures concluded that G-20 members “have continued to honor their pledge not to introduce restrictive measures. Nevertheless, the report warned that, “Despite this encouraging finding, persistent high unemployment, turbulence in financial markets and a weak economic recovery put intense pressure on governments to grant assistance to individual domestic companies and to preserve jobs. As a result, governments may resort to policies or practices that discriminate against foreign investors or discourage outward investment.” Corporate and Industry-Specific Codes of Conduct A broad range of factors are influencing firms to adopt codes of conduct. Some firms see it as enlightened self-interest, while others see it as a necessary part of risk management. 264 CU IDOL SELF LEARNING MATERIAL (SLM)

Corporate codes of conduct and industry-specific codes now exist in one form or another among most large multinational corporations and among most of the developed countries. A recent study by the OECD concluded that most corporate codes tend to be highly specific and to deal with the idiosyncrasies of a particular company, project, or location. Industry-specific corporate codes dealing with environment and labor issues appear to be the most common, and most U.S. manufacturers and retailers in the apparel industry have adopted corporate codes that prohibit using child, sweatshop, or prison labor. U.S. companies in such diverse industries as footwear, personal care products, photographic equipment and supplies, stationary products, hardware products, restaurants, and electronics and computers have adopted corporate codes of conduct. Multinational corporations generally support the concept of codes of conduct that standardize rules of corporate behavior across a broad range of countries and industries. While the motivation behind adopting corporate codes of conduct can be quite complex, multinational firms generally adopt codes of conduct because they believe they represent good business practices. Generally, multinational corporations desire national treatment as a basis for any investment agreement but are concerned that standards negotiated in one agreement could be applied to their worldwide operations, regardless of the disparity in economic conditions between locations, local customs, jurisprudence, or differences in local business practices. Some firms also argue that codes which allow foreign groups to submit complaints to U.S. regulatory bodies concerning the overseas operations of the subsidiaries of U.S. firms could be used as a competitive tool to damage the worldwide reputations of U.S. firms. Industry-specific codes of conduct are as varied and as extensive as the multitude of industries they cover. Labor and environmental issues, however, are the two most frequently covered areas in the codes, regardless of industry. Environmental standards often comprise commitments from firms to be open to the concerns of the communities in which they locate. The most common labor codes include commitments for firms to provide a reasonable working environment, provisions against discrimination and a commitment to obey laws regarding child labor and compensation. Concerns over child and sweatshop labor, in particular, have spurred some public groups to take action on their own. The Workers’ Rights Coalition, an alliance of 67 universities and colleges, pressured Nike and Reebok to investigate allegations of sweatshop labor conditions in a Mexican apparel factory. 13.5 CONCERNS OF STAKEHOLDERS While traditional economic theory holds that corporations strive to maximize their profits to benefit the stockholders, a broad group of “stakeholders” is pressing to have their interests represented as well. These stakeholders argue that corporations have responsibilities beyond the narrow scope of their legal charters, or that they should abide by a “social contract” that reflects society’s changing social and cultural mores. The size of the group of stakeholders and the social responsibilities they expect varies with the size of the firm, the industrial sector 265 CU IDOL SELF LEARNING MATERIAL (SLM)

it is involved in, and its products and operations. This group of stakeholders and the associated social responsibilities also become vastly larger for firms that operate in more than one country and can include issues beyond the common areas of workers’ rights, environmental concerns, and business production or financing operations. At times, the issues sought by stakeholders in one country can clash with those sought by stakeholders in another country, for instance when workers in developed countries push for job security, health care and other benefits, and environmental issues, while workers in developing countries push for more local jobs and local managers, worker training and education, technology transfers, and higher levels of local production. 13.6 MULTINATIONAL IN INDIA – CASE STUDIES Case Study – 1: LG's Marketing Strategy in India The case examines the marketing strategy of LG Electronics in the Indian market. It provides a detailed account of LG's strategies for gaining market share by examining its approach to product, pricing, distribution and promotion. The case also provides insights into the future prospects of the company in light of the increase in competition and the slowdown in the consumer electronics market. Issues: The promotion and advertising strategies that companies with a broad range of products should adopt. Cricket First In November 2002, LG Electronics India (LG), one of the leading consumer durables companies in India, launched advertising campaigns featuring cricketers. LG announced that it would release 22 ad films featuring world-class cricketers to strengthen its association with cricket. The campaign, 'Cricket First,' which featured captains of the 14 teams participating in World Cup 2003, highlighted the spirit of cricket with a tagline, 'Captains of Cricket World, for the Captain of Consumer Electronics and Home Appliances. The company announced that it would spend around Rs 400-500 million on advertising during the World Cup. Analysts felt that LG might reap rich benefits by associating itself with cricket in a cricket crazy country like India. Since 1997, when LG entered India, it has emphasized on marketing. Analysts felt that LG was trying to sell a brand of consumer durables using an FMCG marketing model and was trying to create a mass market for a brand, which had a premium image. 266 CU IDOL SELF LEARNING MATERIAL (SLM)

Like the marketing of FMCG products, LG's marketing was heavily dependent on advertising. Its ad spend to sales ratio at 5-6% of sales was very close to that of FMCG giant HLL. LG's use of the FMCG model was not limited marketing alone. Even at the retail and trade level, LG followed the strategies of FMCG companies. By 2002, LG was the market leader in Colour Televisions (CTVs), air conditioners, microwave ovens, semi-automatic washing machines and frost-free refrigerators. Analysts felt that LG was able to achieve a leadership position in all these segments because of its aggressive marketing. Background Note LG was established in 1958 as the Goldstar Co as part of the LG group founded in 1947. Initially, company was incorporated under the name Lucky Chemical Industrial Co. and was into the business of chemicals. Over the years, LG group expanded its presence in the fields of energy, electronics & telecommunications, finance, services and e-business. Within a year of its inception, LG (then Goldstar) manufactured Korea's first radio -A 501. In the 1960s, the company manufactured Korea's first telephone, refrigerator and black & white television. In the mid-1960s, LG expanded its operations to foreign countries. It established its first overseas branch in New York in 1968 and in the same year it manufactured Korea's first air conditioner. Product Innovation LG believed in holding the interest of its customers by bringing out new products regularly. In its first year of operations, it launched 70 models across a range of products. In 2001, it launched 45 new models across its entire product range and in 2002 it launched 60 new models. LG customized product for Indian markets. Before developing products, LG conducted market research to ensure that its products met local requirements. Distribution Soon after its entry into India, LG realized that it needed to be innovative to capture the market. LG expanded throughout the country to far-flung towns and semi-urban markets. It sent vans across the country, covering a distance of 5000 km every month, to increase brand awareness among the trade and the customers... Price 267 CU IDOL SELF LEARNING MATERIAL (SLM)

Initially, when LG entered the Indian market, its products were priced high. This was because LG had to import products in the absence of a manufacturing facility in India. Thus, its products were priced as high as Japanese products. According to some analysts, this strategy was adopted to make local consumers feel that LG products were by no means inferior to Japanese products in performance or in quality. However, in 1998, LG launched 'Sampoorna,' a low priced TV aimed at rural consumers. Promotion Of all the elements of marketing mix, LG seemed to have put more emphasis on promotion and advertising. Some analysts are of the opinion that the cornerstone of LG's strategy was its heavy advertising. In 2002, it spent around 1.3 billion on advertising. An ad agency which handled the account of one of the LG's rivals, commented: \"Communication creates a mind space among the consumers and LG has occupied that fairly well.\" Unlike many Indian brands which advertised seasonally i.e., (two-three months of the festival season-September, October and November), LG advertised all-round the year. According to analysts, this resulted in high brand recall and successful positioning. In all the communications of LG, the USP remained the same for individual products. For refrigerators, it was \"preserve nutrition;\" for CTVs, it was \"less strain on eyes;\" for air conditioners, it was \"healthy ambience and air quality;\" for washing machines it was \"fabric care;\" and for microwave ovens it was \"healthy cooking.\"... Sustaining LG's Marketing Strategy By the end of 2002, LG had emerged as one of the top 3 consumer durables players in India. Its success was largely attributed to its marketing strategy. Though analysts agree that LG's performance has been remarkable in India, they point out that it still has to enter the audio segment, which is the largest of the home appliance segment. Case Study 2: Gillette's Restructuring in India The case focuses on the turnaround of Gillette India Limited (GIL) the Indian arm of the multinational Gillette Company. The Gillette Company entered the Indian market in 1984 through a joint venture as a minority shareholder and then garnered shares, so that it had three-fourths of the shares by 2002. During these two decades, Gillette followed inorganic growth by acquiring domestic companies in oral care, battery, blades and razors and stationery business. This diversification resulted in adding flab to the company's costs. With operating profits coming down, the company engaged in a restructuring exercise, which resulted in selling the same businesses the company had acquired. The restructuring was 268 CU IDOL SELF LEARNING MATERIAL (SLM)

successful and in 2003 GIL made a turnaround with net profit growth being the highest in the two decades of the company's presence in India. Issues: 1. How a company reaches a situation where restructuring is needed and how it goes ahead with restructuring 2. The growth strategies followed by a company in international markets 3. How transactions between joint venture partners evolve through the years. How a company adapts to the needs of local markets 4. How decisions and practices of the parent company have an impact on the operations of the subsidiary. The relationship between the parent company and the subsidiary. Introduction Gillette India Limited (GIL), the Indian arm of The Gillette Company (Gillette), the world's largest manufacturer of shaving products, had been in India for a decade and half by 1998-99, but was unable to generate the expected growth. In particular, the company's net profit margin took a severe beating during the period 1998- 2000. To turnaround the company, in 1999-2000, GIL started a restructuring programme. The programme was three-pronged. It focused on functional excellence, a strategic re-look at the organization and a financial turnaround. The firm implemented the first with the objective of benchmarking and improving systems, processes and resource deployment in the company with that of the industry as a whole. This resulted in increased productivity, lower overheads and working capital deployment. At the strategic level, the company exited from non- profitable and non-strategic businesses to focus on profitable businesses. It concentrated on the grooming and oral care business and exited the battery and household appliances activities. For the financial turnaround, the company paid attention to working capital management and improvement in operating efficiencies. The company achieved a 56% reduction in net working capital from Rs 1.56 billion to Rs 684.2 million between December 2001 and December 2002. There was decrease in receivables, product lines and inventories. The savings were put into marketing. Improved performances in key product segments and effective cost management resulted in GIL achieving a turnaround in the early 2000s. Background Note With manufacturing plants in 51 locations in 20 countries, Gillette catered to the need of more than 200 countries around the world. Globally, Gillette's portfolio of brands was 269 CU IDOL SELF LEARNING MATERIAL (SLM)

organized into five business units: Blades and Razors, Personal Care, Oral Care, Duracell,4 Braun.5. It was the market leader in alkaline batteries, toothbrushes and oral care appliances. Gillette started its Indian operations through a joint venture with the Kolkata- based Poddars6 in 1984. The venture was called the Indian Shaving Products Limited (ISPL) and Gillette had a minority stake of 24% in ISPL. In 1985, ISPL came out with an IPO for funding its manufacturing operations. ISPL's commercial production started in 1986 with the 7 O' Clock brand. Gillette increased the equity stake in ISPL from 24% to 40% in 1989 and further to 51% in 1993. It was with the launch of the Gillette Presto Ready shaver in 1993 that ISPL started selling products under the Gillette brand name. Till then, ISPL was marketing products under the 7 O' Clock brand. In 1996, the Gillette Company started Gillette Diversified Operations Private Limited (GDOPL) in India to market the electrical and kitchen appliance brand, Braun. The merger of ISPL, Duracell India Limitedand Wilkinson Sword India Ltd8 in 2000 resulted in the formation of GIL. By 2002, Gillette had a stake of 75 per cent in GIL. The equity capital of GIL was Rs 325.9 million with Gillette holding 45 per cent. Another 30 per cent was owned through the investment vehicle, Gillette Group India Private Limited (GGIPL),9 thereby making the total group stake in GIL 75 per cent. The remaining shares were owned by the Poddar group and the general public. GIL had manufacturing units for razors and blades in Bhiwadi (Rajasthan) and Mysore (Karnataka), and one for oral care in Chennai (Tamil Nadu). Gillette Presto, Sensor Excel, Gillette Mach 3, Gillette Mach 3 Power and Gillette Series Shaving Gel were GIL's brands in the grooming segment. The grooming and oral care business contributed the bulk of the company's profits. Segmentwise Information Grooming In 1986, the Indian razor blade market was valued at Rs 2 billion. As per figures provided by GIL, the total razor blade market in India in 2003 was Rs 6 billion by value and 3.8 billion units by volume. India is the world's largest market for Gillette in terms of volumes. The double-edge segment formed 97 per cent of the Rs 6 billion Indian blade market. Half of this came from salon usage. Eighty per cent of Indian consumers used double-edged blades. However, the growth in value share of twin blades from three per cent of the total value (Rs 60 million) in 1986 to 28 per cent (Rs 1.68 billion) in 2003 showed that twin blades had made considerable inroads into the Indian market. Systems and disposables accounted for three per cent of the Rs 6 billion market. The triple blade segment, a segment charting growth, occupied two per cent of the market. In value terms, in 2003, double-edged blades comprised 78%, systems 15% and disposables 7%. As per AC Nielsen/ORG's estimates, the domestic shaving preparations market in 2003 was pegged at Rs 1.5 billion... 270 CU IDOL SELF LEARNING MATERIAL (SLM)

Restructuring In the mid-1990s, Gillette went into an acquisition mode to grow in the Indian market. It made two acquisitions in 1998 -- the oral care division of Parle and Geep non-alkaline batteries from the Geep Industrial Syndicate. Oral B was launched in India in the year 1996 and was targeted at the upper segment of the market. The oral care business was showing faster growth and therefore the company began exploring ways to increase its presence in the urban and rural market. The Indian arm of Gillette also felt the need to align its operating practices with global practices. Globally, Gillette had a two-brand strategy in the oral care segment. In 1998, Gillette acquired the prudent brand from Parle. Customers had certain perceptions about the prudent brand, which Gillette had to change. Prudent was known as a paste/mouthwash brand rather than a toothbrush brand. Parle had repeatedly repositioned Prudent, creating confusion in consumers' minds. Gillette revamped the entire product range by totally changing the package to make it look more contemporary. Returns on Restructuring In 2002, GIL posted a net profit adjusted for extraordinary items at Rs 65 million. Operating expenses went down by 24.6 per cent to touch Rs 3.39 billion and raw material consumption fell by 36.7 per cent to Rs 654 million. The financial year 2003 saw a 594 per cent growth in net profit, touching Rs 448.2 million. This was the highest growth for GIL in its 20- year history in India. In 2003, sales in the grooming business went up by 23 per cent to Rs. 2.81 billion, oral care sales and battery sales went up by 44 per cent and 20 per cent respectively. \"Divestiture from non-core businesses, enhanced focus on core businesses, increased spends on marketing and strategic thrust towards functional excellence have borne fruits,\" said S. K. Poddar, Chairman, GIL. The company's net cash flow continued to increase through 2001-2003. In Q1 2004, sales of the company's oral care business went up by 17 per cent. Oral-B contributed 12.66 per cent to Gillette sales. 13.7 SUMMARY  The recent trends of MNCs are shift in Bargaining Power, Dealings with a Greater Number of Foreign Companies, Competition among the MNCs, Establishment of MNCs by the Developing Countries, and some multinationals from the developed countries have accommodated themselves to the needs of the developing countries.  Second MNC in India was DUTCH EAST INDIA Co. in 1600. MNC in India represent a diversified portfolio of companies representing different nations. 271 CU IDOL SELF LEARNING MATERIAL (SLM)

 The main principles comprise the UN Global Compact which covers four main areas are Human Rights, Labour Standards, Environment and Anti-corruption.  Multinational Corporations and nations have adopted voluntary, legally enforceable, and industry-specific codes of conduct to address concerns over the economic, social, and political impact of this phenomenon.  Multinational corporations generally support the concept of codes of conduct that standardize rules of corporate behaviour across a broad range of countries and industries.  Industry-specific codes of conduct are as varied and as extensive as the multitude of industries they cover. 13.8 KEYWORDS  Trade Blocs: A regional trading bloc is a group of countries within a geographical region that protect themselves from imports from non-members.  Trade Agreement: A Trade agreement is a wide-ranging tax, tariff and trade treaty that often includes investment guarantees  UNCTAD: The United Nations Conference on Trade and Development (UNCTAD) is a UN body responsible for dealing with development issues, particularly international trade. 13.9LEARNING ACTIVITY 1. What is the code of conduct for multinational corporations? ___________________________________________________________________________ ___________________________________________________________________________ 2. State the factors attracting Transnational Corporations? ___________________________________________________________________________ ___________________________________________________________________________ 13.10 UNIT END QUESTIONS A. Descriptive Questions 272 Short Questions 1. What is a G-20 Investment measure? 2. Explain the Principles of UN Global compact? 3. State the main areas of the principles comprising the UN global compact? CU IDOL SELF LEARNING MATERIAL (SLM)

4. What is meant by inter-firm trade? 5. List the determinants of intra-firm Trade? Long Questions 1. Discuss the recent trends of MNCs? 2. Explain the corporate and industry specific code of conduct? 3. Discuss the external code of conduct of MNCs? 4. Explain the features of Transnational Corporations? 5. Explain the code of conduct of Indian MNCs. B. Multiple Choice Questions 1. The main motive behind the investments of MNCs is a. To increase their assets and earn profits. b. The welfare of the poor people. c. To offer financial support to the government of their country. d. The main motive is to benefit foreign countries. 2. Which of the following statement is not correct regarding the G 20? a. The G20 summits are now attended by the Finance Ministers and Central Bank Governors of the member countries only. b. India never hosted any G20 summit c. Its main aim is to eliminate poverty from the world d. Its meetings are held annually. 3. Which of the following statement is not correct regarding the G20? a. In the meetings of the G20, EU is represented by the European Commission and by the European Central Bank b. The G20 economies account for around 85% of the gross world product (GWP) c. The G20 economies account for around 80% of world trade d. The G20 economies account for around 40% population of the world 4. A multilateral agreement is 273 a. A commerce treaty between three or more nations. CU IDOL SELF LEARNING MATERIAL (SLM)

b. Is to cover agreements between two parties. c. Is an agreement between more than two countries d. Is a treaty between two or more governments that define the rules of trade for all signatories 5. First MNC in India was _________- a. East India company b. Dutch East India c. British company d. Hindustan Uniliver Answers 1-a, 2-c, 3-d. 4-a, 5-a 13.11 REFERENCES References books  Jedrzej George Frynas, Kamel Mellahi , Global Strategic Management, Oxford University Press, 2015  Kazuyuki Motohashi, Global Business Strategy - Multinational Corporations Venturing into Emerging Markets, Springer Japan, 2015  Pawan Kumar Oberoi, International Trade, Global Academic Publishers & Distributors (2nd Edition), 2015 Textbook reference  Jessie Poon and David L Rigby, International Trade: The Basics, Routledge, 2017 Websites  https://brainly.in/question/9953654  https://fas.org/sgp/crs/misc/RS20803.pdf 274 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 14: GLOBALIZATION AND DEVELOPING COUNTRIES STRUCTURE 14.0 Learning Objectives 14.1 Introduction 14.2 Commodity Composition of Agriculture 14.3 Globalization of Service Industries 14.4 Globalization Processes and their Impact on Migration 14.5 Outsourcing in Globalization 14.6 Globalization of SEZ’s 14.7 Summary 14.8 Keywords 14.9 Learning Activity 14.10 Unit End Questions 14.11 References 14.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  What is Globalization of Agriculture Industry  Explain Globalisation of Service Industry  State the Globalization of Labour Migrations  What is Outsourcing and Globalisation  State the Globalization of State Export Zones 14.1 INTRODUCTION Globalization has allowed agricultural production to grow much faster than in the past. A few decades ago, fast growth was somewhat over 3 percent per year. Now it is 4 to 6 percent. However, these higher rates of growth involve a substantial change in its composition. The bulk of growth initially came from basic food staples when the scope for export markets is limited, whereas there is now a swing towards much higher value commodities. Explosive growth in income of high-income countries means that large aggregates of production can

now occur in what were previously small niche markets. High quality coffee and tea are examples. The market for horticulture exports has also grown immensely and can continue to grow. 14.2 COMMODITY COMPOSITION OF AGRICULTURE As exports of high-value agricultural commodities increase and the multipliers to per capita income develop, domestic demand for high-value livestock and horticulture will increase rapidly. Thus, even in quite low-income countries, around half the increments to agricultural production will be in high value horticulture and livestock for both export and domestic use. As a result, the role of cereal production will become relatively less important. As the production mix moves more towards export crops and high-value crops and livestock, the rate of return to investments that reduce transaction costs will increase rapidly. The same is true for investments in all the value-added enterprises. There is however a caveat on value added. Much of such activity is through capital-intensive processes. There are also complexities in marketing. Both will give comparative advantage to high-income countries. Low-income countries need to pay attention to comparative advantage at every step in the chain from producer to consumer and should not attempt components in which they lack a comparative advantage. Cereals play an important role in food security in a global economy. The cost of shipping is declining. Two forces in developing countries may lead to increased cereal imports. First, Globalization and specialization may lead to an increase in the area planted to high-value commodities and potentially result in a decline in the area planted to cereals if either increased intensity of production (i.e. double cropping) or extensification are not possible. Second, any shift of income distribution towards the low-income, food insecure, will shift the demand schedule upwards. Thus, low-income countries may be beneficiaries of declining cereal prices, even while they lose from declining prices of other agricultural commodities. Converting the benefits of Globalization into food security A major element in ensuring food security is increased incomes of poor people. The marginal propensity of the poor to spend on food is high. The primary means by which low-income people increase their incomes and hence their food security is through increased employment. It is agricultural growth that reduces poverty, and agriculture’s impact is dependent on growth rates that are considerably higher than population growth rates. The latter are indirect, working through their impact on the demand for rural non-tradables that occupy a high proportion of the total labour force and the bulk of the poor, food insecure. The great majority of persons below the poverty line work in the rural non-farm sector. They include many with a small tract of land that is insufficient to provide minimum subsistence. The rural non-farm sector uses very little capital and hence is highly employment-intensive. It 276 CU IDOL SELF LEARNING MATERIAL (SLM)

produces goods and services that are dominantly non-tradable, that is they are dependent on local sources of demand. Agricultural growth is the underlying source of that demand growth. The agricultural demand shows strong growth multipliers since the rural non-farm sector also tends to spend substantially on itself. This sector is highly elastic in supply, as would be expected of a labor-intensive sector in a low-wage economy. The supply of rural non-tradable is highly elastic, mainly because labour is the primary input and labour is elastic in supply as long as incomes are low, or underemployment is endemic. It is demand that constrains growth of the sector and that demand comes from high agricultural growth rates. That the impact of agriculture on poverty is indirect is consistent with the three- or four-year lag noted before the full impact on poverty. That it works through the rural non-farm consumer-goods sector is consistent with the finding that agriculture has little impact on poverty decline when land distribution is highly unequal- usually associated with absentee landlords who have quite different consumption patterns from those of peasant farmers. For a major effect on employment, agriculture must grow substantially faster than population growth. If it is to grow at the 4 to 6 percent rates required for achieving employment levels essential to food security, then major components of agriculture must be exported. This will include the traditional bulk exports such as cotton, coffee, tea, oil palm, and non-traditional exports including horticulture. Globalizationrequires constant reduction in costs through research and its application as well as constantly declining transaction costs through constantly increasing investment in rural infrastructure. Without these a nation cannot compete it is no accident that it is African nations that suffer the most from declining commodity prices. Opening the economy to trade and market forces The benefits of Globalization flow from trade. Exports require imports, but trade restrictions tend to drive up the cost of exports through higher costs of vital inputs and technology. Comparative advantage needs to be seen for each component of a supply chain, not just for the final product. Customs inefficiencies and corruption and myriad other bureaucratic constraints are just as stifling as tariffs and all need to be dealt with. However, opening to global market forces does little good if costs are not being constantly reduced. Put differently, if the result of global forces interacting with domestic investment and policy is to leave comparative advantage with subsistence production, no amount of opening of markets will help. Investing in agricultural research and dissemination Low-income countries need to invest far more than at present in agricultural research and technology dissemination. Without such investment, opening markets will do little good for agriculture and hence for poverty reduction and food security. Identifying supporting 277 CU IDOL SELF LEARNING MATERIAL (SLM)

mechanisms such as research and training to minimize the exclusion of small resource poor farmers from value chains is also important. Investing in rural infrastructure Given the deplorable state of rural infrastructure in low-income countries, massive investments are needed Investment in other economic risk reduction services such as insurance, irrigation, storage are also likely to be required. Lack of such investment gradually shifts comparative advantage back towards subsistence production at very low-income and little multiplier to the rural non-farm sector. Winters notes that “the transaction costs of trade with remote villages are often so great that it can be cheaper for grain mills to buy from distant commercial growers than from small farmers located in the region.” However, improved infrastructure also lowers the final cost of imports in the producing areas. Facilitating private sector activity All too often forgotten in these days of removing public sector constraints is the role that the public sector plays in conjunction with the private sector, especially in exports. It is not enough to remove bureaucratic constraints. Private sector investors in low-income countries tend to search for quick turnover, particularly in trade. Initially, governments have to play a role in assisting the private sector by participating in the costs of market analysis, assisting in the development of trade associations that can diagnose needs, developing and enforcing grades and standards, meeting health regulations of high-income importers, diagnosing special niche markets and carrying out analysis of constraints. In the case of most low- income countries, such efforts are sometimes financed by foreign aid programs, in a sense acting as public sector. Such efforts need to facilitate private sector action and gradually low- income countries need to play that role themselves, rather than relying on foreign aid. 14.3 GLOBALIZATION OF SERVICE INDUSTRIES The potential for Globalization as a competitive strategy available to service industries is still poorly recognized. It is a view which attracts criticism and hostility. Evidence remains piecemeal and often anecdotal. For every service company which is reconfiguring its business globally, there remain a dozen which are not. However, it is the contention of this paper that the race for pre-eminence in international services trade has &ready begun. The historical pattern of competition in the manufacturing industries can be seen repeating itself in the service sector. Those companies which have recognized at an early stage the trend to inter-nationalization of services and have begun to reorganize their businesses, accordingly, are likely to be most strongly placed to meet future developments. A global industry is one in which rivals compete against each other on a worldwide basis. Firms operating in global industries are characterized by high levels of coordination and integration of activities across national markets (Porter, 1986; Prahalad & Doz, 1987; Bartlett & Ghoshal, 1989). It is not a definition commonly thought appropriate to service industries, 278 CU IDOL SELF LEARNING MATERIAL (SLM)

which have been most often conceived as “fragmented” industries, lacking powerful market leaders (Porter, 1980). This is because service industries were characterized by low entry barriers, diseconomies of scale, close local control, high personal service and “image” content, where service delivery is at the point of sale to the customer (Sasser et al, 1978; Normann, 1984; Daniels, 1985; Albrecht & Zemke, 1985; Heskett, 1986; Hindley, 1987; Carlzon, 1987). However, the nature of international competition in the service industries has shifted as a result of recent structural, market and technological changes. Global manufacturing companies are increasingly being supported by global service companies (Enderwick, 1989). Some of the problems inherent in the management of global service delivery, the key implementation issue faced by global service companies, are being addressed by greater sophistication of management practice and innovative use of technology. The developing literature on global strategy (Harrigan, 1984; Hamel & Prahalad, 1984, 1985 &1989; Ohmae, 1985; Kotler et al, 1985; Stopford & Turner, 1985; Doz, 1986; Porter, 1986; Telesis/PSl, 1986; Bartlett & Ghoshal, 1986 & 1987; Ghoshal, 1987; Prahalad & Doz, 1987; Ohmae, 1989; Franko, 1989; Yip, 1989) takes its evidence overwhelmingly from manufacturing industry. It provides a range of views concerning both how to manage global expansion successfully and also the goals and critical features of such global strategies. The literature is both contradictory in its recommendations and largely consists of extending the basic framework for the analysis of competitive advantage developed by Porter (1980, 1985 &1986) to global competition, This approach is of only a limited use in regard to the service industries since it concentrates mainly on the functional middle around common to both manufacturing and services, rather than the servlce delivery Issues of particular importance to service industries. This chapter addresses the changing nature of international competition in the service industries. It is argued that product and market evolution, developments in information technology, economic and cultural homogenisation of markets, and political and economic deregulation have combined to change the competitive environment for service industries. It is now possible for world market leaders to emerge and reshape the potential sources of competitive advantage in their sector. The Growth of the Service Sector The service industries are significant to the developed economies in terms of output, jobs and trade balances. Increasing internationalization of services is likely to be encouraged by slow but real progress towards international agreement to reduce service trade barriers in the current Uruguay Round of GATT. Demand growth has recently begun to flatten out as market penetration, industry concentration and rationalization take their course, both nationally and internationally. This process is already well-advanced in retailing, airlines and financial services, and has progressed some way in professional service firms and advertising 279 CU IDOL SELF LEARNING MATERIAL (SLM)

and media agencies. Domestic industry restructuring has been followed by expansion into world markets. Growth in services is built on three factors: ● Increased demand for services by both firms and households ● The separation of service suppliers ● The standardization of service delivery processes. Demand for new types and configurations of services arises from the changed socio- demographic structure of the advanced economies, such as dual-income families, single- person households, affluent older consumers and financially more sophisticated consumers. Greater corporate consumption of services arises from more specialization, sophistication and internationalization, as in the examples of corporate business travel expenditure management and executive recruitment. Growth has also come from more specialist service suppliers replacing service provision previously carried out in-house. Rajan (1987) calls this “externalization”; Porter (1990) calls it “de-integration”. Growing capital intensity and rising productivity of specialist service companies (both mostly IT-related) makes internal service provision increasingly inefficient. This is exacerbated by the ability of large service firms to standardize and replicate facilities methodologies and procedures across locations. Specialization and standardization leading to high quality provision at lower cost to the Client Company or customer, whether in car exhaust and tyre centres or consultancy packages for executive compensation. The Spread of Global Competition In The Service Industries The factors underlying the changing pattern of international competition are familiar and well-documented. Global oligopolies are developing in which successful firms are able to achieve economies of scope in international information systems and product policy throughout Ohmae’s (1985) “triad”. Managing multidomestic markets independently becomes more difficult as more firms find ways of gaining advantage from working globally and forcing others to do the same, or risk being relegated to small niches which may themselves become indefensible. It now makes more sense to minimize the gap between the launch of new products and services in international markets, since lead times for securing markets become shorter and shorter. For example, the 1989 UK launch by American Express of its “Optima” credit card followed shortly on its test launch in the US market. “As global competition grows, so does the need for rapid worldwide rollouts of new products”. Globalization as a concept has been developed with a focus on manufacturing. Most of the current literature on global strategies is based on evidence from the manufacturing sector, favorites being automobiles, motorcycles, construction and agricultural machinery, watches, 280 CU IDOL SELF LEARNING MATERIAL (SLM)

textiles and consumer electronics. The best documented global market development for a service industry is that for financial services. Attention has been given to deregulation and the effect of the 24-hour financial market-place on international banking and financial services. Yet little real analysis has occurred of the routes to creating global strategic capability or the common denominators in such capability which are emerging more generally for service industries. Service industries are those whose output is not a physical good or product and where added- value is derived from such factors as concept, image, quality of service delivery, reliability, convenience, flexibility. This underpins an essential difference in the significance of Globalization in services as opposed to manufacturing. For manufacturing industries, the sources of global advantage come mainly from: comparative advantage e.g. in factor costs; economies of scale in production, marketing, distribution, logistics- and purchasing. Mobility of production of any combination thereof (Porter, 1980). This means that manufacturing is concerned with the most effective ways of moving the product to the market. In service industries, Globalization means that a mobile customer base (often literally mobile e.g. the tourist, the shopper, the business traveller) experiences an identical product wherever they go, at each access point or transaction. Service delivery is about controlling the quality of the offering at the point of sale to the customer. In service industries the customer can move to the product. It is for this reason that American Express labels its core charge card (and travellers cheque & travel shop) business: “Travel Related Services” (TRS). The TRS market is the international traveller for whom the TRS core concept - the “global servicing concept” - has been developed. Service industry restructuring from fragmentation to concentration Service industries have traditionally been defined as “fragmented” industries (Porter, 1980). By this is meant an environment in which many firms compete, but which lack clear market leaders with significant market share. It is this absence of market leaders with power to shape the industry which Porter stresses as being the most important competitive feature of fragmented industries. Financial, health, leisure and recreation services, retailing, distribution and “creative” businesses were considered to conform to the fragmentation stereotype. The reason for this is that these industries possessed many of the characteristics by which fragmented industries are defined including:  Numerous small firms providing services on a localised basis  High personal service content  High labour content  Hard to routinise  The service must be delivered at the point of sale to the customer (at the customer’s location or the customer must come to the service) 281 CU IDOL SELF LEARNING MATERIAL (SLM)

 Low entry barriers  Low economies of scale  Close local control While most or all of these characteristics applied to service industries in the past, and some such as personal service still it is a very large extent consolidation and vertical integration (e.g. estate agencies; airlines/ travel agencies) have occurred as a result of fundamental changes in many of the key factors listed above. Service industries have been undergoing a prolonged process of concentration and rationalization for the last 20-30 years, although the pace has certainly hotted up over the last S- 10 years, as witness the emergence of very large firms in insurance, banking, distribution, communication, consultancy and business services, fast food, leisure companies, and retailing. Even very traditional professional services such as law, accountancy and surveying already contain international firms of great size (e.g. Clifford Chance, Arthur Andersen, and Jones Lang Wootton respectively). They market a global brand of quality and service delivery. Consultancy firms such as McKinsey have been doing so for some time. Merger and acquisition have been commonplace, and even increasing (the accountancy “Big 8” having become the “Big 6” during 1989-90) across all these groups but they have not noticeably experienced difficulty in recreating the image and the service delivery package. Service concepts can and do “travel”. Global competition in the service industries The major issues driving the spread of global competition in the service industries may be summarized as:  Global market segments have emerged for global products and services  Political and economic policies (such as deregulation) intensify international competition, for both aggressive and defensive reasons.  The service industries are information-intensive and therefore well-positioned for operating in all major markets.  The service industries have become significantly concentrated and capital-intensive with increased barriers to entry  Very large firms have emerged in the service industries operating across both national and traditional industry boundaries. Changing the Approach To The Customer Service industries have some important characteristics which distinguish them from manufacturing industries. Amongst the most widely recognized are those of “intangibility” of the service offering and the simultaneous production and consumption of the service (Sasser et al, 1978). The nature of a service offering therefore may be best understood as an 282 CU IDOL SELF LEARNING MATERIAL (SLM)

“experience” or “outcome”. The successful management of a service business thus becomes the management of the quality of the experience for the customer or client. It is this quality of customer experience, of ten known as u the moment of truth”, by which service quality is measured. This would be equally true of a firm of accountants as for a restaurant. Thus, for service industries, control of the offering at the transaction point with the customer or client is critical. When the service network is extended globally, the management of outcomes for the customer faces obvious quality control problems in accurately reproducing the service concept in different cultural political and economic environments and ensuring consistency in the quality of the offering at all transaction points. Most large service firms have met these requirements for consistency through standardization of their offering. This has in turn meant that service businesses have grown in particular sorts of ways. Carman & Langeard (1980) argue that profitable growth strategies for service firms are based on “multisite development” which exploits the “duplication of a well-conceived system”. Duplication is carried out by means of standardization. Standardization requires clarity in the core service concept. In strategic terms, core concepts can either be about playing the same game better than your competitors, or about changing the rules to directly challenge the conventional wisdom about product and market. A challenging core concept should focus on identifying the objective function of the offering for the customer, rather than on existing approaches to satisfying customer needs. Given the structural, market and technological changes in service industries described above, there exists an opportunity for challenging the conventional wisdom in many service sectors. The Service Industries & Global Strategic Intent The service industries are going through a period of rapid evolution which is changing the nature of competition in service businesses. This paper has considered changes in the structure and environment of the service industries, which create potential for Globalization strategies and global configuration to be adopted more widely by service companies. Some service companies have already leveraged existing strengths to establish identifiable worldwide market presence. It is argued here that this trend will be accelerated by the combined impact on the service industries of global market segmentation, reductions in structural barriers to international trade through deregulation, growing concentration of service industries and the far-reaching effect of IT on every aspect of service business. Economies of scale and scope are now available in-service businesses. New types of competition in services have emerged which require high resource levels. Opportunities for building world market share in services threaten to erode the position of currently strong domestic competitors. Historically, the service industries have been strong in the Western economies. They are significant in terms of output, wealth and jobs. Many of them still offer considerable growth potential. However, increasingly, as earlier in manufacturing, service 283 CU IDOL SELF LEARNING MATERIAL (SLM)

companies are facing fierce competition from international new entrants in their domestic markets. Significant changes have already occurred. In banking, large Japanese firms have acquired dominance. The same process appears to be beginning in hotels and leisure. Structural change in an industry necessitates strategic change by the firms in that industry. Where existing brand strengths, distribution networks and skill base are not utilized as a platform for building world market share when such opportunity exists, lost market opportunities abroad and a gradual erosion of the domestic base can result. 14.4 GLOBALIZATION PROCESSES AND THEIR IMPACT ON MIGRATION People have always left their homes in search for better economic opportunities, both within and outside of their own homeland. But economic Globalization has put a new spin on global migration causing global up rootedness and human displacement of an unprecedented scale. Impact of Globalization on migration Migration is not a new thing. People have always left their homes in search for better economic opportunities, both within and outside of their own homeland. But economic Globalization has put a new spin on global migration causing global uprootedness and human displacement of an unprecedented scale. Because economic Globalizationexacerbates inequality among nations, migration for many becomes not a choice but an economic necessity. Immigration, especially of people of working age, increases potential workforce and can partly compensate low participation of native population. More hands on deck ultimately mean more economic growth and prosperity. This makes possible for humans to earn more money abroad than in the own country. That leads to increase of living standard of people who work abroad or their families in the home countries. Of course, many people who immigrate do it for the reason that they cannot find a job on their own labor market but also many people immigrate because wages in other countries are higher. Thus, their outgoing leaves jobs on the own labor market which must be occupied. Each immigrant entering the country as well as being a job seeker also provides work to others because he or she is a consumer and user of all kinds of services and supplies and creates demand and hence work. Migratory networks develop intensifying links between the areas of origin and destination. Sassen (1999) concurs noting that people who travel and move help to shape the material and spiritual culture of places: therefore, migration should be seen as an equally central component of Globalization as trade and finance. The relationship between Globalization and immigration makes a strong reason for studying immigration and world cities. Immigration and its impact on the changing urban landscape 284 CU IDOL SELF LEARNING MATERIAL (SLM)

are an important part of the process of Globalization, although they are not included as criteria for inclusion in the global urban hierarchy. One problem is that much of international migration data are at the country level; there is no standardized institutional data on immigration to cities around the world. Migration was identified as an important factor in the original formulation of the world city hypothesis of Friedmann (1986), who observed that “world cities are points of destination for large numbers of both domestic and/or international migrants”, there are numerous studies on immigrants in particular cities; not much empirical work has been done to look at immigration and formation of world city status. Much of research on migration, Globalization and the global urban hierarchy has analyzed inter-city migration or transnational business elites, or focused on migration in one or two specific cities as case studies Today both Europe and North America are home or host areas for about one fifth of the world’s migrant population each. Along with the US and Canada, Western Europe has become one of the two most important destinations on the world map of international migration. And given foreseeable demographic and economic imbalances it is not only likely but also necessary that Europe remains on that map and continues to manage economically motivated migration for its own benefit. Due to Globalization rates of migration have accelerated and the diversity of origin points has increased. Much of this immigration is driven by economic factors, most notably wage differences among countries. Differing national policies are also extremely important explaining the flow and composition of immigrant groups to cities around the world. Cultural consequences of large numbers of people from diverse countries settling in particular points on the globe (almost always cities) are real. Concentration of skilled international labor within transnational corporations (TNCs) is another area of urban migration research. Beaverstock (1994) has noted that skilled international labor migration is a vital ingredient to, and outcome of, being a world city, and both Friedmann (1986) and Castells (1996) studied flows of skilled migrants between world cities. These are important contributions to an understanding of the link among Globalization, migration and world cities, yet they focus on a very narrow range of migrants. With the Globalization of migration, most countries do not host one category of migrant (i.e., elite lab our or refugees), but receive a diverse range. Employment in both highly specialized labor and low-skilled service jobs is characteristic for global cities. There has been much research on the impact of skilled (or elite labor); less on unskilled migration. Both forms not only affect the host city and country, they also affect the sending city and country. The World Bank conservatively estimates that $80 billion in work remittances were transferred from immigrants to their countries of origin in 2002 (World Bank Group, 2003). Other sources suggest the figure may have totaled to $100–$200 billion in 2003. Remittances are just one example of how immigration is establishing new socio- 285 CU IDOL SELF LEARNING MATERIAL (SLM)

economic networks that link world cities to each other and to other peripheral locales around the world. Remittances are an increasingly important topic of interest, but their impact at the urban scale has not been well researched. Contemporary views on migration depart from the earlier premise of the push-pull theory on migration. According to this theory, people moved either because of social and economic forces in the place of destination impelled them to do so, or because they were attracted to places of destination by one or more social and economic factors there. Observers of migration flows have long seen the vast changing nature of migration. What used to be purely economic reasons for migrating no longer hold in many cases?Globalization of communication technology has affected extensively the original impetus of individuals to migrate. Linkages between receiving and sending countries are readily established. Networks connect migrants and non-migrants, where news and information are shared. This sustains the flow of migration. Studying networks, particularly those linked with families and households, sheds of understanding in the development of, and encouragement in additional migration. Migrants bring to the receiving countries many customs, practices and behavior patterns from the home country. Smaller communities of the original culture are recreated in host countries, such as “little Italy” or Chinatown, in New York and Los Angeles. Multi-ethnicity is seen in large urban communities. However, a multicultural society may be threatening to native-born citizens of receiving countries. This can elicit resentment among the citizenry which can trigger social conflicts. Migration policies in many Western countries are not integrative. The effect of these policies is marginalization of migrant workers. Marginalization takes the form of low incomes, and unskilled jobs. Factors such as unequal opportunities, prejudice and discrimination may be involved in prolonged periods of marginalization. Inequalities between rich and poor countries increase, borders are becoming more and more closed to people. Because of these tight border controls and a growing global fear of those seeking refuge, migration is a risky business. Migrants also face racism and marginalization, despite the fact that many of the citizens of countries where they arrive to are also immigrants or the children of immigrants. Migrants are often seen as freeloaders or suspected of being criminals. Migrants are looking for basic human rights: safety, home, and a chance to provide for themselves and their families; all rights guaranteed to them under international human rights laws. There are ethical and moral reasons for countries to open their borders. But there are also economic reasons to encourage immigration. Immigrants tend to contribute more in taxes than they receive in social services. Immigrant labor is also needed to sustain the workforce in rich countries with aging population and to protect industries that rely on immigrant labor (Hayter, 2002). Ironically, the United States, despite their tight border controls, depend heavily on illegal farm workers to do work such as fruit and vegetable picking. 286 CU IDOL SELF LEARNING MATERIAL (SLM)

International migration of highly-qualified (after end of the World War II) is known in the science as “brain drain”. By “brain drain” one understands loss of human capital and/or outflow of intelligence and understanding. By the drift it can come into e.g. certain sectors to bottlenecks and to a decrease of production capacities. Particularly the drift of highly-qualified ones is also on decrease. Humans with a high measure of human capital are one of the most important factors for economic development. Besides they are to call loss of potential tax receipts and loss of the funds, invested in training. But a reduced number of highly-qualified ones rises, wages of these workers simultaneously the wages of unqualified sink and lead thereby partly to a prosperity duty. Apart from these economic effects, the drift can also lead to political and social disadvantages. The dangers of corruption, bad Governance and general instability can increase because of the absence of funds. 14.5 OUTSOURCING IN GLOBALIZATION Outsourcing is a business practice in which a company hires a third-party to perform tasks, handle operations or provide services for the company. Role of Outsourcing in Globalization Outsourcing offers a strategic solution to easing pressure on the production cycle and enables these companies to leverage the expertise of CDMOs, helping them respond to increased competition pressures, without compromising their own business objectives. Globalization can relate to outsourcing and business development as follows: Automation: At all stages of recruiting numerous sourcing programs can find people from all over the world who are qualified for jobs and have a conversation through a chatbot and then route them to a recruiter if qualified. In this way, you can hire qualified contractors and outsource a part of your job. Devolution: People with less experience but more technology can now do the work of very specialized jobs. A good example is Khan Academy, which allows laypeople with certain skills and information to share to become teachers, despite possibly having no formal education training. The Gig Economy: People are no longer being hired for a full role in many cases. They’re hired for bite-sized pieces of work. Contractors and freelancers now are getting more popular than full-time employees. This is a good way to save money for further investments. The relationship between Globalization and Outsourcing The last two decades have seen the growth and rise in the level of outsourcing and Globalization in the globe. The two issues have led to an increase in each other. Globalization 287 CU IDOL SELF LEARNING MATERIAL (SLM)

has led to an increase in the level of outsourcing of activities and functions by organizations. Outsourcing on the other hand has promoted the Globalization and the integration of different national economies resulting to a common global economy. However, if there was no outsourcing, would Globalization be as prevalent as it is today? To answer this question, an understanding of the main causes of Globalization is necessary. At the onset, it was stated that the main cause of Globalization is technological improvement and development. The development has made it easier for the exchange of information and communication around the world. The internet has been the one of the biggest causes of Globalization. An individual in one corner of the globe is able to learn about the occurrence of events in another corner of the globe real time, as they happen. The internet through emails, video calls and social networking sites allows people in different regions to effectively and cheaply communicate with each other. This has converted the world into a global village. Outsourcing has played a key role in the development experienced in the information technology. This is because large information technology companies in the west outsource their research and development functions to different developing countries with innovative minds such as China, India and Brazil. Was it not for outsourcing, this creative minds would never have had the opportunity to participate in the innovation and developmentprocess? Therefore, by providing an avenue for the development and growth in information technology, outsourcing has helped speed up the Globalization process. If there was no outsourcing, Globalization would still have taken place, but at a slower rate. Another cause of Globalization is the improvement of transport and infrastructural facilities in the world. This has made the movement of goods, personnel and capital easy. The last few decades have seen the development of infrastructural facilities in the developed, developing and least developed countries. Entities are now able to move both raw materials and finished goods cheaply when required in different regions. Outsourcing helps empower the least developed and developing economies by providing resources that facilitate the developed of infrastructure. Therefore, outsourcing has added momentum to the Globalization process by aiding in the development in transport system in underdeveloped economies where the activities are outsourced. Globalization has been as a result of the rise of multinational companies operating all over the globe. Multinational entities facilitate the movement of labor, expertise and capital from one region to another. They help in the transfer of technology from advance economies to developing and under developing economies. They help integrate the developing and underdeveloped economies into the world economy resulting to Globalization. Outsourcing has facilitated the growth of multinational entities. Outsourcing helps cut down operational costs ensuring that firms maximize their profits that are then invested in foreign subsidiaries and associates. Outsourcing ensures that the management and entity resources are only 288 CU IDOL SELF LEARNING MATERIAL (SLM)

committed to material issues in the company. The control of strategic business units helps develop the firms resulting to Globalization. The basis of outsourcing is the removal and reduction of trade and tariff barriers. Analysis shows that activities and functions are outsourced to countries that have been able to liberate their economies and reduce tariff barriers. In a bid to secure outsourcing services, governments in different regions have put up different measures to help attract as much foreign investment as possible. Other than encouraging outsourcing of activities, the reduction of trade and tariff barriers has resulted to a rise in international trade, a key feature in Globalization. Therefore, outsourcing by helping eradicate international trade and tariff barriers has enhanced Globalization. Globalization also results due to firms exploiting or aiming to exploit economies of scale that result from increased specialization. Specialization refers to a situation where tasks necessary to achieve a particular goal are divided into many different parts or units and allocated to different people or sections. Specialization aims to ensure that a given task is performed by the most qualified individual in the organization. Outsourcing is a form of specialization. This is because in outsourcing, certain tasks are contracted to other firms that have greater efficiency and capacity in their execution than the organization. Specialization ensures that functions are outsourced to different firms both local and foreign. Outsourcing therefore facilitates the integration of firms in different economies resulting to Globalization. Although a number of causes show that outsourcing has helped in the growth of Globalization, a set of Globalization causes show that it has not. For instance, Globalization has resulted from the growth of international media. Such include CNN, BBC and The Aljazeera media stations (Steger, 2010). These facilitate the exchange and transfer of ideas, information and knowledge between different parts or economies in the world. They have played a key role in making the world a global village. The world has experienced the formation of an international financial system. Globalization has also resulted from the growth of a global trade cycle. Since economic growth is universal in nature, countries are now more interconnected. For instance, the occurrence of recession in one country results to recession in another country. At the moment, China and its city states such as Hong Kong and Shanghais, and India might experience a recession because of the occurrences in Europe. This is because their economies are all interconnected. A difficulty in one economy affects all its trading partners. 14.6 GLOBALIZATION OF SEZ’S The idea of EPZs was carried by the United Nations Industrial Development Organization from a peripheral area of Europe, Ireland, to the world's economic periphery, the Third World, in the 1960s and 1970s. In mid-1984 there were 79 Export Processing Zones in 35 Third World countries. The example of the booming EPZs was emulated in United States' 289 CU IDOL SELF LEARNING MATERIAL (SLM)

Foreign Trade Zones, beginning on a large scale in the late 1970s. Great Britain's policy makers then introduced Enterprise Zones (although we must also note that different forms of special zones are present in the United States since the 1930s). Proponents of special zones in the developed countries such as Canada have advocated their creation on the basis of their proliferation in the Third World and de-industrialization in the First World. In Asian economies, Chinese government has made use of what seems to be a similar method for promoting its socialist modernization program, although with a much higher rate of state intervention and participation. Different forms of special zones have been present in the United States since the 1930s. The Asian economies have been using Special Economic Zones (SEZs) as a way to initiate or expand export-oriented manufacturing and to promote structural change more broadly through linkages and demonstration effects. They take their cues mainly from successful East Asian economies that began virtuous growth spirals in the late 1960s and early 1970s. Within 3 decades, they have had become upper middle or high-income economies. Although a host of developing economies pursued industrialization in parallel with East Asia, in most cases their objective was to manufacture home grown substitutes for imported products. Tariff barriers sheltered their industries, which serviced small domestic markets. Protection and small scale left productivity low, with high unit costs and no pressure to upgrade technology or innovate. East Asia also began with import substitution, but quickly saw the advantage exports held as a means of accelerating growth while bringing in foreign exchange revenues. However, they approached trade liberalization cautiously and tried to separate the domestic market from the traded goods sector. Purpose of establishing SEZs worldwide The SEZs—insulated from the rest of the economy—offered a convenient vehicle for testing export-led strategies and incentives to produce for the global market. By the 1960s, the concept of zones for processing exports was already in the air and evidence was accumulating from a few trials. With the General Agreement on Tariffs and Trade (GATT) a body formed to initiate trade negotiations and improve prospects for international trade, several East Asian economies jumped on the trade bandwagon and established export processing zones (EPZs). The early mover advantages attracted the attention of other developing economies. By the 1970s, zones of various kinds were multiplying, but with mixed results. Nevertheless, their popularity increased over the years with the “miracle of Shenzhen” serving as beacon. They have become a development policy fixture even as import-substitution fell out of favour with most of the economies adopting market and trade liberalization. With the General Agreement on Tariffs and Trade (GATT) initiating trade negotiations, several East Asian economies jumped on the trade bandwagon and established export processing zones (EPZs). 290 CU IDOL SELF LEARNING MATERIAL (SLM)

A wide range of various economic enclaves are created under various economic policies with different incentives and goals. A significant amount of the international literature has focused on EPZs—zones specifically aimed at attracting export oriented activities. Since the establishment of the first EPZ in Europe in 1959, these zones have become popular as tools to promote industrialization and structural adjustment in primarily unindustrialized nations by promoting exports. Empirical research shows that many SEZs have been successful in generating exports and employment and come out marginally positive in cost-benefit assessments. Many economists, however, still view zones as a second- or even third-best solution to competitiveness, whose success is restricted to specific conditions over a limited time frame. Since the establishment of the first EPZ in Europe in 1959, these zones have become popular as tools to promote industrialization and structural adjustment in primarily unindustrialized nations by promoting exports Concerns also have been raised that zones, by and large, have failed to extend benefits outside their enclaves or to contribute to upgrading of skills and the production base. A number of examples, however, also illustrate the catalytic role zones play in processes of economic growth and adjustment processes. For example, many of the zones established in the 1970s and 1980s in East Asia’s “tiger economies” were critical in facilitating their industrial development and upgrading processes. Similarly, the later adoption of the model by China, which launched SEZs on a scale not seen previously, provided a platform for attracting FDI and not only supported the development of China’s export oriented manufacturing sector, but also served as a catalyst for sweeping economic reforms that were later extended throughout the country. SEZS in China provided a platform for attracting FDI and supported the development of China’s export oriented manufacturing sector, but also served as a catalyst for sweeping economic reforms that later were extended throughout the country. In Latin America, countries like the Dominican Republic, El Salvador, and Honduras used free zones to take advantage of preferential access to U.S. markets and have generated large- scale manufacturing sectors in economies that previously were reliant on agricultural commodities. In the Middle East and North Africa, SEZs have played an important role in catalyzing export-oriented diversification in countries like the Arab Republic of Egypt, Morocco, and the United Arab Emirates. In Sub-Saharan Africa, Mauritius is an example of zones operating as a central policy tool supporting a highly successful process of economic diversification and industrialization. Many of the zones established in the 1970s and 1980s in East Asia’s “tiger economies” were critical in facilitating their industrial development and upgrading processes. Evolution and Expansion of SEZs 291 CU IDOL SELF LEARNING MATERIAL (SLM)

The rapid expansion in SEZs is happening in the midst of substantial changes and the global trade& investment environment is changing in a way that no longer supports the traditional EPZ model. The rapid growth of EPZ programs around the world over the last few decades, and their success in contributing to export-led growth in regions like East Asia, is due in part to an unprecedented Globalization of trade and investment that took place since the 1970s and accelerated during the 1990s and 2000s, which saw trade grow 85 percent faster than GDP between 1983 and 2008. This growth was enabled by the vertical and spatial fragmentation of manufacturing into highly integrated “global production networks,” particularly in light manufacturing sectors like electronics, automotive components, and especially apparel, which accounted for the large majority of investment in traditional EPZs. Especially for countries with low labour costs, scale economies and preferential access to major consumer markets like the Europe, Japan, and the United States, economic zones with their access to duty-free inputs, quality, flexible infrastructure, and often generous fiscal incentives—proved to be a powerful instrument through which to capture increasingly mobile foreign investment. The rapid growth of EPZs across the world was led in part due to an unprecedented Globalization of trade and investment that took place since the 1970s and accelerated during the 1990s and 2000s, which saw trade grow 85 percent faster than GDP between 1983 and 2008. 14.7 SUMMARY  Globalization has allowed agricultural productionto grow much faster than in the past.  It is argued that product and market evolution, developments in information technology, economic and cultural homogenisation of markets, and political and economic deregulation have combined to change the competitive environment for service industries. It is now possible for world market leaders to emerge and reshape the potential sources of competitive advantage in their sector.  Service industries are those whose output is not a physical good or product and where added value is derived from such factors as concept, image, quality of service delivery, reliability, convenience, flexibility.  The service industries are information-intensive and therefore well-positioned for operating in all major markets.  The service industries have become significantly concentrated and capital-intensive with increased barriers to entry  Economic Globalization has put a new spin on global migration causing global uprootedness and human displacement of an unprecedented scale. 292 CU IDOL SELF LEARNING MATERIAL (SLM)

 Migrants also face racism and marginalization, despite the fact that many of the citizens of countries where they arrive to are also immigrants or the children of immigrants.  By providing an avenue for the development and growth in information technology, outsourcing has helped speed up the Globalization process.  The basis of outsourcing is the removal and reduction of trade and tariff barriers.  With the General Agreement on Tariffs and Trade initiating trade negotiations, several East Asian economies jumped on the trade bandwagon and established export processing zones.  Since the establishment of the first EPZ in Europe in 1959, these zones have become popular as tools to promote industrialization and structural adjustment in primarily unindustrialized nations by promoting exports.  Special Economic Zones has been playing a crucial role in generating additional economic activities at the National levels.  The export and employment generation objectives of the SEZ should not result in compromising the quality of the working conditions within the zones.  The rapid growth of EPZs across the world was led in part due to an unprecedented Globalization of trade and investment that took place since the 1970s and accelerated during the 1990s and 2000s, which saw trade grow 85 percent faster than GDP between 1983 and 2008.  Post enactment of SEZ Act 2005 witnessed the growth in number of formal approvals, notifications and operational SEZs in India. 14.8 KEYWORDS  Labour Migration: is defined as the movement of persons from their home State to another State for the purpose of employment.  SEZ: Special Economic Zone  DTA: Domestic Tariff area 14.9 LEARNING ACTIVITY 1. What are the features characterize competing in the current Globalization context? ___________________________________________________________________________ ___________________________________________________________________________ 2. What are the features characterize competing in the current Globalization context? 293 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ ___________________________________________________________________________ 14.10 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. State the forces lead to increase in imports for a developing country? 2. State the features of Transnational Corporations? 3. State the role of outsourcing in Globalization? 4. What is Global competition in the service industries? 5. Discuss the Impact of Globalization on migration? Long Questions 1. Briefly outline the Globalization processes and their impact on migration? 2. Show the Impact of Globalization on migration? 3. State the relationship between Globalization and outsourcing? 4. List out the purpose of establishing SEZs worldwide 5. Discuss SEZ’s in India 6. State the Regulatory mechanism for monitoring of SEZs in India B. Multiple Choice Questions 1. WTO Liberalized Agricultural sector for a. Promoting free and fair trade b. Curb Unfair trade practice in agriculture trade c. Set-off the process of reforms in agriculture sector d. All of these 2. To solve the problems of Indian agriculture Government encourages 294 a. Contract Farming b. Corporate Farming c. an only d. both a and b CU IDOL SELF LEARNING MATERIAL (SLM)

3. Governments can encourage Globalization of industries by a. Increasing tariffs and regulations b. Creating common international technical standards c. Subsidising domestic firms that expand internationally d. Subsidising foreign firms that invest in their country 4. Special Economic Zones (SEZ) developed by the Government of India aim a. To attract foreign companies to invest in India b. To encourage small investors c. To encourage regional development d. None of these 5. Outsourcing is a. Exporting b. Importing c. A firm having someone else do part of what it previously did itself. d. Building a factory in another country to produce for that country’s market. e. Going out of business 6. Special Economic zones are a. The places where industries can operate without any control b. The places wherein any person can start any industry c. The places where industries get certain tax advantages d. The places wherein the national wherein the national labour laws do not apply 7. In India, Special Economic Zones were established to enhance a. Free Trade b. Foreign Investment c. Employment d. Technology Development 295 CU IDOL SELF LEARNING MATERIAL (SLM)

Answers 1-a, 2-d, 3-b. 4-a, 5-c, 6-c, 7-b 14.11 REFERENCES References books  P. Pakdeenurit, N. S. (2014). Special Economic Zone: Facts, Roles, and Opportunities of Investment. International Multi Conference of Engineers and Computer Scientists. Hong Kong: IMECS.  Pawan Kumar Oberoi, International Trade, Global Academic Publishers & Distributors (2nd Edition), 2015 Textbook references  Niraj, A. a. (2016). Impact of Special Economic Zones on Indian Economy. International Journal of Social Science and Humanities Research.  Bartlett CA. (1986), ‘Building and Managing the Transnational: the new organisational challenge” in Porter M. ted.) Competition in Global industries, Boston, Mass.: Harvard Business School Press.  Hamilton A. (19861, The finance/Revolution, Harmondsworth: Viking/Penguin. Websites  https://www.oecd.org/site/tadicite/50287724.pdf  http://www.fao.org/3/y4671e/y4671e0c.htm  https://core.ac.uk/download/pdf/51724473.pdf  https://mindy-support.com/news-post/the-impact-of-outsourcing-on-the-global economy/  http://cgsrs.org/publications/2  https://www.phdcci.in/wp-content/uploads/2018/11/Research-Study-on-Special- Economic-Zones-in-India-April-2017.pdf 296 CU IDOL SELF LEARNING MATERIAL (SLM)