7 Factors Influencing Globalization – Discussed! (2024)

Factors influencing Globalization are as follows: (1) Historical (2) Economy (3) Resources and Markets (4) Production Issues (5) Political (6) Industrial Organisation (7) Technologies.

Globalisation though is basically an economic activity, is influenced by many factors.

The important factors are:

(1) Historical:

The trade routes were made over the years so that goods from one kingdom or country moved to another. The well known silk-route from east to west is an example of historical factor.

(2) Economy:

The cost of goods and values to the end user determine the movement of goods and value addition. The overall economics of a particular industry or trade is an important factor in globalisation.

(3) Resources and Markets:

The natural resources like minerals, coal, oil, gas, human resources, water, etc. make an important contribution in globalisation.

Table 16.1: India’s Strengths and Weaknesses:

The mineral based industries like steel, aluminium, coal in Australia are examples. Few of these Australian mining and metal companies are owned by European / Japanese / American companies.

Near distance to end user or consumer also is an important factor in globalisation. The large markets as consumer bases in Asian countries have led many European, Korean to Japanese manufacturing conglomerates and shift their manufacturing and trading bases in Asian countries.

That is going near the customer makes globalisation. The Table 16.1 gives the strengths and weakness of India in global level. The details are based on expert survey on globalisation. As may be seen from the table low on scale is lack or shortfall and hence, ranking is low.

(4) Production Issues:

Utilisation of built up capacities of production, sluggishness in domestic market and over production makes a manufacturing company look outward and go global. The development of overseas markets and manufacturing plants in autos, four wheelers and two wheelers is a classical example.

(5) Political:

The political issues of a country make globalisation channelised as per political bosses. The regional trade understandings or agreements determine the scope of globalization. Trading in European Union and special agreement in the erstwhile Soviet block and SAARC are examples.

(6) Industrial Organisation:

The technological development in the areas of production, product mix and firms are helping organisations to expand their operations. The hiring of services and procurement of sub-assemblies and components have a strong influence in the globalisation process.

(7) Technologies:

The stage of technology in a particular field gives rise to import or export of products or services from or to the country. European countries like England and Germany exported their chemical, electrical, mechanical plants in 50s and 60s and exports high tech (then) goods to under developed countries. Today India is exporting computer / software related services to advanced counties like UK, USA, etc.

Eight barriers in economic activities:

Many countries in Particular developing ones impose restrictions to globalisations by:

i. Imposing high taxes and duties for capital goods, spares and materials,

ii. Licensing restrictions,

iii. Foreign exchange restrictions,

iv. Investment restrictions,

v. Incentives and prioritisation to specific domestic industries, and

vi. Banning / restricting products of foreign origin.

vii. Procedural hassles, bureaucracy

viii. Closed mind-set

The fears of the countries in that case may be:

i. To provide local employment,

ii. To raise standard of living and GDP,

iii. To help in building up foreign exchange reserves,

iv. To channelise the resources of the country,

v. To develop new skills / markets and

vi. To mobilise capital.

Transport, communication and IT:

The technological revolution the world has witnessed in the last two decades is overwhelming. Development has immensely influenced world trade by bridging space and time. IT has revolutionised the way the business goes. E-money, e-banking, B2B business, B2C business and internet have added to speed up globalisation. Buying and selling of stocks and transfer of funds can take place now instantly.