Driving and Restraining Forces (International Marketing)

There are a number of forces which induce and propel globalization and thereby expand the scope and importance of international marketing. On the other hand there are also forces with restrain globalization.

The important forces driving globalization are the following:-

Liberalization: One of the most important factors, which have given a great impetus to globalization since the 1980s is the almost universal economic policy liberalizations which are fostering a borderless business world. While a lot of the liberalizations owe it to the Global Agreement on Trade and Tariff (GATT) / World Trade Organization (WTO), substantial liberalization have been occurring outside the GATT/WTO like, for example the revolutionary economic policy changes in China and other socialist/communist nations It may be noted that it has become quite common to describe the global trend as LPG (liberalization, privatization and globalization) indicating the mutually interdependent and reinforcing nature of these forces. One of the impacts of liberalization and privatization is the surge in cross border M&A (mergers & acquisitions) and other FDI (foreign direct investment) resulting in greater global economic integration.

Multinational enterprises which link their resources and objectives with world market opportunities, have been a powerful force driving globalization. Taking advantage of the liberalization trend, there has been a fast growth of the number of MNC and their global network of affiliates. The MNC leverage their strengths to link global resources and opportunities and thereby strengthen the globalization trend.

Technology is a powerful driving force of globalization. Technological advances have tremendously fostered globalization. Several technological developments become compelling reasons for internalization. Technological break through are substantially increasing the scale economies and the market required to break even.

Technological revolution in several spheres, like transport and communication, has given a great impetus to globalization by their tremendous contribution to reduce the disadvantages of natural barriers like distance and cost. The developments in the field of air cargo transportation has fostered globalization by enabling quick and safe transportation of sensitive goods like perishables and goods subject to quick changes in fashion/taste. Developments of containerization and refrigeration have also been of high significance. The steep fall in the cost of transportation and communication has considerably accelerated pace of globalization. All these have contributed to the drastic transformation of the logistical and global distribution of the value chain system. The world wide web has a stupendous impact on globalization. Global sourcing was encouraged not only by trade liberalization but also by technological developments which reduced transport costs. Advent of containerization and super tonnage cargo ships drastically reduced transport costs.

The IT revolution has made an enormous contribution to the emergence of the global village.

The cost of new product development is very huge in several industries such as pharmaceuticals. To recoup such high costs a global market is required. A corollary is that the fast technological changes, which hasten product obsolescence, necessitate a short pay back period, which can be realized only with a very large market.

Further, because of the huge investment and diverse skill requirements associated with new product development, cross border alliances in research and development are becoming more and more popular. Again, in a number of cases different phases of the product development are carried out in different countries either by a company’s own affiliates or by outsourcing.

Quality and cost:

The two most important determinants of demand are the quality and price of the offering. These can be better achieved when a firm is global in its operations.

Rising Aspirations and Wants: Because of the increasing levels of education and exposure to the media, particularly the electronic media, aspirations of people all around the world are rising. They aspire for everything that can make life more comfortable or satisfying. If domestic firms are not able to meet the wants, they would naturally turn to foreign firms. The customer today is, by and large, global. He wants a world class product or a product of desired attributes at international price. He may desire a product available anywhere in the world. His aspirations cannot be tied down to the domestic availability.

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