Globalization & Management

Everyone is today concerned about globalization. Love it or hate it, globalization is here to stay! Even political parties that are left behind are willy, nilly forced to admit that it is a phenomenon that is well and truly out of the bottle ! Technology has done what idealogy could not : unite us all into a fraternity of interconnected and interdependent communities.

How do traditionalists deal with such a new world order ? The short answer is that they cannot because their analytical frameworks are incompatible with current realities. Moores law for example, has ensured that the frontiers of knowledge are constantly expanding. The law postulates that the density of information that can be packed into a computer chip doubles every 18 months or so. This means that computing power is doubling every 18 months thereby enabling undreamed of advances in science, technology and knowledge in general. Who would have thought that it was possible to unravel the mystery of life by cracking the hitherto undecipherable genetic code ? Perhaps the best is yet to come because the pundits expect Moores law to be valid till the year 2017 when the limits of computing as we know it would be reached. Thats when sub-atomic computing is expected to take over and keep computational power growing.

All this inevitably means that human beings are getting even more connected every day. Some observers are convinced that the greatest technological marvel of the last century was not the computer chip but the Internet. This is in turn means a networked and therefore globalized world. So, to us in India what are the implications of globalization ?

Change is always open ended so its hazardous to venture into predictions. However, to me, some implications of globalization for management are clear.

Firstly, globalization means a convergence of standards. Therefore, parameters for quality and performance are now not related to our local conditions but to the global norms. This is simply because the markets are global. Therefore, success in these markets demands delivery of global standards, nothing less. There is no hope for any product or service or indeed any organization that does not adhere to global standards even if they are being produced for Indian markets. After all even the Indian markets have gone global because the barriers to entry have been cleared in virtually every industry. The lesson is clear: you cannot survive with lower standards because your competitor is offering global standards to your customer.

Convergence of standards is undoubtedly an effect of technology and competition but it is also equally being driven very proactively by several high power global institutions. For example, the WTO is fostering a transparent rule-based global trading system. The Bretton Woods twins, World Bank and the IMF, are ardent advocates of prudent economic development, trade , fiscal, monetary and other macroeconomic policies; while their prescriptions do not always find ready acceptance or relevance in every country, they are respected sources of research-based advice on sustainable development. The Bank for International Settlements is actively crafting the standards for the global banking industry while the International Standards Organization contributed norms for globally accepted standards for quality (ISO 9000 series) and environment management ( ISO 14000 series).

Secondly, productivity growth will accelerate in India because of the pressure of competition. This will ensure that the laid back approach to work is over, the number of holidays will be slashed and the proliferation of computers across India will accelerate. This is turn will fuel all aspects of the knowledge economy: education, training and services. Though it is fashionable to talk about the global market for software, I am convinced that a significant part of that market is right here in India. The need to increase productivity in every segment of the economy will spur a huge growth in the Indian software industry.

Thirdly, profit margins will narrow to global levels. It is now futile to expect that the usurious margins of the past (20 to 50 %) to continue. Competition from global players in the now opened Indian market has eaten into the traditionally high margins. Soon, companies will have to learn to operate at net margins of around 5 %. Already interest rates have fallen and the benefits have passed through to customers in the form of stable or lower prices. Profitability will now have to come from lower costs from higher volumes and productivity gains. The possibility of raising prices frequently is now more or less like a mirage in the desert. This global reality however does not appear to have sunk in among the ownership and top echelons of management in many companies in India.

Fourthly, if globalization teaches us anything, it is easy information availability and its effect : transparency. Leaders in politics, corporate boardrooms and markets can no longer hide behind opaque shields. Internet, email, data archiving and convergence have ensured that everybody has access to almost everything. For India, the hope of decreasing corruption is now brighter than ritual, moralistic pontification by the psuedo leaders: all the shenanigans will be listed in the public domain and neither the power of the state nor the power of money can stifle the stink. Open societies and the Internet mate to father transparency. Therefore corporate governance, governance by government and compliance all become de facto standards.

And finally, globalization offers the real possibility of improving quality of life for our people by arresting if not reversing the continuous migration from villages to cities. This can happen when the Indian economy becomes not an agricultural economy or an industrial economy but a knowledge economy. We can create the possibility of people earning comfortable livelihoods in their own villages and communities. Therefore, universalization of IT literacy has now to be attached to universalization of primary education. There are very few justifiable subsidies left. However a provision for a subsidy for connectivity and IT literacy in the Union Budget is an idea whose time has come. Surely, this is an investment that will have a huge ROI in the future. After all globalization is all about creating the future!

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