MAYURI VADHER

An Overview Of Liberalization, Privatization and Globalization

• Liberalization refers to relaxation of government restrictions in areas of economic policies. Thus, when government liberalizes trade it means it has removed the tariff, subsidies and other restrictions on the flow of goods and service between countries.

• The term “Privatization” refers to “The transfer of ownership of property or businesses from a government to a privately owned entity.” Privatization in India generally is in the form of disinvestment of equity. In general, here privatization has not led to 100% transfer of control from public sector to private sector unit.

• globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology and capital. It is a process which draws countries out of their insulation and makes them join rest of the world in its march towards a new world economic order.

Reasons for implementing LPG

• Excess of consumption and expenditure.

• Growing inefficiency in the use of resources.

• Over protection to industry.

• Mounting losses of public sector enterprises.

• Low foreign exchange reserves.

• Burden of national debt.

• Inflation.

• Technological impairment.

Liberalization

Advantages

•Increase in rate of economic growth.

•Increase in competitiveness of industrial

sector.

•Reduction in poverty and inequality.

•Increase in Efficiency.

•Better Stock Market Performance.

Disadvantages

•Pressure by IMF and World.

•Depending on Foreign Debt.

•Dependence on Foreign technology.

•Problem of Unemployment.

EXAMPLE: Liberalization: Infosys

• Political

– Flexible and strengthen gov rules

– More govt projects

– Outsourcing from US

• Economical

– Growing domestic market

– Currency fluctuation.

• Social

– English

– More technical education

• Legal

– Security of data

– Software technology park scheme tax benefits

• Technological

– IT revolution after 1991

– Low cost technologies

• Environmental

– Energy utilization, water consumption.

Globalization

Advantages

•Improves the efficiency of resource,

reduce the capital output and increase

labour productivity, update technology.

•Increase in Trade in Goods and Services

•Increase in industrialization

•Commodities at lower price with high

quality

•Increase in jobs and incomes

Disadvantages

•Globalization is helping the developed

economies more than the developing

economies.

•Flood of Multinational companies and

Chinese goods.

•Loss of domestic industries in income

EXAMPLE: Globalization: Tata motors

• Political

– The Singur Controversy

– “Save Farmland” movement .

• Economical

– high interest rates

– price pressure from competitors.

• Social

– Generates local employment.

– supports around 600 NGOs.

– high standards of education to students.

• Legal

– Cases against car explosion.

– Government norms for production.

• Technological

– Tata Technologies Limited FOR R&D

– Tata faced a technological hurdle .

• Environmental

– invested huge sums of money in its R&D section to produce eco-cars.

– “Green Earth, Clean Earth” campaigns.

Privatization

Advantages

•Modernize and diversify business.

•Making public sector units more

competitive. 

•Improving the quality of decision-

making

•Help in reviving sick units which have

become a liability on the public sector.

•Better results in terms of revenues and

efficiency and productivity.

Disadvantages

•Monopoly.

•The limited resources of the private

individuals.

•There is lack of transparency in private

sector

•Privatization results in high employee

turnover

EXAMPLE: Privatization: Tata Communication PVT.

• Political

– Govt teriff

– Safety and privacy regulation.

• Economical

– Inflation rate, price control

– competition

• Social

– Lifestyle change

– New trends

• Legal

– Anti-corruption law.

– Radiation from mobile tower

• Technological

– Internet, Wi-Fi, video conferencing

• Environmental

– invested huge sums of money in its R&D

Introduction

• PESTLE is an analytical tool which considers external factors and helps you to think about their impacts 

Why to use PESTLE

The overriding question:

– Is this an attractive industry?

If so:

– What do we need to do to take advantage of, or position ourselves against, as we move ahead with our strategic thinking and planning?

PESTEL Framework

• Political

– Government pressures

– Differences in countries, states, and regions

– Influences from political pressures

• Economic

– Growth, Interest rates

– Employment levels

– Currency exchange

• Sociocultural

– Norms, culture, values

– Lifestyle changes

• Technological

– Innovation

– Research & development

• Environmental

– Global warming

– Sustainability

– Pollution

• Legal

– Court system

– Legislation

– Hiring laws

3–14

EXAMPLE: Foreign entrance: MC’D

• Political

– Violation of religious laws

• Economical

– Price of burgers.

• Social

– Sensible food for Indian people depending on traditions

• Legal

– Elimination of beef, pork

• Technological

– Promotion via social media

– Toys in meal, I am loving it, effective SCM

• Environmental

– Styrofoam containers and restaurant abuse of the environment.

Advantages

• Provides a simple and easy-to-use framework for your analysis.

• Involves cross-functional skills and expertise.

• Helps to reduce the impact and effects of potential threats to your organization.

• Aids and encourages the development of strategic thinking within your organization.

• Provides a mechanism that enables your organization to identify and exploit new opportunities.

• Enables you to assess implications of entering new markets both nationally and globally.

 

DisadvantagesDisadvantages

• The process has to be conducted regularly to be effective and often organizations do not make this investment.

• Organizations often restrict who is involved due to time and cost considerations. This limits effectiveness.

• Users’ access to quality external information is often restricted because of the cost and time needed to collate it.

• Assumptions often form the basis for most of the data used, making any decision made based on such data subjective.