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The impact of globalisation on business

  • Increased competition - this is caused by more foreign investment flowing to countries, de-regulation which allows businesses to enter markets from which they once precluded.
  • Greater awareness and reactions to customer needs - the consumer is now very selective on such essentials as quality, service and price.
  • Economies of scale - by selling across many continents business can acquire economies of large-scale production. This makes them very competitive.
  • Location flexibility - many modern production techniques and service provisions can be allocated almost anywhere. This allows to them gain the advantages of low cost labour and other resource charges.
  • Increased mergers and joint ventures - allowing access to bigger markets and associated cost advantages.

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The Bangalore Tigers - Wipro, Infosys, TCS (Tata Consultancy Services)

Wipro, Infosys and TCS are India's big three technology companies, all of which have become major global players rivalling the US's largest companies - IBM, Accenture and EDS (HP Enterprise services). Please:

before considering answers to the questions below.


Question 1

Define the terms:

  • Outsourcing
  • Service sector.

Question 2

Explain why Azim Premji believes education is key to India's economic future.

Question 3

Examine methods by which a firm may gain competitive advantage.

Question 4

Discuss the reasons for the growth of India's technology companies such as Wipro, TCS and Infosys.

Extension activity:

Select one of India's top three technology companies and use web searches:

  • Describe the nature of the organisation
  • Report on recent business activity

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Globalisation illustration

A good example of the globalisation is IKEA. IKEA is now one of the world's largest furniture retailers and sell a 'standardised product' worldwide.

  • In 1974 there were only 10 IKEA stores outside of Scandinavia and the company annual revenue was $210m.
  • In 2006 there were 237 stores in 34 countries and their sales revenue was close to 17.3bn euro.
  • They have a global network of suppliers - 1,300 firms in over 54 countries.
  • They have very low costs that are partly derived from huge economies of scale - large stores and a highly organised supply chain.
  • The IKEA group in 2006 employed 104,000 staff - called 'co-workers'.

You can read about the IKEA concept and see a chronological history of the business here.