Capital Budgeting
Pro and Anti Globalization and Capital Budgeting
Globalization
At a worldwide level, globalization refers to the growing economic interdependence among countries as reflected in increasing cross-border flows of goods, services, capital and knowledge. For instance, world trade has increased considerably over the recent years. World exports which stood at $61 billion in 1950 rose to $ 315 billion in 1970, $ 3,447 billion in 1990 and further to $7,480 billion in 2003. During this entire period, the growth in world trade was significantly higher than the growth in world output. As a result an increasing proportion of world output entered into world trade (Mishra & Puri, 2007).
Pro and anti-globalization arguments
Free trade, capitalism and democracy are the factors that support the system that alleviate the globalization. In the developing nations, the supporters of the free trade are in the favor of the globalization, who claims that the economic prosperity and opportunities has been improved due to the globalization. The civil liberties are enhanced and the more efficient allocation of resources is lead by the globalization. According to the theories of comparative advantages, efficient allocations of resources with the countries that are involved in the trade gaining are lead by the free trade. The reduction in prices, high output, more employment and higher standard of living are the results of the globalization (Mishra & Puri, 2007).
The political position of citizenry and groups who defend the neoliberal version of globalization is described by the anti-globalization. The campeigns, which are related to the labor conditions, bio hazardous, environmental destruction, social justice, animal rights and third world development and debt are brought by the anti-globalization. There are two areas, which are focused to oppose the globalization. The percieved development in the ability of transnational corporations is the first focus. The second one is the international bodies, sush as World Trade Organization, International Monetary Fund and World Bank. The protestors in anti-globalization protest the sponsorship and alleviate the power of corporates (Mishra & Puri, 2007).
Globalization has influenced the economic as well as the political arena of the present world. It also has brought into focus the power of culture in this global environment (Rothkop, 2007). At the world level, globalization refers to the growing economic interdependence among countries as reflected in increasing cross-boarder flow of goods, capital and knowledge (Mishra & Puri, 2007). The influences of globalization frequently designed by the new nationalists and by cultural romanticists are in fact affirmative. Globalization promotes incorporation and the elimination not only of cultural barriers but of many of the negative dimensions of culture (Rothkop, 2007). Globalization is a vital step towards both a more stable world and better lives of the people in it.
These issues have serious implications. But the globalization has ruined the culture; the people are imbibing the different cultures, they are adapting the dressing pattern, food pattern, etc (Rothkop, 2007). Due to prevalence of dominating culture, there has been a loss of cultural legacy. Globalization is used by the developed countries as a means to dominate and control the global markets. And due to this, the gap in the economy has increased (Rothkop, 2007). The working style of the employees has been changed due to globalization. In the domain of culture, globalization has an impact on the imagination, idealism, theories, thought process and practices of humankind (Akande, 2002).
Globalization and capital budgeting
In international capital budgeting process, the financial factors do dominate explaining how much cash flow the project is going to generate and what should be the discount rate. But it does not mean that the non financial factors are negated. The behavioral characteristics and business strategy are the two factors, which affect the capital budgeting decision in a multinational firm. Any firm has various level of management depending upon the organizational structure. In an international set-up, the structure is more complex. The design is based normally on the line and staff or functional pattern. Any decision passing through the different levels of management is influenced by the attitude of the managers (Sharan, 2005).
The view of one manager is normally different from that of the other as they come from disparate socio-cultural background. Naturally, the final decision is the result of bargaining among the different levels of management. Apart from the organizational behavior that influences the capital budgeting decision, the proposals meeting the financial norms must fit into the corporate strategy. The management frames the combinations of strategies depending upon its preferences and capabilities and then fits the financial viable projects into the strategy framework (Sharan, 2005).
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