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BVV SANGHA

BASAVESHWAR ENGINEERING COLLEGE

BAGALKOT

A Presentation on impact of Globalization onChemical Industry


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Objectives of the Study

Objectives of the StudyThe overall objective of this study is to examine the impact of globalization on the

manufacturing sector.

will enable the country benefit maximally from the current globalization trend in

the world economy.

In order to achieve this main objective, we intend to do the following.

analyze the challenges, opportunities and risks of globalization and their

implications

for sustainable development in Nigeria;

examine the impact of globalization on the manufacturing sector of the economy .

discuss socio-economic policy issues and reforms needed for the country to

maximize the benefits and minimize the risk associated with globalization.


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INTRODUCTION TO chemicals industry

Over the last eighteen years the Indian chemicals industryhas moved from manufacturing principle chemicals in a highly

regulated market to being a mature industry in a liberalized

economy. Until 1991, with the domestic chemical industry

enjoying protection in the form of differential import duties on

raw materials and finished chemical products. Chemical

manufacturing was largely controlled by licensing regulations.

The Indian chemical industry, 12th largest in production, is

growing at an average rate of 12.5%. However, sector

modernization of existing technology through foreign

collaborations could further enhance growth.


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DEFINED GLOBALIZATION A S

international integration of markets for goods, services and capital. It is theprocess of change towards global economic integration and a worldeconomy characterized by liberation of trade , and rapid diffusion ofadvanced technologies and consumption patterns. Again, Aina (1996)proceeded to review theliteratur e and suggested that globalizationconnotes a presence, the process of making global, being present world

wide, at the world stage or global arena. These imply visibility,120M.A.O. ALUKO, G.O. AKINOLA AND SOLA FATOKUN

immediacy, or availability. Abubakar (2001) argued

that an issue, object, value(s), institutions, or

practices is globalized if either through commerce,

production, consumpt ion, politics and the

information technology it is visible or considered

relevant in global centres. In this sense, therefore,

globalization entails universalization whereby the


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Globalization is the process by

which businesses create valueby leveraging their resources

and capabilities across borders,

and includes the co-ordinationof cross-border manufacturing

and marketing strategies.


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Positive impacts of Globalization

varied opportunities for the developing

countries

. It gave a fillip for better access to the

developed markets.

The technology transfer promised better

productivity

thus improved standard of living.


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Negative impacts of Globalization

Globalization has also thrown open varied challenges such asinequality across and within different nations, volatility in financialmarket spurt open and there were worsening in the environmentalsituation. Another negative aspect of globalization was that amajority of third world countries stayed away from the entire

limelight. Till the nineties, the process of globalization in the Indianeconomy had been guarded by trade, investment and financialbarriers. Due to this, the liberalization process took time to hastenup. The pace of globalization did not start that smoothly.

Economic integration by 'globalization' enabled the cross country

free flow of information, ideas, technologies, goods, services,capital, finance and people. This cross border integration haddifferent dimensions - cultural, social, political and economic. Moreor less the economic integration happened through four channels -


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Strategies Effects of Globalisation on Chemical Industry

The chemical industry has been traditionally been developed in protectedenvironment. The globalisation posed several challenges to the IndianChemical Industry. The Indian Chemical manufacturers were not globallycompetitive and hence they struggled to deliver quality as the import

quality chemicals (KPMG, 2004). Another challenge Indian Industry facedis the environmental regulations forced by the policy makers due to theInternational pressure (Gopalkrishnan R., 2008).

Entry of Foreign Players like Dow Chemicals, Akzo Noble and BASF hasmade the Industry more competitive. As explained by Mr. P.N. Shah, GM,

Larsen & Toubro Ltd., (Personal Communication, January 15, 2009) theforeign players use the world-class technology which gives both, Costeffective as well as better quality products.


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Contd

The import duty has been reduced after opening theeconomy. This has made Indian producers suffer. Especially,the smaller players were affected adversely. The earlier yearsof 21st Century saw closing of many small scale players inIndia. This hinted Government of India to take up initiatives

such as Cluster Development approach for the Developmentin India (Sachitanand, 2009).

Prof. R.N. Shukla (Personal Communication, January 16, 2009)stressed upon the point that Indian Chemical Industry faces

the challenge of dumping which is also a result ofGlobalisation. This has made the import cheaper and localproducers less competitive. This also resulted into shift offocus towards export markets for the Industry.


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The chemical industry is facing some challenges as wellas new business opportunities. The globalisation hasincreased Indias foreign trade and also forayed new

avenues in Pharmaceutical industry. The growingnumbers of expiring patents have increased theimportance of Research and Development.

While basic chemicals segment is facing a decliningdemand, it needs to focus on cost reduction tactics.The growing competition from China andimplementation of REACH agreement are thechallenges faced by the industry. The entrance offoreign players has witnessed technological

advancement in the industry for the larger players. The smaller players have suffered due to lack of funds

and hence collaborative strategies such as ClusterDevelopment is required.


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The advantages of manufacturing highclass chemical products in India are as

follows -Friendly Government of India policiesLow cost labor

Low and world class infrastructureStrong technical educationLarge number of science and engineering graduatesQuality output

Highly skilled workforceUsage of innovative processGood client relationshipslabor cost


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Huge scope for innovationExpansion of existing relationshipsHuge demand in overseas markets

Availability of more technical work forceIncreased number and quality of trainingfacilitiesLarge and very fast growing Indian

petrochemical marketHuge trained talent poolCompetitive


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Weaknesses of Indian chemical industry

Insufficient basic infrastructure for the

chemical industry

High feedstock cost in comparison to Middle

East countries

Prevalence and use of old and outdated

technology

Synthetic fiber industry is unorganized and

operates in small clusters


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Opportunities of Indian chemicalindustry -

Huge demand for polymer and synthetic fiber

Great opportunity for product development

Low consumption of polymer in comparison

to global consumption rate

Ever increasing size of domestic markets


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Threats to Indian chemical industry -

Stiff competition from other regional players

like, china and the Middle East countries

Stiff rational pricing pressures

Environmental hazards concerns

Low market recognition

Relocation of manufacturing sites to regionwith abundance of feedstock


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Notable points of Indian chemical industry -

It share stands at 2% of world market

Annual rate of growth of the Indian chemical industry is 10%

Its business is worth US$ 30 billion

Profit incurred is around 14%

Wide variety of products

Basic components are petrochemicals, inorganic chemicals and

fertilizers

The Indian states of Gujarat, Maharashtra, West Bengal and Andhra

Pradesh have the largest concentration of chemical and

petrochemical units


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CONCLUSION

Lastly it can be concluded that Globalization

has both positive and negative impact on the

chemical industry. Globalization often results in a

melding of foreign & domestic product forms &functions


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