GLOBALIZATION AND THE WTO

Globalization is not as far advanced as many people seem to think. The world is only very partially integrated. The GATT/WTO process, aimed at lowering trade barriers around the world in order to raise economic growth, has achieved much but has taken more than half a century to do so. The vocal anti-globalization backlash has got it wrong in so far as it claims that globalization hurts the poor; it actually helps them, and most developing nations want freer trade.

Businesses need to be aware of changing public attitudes, and today most large companies emphasize their commitment to values such as environmentalism, consumer protection, and energy conservation. Faced with the tough disclosure rules for public companies, 'green" legislation and consumers power to influence politicians, companies are paying more than lip service to these values – many companies publish detailed information on their efforts to reduce waste of raw materials, for instance.

Globalization may be good for business generally, but is it good for your business? Some firms might prefer to enjoy a monopoly rather than struggle with competitors in a fast changing world. New markets, freer trade, and capital flows only offer opportunities to companies that are efficient, flexible, and innovative.

ACCESSING CAPITAL MARKETS

Entrepreneurs dream of successfully floating their companies on a major stock market. Not only will it make them, the prior owners, rich, but it also offers a very large supply of capital for growth. A small private business may be dynamic and have many opportunities to expand, but it cannot sell corporate bonds (a fixed rate loan) easily or issue shares to the general public. It must seek finance from banks, venture capitalists, or private investors, which limits the amount it can borrow and is more expensive. Even large firms in countries with "segmented" capital markets suffer from this problem.

Going public on a major market is not easy. The firm must usually have a good track record, although recently the rules have been relaxed for certain dynamic industries, such as IT and biotechnology, to allow the flotation of start-ups.

To access the global capital markets, a company needs to:

» establish andmaintain good relationswith institutional investors and, eventually, the public;

» conform to very exacting standards of information disclosure, which is costly; and

» consider starting slowly by issuing corporate bonds to create and encourage investor confidence.