A large number of factors have led to this surge in globalization, but most of them fall roughly into three main categories, the three I’s – Investment conditions, Infrastructure development and Information technology. This paper explores how these three factors are driving businesses to globalize their operations.

A number of factors contribute to making a country or area worth an investment, such as trade and investment laws, foreign investment policies and political conditions. Over the last few years, many countries have improved their trade and investment policies and removed barriers to investment, encouraging multinational firms to invest there. With relaxed investment policies, the firms set up significant operations to benefit from lower costs in developing countries and better consumer markets in others. Another component of the investment scenario in a country is the market and consumer spending. Firms set up sales operations in countries that have a market for their products and services. With the growing incomes of people in developing countries like India and China, consumer spending is on the rise, and many international firms are trying to get a share of the market.

Many countries protect their domestic industries through investment barriers. For example, India does not allow foreign direct investment in retail, preventing the likes of Wal-Mart and Tesco from setting up stores in India. Interestingly, Wal-Mart has been using India as a sourcing hub for a number of its products sold in other parts of the world, but is not allowed to sell them in India. Some of the largest retailers in the world are now working on striking alliances with Indian firms to gain an entry into the Indian retail market. The only thing stopping them so far is the foreign investment policy in India.

Good infrastructure is absolutely essential for operating an international business, and is therefore an effective tool to attract investment. With the development of infrastructure and facilities in many developing countries, firms can take advantage of the foreign investment policies and invest in these countries. Developments in the transportation and logistics industry have allowed businesses to set up operations in different parts of the world, and lower costs of transportation have made the businesses more efficient. This has allowed many firms to source raw materials from cheaper countries and to ship final products to other markets across the world. With higher costs of transportation, this would not be an economically viable business activity.

Information technology is perhaps the catalyst that has, over the last few years, changed the way firms compete across the world. The supply chains are now more efficient that ever before, and firms are able to outsource work to other firms halfway across the globe. Real time customer purchase information is available to producers, enabling them match their productions cycles to the customer’s purchase patterns as closely as possible. Information technology has made it easier for the firms to manage their global operations. At the same time, it has enabled developing countries to compete with the more developed economies, leading to a global expansion of businesses from developing countries like India and China.

These three factors – investment conditions, infrastructure development and information technology – are the driving forces behind globalization of businesses today.