This paper is focused on liberalization and how it has impacted the domestic firms by increasing the competition in the industry. It also discusses different ways in which domestic firms can face the competitiveness posed by global firms.
In several cases, in order for an industry to be fully liberalized, it takes several years to complete the process or in some cases may take decades. The liberalization virtually shortens the national boundaries and enables free trade between nations. This, as a result, allows several private firms from overseas locations to expand their business in the host countries which in turn helps the government to earn revenue through taxes paid by the foreign companies. Moreover, entry of foreign firms also increases the employment condition of the host economy along with the infrastructure of the nation in certain cases. Liberalization in the UK allowed privatization of several sectors such as oil and energy sector, telecommunication, etc. The privatization has facilitated to reduce the monopoly business that was being conducted without the presence of any competition. Liberalization also allows the firm to improve the product and service quality and engage in innovative products.
Liberalization creates a competitive environment and as WTO (2001) stated that competition is necessary to ensure that the firms are trying to achieve competitive advantage and in the process generates higher value for the customers. Blair (2005) has also stated that a competitive environment also encourages innovation and new product and service development. This, as a result, leads to infrastructural improvement of the nation. Better products lead to a better lifestyle and security for the people.