UNIT 2 LESSON 2 MARKET INTEGRATION.pdf

1 UNIT II: STRUCTURES OF GLOBALIZATION LESSON 2: MARKET INTEGRATION At the end of this lesson, the student must have:  explained the role of international financial institutions on the creation of global economy  narrated a...

1 UNIT II: STRUCTURES OF GLOBALIZATION LESSON 2: MARKET INTEGRATION At the end of this lesson, the student must have:  explained the role of international financial institutions on the creation of global economy  narrated a short history of global market integration in the 20th century  discussed the attributes of global corporations Global market integration did not happen overnight. It was the result of the establishment of global economy that involved homogenization of trade and commerce. Prior to the trends in globalization of the 20th century, international trade and exchange of goods and services were already practiced. In this lesson it examines how the global market becomes coherent through global corporation and international financial institutions Instruction: Write agree if the statement is correct otherwise write disagree. 1. The Hong Kong Shanghai Banking Corporation is an international financial institution. 2. SM Investment Corporation is a global corporation. 3. The Asian Development Bank is headquartered in Singapore. 4. Chowking is a Filipino-based restaurant chain that expanded in Indonesia and the US in 2008. Prepared by: MARY ANN M. DE LA VEGA, PhD. TCW Unit II Lesson 2  2 Based on your answers in the diagnostic, state your reasons why did you agree or disagree. After the Second World War, almost all countries around the world face great challenge to uplift their status. League of Nations was a failure and was replace by the United Nations (UN) established on October 24, 1945. Its main function was to promote international cooperation and to restore international order. Earlier in 1944 at the Monetary and Financial Conference in Bretton Woods, New Hampshire, United States, the first government sponsored international financial institution were established were the World Bank (WB) and the International Monetary Fund (IMF). Two Types of International Financial Institution Intergovernmental World Bank is an intergovernmental institution which aims to end extreme poverty and promote shared prosperity in a sustainable way (worldbank.org).The following are organizations that belong to WB Group namely, the International Bank for Reconstruction and Development, International Development Association, International Financial Corporation, Multilateral Investments Guarantee Agency and International Center for Settlement and Investment Disputes. These organizations facilitate the granting of loans and financial assistance to developing countries. The IMF works to foster global monetary cooperation, secure financial stability and facilitate international trade (imf/en/About). Like the WB it also grants financial assistance and loans to developing countries. In the 1960s regional development bank were established: the Asian Development Bank (ADB) in 1960 and African development Bank (AfDB) in 1964. These banks are created to spur social progress and economic growth in order to address and reduce poverty. Both are anchored on the goal of fostering sustainable development in their respective member countries. Private Citigroup and Merrill Lynch are private international financial institution. Citigroup is an American multinational investment banking and financial corporation. While Merrill Lynch is the wealth management division of the Bank of America. Both institutions provide investment Prepared by: MARY ANN M. DE LA VEGA, PhD. TCW Unit II Lesson 2  3 around the world. Investment can be in the form of foreign direct investment, stocks of financial loan. Other functions of financial Institution in the global economy: World Bank International Asian Development Monetary Fund Bank  project lending  helps established  lends money for the  established structural institutional bodies to building of reforms address & reduce infrastructures that  provides support & poverty leads to the growth in technical assistance  jobs generation business  helps design modern growth & durable social safety  assist in creating nets condition form mobilization of private domestic & foreign capital These global institutions are active agents in fostering social and economic development by providing various forms of help to improve the national and global economies. The integration of global market started when big American corporations began to emerge after the Second World War with the rise of new conglomerates. International Telephone and Telegraph bought Avis Rent a Car, Continental Banking, Sheraton Hotels and Hartford Fire Insurance (American History 2018). Later Japan and Europe followed. Japanese global Automobile Corporation like Toyota, Nissan and Isuzu took off after the giant American companies flourished. These companies prospered as the primary and global makers of trucks for the Japanese military (Dower, 1992). Renault Automobiles a French multinational automobile manufacturer was also used to help in the military post war operations. The rise of American, Japanese and European global corporations opened the doors for development of international trade. Iwan (2012) identifies the differences among international, multinational, transnational and global companies: Prepared by: MARY ANN M. DE LA VEGA, PhD. TCW Unit II Lesson 2  4 Global International Multinational Transnationa l Any company Companies that Have Are more which is having sell their investments in complex Operations & operations and products in other organizations Trading trading in foreign countries, but that have many countries countries by do not havea investment in across the exporting and coordinated foreign world also involved in product operations, importing offering in each have a central activities country. They corporate are more facility but give focused on decision adapting their making, products and research and services to development each individual and marketing market. powers to each individual foreign market. Global International Multinational Transnational companies companies do companies may companies may Investment have foreign not have any have foreign have foreign direct foreign direct direct direct investment investment in investment in investment in (FDI) in the country very few of the many of the countries where they foreign foreign where they export or to countries countries operate. import from where they where they their operate. operate in. products/servic es. Organization No foreign set Centralize Decentralized structure and up or organization organization key decisions branches, key structure and structure and are centralized. decisions key decision- key decision- Major decision making is making making Strategy making is always taken functions. functions taken from the from the wherein each headquarters domestic international such as country of the establishment merger, company. are responsible amalgamation to take their Prepared by: MARY ANN M. DE LA VEGA, PhD. TCW Unit II Lesson 2  5 and new own decision to product suit the local region they are Launching. in. Products Products Products Subsidiary development development development companies processes are processes are processes are given rights to Products / generally accomplished generally develop R&D initiated by the in the domestic initiated by the product of their mother country. mother own base on company and company and the local needs distributed to distributed to and demands. the its the its Final approval subsidiary subsidiary mother companies in companies in company. othercountries othercountries Product varies from country to country. They face They face International Due to varied regulatory and regulator, legal legal issues international Challenges legal issues in issues and and intellectual structures and the countries customs. Also property rights culture, where they on the (IPR) issues transnational have invested. products which like product is companies face may not copied or internal man match. imitated. power issues and organizational problems. Abbreviation None None MNC TNC Lenovo, Wal-Mart, General Motors BMW, Nokia Kellogg, Shell, Spencer and Toyota and Ford Examples Coca Cola and Motors Microsoft. The ascent of global corporations is a reflection of globalized market integration. TNC’s and MNC’s are no longer limited to their home countries. They are able to expand their reach to other continents and countries all throughout the world. Prepared by: MARY ANN M. DE LA VEGA, PhD. TCW Unit II Lesson 2  6 Each will identify 5 global corporations present in the Philippines and categorize to where they belong whether they are global, international, multinational or transnational companies and defend your answers. 1. Discuss comprehensively the role of the international financial institution in the 20 th Global Market Integration? 2. In what way can global corporation help you as a student? Prepared by: MARY ANN M. DE LA VEGA, PhD. TCW Unit II Lesson 2