Globalization PDF

Globalisation Dr. Elaine Berkery 1 1 Learning Objectives 1. To understand and define the concept of globalisation 2. To distinguish between the globalisation of markets and production 3. To understand the impact of globalization 4. To analyse the MNC 5. To define the term MNCs 6. To critically ev...

Globalisation Dr. Elaine Berkery 1 1 Learning Objectives 1. To understand and define the concept of globalisation 2. To distinguish between the globalisation of markets and production 3. To understand the impact of globalization 4. To analyse the MNC 5. To define the term MNCs 6. To critically evaluate the capabilities of the MNC 2 Coca Cola - A Global Brand • Approx 250 beverage brands worldwide • Highest brand recognition globally This Photo by Unknown author is licensed under CC BY-NC. 3 1 Coca Cola - A Global Brand • The most global function of the company is ADVERTISING • So they avoid themes which might be controversial in local markets 4 “Think globally- act locally” This Photo by Unknown author is licensed under CC BY-NC-ND. • Despite moves towards a global market there remain fundamental differences based on geography and culture. • It also adapts taste as well as operations to local markets. 5 6 2 Converging or diverging • Levitt (1983) predicted that there would be a single global market where standardised products would be sold everywhere 7 Several defining characteristics of globalisation What is Globalisation? 1. Growth in capitalist market economies, reducing barriers to trade & investment 2. Growing interconnectedness between firms, governments and individuals 3.Advances in I&CTs 4. Qualitative changes in firms and societies 8 1830 to late 1800’s Main changes Growth in rail networks Efficient ocean transport Rise in manufacturing Telegraph and telephone 1900-1930 1948-1970 1980 to present Main changes Main changes Main changes Rise of electricity and steel production Increased demand for consumer products Growth in cross border trade and investments Emergence and dominance of MNCs-mainly from Europe and North America Rise in MNC’s from Japan Rise on global brands GATT (WTO) established Rise in the use of personal computers. Internet Technological advances Rise of SME’s 9 3 Drivers of Globalisation • Worldwide reduction of barriers to trade and investment • Market liberalisation and adoption of free markets • Industrialisation, economic development and modernisation • Integration of world financial markets • Advance is technology 10 The Globalisation of Markets • Markets for consumer products in which tastes and preferences are influenced by culture have not become as homogenised • The successful firm is able to source components globally and deliver finished products to diverse markets, providing customers in each with products adapted to their tastes at competitive prices • Globalisation of production has been crucial This Photo by Unknown author is licensed under CC BY-SA-NC. 11 Globalisation of Production • Globalisation of production allows companies to break down the manufacturing process into separate stages, each in the most advantageous location • For example India’s IT capacity has attracted global companies outsouring IT and related services • China – cheap labour has allowed mass produced manufacturing to flourish This Photo by Unknown author is licensed under CC BY-SA. 12 4 What does globalisation mean to the consumer? • More choice • Lower prices • An increasingly blurred national identity for products & services • Impacts on career choice & progression This Photo by Unknown author is licensed under CC BY-NC. 13 1. Economic 2. Diffusion of Technology The Impact of Globalisation 3. Global Financial Markets 4. Culture change and globalisation 5. Environment 14 Economic benefits? • Globalisation enhances the monopoly power of large MNCs? • Only partially accurate as small firms remain viable players & have a role in the global economy • Globalised production has led to waves of industrialisation, creating manufacturing jobs & related development in regions & countries favoured by FDI & outsourcing • Workers in new manufacturing regions have gained, as have skilled workers in technology intensive sectors. • Less fortunate have been low skilled industrial workers in high cost countries 15 5 Diffusion of Technology • Technology diffusion is the process by which new technologies are adopted for use across individual firms or households in a given market, and across different markets. • Spill-over effects – opportunities for local firms to benefit from FDI, gaining technological competence which generates new local businesses and technological capacities 16 The Environment • Globalisation & the environment? • Environmentalists argue that firms relocate to avoid stricter pollution rules – the ‘race to the bottom’ • Only partially true – some such as Dow Chemicals have been involved in huge clean up in Eastern Europe 17 This Photo by Unknown author is licensed under CC BY-SA. 17 Social Impact • • • • • Vulnerable to location shifts • Environmental Degradation New Jobs Industrialisation Technology transfer Spillover Effects • Growth in outward FDI • Increased Corporate Profits • Increased shareholder value Host Society Benefits Host Society Adverse Effects Home Society Benefits Home Society Adverse Effects • Income Inequality • Loss of low skilled Jobs 18 6 Who benefits • Globalisation carries both promises and threats and has winners and losers at national, regional and organisation level • The most open economies are the most vulnerable to a global slowdown! • A balanced view of globalisation is that its one of many factors affecting the wellbeing of a population This Photo by Unknown author is licensed under CC BY-SA. 19 The End of Globalisation? BREXIT This Photo by Unknown author is licensed under CC BY-SA-NC. Trumpism This Photo by Unknown author is licensed under CC BY-NC-ND. 20 The MNCorporation/Enterprise Dr Elaine Berkery 21 7 This Photo by Unknown Author is licensed under CC BY 22 MNE/MNC MNC is “an enterprise that engages in FDI and owns or controls value adding activities in more than one country” OECD • An MNC is a large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries. • MNC’s benefit economies of scale and scope, giving opportunities for lower prices. • MNC’s have also altered career progression, many people work for the same company through their career, across a number of geographical locations. • The national identity of brands has become increasingly blurred. This Photo by Unknown author is licensed under CC BY-SA. 23 The MNCorporation /Enterprise • 60,000+ MNCs with over 800,000 affiliates • They generate 50% of worlds industrial output and 2/3 of world trade • 50% of all MNC trade is intra-firm • MNCs – 70% of manufacturing output in Ireland This Photo by Unknown author is licensed under CC BY-NC-ND. 24 8 International Firm • A firm engaged in trade activities with no FDI component is referred to as an international firm • For eg, Italian leather manufacturers who export goods internationally 25 MNCs in Ireland • ICT, Social Media, Pharmaceuticals and Finance have made Ireland the hub of their European operations, with names such as Google, HP, Apple, IBM, Facebook, Linkedin, Twitter, Pfizer, GSK and Genzyme. • Ireland continues to attract a huge amount of foreign direct investment (FDI), and is the second most attractive country globally for FDI after Singapore • IDA Ireland is the agency responsible for the attraction and retention of inward foreign direct investment (FDI) into Ireland. 26 Growth of Service MNCs • Media, education, information services, travel, tourism, health care and professional services • Why? • Economic Transformation • Regulatory systems • Communications advances 27 9 Competitive Advantage of the MNC • With global scale & experience the MNC has a large capital, human, brand & technological resource base that it can leverage in many countries • Proctor & Gamble – global operations allow it to spread costs and lessons globally This Photo by Unknown author is licensed under CC BY. 28 Lower production costs Competitive Advantages of MNCs Price stability Product quality. Logistics flexibility 29 10