Defining Globalization - Caraga State University

Defining Globalization WHAT IS GLOBALIZATION? Globalization can be defined as a process of rapid economic, cultural, and institutional integration among countries. This unification is driven by the liberalization of trade, investment and capital flow, technological advances, and pressures for...

Defining Globalization WHAT IS GLOBALIZATION? Globalization can be defined as a process of rapid economic, cultural, and institutional integration among countries. This unification is driven by the liberalization of trade, investment and capital flow, technological advances, and pressures for assimilation towards international standards. Globalization makes the world more accessible to everyone. WHAT IS GLOBALIZATION? It is the free movement of goods, services, and people across the world in a seamless and integrated manner. It is the liberalization of countries of their impact protocols and welcome foreign investment into sectors that are the mainstays of its economy It refers to countries acting like magnets attracting global capital by opening up their economies to multinational corporations. WHAT IS GLOBALIZATION? Globalization is the increasing interaction of people, states, or countries through the growth of the international flow of money, ideas, and culture. Thus, globalization is primarily focused on economic process of integration that has social and cultural aspects. It is the interconnectedness of people and business across the world that eventually lead to global, cultural, political, and economic integration. It is the ability to move and communicate easily with others all over the world in order to conduct business internationally. Globalization as defined by other authors "Globalization as process by which the people of the world are incorporated into a single world society." - Martin Albrow and Elizabeth King "Globalization as the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa.“- Anthony Giddens (The Consequence of Modernity) "Globalization as the compression of the world and the intensification of the consciousness of the world as a whole." - Prof. Roland Robertson (Sociology), 1992, University of Aberdeen  Types of Globalization ECONOMIC GLOBALIZATION Countries that trade with many others and have few trade barriers are economically globalized. It also refers to the widespread international movements of good, services, capital, technology and information. Economic globalization primarily comprises the globalization of production, finance, markets, technology, organizational regimes, institutions, corporations, and labour. SOCIAL GLOBALIZATION A measure of how easily information and ideas pass between people in their own country and between different countries (includes access to internet and social media networks). It pertains to human interaction within cultural communities, encompassing topics like family, religion, work and education. It is a global interconnectedness between the people. POLITICAL GLOBALIZATION Refers to the amount of political co-operation that exist between different countries. Political globalization refers to the growth of the worldwide political system, both in size and complexity. It also refers to the organization of different countries into trade blocs  What Causes Globalization? CAUSES OF GLOBALIZATION Trade liberalization Improvements in technology Reduced cost/improvement of communications and transportation Deregulation of financial markets. Increased significance of TNCs (transnational corporations) TRADE LIBERALIZATION TRADE LIBERALIZATION Trade liberalization refers to a reduction of trade barriers, this will open up worldwide markets. Trade barriers have fallen since the Second World War. New organizations were formed to increase integration - GATT (General Agreement on Tariffs and Trade, WTO from 1995) IMPROVEMENTS OF TECHNOLOGY Improved technology makes it easier to communicate and share information around the world. The most important development in the recent years is the internet. REDUCED COST AND IMPROVEMENT OF COMMUNICATIONS AND TRANSPORTATION. Improvements in transportation have also allowed firms to split up the production process to cash in on varying cost conditions in different parts of the world. This has helped to facilitate the growth of TNCs. REDUCED COST AND IMPROVEMENT OF COMMUNICATIONS AND TRANSPORTATION. Fall in the real cost of transporting goods has allowed cheaper importation and exportation of goods. Decline in the cost of communications has also helped this. DEREGULATION OF FINANCIAL MARKETS There have been moves towards removing restrictions on the movement of financial capital between countries. Many countries have removed capital controls - made it easier for firms to operate globally. Reinforced by developments in technology that enable financial transactions to be undertaken more quickly and efficiently - i.e. the Internet. DEREGULATION OF FINANCIAL MARKETS Financial markets have increased globalization due to their being set up in various countries. They allow for more interface and communication between different parts of the world over the trade of financial assets. INCREASED SIGNIFICANCE OF TNCS After the Second World War more economic power was shifted to corporations - accelerated growth. TNCs have grown even further due to favorable corporation tax rates in many countries and tax breaks, as TNCS supposedly bring in more jobs. INCREASED SIGNIFICANCE OF TNCS TNCs partake in foreign direct investment, which increases the integration of economies. Many TNCs want to gain entry to, for example, the EU due to its single market, and China due to its large and growing market.  Effects of Globalization Positive Effects on Economy Free Trade Exchange goods and resources Increased Exports and import Free Movement of Labour advantages to both workers and recipient countries. Ex. If a country experiences high unemployment, there are increased opportunities to look for work elsewhere. This process of labour migration also helps reduce geographical inequality Greater Competition Domestic monopolies will try to develop the quality of their products and services INCREASING INVESTMENT Investment by multinational companies can play a big role in improving the economies of developing countries. Negative effects on Economy Free Trade Can Harm Developing Economy Developing countries are hard to compete with developed countries Developing countries are often harmed by tariff protection Labour Drain Some countries find it difficult to hold onto their best skilled workers, who are attracted by higher wages elsewhere Increasing Environmental Issues Using non- renewable resources Deforestation Pollution Global Warming  Positive Effects on Culture Cultural Diffusion Cultural Diffusion happens when the cultural beliefs and social activities are spread through different ethnicities, religions, Multi-Cultural Awareness You will start to understand the world.  Negative Effects on Culture Loss of Local Culture The cultures from around the world replace the local ones. Less Cultural Diversity When the local cultures are lost, the world culture will replace. Then it will become one Effects on Education  Positive Negative Local school will upgrade Local schools are hard to their curriculum to a compete standard one Using technology in Some learners having educational sector difficulties with languages and technology used in school systems International Schools will be increasing The Global Economy WHAT IS A GLOBAL ECONOMY? The global economy refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved. Refers to the free movement of goods, capital, services, technology and information. The Global Economy includes several characteristics, such as: Globalisation: Due to the global economy and globalisation, domestic economies have become cohesive, leading to an improvement in their performances. International trade: Is the exchange of goods and services between different countries. International finance: Is a primary feature of a global economy. Global investment: Mainly takes place via foreign direct investment. WHO CONTROLS THE GLOBAL ECONOMY? The big banks and large corporations control and essentially fund governments. These large financial institutions dominate the global economy. For example, US banks participate in many traditional government business like power production, oil refining and distribution, and the operation of public facilities like airports. HOW DOES THE GLOBAL ECONOMY WORKS? The global economy works mainly through trade between different countries. Trade provides a foundation for worldwide economic growth by encouraging competitiveness between countries in various marketing and raising productivity and efficiency across countries. The global economy helps underdeveloped countries by allowing them to import capital goods (machinery and industrial raw materials) and export primary goods (natural resources and raw materials). WHAT ARE THE EFFECTS OF GLOBAL ECONOMY? Countries usually specialise in products that they can produce efficiently, which helps in reducing overall manufacturing costs. Then, they trade these products with other countries. Sometimes countries add barriers to international trade, such as a trade tariffs (taxes on imports) and trade quotas (limitation on the number of products that can be imported into a country). Trade barriers often affect the economies of the trading countries, and in the long run, it becomes difficult to keep employing such barriers. WHAT ARE THE BENEFITS OF GLOBAL ECONOMY? Free trade: Allows countries to specialise in the production of those goods in which they have a comparative advantage. Movement of labour: Increased migration of the labour force is advantageous for the recipient country as well as for the workers. WHAT ARE THE BENEFITS OF GLOBAL ECONOMY? Increased economies of scale: The specialisation of goods production in most countries has led to advantageous economic factors such as lower average costs and lower price of customers. Increased investment: A global economy has made it easier for countries to attract short-term and long-term investment. Market Integration WHAT IS MARKET INTEGRATION? Kohls and uhl have defined market integration is a process which refers to the expansion of firms by consolidating additional marketing functions and activities under a single management. Market differ in the extent of integration and, therefore, there is a variation in their degree their efficiency. Integration shows the relationship of firms in a market, influences the market conduct of the firms and consequently their marketing efficiency. TYPES OF MARKET INTEGRATION There are three basic kinds of market integration 1. Horizontal Integration. 2. Vertical Integration. 3. Conglomeration. 1. Horizontal Integration In this type of integration, some marketing agencies combine to form a union with a view to reducing their effective number and the extent of actual competition in the market. This occurs when a firm or agency gains controls of other firms or agencies performing similar marketing functions at the same level in the marketing sequence. It is advantageous for the member who join the group. For e.g. Primary milk producers, Facebook with Instagram. Effects of Horizontal Integration Buying out a computer in a time bound way to reduce competition. Gaining larger share of the market and higher profits. Attaining economies scale. Specializing in the trade. Advantages of Horizontal integration 1. Lower costs 2. Higher efficiency 3. Increased differentiation 4. Increased market power 5. Reduced competition 6. Access to new markets 7. Economics of scale 8. Economics of scope 9. International trade Disadvantages of the Horizontal integration 1. Destroyed Value 2. Legal Repercussions 3. Reduced Flexibility 2. Vertical Integration Occurs when a firm performs more than one activity in the sequence of the marketing process. It is linking together of two or more functions in the marketing process with in a single firm under or under single ownership. It reduces middle men in the marketing channel. For e.g. if a firm assumes wholesale as well as retailing, it is a vertical integration or rice processor under taking retailing. 2. Vertical Integration a. Forward Integration: Takes activities to the consumption function b. Backward Integration: Combination of source of supply c. Balanced Integration: Combination of the backward and the forward vertical integration Effects of Vertical Integration More profits by taking up additional functions. Risk reduction through improve market coordination. Improvement in bargaining power and the prospects of influencing prices. Lowering costs through achieving operational efficiency. Advantages of Vertical Integration 1. It allows you to invest in assets that are highly specialized. 2. It gives you more control over your business. 3. It allows for positive differentiation. 4. It requires lower costs of transactions. 5. It offer more cost control. 6. It ensures a high level of certainty when it comes to quality. 7. It provides more competitive advantages. Disadvantages of Vertical Integration 1. It can have capacity-balancing problems. 2. It can bring about more difficulties. 3. It can result in decreased flexibility. 4. It can create some barriers to make entry. 5. It can cause confusion with the business. 6. It requires a huge amount of money. 7. It makes things more difficult. 3. Conglomeration A combination of agencies or activities not directly related to each other may operate under a unified management. For e.g. conglomeration are Hindustan Unilever Ltd. (processed vegetables and soaps), Delhi Cloth and General Mills (Cloth and Vanaspati). What: involved in a number of different and frequently unrelated activities How: most of the business firms have some degree of vertical integration, horizontal integration and conglomerate character 3. Conglomeration Whom: firm which buys and sells the grains is also engaged in selling of fertilizers, insecticides and pesticides, feed Why: meeting the multiple needs of their customers, most of whom are farmers spreading the risks and helps in expanding the activities to additional markets Effects of Conglomeration Risk reduction through diversification Acquisition of financial leverage Empire - building urge Reasons for Market Integration To remove transactions costs Foster competition Provide better signals for optimal generation and consumptions decisions Improve security of supply Price Correlation The degree of correlation between two prices is taken as an index of the extent to which the two markets are integrated. The correlation in the price of commodity in any markets is unity under spatial price integration