The impact of global events and ethics (Globalisation (Globalisation…
The impact of global events and ethics
Globalisation allows for:
Easier travel between countries in terms of being quick and relatively cheap
Faster communication and contact between people and financial markets almost instantaneous
Businesses frequently trade between borders because goods can now be easily transported
Migration has become easier because travelling has too
Many businesses expand their operations overseas
Globalisation can be defined as "the international integration of business, industry and society through developments in technology, communication and migration.
Some people see globalisation as a bad thing because they feel that it undermines the local culture in those countries and they do not like the depersonalisation that they believe results in
The key point is that what happen in one part of the world affects people in other parts much more than used to be the case. As well as being affected by our local economies, we are affected by what is happening in the world as a whole - and this is particularly true in the financial service arena
Another criticism of globalisation is that it has led to the emergence of very large multinational companies, which can dominate markets and be so competitive that small local businesses fail
Many corporations have bought smaller rival companies, adding to their own size and power by means of these mergers and acquisitions. When these happen, they often result in redundancies because the combined operations has more staff than it needs to carry out the work
The effects of globalisation
Increasing globalisation means that UK providers face competition from overseas providers, which may set up operations in the UK or simply offer their products via the internet, as a comparatively low-cost way of finding and serving customers.
UK providers can now expand overseas. They must then decide how much of their resources to commit to the UK market in the light of the opportunities elsewhere in the world
UK providers also need to understand the cultural, regulatory and other constraints that may affect how successful they will be overseas.
Outsourcing and offshoring
This is the process of one provider paying another to carry out certain functions that it previously performed itself.
This refers to the practice of moving some of a company's operational functions to overseas locations
Outsourcing and offshoring can bring benefits for customers if they lead to lower-priced products and services, but they can also be unpopular - particularly so if it is the call centre or helpdesk function that has been relocated.
The global economy
Economy refers to all of the economic activity that takes place between the people living in a particular region or country.
This activity consists of producing and consuming all of the goods and services that people need and want
Financial providers are affected by what goes on in their local economy, eg what can happen when local interest rates change or when the job market suffers a setback. But each is also affected by what is going on in the global economy
If Sterling were to become very strong against the euro then UK goods would become expensive to European buyers, even though their sterling price had not changed
Exchange rates also affect and are affected by what happens in the world's financial markets. A strong and growing economy in the US would lead to higher US interest rates and a rising US stock market - which would encourage investors in other countries to buy US government bonds and shares in US companies
International trade organisations
Authorities in a country often have to take steps and adopt new policies to try to improve the local economy
World Trade Organization (WTO)
Has over 160 member countries and promotes cooperation and trade between those members
European Union (EU)
28 member countries
Association of South Eastern Asian Nations (ASEAN)
10 member countries
Caribbean Community (Caricom)
15 full members and 5 associate members
The effect of changes in the global economy
Investment companies may find it difficult to identify good investment opportunities. If the world economy is performing badly, they may struggle to find any particular country in which the economy and markets are doing well
Employment and earnings
Falling growth and recession generally means falling employment levels. Those who manage to keep their jobs may also see the real value of their wages and salaries fall, either because their hours are reduced or because any growth in earnings is outstripped by a higher rate of price inflation
At the same time as the economic downturn has gripped the United States, Europe and other developed countries, industrialised countries, the world's emerging markets have been experiencing a high level of economic growth.
Growth in the 'BRIC' (Brazil, Russia, India and China) and 'MINT' (Mexico, Indonesia, Nigeria and Turkey) countries has led to high levels of demand for commodities, such as raw materials (oil, metals and foodstuffs)