Globalization

Increasing movement of goods, services and capital across national borders.


Globalization is a process, ongoing series of inter-related events

Why trade?
Comparative Advantage

Enter & Compete in Global Marketplace

MAKE
Establish Global Operations

SOURCE
Develop Global Supply Chains

SELL
Develop Global Market Channels

Build a successful business in home country, then export
e.g. Nestle

Locate manufacturing firms/service operations to cut cost;
e.g. Ford, BMW, XiaoMi

Purchase materials/components overseas (to cut cost)
e.g. Nike

Major Transnational Corporations (TNCs)

International Financial & Trade Insitiutions

Benefits

Cost

International Monetary Fund (IMF)

World Trade Organisation (WTO)

World Bank (WB)

Global Inequality & Bottom of Pyramid

Comparative Political & Economic Systems

Collaborative Partnerships for
Global Problem Solving

Microfinance

Threats

Defined by UN as firms that control assets abroad

Foreign Direct Investment (FDI)

Inversion

Company/Individual invest money in another country
e.g. buy shares/loaning money to a foreign firm

Cross-boarder flow of capital

Rise in sovereign wealth funds; funds where government invest in their foreign currency reserves

Avoid taxes in home country; by merging with companies located in other countries, shifting headquarters there

Strategy to acquire or merge with foreign firm to reduce corporate tax obligations at home (country)

Funding provided by member countries &
international capital markets
e.g. U.S.

Funds used for infrastructure, education, health & social services

Provides economic development loans to member nations

"Sister" to WB

Stabilize system of currency exchange rates & international payments to enable member countries to participate in global trade

Lends foreign exchange to member countries

Impose conditions on
governments that receive loans

Promote free trade; attempts to eliminate barriers to trade
(e.g. quotas, duties and tariffs)

Conducts "rounds" of negotiations on various topics

International body that establishes
ground rules for trade among nations

"Most favored nation" rule;
Member countries cannot discriminate against foreign products for any reason

Demands government to cut spendings

Devalue their currency

Increase exports

Liberalize financial markets; reduce wages

e.g. Greece

Foreign investment funds; support economic development

Transfer technology

Reduce prices for consumers; e.g. Shopping on Taobao

Spread of democracy & freedom,
reduce military conflict; money invested in military forces now used to invest in infrastructures

Increase economic productivity; comparative advantage

Prevent nation to adopt policy that promotes environmental/social objectives; if it discriminate against products from another country

Erodes regional & national culture;
undermine cultural, linguistic and religious diversity

Compatible with despotism;
exercise absolute power, esp. in cruel & oppressive ways

Weakens environmental & labour standards;
due to lax enforcement

Causes job insecurity; cheaper labour overseas (e.g. Singapore)

Political

Economic

Democracy

Military Dictatorship

Human Rights

Central State Control

Index of Economic Freedom

Named Global Action Networks (GNA)

Three-Sector World

Development of collaborative, multi-sector
partnerships focused on particular
social issues/problems in global economy

Government

Civil Society

Business

Presence of political freedom

Features

Independent Media

Separation of Power among
the Arms of Government

Fair Elections

Open society

Repressive regimes ruled by dictators,
exercise total power through armed forces

Rights of citizens to organize for
cultural/religious freedom is restricted

Free Enterprise Systems

Based on voluntary association & exchange

Economic power is concentrated in the
hands of government officials & political authorities

Central government owns property that
produces goods & services

Private ownership: Forbidden/Greatly restricted
Private market:Illegal

Score to indicate how much
economic freedom the country has

Bottom of the Pyramid

Inequality

Wealth

Income

Assets that a person
accumulates/owns at a point in time

How much a person earns in a day/year

Collectively a large market;
business opportunity

Focus on the bottom:

  • Foster social development
  • Provide employment
  • Reap Profits

Individuals earning below $3, 000 a year

Financial organisation provide loans to low-income clients/solidarity lending groups (community of borrowers) who traditionally lack access to banking or related services

E.g. BTPN, Indonesia/Grameen Bank, Bangladesh

  • Triangle of Terrorism, Crime & Infectious diseases
  • Wealth vs Identity
  • Growing inequalities
  • Outsourcing; unemployment; demand for protectionism