Globalization

Globalisation

Objectives and Aims of Session Three

•         Reflect on the meaning of globalisation

•         Differentiate between internationalisation and globalisation

•         Consider the different drivers of globalisation

•         Describe multinational corporations

Defining Globalisation

•         Globalisation means different things to different people.

•         It can be defined as the expansion of economic activities across political boundaries of nation states.

•         It is the process of increasing economic openness, growing economic interdependence and deepening economic integration between countries in the world.

Important Definitions

Discrete countries involved in international trade with other nation states.	Nation-States
Reduction of trade barriers and restrictions, usually through the World Trade Organisation (WTO)	Increasing Economic Openness
Trading, financial and political agreements taken among nation states, creating relationships of some form of mutual dependency.	Economic Interdependence
It is the process of growing dependency of nation states on one another in terms of economies, resources, firms and policies. Also known as harmonisation.	Integration
It is the ability of a nation-state to convert its input resources into output resources of higher value, which are greater than the cost of conversion, and to sell these in the international market.	Profit
It refers to the arena for the making, buying and selling of goods and services which now encompass a worldwide environment.	Market

Internationalisation Versus Globalisation

Globalisation It is an extension of internationalisation in the sense that most aspects of the production or service are performed and integrated across many global locations.

Internationalisation Includes activities such as joint ventures with partners in other countries to cooperate in some aspects of business.

Drivers of Globalisation

•         Drivers of globalisation are

                        “the pressures or changes that have            impelled both businesses and           nations to adopt this approach.”

Drivers include:

(1)   Cost drivers

(2)   Market drivers

(3)   Government drivers

(4)   Competition drivers

Competition Drivers Competition will increase as the businesses strive to attract potential consumers for their products or services by -           Cross border ownership of home firms by offering organisations -           Movement of companies to become globally centered rather than nationally centered through acquisition -           Growth of these global networks of organisational structures and businesses.

Government Drivers Nations work together to increase the possibility of trading activities in their international trade to create economic activity and wealth by -          A reduction in trade barriers, removal of tariffs -          Creation of trading blocs -          Creation of more open and freer economies -          Privatization of previously centrally controlled industries.

Market Drivers The development in world market brings changes in the demands and tastes of consumers by -          Establishment of global brands which have instant recognition and are created and supported by global brands. -          Increasing low cost travel which begins to create the idea of global consumers with a growing convergence of lifestyles and tastes.

Cost Drivers These seek out an advantage to a business from the lowering of cost of the service of production through -          Gaining economies of scales -          Lower labour and other resource costs -          Fast and efficient transportation systems -          Strong infrastructure

Advantages Versus Disadvantages of Globalisation

Advantages

•Globalisation generates wealth, goods and services which are available to a greater percentage of the world.

•It gives rise to economies of scale, the more you produce the cheaper it becomes.

•Business are better able to seek out low-cost producers and move the manufacture of goods and the provision of services in more competitive prices.

•It facilitates growth in communications, the Internet, email, satellite and television.

Disadvantages

• The vast majority of the world’s population may not be able to purchase these consumer goods, even at the lower prices.

• The new technologies and access to communications may not benefit all in that they create social and economic desires which cannot be met within all societies

• The products of the global economy may destroy the manufacturing diversity and cultural heritage of a country as products become standardised worldwide

• Globalisation may undermine the idea of a nation state as a global business becomes more powerful financially and politically than its host country.