Globalization

GLOBALIZATION

PRESENTATION BY: 1.KARAN POSHATTIWAR 2.NITIN CHAVHAN 3.ARPIT KHANDELWAL 4.ASHISH KURWANSHI

Globalization

What does “globalization” mean?

◦What are its causes?

◦Why is it proceeding rapidly?

◦What are its aspects?

GlobalizationGlobalization is the system of interaction among the countries of world in order to develop global economy

Power in the hands of stock, bond and currency traders moving fundsaround the world

Multinational corporations looking for most efficient, low-cost producers

MNCs

1-4

Globalization

Private sector primary engine of economic growth

Maintain low inflation and price stability

Shrink government bureaucracy Balance budget

Globalization and the MNE

A multinational enterprise (MNE) is any business that has productive activities in two or more countries

Globalization of Markets

Distinct/separate markets merging into a huge global marketplace◦Mostly NOT consumer product markets

◦Mostly industrial products◦Tastes and preferences of consumers converging (??)

MNCs creating global marketplace?MNCs more vulnerable to competition

in their home markets

“Drivers” of Globalization:

Globalization of markets and production◦result of lowering of trade barriers◦enabled by technological change

Telecommunications and microprocessors

The internet and the world-wide web

Transportation technology

Global Telecommunications

“Drivers” of Globalization:

Average Tariff Rates on Manufactured Products (% value)

1913 1950 1990 2002 France 21 18 5.9 4.0 Germany 20 26 5.9 4.0 Italy 18 25 5.9 4.0 Japan 30 – 5.3 3.8 Holland 5 11 5.9 4.0 Sweden 20 9 4.4 4.0 Britain – 23 5.9 4.0 USA 21 18 5.9 4.0

Global Institutions’ Emergence

Supra-national organizations define the

“rules” of international economic activity:

World Trade Organization (succeeded

GATT)

International Monetary Fund (IMF)

World Bank

United Nations

Globalization and the Global Economy

% share of world output and exports1963 1997 2003 1998 2003

output exports

United States 40.3 20.8 21.1 12.7 11.0Japan 5.5 8.3 7.0 7.3 5.7Germany 9.7 4.8 4.5 10 9.6France 6.3 3.5 3.2 5.7 5.7United Kingdom 6.5 3.2 3.2 4.5 4.7Italy 3.4 3.2 3.0 4.5 4.1Canada 3 1.7 1.9 4.0 3.6China NA 11.3 12.6 3.4 5.0

Globalization of Production

Each MNC◦ Sources particular goods and services from a set

of locations it selects around the world◦ Develops a global web of suppliers as a source of

competitive advantage◦ Decides “where to produce” depending on a

country’s factors of production Labor, land, capital, energy, expertise

Host governments have a stake in the successful establishment of an MNC’s operations

Globalization

Eliminate or lower tariffs, quotas, domestic monopolies

Increase exports Encourage FDI Privatize state owned industries and

utilities

Globalization

Deregulate capital markets Open up stock and bond markets to

direct foreign investment and ownership

Open banking, telecommunications systems to private ownership

Globalization

Citizens able to chose from variety of competing pension options including foreign-run pension and mutual funds

Deregulate economy to promote domestic competition

Eliminate government corruption, kickbacks and subsidies

5 ASPECTS OF GLOBALIZATION

1. ECONOMIC2. TECHNOLOGICAL3. CULTURAL4. POLITICAL5. MILITARY

THESE ASPECTS ARE ALL INTERCONNECTED!

1. ECONOMIC GLOBALIZATION

EARLY CAPITALIST IDEAS:1. “Free Market Economy” (Adam Smith,

Wealth of Nations, 1776)Market is “free” from State control

2. Division of labor

3. Competition

Economic GlobalizationTODAY:

Economies Are Increasingly Linked TogetherEXS: NAFTA (MX, CA, US), The EU, WTO (World Trade Organization)

WTO Top 100 multinationals are all US-owned

companies!

Goal: help producers of goods and services, exporters, and importers conduct their

business

2. TECHNOLOGICALGLOBALIZATION

• “World Wide Web” has exploded in last 10 years

• Computers can move money around world = “finance capital”

The “G” Technology

3. CULTURAL GLOBALIZATION

Cultural Imperialism = Dominance of one culture over others

Hollywood movies, MacDonald’s, Disneyland, Starbucks

Dominance of the English language

and invasion of other languages

CULTURAL GLOBALIZATION

McArabia Kofta

4. POLITICAL GLOBALIZATION

The United Nations: Global assoc. of govts. facilitating cooperation in international law,

security, economic development, and social equi

The US and the UK were the only nations in support of going to war in Iraq

POLITICAL GLOBALIZATIONSouth Africa

• In 2001, US pharmaceutical corporations sued South African companies for infringing on AIDS medication patent laws

• In 2003, President George W. Bush announced the Emergency Plan in 2003 - the largest international health initiative in history by one nation to address a single disease

• HIV/AIDS Situation in 2004HIV Infected: 5.3 millionAIDS Deaths: 370,000AIDS Orphans: 1.1 million

5. MILITARYGLOBALIZATION

Nuclear Bombs F/A-22 Raptor

MILITARYGLOBALIZATION

Global alliances become clear during war time

Ex: Today’s US alliance with Britain in wars against Afghanistan and Iraq

MILITARYGLOBALIZATION

Smart Bombs Sidewinder Missiles

THANK YOU…!!