globalisation

Question 1

What is globalisation?

Answer 1

There is no widely accepted definition of globalization, but it’s essentially the world economy becoming more integrated and interdependent.
Globalization can be defined as a mixture of processes by which products, people, companies, money and information are able to move quickly around the world as decision-makers desire, with few cross-border impediments in their way.

Question 2

Are national economies less isolated?

Answer 2

• There is lower cross-border trade and investment barriers.
• There are “smaller” geographic and time (zones) distance.
• There are fewer national government regulations.
• There is lower impact of national culture differences.

Question 3

How can globalisation be divided?

Answer 3

globalisation of markets and globalisation of production

Question 4

what is globalisation of markets?

Answer 4

Historically distinct and separate markets are merging into a huge global marketplace. Globalization of markets refers to MNEs’ ability to serve consumers across the world with their products, in contrast to an approach which views national markets as essentially separate.

Question 5

what is globalisation of production

Answer 5

MNEs dispersing different parts of their operations to various locations around the world. They take advantage of differences in factors of production (labor, land, capital, energy, expertise).Other factors affect choice of location. Globalized production refers to MNEs’ ability to locate different stages of production in the most advantageous location. The different stages of production can be seen as forming a value chain, from sourcing of materials through to production, distribution and delivery to the end consumers. Each stage in the chain contributes value to the final product.

Question 6

when did the current era of globalisation start?

Answer 6

It was only in the post-Second World War period, with the deepening of economic ties through trade and cross-border investment, combined with improved communications and transport, that the current era of globalization began.

Question 7

what is FDI and its characteristics?

Answer 7

“Investment that involves a long-term relationship reflecting a lasting interest of a resident entity in one economy (direct investor) in an entity resident in an economy other than that of the investor. The direct investor’s purpose is to exert a significant degree of influence on the management of the enterprise resident in the other economy”.

1. Involves minimum threshold equity stake (10% or more).
2. Involves the transfer of package of assets or intermediate products.
3. Transfer occurs inside the investing company i.e. from home country to host country, but same company.
4. Hence no change of ownership, therefore the control of decision- taking over assets stays with investor.

Question 8

what are the drivers of globalisation?

Answer 8

1. Technological development
2. Rising incomes
3. Declining trade and investment barriers
4. More cooperative arrangements among countries
   The two overarching themes are interconnectedness and interdependence.

Question 9

why are technological developments drivers of globalisation?

Answer 9

Developments in communications and transportation are at the forefront of technologies that push globalisation. Space shrinking technologies (the death of distance):
Transport systems and Communication systems.

Transport and Communications Costs have been decreasing fast since the 1920s, with telephone calls and computers having almost no cost since the mid 1980s.

Question 10

true or false: the volume of trade has been increasing more than the world gdp

Answer 10

true

Question 11

how can we notice the declining trade and investment barriers?

Answer 11

average tariffs on manufactured products have been decreasing since the 1950s.

Question 12

what is slowbalisation?

Answer 12

neither the forces of globalization nor deglobalization will prevail, but rather an unstable struggle between them will persist.

Question 13

true or false: The world FDI inflows volume is a lot bigger than in 1990. Developed economies received more than developing economies until 2020.

Answer 13

true

Question 14

what is the area that has been receiving the most fdi inflows (2018-2022)?

Answer 14

asia

Question 15

what is the area that has been receiving the least fdi inflows (2018-2022)?

Answer 15

africa

Question 16

what is the only area that received negative fdi inflows in 2022?

Answer 16

europe

Question 17

true or false: fdi inflows declined in more than half of the top 20 recipients between 2022 and 2023

Answer 17

true

Question 18

what are the top 5 recipients of fdi inflows in 2023?

Answer 18

usa
china
singapore
hong kong
brazil

Question 19

what are the top liveable cities in world?

Answer 19

vienna
copenhagen
melbourne
sidney
vancouver

Question 20

what are the bottom liveable cities in world?

Answer 20

damascus
tripoli
algiers
lagos

Question 21

what are the top countries in terms of ease of doing business?

Answer 21

new zealand, georgia, canada

Question 22

what are the bottom countries in terms of ease of doing business?

Answer 22

venezuela, lao, cambodia

Question 23

what is the area that needs the most days to start a business?

Answer 23

latin america and caribbean

Question 24

how has the cost of starting business been behaving in low/middle-income economies?

Answer 24

it has been decreasing fast since the 2000s

Question 25

what is the area with the highest enforcing contracts score?

Answer 25

oecd high income

Question 26

what is the area with the lowest enforcing contracts score?

Answer 26

south asia (lowest) and sub-saharan africa

Question 27

what is the area that needs the most time to export and import?

Answer 27

sub-saharan africa

Question 28

what did panjak ghemawat introduce?

Answer 28

he introduced the “the cage” concept and the notion of a semi-integrated world economy.

“This condition of incomplete cross-border integration, referred to here as semi-globalization, is more complex than the extremes of total insulation and total integration because it involves situations in which the barriers to market integration at borders are high, but not high enough to from each other.”

Question 29

What are 4 of the biggest criticisms of globalisation?

Answer 29

• Threats to national sovereignty (Sovereignty is the ability of a nation to govern its own affairs. One country’s laws cannot be applied or enforced in another country. Biggest example is Brexit)
• Negative costs of economic growth
• Increasing income inequality
• Environmental & labor issues

Question 30

how can economic activity be divided?

Answer 30

Economic activity can be divided into three broad sectors: primary production, which includes agriculture, mining and fishing; secondary production, which is industrial production; and the tertiary sector, which consists of services, such as financial services. All three types of activity are carried out in every economy, but there are big differences in their proportions.

Question 31

what is industrialisation?

Answer 31

Globalization is closely linked with industrialization, which normally drives economic development. Industrialization is the process of transformation of an economy from mainly agricultural production for domestic consumption to an economy based on factory production, with potential for export. Industrialization enhances a country’s potential for wealth creation and economic growth, especially if its industries grow into successful MNEs. Industrialization is therefore seen as key to economic development.

Question 32

how does the un categorize economies?

Answer 32

Developed: The world’s developed countries are mostly those whose industrialization processes reached maturity by the 1980s. The UN classifies 24 countries as high-income OECD countries, which roughly equates with developed economies. They are mainly in North America, the European Union (EU) and Japan, known as the triad countries. Australia and New Zealand are also in this category.
Developing: Countries changing from agricultural to industrial production fall within the broad category of developing countries.
Transition: The UN has a separate category for the transition economies of Central, Eastern Europe and CIS (Commonwealth of Independent States, including Russia) which have been making the transition from the planned economies of the former Soviet Union to market-based economies from 1991 onwards.
Least developed: The UN’s last category is the least developed countries, which are the 50 poorest countries of the group of developing countries. These are mainly in sub-Saharan Africa, but also in South Asia. These countries, which have the world’s fastest-growing populations, are mainly primary agricultural producers, with little industrialization.

Question 33

who has been the star performer in terms of globalisation?

Answer 33

china

Question 34

what are three main characteristics of mnes?

Answer 34

• Co-ordination and control of stages of production chains within and between countries
• Ability to take advantage of differences between countries, including geographical differences, natural resources, availability of labour and government policiec
• Geographical flexibility to shift resources and operations between locations at international level

Question 35

why do companies internationalise?

Answer 35

-New markets
- More efficient production
- Proximity to key resources
- Access to technology and skills
- Proximity to customers
- Deterioration in the home business environment

Question 36

what are the modes of internationalisation?

Answer 36

• Export: low-risk strategy, of foreign demand is promising it might establish a sales office in selected foreign markets
• FDI: the company invests in productive assets in a foreign country, acquiring them wholly or patly and using its ownership stake to exert control on operations
  
  • foreign subsidiary
  • greenfield investment (significant commitment to the country as it involves a large capital outlay, with the probably little prospect of immediate profits)
  • acquisition
  • joint venture (partner tends be a local firm)
• Portfolio investment
• Manufacturing under license (franchise)

Question 37

what are fdi inflows and fdi outflows?

Answer 37

FDI inflows are the aggregate value of investments that flow into a country, and FDI outflows are the aggregate value of investments from a country’s organizations to overseas destinations.

Question 38

what is fdi inward stock and fdi outward stock?

Answer 38

The total value of foreign investments that a country has attracted is its FDI inward stock, and the total value of investments made by its nationals is its FDI outward stock.

Question 39

what can we say about a country’s outflows and inflows being unbalanced?

Answer 39

Where a country’s outflows and inflows are unbalanced, say, by strong outflows and weak inward investment, it might be an indication of a weak domestic business climate. Japan is an example. Where the balance is tipped towards inward investment, it might be an indication that the country enjoys location advantages, but its domestic firms are not globally competitive - as yet. China is an example.

Question 40

why can fdi inflows be highly beneficial?

Answer 40

• bring jobs, wealth creation and greater choice for consumers.
• spillover effects: for developing countries, the benefits can be transformational, bringing a shift towards an industrial economy by boosting economic development and promoting technology transfer, whereby skilled workers in the host country are able to learn from the technology of the foreign investor.

Question 41

why can fdi inflows be risky?

Answer 41

• location advantages are constantly shifting, and inward investors migrate as the balance of advantage shifts to new locations.
• Manufacturing companies invested in four Asian ‘tiger’ economies (Hong Kong, Singapore, Taiwan and South Korea) in the 1980s, promoting industrialization and high growth. But by the 1990s, they were shifting their attention to mainland China, which enjoyed cost advantages. The four Asian tigers had to shift to more high-value manufacturing and R&D to sustain economic growth.

Question 42

where are fdi inflows to developed countries oriented?

Answer 42

FDI inflows to developed countries are typically market oriented. The investor seeks to manufacture or assemble products in or near large markets. Furthermore, local manufacturing can bypass tariff barriers which would apply to imports.

Question 43

quotes on globalisation

Answer 43

Kofi Annan: “It has been said that arguing against globalization is like arguing against the laws of gravity”.
Jimmy Carter: “If you are totally illiterate and living on $1 a day, the benefits of globalization never come to you”.
Joseph Stiglitz:
“Inequality [in incomes] is the most serious problem with globalization.”
“Globalization has brought enormous benefits to some countries.”
“I am a great cheer for a globalization when it is managed well.”

Question 44

what can we say about the trends in fdi?

Answer 44

• Developed countries historically dominated both inflows and outflows, driven by advanced markets, skilled labor, and high-tech capabilities.
• FDI shifted towards developing economies, notably China and Eastern Europe, due to low labor costs and emerging consumer markets.
• The global financial crisis (2008) caused a dip in FDI flows to developed nations but left developing economies relatively less affected.

Question 45

how did china surpass Japan?

Answer 45

China surpassed Japan economically by attracting significant FDI while developing global competitiveness.

Question 46

what are some of the benfits of fdi?

Answer 46

• Creates jobs, wealth, and consumer choices.
• Facilitates technology transfer: Host-country workers and suppliers gain technical and managerial skills.
• Encourages industrialization and economic growth, particularly in developing countries.

Question 47

what is the difference between the fdi of developed and developing economies?

Answer 47

Developed Countries typically receive market-oriented FDI to bypass trade barriers and access large consumer bases. Example: Japanese automakers setting up U.S. factories in the 1970s to avoid tariffs.
Developing Countries benefit significantly from resource-based FDI (e.g., mining, energy), but risks include dependence on foreign investors and volatile global markets. Chinese investments in Africa highlight how FDI often serves investor interests, sometimes bypassing local labor in favor of imported workforces.

Question 48

what are the challenges regarding fdi (text)?

Answer 48

-Volatility: FDI is mobile, moving as location advantages shift (e.g., from Asian Tigers to mainland China).
- Dependence on Foreign Firms: Overreliance on FDI can hinder domestic industrial development.

Question 49

in terms of the impacts of globalisation on the international environment, what are the economic impacts?

Answer 49

• Emerging economies have seen significant benefits from globalization, such as industrial growth and global integration (e.g., China’s manufacturing and Brazil’s resource exploitation).
• For poorer economies like Zambia, globalization can lead to dependency on foreign investment, often resulting in long-term economic and social challenges.

Question 50

in terms of the impacts of globalisation on the international environment, what are the environmental consequences?

Answer 50

• Rapid industrialization in emerging economies, driven by globalization, accelerates environmental degradation, resource depletion, and greenhouse gas emissions.
• While global agreements like the Kyoto Protocol aim to address climate change, nations often prioritize national interests, slowing collective action.

Question 51

in terms of the impacts of globalisation on the international environment, what are the cultural and political dimensions?

Answer 51

• The blending of cultures, often perceived as “Americanization,” raises concerns about the erosion of traditional identities.
• Politically, globalization challenges national sovereignty but simultaneously fosters international cooperation for mutual economic and social goals.

Question 52

what are the implications of globalisation for business strategy?

Answer 52

• Globalization has redefined business operations, emphasizing interconnected global supply chains and international consumer markets.
• Multinational enterprises (MNEs) must navigate extended supply chains, financial market volatility, and sustainability concerns.
• The 2008 financial crisis exemplified vulnerabilities in global financial systems, prompting businesses and governments to rethink strategies toward more localized and sustainable approaches.