Globalisation

Question 1

What is Globalisation?

Answer 1

• The process of social, political, economic, cultural, and technological integration among countries around the world” (Luthans and Doh, 2009
• movement towards an interdependent, integrated global system
• not a new concept but developed since the 1800’s

Question 2

Drivers of Globalisation (5)

Answer 2

• Worldwide reduction in barriers to trade and investment (supported by global institutions)
• Market liberalisation and adoption of free markets
• Industrialisation, economic development, and modernisation
• Integration of world financial markets
• Advances in technology (e.g. IT & communication, transportation)

Question 3

Name some global institutions that regulate the global market place (4)

Answer 3

• The International monetary fund (IMF)
• the world bank
• the world trade organisation
• the united nations

Question 4

Dimensions of Globalisation (5)

signs of globalisation

Answer 4

• Integration and interdependence of national economies
• Rise of regional economic integration bloc
• Growth of global investment
• Convergence of consumer lifestyle and preferences (IPLC)
• Globalisation of production and services

Question 5

Pros and cons of North American Free Trade Agreement (NAFTA) 4/4

Answer 5

Pros

• Mexico gets investment and employment
• Increased Mexican income to buy US/Canada goods
• Demand for goods increases jobs
• Consumers get lower prices.

Cons

• Loss of jobs to Mexico
• Mexican firms have to compete against efficient US/Canada firms (more resource scarce)
• Environmental degradation
• Loss of national sovereignty

Question 6

signs of the Globalisation of markets 4

Answer 6

• the merging of historically distinct and separate national markets into one huge global marketplace
• falling trade barriers make it easier to sell globally
• consumers’ tastes and preferences are converging on some global norm
• firms promote the trend by offering the same basic products worldwide

Question 7

define and positives Globalisation of production

Answer 7

the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor energy, land, and capital)
- lowers costs or improves quality/functionality of the product

Question 8

Firm-level consequences of Globalisation 5

how will it effect firms?

Answer 8

• Countless new business opportunities for internationalising firms
• New risks and intense rivalry from foreign competitors
• More demanding buyers who source from suppliers worldwide
• Greater emphasis on proactive internationalisation
• Internationalisation of firm’s value chain

Question 9

Managing an international business differs from managing a domestic business because…
4

Answer 9

• countries are different
• the range of problems confronted in an international business is wider and the problems more complex than those in a domestic business
• firms have to find ways to work within the limits imposed by government intervention in the international trade and investment system
• international transactions involve converting money into different currencies

Question 10

Societal consequences of globalisation 6

Answer 10

• Rapid spread of financial crises from one country to another - contagion
  ( the recent financial crisis that started in the U.S. in 2008-2009, and moved around the world)
• Loss of national sovereignty
• Offshoring and the flights of jobs
• Effect on the poor
• Effect on the natural environment
• Effect on national culture

Question 11

Is An Interdependent Global Economy A Good Thing?

Answer 11

Supporters believe that increased trade and cross-border investment mean
- lower prices for goods and services
- greater economic growth
- higher consumer income, and more jobs
Critics worry that globalisation will cause
- job losses
- environmental degradation
- the cultural imperialism of global media and MNEs
Anti-globalisation protesters now regularly show up at most major meetings of global institutions

Question 12

How Does Globalisation Affect Jobs And Income (manufacturing) in developed countries?

Answer 12

• Critics argue that falling barriers to trade are destroying manufacturing jobs in advanced countries
  + Supporters contend that the benefits of this trend outweigh the costs
  (Countries will specialize in what they do most efficiently and trade for other goods—and all countries will benefit)

Question 13

How Does Globalisation Affect Labor Policies And The Environment?

Answer 13

• Critics argue that firms avoid the cost of adhering to labour and environmental regulations by moving production to countries where such regulations do not exist or are not enforced
  + Supporters claim that tougher environmental and labour standards are associated with economic progress
  As countries get richer from free trade, they implement tougher environmental and labour regulations

Question 14

How Does Globalization Affect National Sovereignty?

shifting power away from national governments and towards supranational organisations like the WTO, the EU and the UN

Answer 14

• Critics argue that unelected bureaucrats have the power to impose policies on the democratically elected governments of nation-states
  + Supporters claim that the power of these organizations is limited to what nation-states agree to grant
  The power of the organizations lies in their ability to get countries to agree to follow certain actions

Question 15

How Is Globalization 
Affecting The World’s Poor?

Answer 15

• The dichotomy between worlds rich and poor increasing (Critics believe that if globalization was beneficial there should not be a divergence between rich and poor nations)
  + Supporters claim that the best way for the poor nations to improve their situation is to…
  + reduce barriers to trade and investment
  + implement economic policies based on free market economies
  + receive debt forgiveness for debts incurred under totalitarian regimes

Question 16

How Will The Global Economy Of The 21st Century Look?

Answer 16

Globalisation may always reverse- deglobalisation could occur: retreating from liberal economic ideas e.g. Brexit and Trump’s policies

Question 17

Technology as a driver of Globalisation

Answer 17

Technological advancements provide the means for globalisation to occur

• companies can continuously transmit information to make sure operations are running
• have made it more affordable for SMEs to internationalise
• helps developing economies ‘leapfrog’ technologies that other countris had to pass through
• transportation advancement in cost-effective air travel and low cost shipping etc

Question 18

Contagion

Answer 18

The tendency of a financial or monetary crisis in one country to spread rapidly to other countries , due to the ongoing integration of national economies

Question 19

Contagion example

Answer 19

• 2008 financial crisis that started in the US fuelled by real estate market crash… spread rapidly to other countries due to the integrated economy
• Canada and Mexico suffered greatly due to their heavy reliance on trade with the US

Question 20

Offshoring and the flight of jobs

Answer 20

first wave of offshoring occurred in the 60’s and 70’s - shift of manufacturing to Mexico and SE Asia
- then service -sector jobs in the 90’s e.g. accounting etc
- These large scale relocations hurt the local economy massively and devastated whole towns
- BUT MNEs create millions of jobs abroad, which helps raise living standards
BUT this may be criticised as conditions are often poor and wages minimal

Question 21

Effect on sustainability and the natural environment

Answer 21

• Growing industrial demand has led to much infrastructure and development such as is Eastern China, demand for electricity led to the three gorges dam construction which flooded and destroyed agricultural land
  BUT evidence suggests that all countries pass through such a phase before a refocus on their environment when resources are increased

Question 22

MNEs effect on the poor

Answer 22

• exploitation of workers
• low wages
• Child labour
  E.g. Nike - sweatshop conditions and low wages whilst the shoes sold for more than $100
• some say its better than the alternative - no work

Question 23

market liberalisation poland example

Answer 23

• Government intervention is at odds with free trade
• Market liberalisation and free trade are best for supporting economic growth & national living standards
  EXAMPLE
• Poland reduced trade barriers and participated in international trade - focusing on producing and exporting goods it was best suited to
• Poland’s production possibilities frontier for products and services shifted outward
• Poland’s annual income rose, as efficiencies were realised
  BUT govs interrupt free trade processes e.g. protectionism policies (restrict free trade and promote domestic industries)

Question 24

The first phase of globalisation

Answer 24

1830 - late 1800s

• the invention of railroads, efficient ocean transport and rise of large manufacturing firms
• the invention of the telegraph and the telephone facilitated information flow between and within nations j

Question 25

The second phase of globalisation

Answer 25

1900-1930

• rise of electricity and steel production
• The emergence of early MNCs in Europe and N. America

Question 26

The third phase of globalisation

Answer 26

1948-1970’s

• after WW2, the formation of General Agreement on Tariff and Trade (GATT)
• idea was that if nations were economically dependent then they would not have conflict between them

Question 27

The fourth phase of globalisation

Answer 27

• 1980’s to present
• privatisation of state enterprises in transition economies
• the revolution of transportation, communication and information technology
• huge growth of emerging markets
• rapid growth of cross-border trade, international SMEs and services e.g. call centres

Question 28

Born Global Firms

Answer 28

• SMEs account for the majority of all firms
• a young, entrepreneurial firm that initiates international business activity very early on in its evolution, moving rapidly into foreign markets
  + better able to serve niche markets around the world
  + can utilise technology and lower overheads to compete with bigger companies
  + more flexible to adapt quickly in new ideas and tech

Question 29

McDonalisation of the world

Answer 29

increasing westernisation and standardisation