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This document discusses globalization, including its objectives, introduction, emerging global economy, drivers, and globalization of markets. It defines globalization as the growing interdependence of countries through increasing cross-border transactions, capital flows, and technology diffusion. The key drivers are declining trade barriers since WWII and technological advances in transportation and communication. As barriers fall and technology connects people globally, distinct national markets are merging into a single global marketplace.

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0% found this document useful (0 votes)
51 views7 pages

Example: at Distributed Service Systems, A Small Full-Service Computer Company Located in

This document discusses globalization, including its objectives, introduction, emerging global economy, drivers, and globalization of markets. It defines globalization as the growing interdependence of countries through increasing cross-border transactions, capital flows, and technology diffusion. The key drivers are declining trade barriers since WWII and technological advances in transportation and communication. As barriers fall and technology connects people globally, distinct national markets are merging into a single global marketplace.

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Rajah Calica
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Globalization

Objectives
After studying this unit, you should be able to:
 Realize the trends in the emerging global economy
 Identify the drivers of globalization
 Describe the concept of ‘globalization of markets’
 Discuss the policy issues in globalization

Introduction
A fundamental shift is occurring in the World economy. We are rapidly moving from a world in
which national economies were relatively self-contained entities, isolated from each other by
barriers to cross border trade and investment; by distance, time zones, and language and by
national differences in Govt., regulation, culture and business systems –And we are moving
towards a world in which barriers to cross- border trade and investment are tumbling, perceived
distance is shrinking due to advances in transportation and telecommunication technology,
material culture is starting to look similar the world over and national economies are merging
into an inter dependent global economic system. The process by which this is happening is
currently reported as globalization.
International Monetary Fund defines Globalization as “the growing interdependence of countries
worldwide through increasing volume and variety of cross border transactions in goods and
services and of international capital flows and also through the more rapid and wide spread
diffusion of technology”.
Charles U.L. Hill defines globalization as “The shift towards a more integrated and
interdependent World Economy. Globalization has two main components-the globalization of
markets and Globalization of production.”
Interdependence and integration of individual countries of the World may be called as
Globalization. Thus, globalization integrates not only economies but also societies.

Emerging Global Economy


The decades of the 1980s and 1990s brought transitions in the political, economic, technological,
and environmental arenas. Some of these changes continue to reshape our work and non-work
lives, much as the early Industrial Revolution did during the mid-1800s. This revolution is fuelling
increased globalisation. Globalisation has made a big world smaller.
Globalization affects trade, finance, production, communications, and technological change.
When we look at the world map, we need to think about how this global community of people
and nations is being systematically drawn closer together.
Example: At Distributed Service Systems, a small full-service computer company located in
Reading, Pennsylvania, a technical consultant sits at a terminal and solves assembly line
production problems at Carpenter Technology steel plants in India, China, Mexico, and Taiwan. At
the same time, a major U.S. global manufacturer in Green Bay, Wisconsin, has a small staff of
foreign currency traders working twenty-four hours a day to manage the firm’s global financial
needs and resources.
Since 1980, world exports (goods leaving a country) have increased 194 per cent, and U.S.
imports (goods coming into the country) have more than tripled. In 1980, total U.S. trade
equalled 9 per cent of Gross Domestic Product (GDP), and Gross National Product (GNP), both of
which measure the annual output of goods and services; in 2004, it amounted to 26 per cent.
Nations have found it cheaper and more efficient to trade more with each other than to produce
all their products at home.
The last quarter of century has seen rapid changes in the global economy. Barriers to the free
flow of goods, services, and capital have been coming down. The volume of cross-border trade
and investment has been growing more rapidly than global output, indicating that national
economies are becoming more closely integrated into a single, interdependent, global economic
system.
The move toward a global economy has been further strengthened by the widespread adoption
of liberal economic policies by countries that for two generations or more were firmly opposed to
them. Country after country, we are seeing state-owned businesses privatized, widespread
deregulation, markets being opened to more competition, and increased commitment to
removing barriers to cross-border trade and investment.
BRICS
BRICS is the title of an association of leading emerging economies, arising out of the inclusion of
South Africa into the BRIC group in 2010. As of 2012, the group's five members are Brazil, Russia,
India, China and South Africa. With the possible exception of Russia, the BRICS members are all
developing or newly industrialized countries, but they are distinguished by their large, fast-
growing economies and significant influence on regional and global affairs. As of 2012, the five
BRICS countries represent almost 3 billion people, with a combined nominal GDP of US$13.7
trillion, and an estimated US$4 trillion in combined foreign reserves. Presently, India holds the
chair of the BRICS group.
President of the People's Republic of China Hu Jintao has described the BRICS countries as
defenders and promoters of developing countries and a force for world peace. However, some
analysts have highlighted potential divisions and weaknesses in the grouping, such as India and
China's disagreements over Tibetan and border issues, the failure of the BRICS to establish a
World Bank-analogue development agency, and disputes between the members over UN Security
Council reform.
The grouping has held annual summits since 2009, with member countries taking turns to host.
Prior to South Africa's admission, two BRIC summits were held, in 2009 and 2010. The first five
member BRICS summit was held in 2011. The most recent summit took place in New Delhi, India,
on March 29, 2012.

Drivers of Globalization
Two macro factors seem to underlie the trend toward greater globalization. The first is the decline
in barriers to the free flow of goods, services, and capital that has occurred since the end of
World War II. The second factor is technological change, particularly the dramatic developments
in recent years in communication, information processing, and transportation technologies.
Declining trade and investment barriers: During the 1920s and 30s, many of the nation-
states of the world erected formidable barriers to international trade and foreign direct
investment. International trade occurs when a firm exports goods or services to consumers in
another country. Foreign direct investment occurs when a firm invests resources in business
activities outside its home country. Many of the barriers to international trade took the form of
high tariffs on imports of manufactured goods. The typical aim of such tariffs was to protect
domestic industries from foreign competition.
Having learnt from this experience, the advanced industrial nations of the West committed
themselves after World War II to removing barriers to the free flow of goods, services and capital
between nations. This goal was enshrined in the treaty known as the General Agreement on
Tariffs and Trade (GATT). It started out in 1947 as a set of rules to ensure non-discrimination,
transparent procedures, the settlement of disputes and the participation of the lesser-developed
countries in international trade.
The latest GATT negotiations, called the Uruguay Round, were initiated in 1987. Even though
tariffs still were addressed in these negotiations, their importance has been greatly diminished
due to the success of earlier agreements. The main thrust of negotiations had become the
sharpening of dispute-settlement rules and the integration of the trade and investment areas
that were outside of the GATT. After many years of often-contentious negotiations, a new accord
was finally ratified in early 1995. The GATT was supplanted by a new institution, the World Trade
Organization (WTO), which now administers international trade and investment accords.
The role of technological change: Microprocessors and Telecommunications: Perhaps the
single most important innovation has been development of the microprocessor, which enabled
the explosive growth of high-power, low-cost computing, vastly increasing the amount of
information that can be processed by individuals and firms. The microprocessor also underlies
many recent advances in telecommunications technology.
The Internet and the World Wide Web: The phenomenal growth of the Internet and the
associated World Wide Web is the latest expression of this development.
Transportation technology: In addition to developments in communication technology,
several major innovations in transportation technology have occurred since World War II. In
economic terms, the most important are probably the development of commercial jet aircraft and
super freighters and the introduction of containerization, which simplifies transshipment from
one mode of transport to another. The advent of commercial jet travel, by reducing the time
needed to get from one location to another, has effectively shrunk the globe.
Globalization of Markets
The globalization of markets refers to the merging of historically distinct and separate national
markets into one huge global marketplace. Falling barriers to cross-border trade have made it
easier to sell internationally. It has been argued for some time that the tastes and preferences of
consumers in different nations are beginning to converge on some global norm, thereby helping
to create a global market.
Example: Consumer products such as Citicorp credit cards, Coca-Cola soft drinks, Sony play
station, and Mc Donald’s hamburgers are frequently held up as prototypical example of this
trend; they are also facilitators of it. By offering a standardized product worldwide, they help to
create a global market.
Despite the global prevalence of Citicorp credit cards and McDonald’s hamburgers, it is important
not to push too far the view that national markets are giving way to the global market. Very
significant differences still exist between national markets along many relevant dimensions,
including consumer tastes and preferences, distribution channels, culturally embedded value
systems and the like. For example, automobile companies will promote different car models
depending on a range of factors such as local fuel costs, income levels, traffic congestion, and
cultural values.
The most global markets are not markets for consumer products – where national differences in
tastes and preferences are still often important enough to act as a brake on globalization – but
markets for industrial goods and materials that serve a universal need the world over. These
include the markets for commodities such as aluminum, oil and wheat; the markets for industrial
products such as microprocessors, computer memory chips and commercial jet aircraft. In many
global markets, the same firms frequently confront each other as competitors in nation after
nation.
Example: Coca-Cola’s rivalry with Pepsi is a global one, as are the rivalries between Ford and
Toyota, Boeing and Airbus, Caterpillar and Komatsu.
If one firm moves into a nation that is not currently served by its rivals, those rivals are sure to
follow to prevent their competitor from gaining an advantage.

Transition from Domestic to International to Global Markets


After a company decides to go international, it must decide the degree of marketing involvement
and commitment it is prepared to make. Generally, a domestic company enters emerge as an
international company through the following stages:
1. No direct foreign marketing: A company in this stage does not actively cultivate
customers outside national boundaries; however, this company’s products may reach
foreign marketing. Sales may be made to trading companies as well as foreign customers
who come directly to the firm. Or products may reach foreign markets via domestic
wholesalers or distributors who sell aboard without explicit encouragement or even
knowledge of the producer. As companies develop websites on the Internet, many receive
orders from international web surfers.

2. Infrequent foreign marketing: Temporary surpluses caused by variations in production


levels or demand may result in infrequent marketing overseas. The surpluses are
characterized by their temporary nature; therefore, sales to foreign markets are made as
goods are available, with little or no intention of maintaining continuous market
representation.

3. Regular foreign marketing: At this level, the firm has permanent productive capacity
devoted to the production of goods to be marketed in foreign markets. A firm may employ
foreign or domestic overseas middlemen to it may have its own sales force or sales
subsidiaries in important foreign markets. The primary focus of operations and production
is to service domestic market needs. However, as overseas demand grows, production is
allocated for foreign markets.

4. International marketing: Companies in this stage are fully committed and involved in
international marketing activities. Such companies seek markets all over the world and sell
products that are a result of planned production for markets in various countries. This
generally entails not only the marketing but also the production of goods outside the home
market. At this point, a company becomes an international or multinational marketing
firm.

5. Global marketing: At the global marketing level, the most profound change is the
orientation of the company toward markets and associated planning activities. At this
stage, companies treat the world, including their home market, as one market. Market
segmentation decisions are no longer focused on national borders. Instead, market
segments are defined by income levels, usage patterns, or other factors that often span
countries and regions. Often, this transition from international marketing to global
marketing is catalyzed by a company’s crossing the threshold of more than half its sales
revenues coming from aboard.

Policy Issues
The key problems of the major institutions of global governance is that of unilateralism led by
hegemons and lack of democracy in the workings and operations of these institutions - voting
and representation is heavily skewed towards the hegemons. Secondly, these institutions have
continued to foster policies in the old spirit and using the same methods, without taking into
account the dynamizing impact of the logic of globalization which has implication for time and
space compression and mobility of capital and markets.
These processes have further intensified the poverty in the global south and increased income
inequalities in the global North. In particular, there has been so much arbitrariness in the
operation of the World Bank and IMF and so much tele-guiding of the activities of the UN and its
agencies - the result of which is the Gulf crisis. All these organizations and agencies need reform
in their Charters and Conventions to bring them up to date with the demands of current thinking
and the democracy current gripping the world. In particular, the WTO has in many ways made it
impossible for smaller countries to have leverage for their internal development with its clause
on the principle of “Reciprocity”. Its pronouncement on Agricultural development and indeed
Third World Development has been most pernicious since the Doha Rounds, over which the major
economic powers have foot dragged.
Over the years, the roles and responsibilities of international organizations have been affected
seriously by national, regional and global events, as well as the defining and changing features of
globalization. On the one hand, their roles in international affairs first, after the Second World
War in the 1940s and secondly after the cold war in the 1990s have increased significantly as
globalization and governance issues raise the bar for global problems and challenges. They
however, would be best described at this time as anachronisms, organs that are more or less in
danger of living out their relevance.
Presently, international organizations, particularly the multilateral organization s, such as the
United Nations Organization, the World Bank, the International Monetary Fund and the World
Trade Organization, among others, carry with them fundamental structural deformities. They,
thus face compelling operational challenges.
These challenges are essentially derived from some of the following:
 At inauguration: The global circumstances which gave birth to the constitutive rules and
consequently gave international institutions their structure of operations have changed
significantly particularly since the end of the Cold War. The extant structures, therefore
cannot serve effectively the present global system of organization. At the minimum, the
structures would have to be reviewed and revised to take into cognizance, the present
configurations of national and regional balances and imbalances.
 Democratic Deficits: Engagements within international organizations can hardly be
described as democratic, as issues bordering on the transparency in the decision making
processes are constant. Developing countries are hard pressed to pursue their positions
conclusively, as they lack the resources/capacity to do so at the expense of dominant
states, which have the capacity. In the United Nations for example, the presence of a
permanent Security Council with veto powers to vet decisions at the General Assembly,
constitute a block of the “almighty” in an assembly of equal states. The UN operates like a
huge bureaucracy, affecting its response and carrying capacity, and ultimately its output.
There is disproportionate structuring of the UN such that the carrying capacity of some of
its agencies, groups and individuals is more than that of others. Indeed, some offices end
up carrying out the responsibility and schedule of other agencies or departments. The
efficiency of the UN system is measured more by paper work than operation and real work.
Proposed reforms of such should not be delayed, but pursued to their logical conclusions.
 Global response to regional problems: The response of international organizations to
developing regions like Africa and their most pressing problems has in many cases not
been adequate, and most times, it is untimely. Early warning signals are either disregarded
or totally ignored in a somewhat mindless manner. The way and manner international
organizations such as the IMF, World Bank and even the United Nations address national or
regional problems in some of the continents are more of a wait for-something-to-happen-
before-we-move engagement. International mechanisms for protecting basic human
rights, or even preventing wide-scale atrocities, are weak and inadequate and used
sometimes arbitrary (i.e. the haste to save Kuwaitis under Iraqi occupation and the lack of
enthusiasm to prevent the Rwandan Genocide or the lukewarm approach to Darfur).
Therefore, what is needed, are responsive global governance institutions that meet the
needs of everyone in a balance between the rights of the citizens, sovereignty of states
and legitimacy of mandate.
 Legitimacy issues: Legitimacy is mostly linked to perception, and the issue of legitimacy
is at the heart of the challenge facing many international organizations. Their failure to
rise to meet certain global challenges, particularly in distraught humanitarian cases (for
example Rwanda and Darfur), leads to constant suspicion and calls, questioning the very
basis of their existence and their corporate legitimacy.
 Issues of accountability and transparency: The case of accountability is worsened by
the perceived lack of transparency in international organizations. This is made important
as they assume more and more global tasks and responsibilities that go beyond the
mission for which they were originally created. They thus have a greater impact on the
lives of peoples and states, in ways that were not possible 20 years ago. They however,
are hardly accountable to any independent institution acting on behalf of the generality of
nations they represent or on whose behalf they act.
 Enforcement of Mandates: Enforcement powers of international organisations are
severely limited, as their mandates are subject to the availability of resources to be
provided by the patronizing or member states as well as their authorization. The
concentration of powers in centralized distant bureaucracies with little sympathy for local
cultural norms has the potential to counteract the concept of “division of powers” and the
benefits of adapting methods of government to localities.
International organizations are generally prone to the duplication of projects and mission
objectives. This can lead to an over concentration efforts on a single subject or agenda, at the
expense of other critical areas. Environment problems are an instance of this. Perhaps more
important is the fact that the current relentless push for some form of uniformity under the rubric
of an imposed single market. This in turn has created a situation wherein there is increasing
political, social and cultural fragmentation. In essence the world is today witnessing
factionalization which in turn breeds complex frictions. From all indications, the Doha process of
the WTO is more or less comatose, the IMF and the World Bank cannot be said to be at their
imperial best and may become irrelevant once the Asian powers consolidate their growth and
grip. Current prognosis suggests that only the United Nations might maintain any form of serious
strategic relevance.
Globalization is not based on any ethical or moral guidelines. Most of the rules and regulations
guiding the global processes have been made by the developed or the heavily developed
countries. They have the resources as well as control the international institutions or
mechanisms of globalization. Developing countries are therefore kowtowed into globalization
without choices.
Globalization’s Free Trade and its concomitants as promoted through international organizations
like the WTO, work to the disadvantage of developing market economies. Free Trade seeks the
removal of protective measures and tariffs, put in place by developing economies to protect
indigenous entrepreneurs, who are not likely to survive the influx of heavily subsidized products
from developed nations if they remove protective measures.
Globalization’s features have exposed inherent weaknesses by internationalizing crime and
battlefields. Resources used to process globalization may also be deployed to perpetrate crimes.
Ideological conflict agendas are being reinterpreted to include anywhere and everywhere. For
instance, terrorists battling America, have no compulsion bombing American Embassies in Kenya
and Tanzania, developing countries without the resources to deal with global terrorism.
Globalization has facilitated an increasing growth trend for urbane centers. The attendant
pressure on the existing inadequate recreational and development infrastructures adds to the
environmental security and heightens the challenges to the provision of water and energy
resources to the growing population. The consequence is a natural increase on violent crimes,
conflicts hotspots and dysfunctional cities. These problems are magnified when the developed
centers lure away professionals from poor nations to the richer nations. Globalization facilitates
this by the inequality that is accentuated in remunerations and incomes for professionals.
Globalization promotes competitions, sometimes violent competitions and conflicts, among
nations, thereby putting in place motives for regional insecurities. It also promotes emergence of
global oligopolies as typified by the rash of Mergers and Acquisitions (M&A) especially in banking
and extractive industries.

References:
http://economics.about.com/od/globalisationtrade/l/aaglobalisation.htm
http://www.legalserviceindia.com/articles/glob_is.htm
http://www.b2binternational.com/publications/white-
papers/globalisationand-marketing/ http://www.3s4.org.uk/drivers/globalisation-of-markets

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