Globalisation.

CHAPTER 12 : GLOBALISATION

1. Introduction :

• the second half of the 20th century = a real milestone:

• development of air transport, huge ships
• expansion of new technologies

• large companies :

• benefited from advances in technology and new investment opportunities
• crossed national borders :

• developing countries in Africa
• the BRICs (brazil, Russia, india, and china)

• in developing countries : manufacturing (past) ➔ jobs requiring high levels of skills and training (present)

• example : well-trained and well-educated engineers and IT specialists in India and China = cheaper to employ than American or European workers.

• Outsourcing to developing countries ➔ decrease in production costs and rise in profits

1. Definition :

• Globalisation = process of developing economic, political, cultural and communication links.

➔from local and nationalistic perspectives to a larger view of an interconnected and interdependent world

• Economic : trade, investment, production and finance
• Political : organizations establishing frameworks and rules

• Examples : the United Nations, the World Trade Organisation, the International Monetary Fund and the G20

• Cultural : holiday abroad, sharing of ideas, fashions and music, global sporting events
• Communication : the internet

• Objective of companies  = take advantage of that borderless world

• Move beyond domestic and national markets to other markets around the world

• Globalisation ➔process of relocation and construction of a business strategy within a global context

1. Globalization drivers :

• Technology :

• Growth in globalization
• Ability to communicate internationally
• People are more informed about economic trends
• People take advantage of investment opportunities

• George Yip (1947) : a research specialist in global strategy and marketing

• The globalisartion potential of an industry includes four types of drivers :

• Market drivers : markets = similar

➔ example : convergence of lifestyles and tastes, establishment of world brands, development of global advertising.

• Cost drivers : global reorganisation of operations ➔ reduction in costs.

➔ e.g. technological innovation, advances in transportation, emergence of newly industrialised countries with productive capability and low labour costs.

• Government drivers : global rules and protocols

➔e.g.reduction of tariff barriers and non-tariff barriers, creation of trading blocs.

Example: GATT = facilitate free trade between member states by regulating and reducing tariffs on traded goods. 

• Competitive drivers ➔ global business strategies to maintain a competitive position

➔e.g. emergence of news competitors that are determined to become global competitors, companies becoming globally centred rather than nationally centred

1. Globalization : benefits and disadvantages:

• Supporters = opponents :

• Globalization $ a new phenomenon
• Technological change ➔ globalization
• Globalization ➔ impact on political attitudes

• Supporters Vs opponents :

• Consequences of globalization : beneficial or harmful ?

1. The proponents :

• Alan Greenspan (1926) American economist and former chairman of the Federal Reserve (1987-2006) : “the basic problem that we confront is given that the advantages (of globalization) are so much greater than the deficits, how de we take care of those who are on the wrong side of this process ?”
• Companies can easily trade and relocate, invest directly and more easily
• Rise in the living standards of the middle classes of emerging countries (OECD)
• For consumers : globalization ➔ inexpensive imported goods
• Supporters of globalization :

• Technology spreads faster
• Countries specialise in particular products ➔ optimize their competitive advantages
• Political relationships between nations = more stable
• Yet globalization does not benefit countries equally :

• Rich countries = more likely to benefit from the globalization process (lower prices or global political agreements)
• But in the long term it will benefit rich and poor countries alike

• Major supporters of globalization :

(the world bank, world trade organization, OECD, world economic forum, international monetary fund)

• The World Economic Forum = a Swiss non-profit foundation

➔”to improve the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas”

➔annual meeting in Davos

=2,500 top business leaders, international political leaders, economists

...