C1- Globalization Flashcards
(28 cards)
Globalization
Trends toward more integrated and interdependent world economy
2 facet of globalisation
- Globalisation of market
- Globalisation of production
globalisation of market
- Distinct and separate national market merging into one huge global marketplace
- Converging of consumers’ taste and preference(like ada yang suka baju kurung, blouse, etc)
globalization of production
- source the products from location around the globe
Why? to take advantage over national differences in the cost and quality of production (labor energy, capital, land)
. - lower cost structure
. - improve quality of product to compete effectively
. - outsource at first for manufacturing, but now can outsource service also
Impediment (effect) of globalization of production to globalization
- formal and informal trade barriers
- barriers to foreign direct investment
- transportation cost
- economic and political risk
- managerial challenge
What is driving the move toward greater globalization?
- Declining trade & investment barriers
- Technological change
What is global trade?
Exchange goods/services between countries
The emergence of global institution
1. What Global Institution do?
- Manage, regulate, police global marketplace
- promote establishment of multinational treaties to govern global business system
The emergence of global institution
2. What is World Trade Organization (WTO)?
A. Police world trading system to ensure nations adhere to WTO’s rules
B. Focusing on cutting tariffs on industrial goods, services, agricultural products
-succeed the General Agreement on Tariff and Trade (GATT)
C. Reducing barriers to cross-border investment
The emergence of global institution
3. What is International Monetary Fund (IMF)?
a. Monitor international monetary system & global economic development to identify risk to the economic stability of its 190 member countries.
b. Lender of last resort
C. 1 trillion amount available for lending
The emergence of global institution
4. What is World Bank and what the role?
- World Bank is international development organization own by 187 countries.
- Promote economic development using low-interest loans
- Lending money to gov of its poorer member countries to improve their economies
The emergence of global institution
5. What is United Nation (UN)
5(a). What UN do?
a. 193 member countries
b. What UN do?
-maintain international peace and security
-develop friendly relationship among nations
-promote respect for human right
-the center of harmonizing the action of nations
-cooperates in solving international problems
The emergence of global institution
6. What is Group of 20 (G20)
-A intergovernmental forum for coordinated policy response to financial crisis 2008-2009
-represent 90% of global GDP (gross domestic products)
-comprises of 19 countries such as India, China, Brazil, Mexico, and European Union
Driver of Globalization
1. Declining trade & Investment barrier
NOTES
International Trade: firm exports products to consumers in another countrier
Foreign Direct Investment: Firm invests resources in business outside its home country
-During 1920s and 1930s, banyak nations put up barriers to international trade cuz they want to protect domestic industries
-But after WWII, barriers reduced by advanced Western Countries
-Products being produce more than before but greater proportion being traded across national borders
-Consumers become more knowledgeable which drive more demands
-Volume of world trade growing faster than GDP
a. economies become more intertwined
b. world become wealthier
c. companies dispersing production to decrease cost and increase product quality
Driver of Globalization
2. The role of technological change
After WWII, makin banyak advance in communication, information processing, and transportation;
a) Microprocessors and telecommunication advance
-Moore’s Law: No of transistors on microchip will double
b) Internet: people search more info
c) Transportation technology: use containerization (kontena)
Implication of globalization towards market and production
1) Globalization of production
a. lower transportation cost
b. Allow firms respond better to consumers’ demand
c. Make geographically dispersed production system more economically (macam phone part ada yang dari India, China, etc)
2) Globalization of market
a. Reduce cultural distance
b. Consumers’ tastes and preferences converging (macam ada yang suka tshirt, baju kurung, taste lelain)
c. Low cost transportation- can ship products globally
d. Low cost communication network- helps create electronic global marketplace (shopee, alibaba, agoda)
The Changing Demographic of Global Economy
- The Changing World Output & World Trade Picture
- Early 1960s, U.S. dominate industrial power (economy, trade, FDI) accounted for about 38.3% of world manufacturing output
- in 2014;
-US accounted to 22.4% (decline)
-German, France, Uk also decline
-rapid growth of world manufacturing output: India, China, Russia, Brazil
The Changing Demographic of Global Economy
- The Changing Foreign Direct Investment (FDI) Picture
- Shares of world output generate by developed countries has been increase since 1960s
- Stock of FDI generated by rich industrial countries declining
- FDI cross-border flows rising
- Large recipient FDI: China, Brazil, Mexico, India
The Changing Demographic of Global Economy
- The Changing Nature of Multinational Enterprise (MNEs)
Non-US mltinational
MNEs: business with productive activities in 2 or 3 countries
Since 1960s, the rise in non-US MNEs and mini-multinationals
The rise of mini-multinationals:
a. more small business companies involve in international trade & investment
b. barriers of small firms got lowered by Internet (positive thing)
The Changing Demographic of Global Economy
- The Changing World Order
- The collapse of cmmunism in Eastern Europe
-greater export and investment opportunities
- but political unrest is increasing risk - Economic development in China
-huge opportunities despite of gov control
-but new competition from Chinese firm - Free market reforms and democracy in Latin America
-new market & sources of materials and production
-but eco and political risks high
The Changing Demographic of Global Economy
- The Global Economy of 21st Century
More integrated global economy
-new opportunities for firm
-but, political and eco disruptions can throw plans into disarray
(GLOBALIZATION DEBATE)
Antiglobalization Protest
- Protest become violent - began with WTO protest in Dec 1999 in Seattle
- Protestors fear globalization has bad effect towards living standard, wages, environment
(GLOBALIZATION DEBATE)
Globalization, Jobs, Income
- Manufacturing jobs in rich economies (US and western Europe) destroyed because the trade barriers fall
. - Service activities highly outsourced to nations with lower labor costs
. - supporters say benefits outweigh the costs
. - Outsourcing allows companies to redue cost structure, resulting in reducing prices
. - Gap between poorest-richest segments of society has widened, but real income levels increase for all including the poorest segment (B40,M40T20 semua income naik)
. - Advanced ecnonomies report shortage og highly-skilled workers and excess of unskilled workers
(GLOBALIZATION DEBATE)
Globalization, Labor Policies, and Environment
- Lack regulations in less developed countries
- Adhere to environmental regulations increase manufacturing’s costs
- Supporters argue that tight regulation leads to economic progress
- Studies shows hump-shaped (bonggol) relationship between income levels and pollution levels
