II.

THE STRUCTURES OF GLOBALIZATION

“THE GLOBAL ECONOMY”

- Define economic globalization and the modern world system.

o Economic globalization refers to the increasing interdependence of world
economies as a result of the growing scale of cross-border trade of commodities
and services, flow of international capital and wide and rapid spread of
technologies. It reflects the continuing expansion and mutual integration of
market frontiers, and is an irreversible trend for the economic development in the
whole world at the turn of the millennium. The rapid growing significance of
information in all types of productive activities and marketization are the two
major driving forces for economic globalization. In other words, the fast
globalization of the world’s economies in recent years is largely based on the
rapid development of science and technologies, has resulted from the environment
in which market economic system has been fast spreading throughout the world,
and has developed on the basis of increasing cross-border division of labor that
has been penetrating down to the level of production chains within enterprises of
different countries
o The global economy is the world economy or the worldwide economy.

It is all the economies of the world which we consider together as one economic
system. Put simply; it is one giant entity. It is also the system of trade and industry
across the world that has emerged due to globalization. In other words, the way in
which countries’ economies have been developing to operate collectively as one
system.

The term has two meanings:

 The economy of the whole planet, i.e., global GDP. GDP stands for Gross Domestic
Product.
 The way the world is today, with countries’ economies so intertwined and interdependent
that they all seem like parts of one whole. That ‘whole’ we call the ‘global economy.’

Gross domestic product (GDP) is probably the most important economic measure of the state of
a nation’s economy. With just one figure, one can tell whether a country’s economy has changed
compared to a past time.

Gross Domestic Product is the net value of all goods and services that an economy produces
during a specific period. The total accounts for taxes, and subsidies.
Put simply; gross domestic product is the sum of all economic activity in a country over a
specific period.

GDP figures allow economists to record and analyze the economic output of a region or country.
Economists do this over a specific period, i.e., yearly, quarterly, or monthly.

Gross domestic product patterns help us determine when an economy may be heading the wrong
way. It also helps us determine when we are in a recession.

FACTORS THAT FACILITATE ECONOMIC.

Containerization

The costs of ocean shipping have come down, due to containerization, bulk shipping, and other
efficiencies. The lower unit cost of shipping products around the global economy helps to bring
prices in the country of manufacture closer to those in export markets, and it makes markets
more contestable globally

Technological change

Rapid and sustained technological change has reduced the cost of transmitting and
communicating information – sometimes known as “the death of distance” – a key factor behind
trade in knowledge products using web technology

Economies of scale

Many economists believe that there has been an increase in the minimum efficient scale (MES)
associated with some industries. If the MES is rising, a domestic market may be regarded as too
small to satisfy the selling needs of these industries. Many emerging countries have their own
transnational corporations

Differences in tax systems

The desire of businesses to benefit from lower unit labor costs and other favorable production
factors abroad has encouraged countries to adjust their tax systems to attract foreign direct
investment (FDI). Many countries have become engaged in tax competition between each other
in a bid to win lucrative foreign investment projects.

Less protectionism

Old forms of non-tariff protection such as import licensing and foreign exchange controls have
gradually been dismantled. Borders have opened and average import tariff levels have fallen.
That said, it is worth knowing that, in the last few years, there has been a rise in non-tariff
barriers such as import quotas as countries have struggled to achieve real economic growth and
as a response to persistent trade and current account deficits.

Growth Strategies of Transnational and Multinational Companies

In their pursuit of revenue and profit growth, increasingly global businesses and brands have
invested significantly in expanding internationally. This is particularly the case for businesses
owning brands that have proved they have the potential to be successfully globally, particularly
in faster-growing economies fuelled by growing numbers of middle class consumers.

“MARKET INTEGRATION”

(How markets integrate?)

RISE OF FREE TRADE

Physical changes in lowering freight and transaction costs were not the only forces stimulating
market integration. It was normal for countries to impose import duties on foreign goods, seeking
to gain an inflow of gold in their foreign trade accounts by selling more to each of their trading
partners than they bought from them. But in 1846 the merchants of Manchester, England, the
center of the world's cotton textile industry, struck their famous victory for free trade by forcing
the British government to abandon tariffs on all imported goods apart from a few luxury items.
The tariffs on wheat were the first to go, opening up the Great Plains of the United States for
wheat production to supply Britain. With free trade, no longer did trade relations with a foreign
country have to balance or be in surplus; rather, a deficit in trade with one country could be
offset by a surplus in trade with another country, liberalizing world trade in a way never
previously seen. Britain moved heavily into deficit on trade account, but this was sustained by
considerable invisible inflows generated by her substantial overseas investments, particularly in
the railroad systems of the United States.

This policy of open markets became a dominating principle extended through much of
the British Empire, including the key market of India, although Canada and the State of Victoria
in Australia chose to be notable exceptions. The United States retained import duties, and after
short periods of trade liberalization most European countries also returned to protectionism so
that their new manufacturing industries could establish themselves safe from the competition of
cheaper goods from Britain. Britain itself ran heavy trade deficits with the United States due
largely to grain purchases, and it also had deficits with the newly industrialized countries of
continental Europe, due to purchases of manufactured goods. Britain was able to sustain these
deficits because of its own sales of manufactures, especially cotton yarn and textiles, to India and
the rest of Asia, including China. So the open-market polices of the British Empire played a
crucial role in sustaining a complicated interrelated mesh of world payments, and newly
industrializing countries took advantage of these open markets whilst maintaining their own
protective walls. Each country could specialize in producing those goods they were best
endowed by nature to produce, and could exchange them for the other products they needed. The
vast market of British India was crucial, and though Britain, the colonial power, was the leading
supplier of manufactured goods there, Germany and other industrial nations were free to trade,
and did so very effectively. India itself had big surpluses with the rest of Asia, particularly
China, because of its sales of opium and of cotton yarn and textiles from Bombay.

ATTRIBUTES OF GLOBAL CORPORATIONS.

OVERSEAS EXPERIENCE

Many global executives understand what doing business in a flat world is like because they’ve
lived overseas, sometimes for decades at a time. If you want to become a successful international
business leader, transcending your own cultural perspective and learning how business is done in
different contexts is essential.

DEEP SELF-AWARENESS

Understanding your beliefs and knowing where they might differ from others’ is critical to global
executive success. Without this key characteristic, you will not be able to adapt to and tolerate
the deep-seated beliefs of others — and business opportunities will evaporate. Beware of the
“I’m right; you’re wrong” assumption.

SENSITIVITY TO CULTURAL DIVERSITY

Are you willing to eat raw fish? Snake? Raw monkey brains? Can you adjust your eating and
sleeping habits to match the local executives’ routines and patterns? In other countries,
seemingly minor things can be off-putting, such as sticking your chopsticks in your rice or
touching someone with your left hand.

Much of this insight comes from experience. You must have an intense interest in the lives and
cultures of others, recognizing that your culture and background are not inherently superior, to
master the global business arena.
HUMILITY

Being interested in other cultures and how people in those cultures do things, especially with
regard to business, implies a certain humility. Humility here means a belief that other lands and
cultures have figured out very interesting answers to life’s problems. As a good international
business person, you must be open to and fascinated by those answers. This trait requires a
willingness and ability to listen well and with real intention.

LIFELONG CURIOSITY

The world is constantly evolving. Without an intense curiosity and a desire to learn, you will be
left behind and increasingly unable to converse, much less keep up, with your peers. Staying
abreast of new learning opportunities requires a humble awareness that what you know is not
enough and that you always have more to learn.

CAUTIOUS HONESTY

Surprisingly, the definitions of “honesty” and “truth” vary widely in the business arena. People
sometimes omit information or only tell the truth they think other people need to know. However
you design your ethics and morality in your personal life, in global business settings, executives
need to know they can count on you. If you don’t deliver on your business promises, your
reputation will suffer. Effective global leaders can balance the need to be cautious in different
contexts while demonstrating they can follow through.

GLOBAL STRATEGIC THINKING

When you have a global perspective, you think strategically about managing business using the
best people from around the planet. Much of your ability to do this comes from a lifetime of
networking at the highest levels in global boardrooms and your aptitude for seeing how various
pieces of global industries play out internationally. To make strategic decisions for your
company, you need to understand how the business world works on a global scale.

PATIENTLY IMPATIENT

How do you become patiently impatient? You must be in a hurry and yet be patient enough to
allow the local and regional processes to unfold as they are meant to. Time and pace are not the
same in every country. Balancing the demands of hot competitive and technological trends with
the pace of local cultures can be frustrating to the uninitiated.

WELL-SPOKEN

Given the challenges of working via interpreters or fumbling through conversations in more than
one language, the ability to say clearly what you mean is a key global business skill. If you
converse with others in their native language, you usually earn brownie points — however, if
what you have to say is obscure or unintelligible, you’ll quickly be in a deficit balance. Clear
communication is a powerful leadership trait to have on the global stage.

GOOD NEGOTIATOR

Doing business across ethnic, national and regional boundaries requires strong negotiating skills.
If you can add these skills to an innate enjoyment of the gamesmanship involved in negotiating,
you will become a highly effective negotiator.

PRESENCE

A certain charisma surrounds you if you are an influential global leader. Part of it — but only
part — is position or title. The bigger portion is dress, self-confidence, energy level, interest in
other people and comfort with the challenges at hand. You may not want to believe these things
matter, but they do.

As a global business leader, you must respect the identities and affiliations of others. Some
people can do that; many or most cannot. Do you have what it takes to become a global business
leader?

https://ideas.darden.virginia.edu/11-key-characteristics-of-a-global-business-leader
https://www.tutor2u.net/business/reference/factors-that-have-contributed-to-globalisation