THE

GLOBAL ECONOMY
 THE GLOBAL ECONOMY
OR
ECONOMIC GLOBALIZATION
• The global economy refers to the interconnected worldwide
economic activities that take place between multiple countries.
These economic activities can have either a positive or negative
impact on the countries involved.
• Is the economic mixing and interdependence of economies
across the world through an escalation of cross cultural
movements of goods, services, technologies and wealth (Joshi,
2009).

• It is the world’s money being spread around as goods, products,

and technology are sent from one country to another country.
Give an example of product you
bought in the super market/mall
and identify where the item has
been manufactured.
 INTERNATIONAL
TRADE
• International Trade (IT) is the process and system when goods,
commodities, services cross national economy, and boundaries in exchange
for money or goods of another country (Balaam and Veseth, 2008). Global
trade has grown dramatically since the post-cold war era as a result of
increasing demand of goods and services of countries.

• Trading globally gives consumers and countries the opportunity to be

exposed to goods and services not available in their own countries, or more
expensive domestically.
• Economies set rules and guidelines for international trade which led to the
formation of General Agreement on Tariffs and Trade (GATT).

• In 2021, the GDP in Philippines was worth 394.09 billion US dollars

according to the official data from the world bank.
THREE (3) PERSPECTIVES
ON INTERNATIONAL TRADE

Mercantilism
• a trade theory prevailed during 16th to 19th centuries
• The wealth of nation is measured based on its accumulated wealth in
terms of gold and silver.
• Nations should accumulate wealth by encouraging exports and
discourage imports.
• It aims at creating trade surplus and in turn accumulate nation`s
wealth.
 PERSPECTIVES ON
INTERNATIONAL TRADE

Economic Liberals

• Economy is made up of individual people

• People make their own decision
• People should be free to trade with whomever they want
Structuralism

 The structuralists believed that trade between rich and poor countries
would increase international inequality. Rather than leading toward
convergence of incomes, they argued that the process would tend to
“award its favors to those who are already well-endowed and even to
thwart the efforts of those who happen to be in regions that are lagging
behind.”
• Developing countries are lack of technologies, sufficient transportation
and education thus, this limits their potential to specialize in crucial
productive sectors.
 The Modern World System (MWS) theory developed by Immanuel Wallerstein,
explains the contact of economies between core, semi peripheral, and peripheral
countries in the world. The core states have the absolute advantage over the other through
unequal exchange and extraction of raw materials from periphery and semi-periphery.
TWO BROAD CATEGORIES THAT DESCRIBE
THE IMPACT OF GLOBALIZATION

Market Globalization – is the decline in barriers to

selling in countries other than the home country. This
change will make it easier for your company to begin selling
products internationally, since lower tariffs keep consumer
prices lower and fewer restriction when crossing borders
makes it easier for a company to enter a foreign market.

It also means that companies must consider other cultures

when developing their business strategies and potentially
adjust the product and marketing messages if they aren’t
appropriate in the target country.
TWO BROAD CATEGORIES THAT DESCRIBE
THE IMPACT OF GLOBALIZATION

Production Globalization – is the sourcing of materials and

services from other countries to gain advantage from price
differences in different nations.

Example:
You might purchase materials and components for your
cameras from multiple countries and then assemble the
product in yet another international location to reduce your
cost less to produce.
 WHAT, THEN, ARE THE EFFECTS OF
GLOBALIZATION?

Primary effects of globalization include the following:

1. Distributed Operations wherein companies may

locate facilities in multiple countries. There are many
reasons to spread out operations, including:
 Reduce labor or production costs
 Reduced distribution costs

2. Changes in Location wherein companies may locate

their firms in new places, both to reduce labor and
production costs and to take advantage of free trade zones.
3. Increasing Complexity although multiple
locations and distributed operations may lead to
reductions in cost, it also causes increasing
complexity in management of the interactions
between the facilities