GLOBAL

ECONOMY
Contemporary World
Go to your closet and examine your wardrobe, or you
may simply examine the clothes you are currently
wearing. After paying a quick attention to your clothing,
ponder on the following questions:
1. What brands are you wearing?
2. How many percentage of your wardrobe or clothing
are from imported brands?
3. How are you able to acquire those?

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If you find yourself
swarm or even
owning one or two GLOBAL ECONOMY
imported pieces...

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Forces Surrounding
Global System of
Production

1. Trans-national or multi-national corporations

(MNCs)-firms that operate in many nations
• Increasingly these firms have local production
points and suppliers that operate across national
boundaries providing and securing labor, capital
and other resources from a variety of places and
which have become very powerful and important
influences in the global economy

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Sequential Model
of TNC
Development

Stage II- Export

to overseas Stage III- Establish Stage IV- Establish
Stage I- sales outlets in production facility
markets
Serve overseas markets overseas by
through
domestic independent
by acquiring local acquiring local
firm and/or setting firm and/or setting
market only channels (sales up new facility up new facility
agents)

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Surrounding
Global System of
Production

2. National governments- through their industrial, trade

and foreign policies especially liberalization policies
 Deregulation refers to the easing of taxation, entry
and pricing of products or services dictated by
government policy
 Privatization refers to the ownership of former public
sector operations and firms by private corporations
and enterprises

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Forces Surrounding
Global System of
Production

3. Enabling Technologies- transport, communications, production and

organizational improvements
 Explosion of enhanced transport and
communication services such as air cargo,
integrators offering definite time delivery (FedEx
and UPS), electronic mail and electronic data
interchange (EDI)
 Advanced inventory management such (just-in-time
(JIT)) and new systems of distribution such as third
party logistics (3PL)
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Forces Surrounding
Global System of Production

4. Shifts in Market Conditions and Demand

╸ Economic cycles affect markets and production, e.g. the Asian
financial crisis
╸ Dramatic shifts in demand affect over time influence type of good
being produced and production schedules
╸ Application of new technology can mean product obsolescence
╸ These changes can be described in part through product life cycle

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Product Life Cycle

╸ Essence of PLC is that growth in sales of

product follows systematic path, from initial
introduction to market through
development, growth, maturity, decline
and obsolescence

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Conclusion

 Differences are being smoothed through globalization (Thomas Friedman’s book The World is Flat)

 Cheap labor, exports, and manufacturing are not enough to create developmental equality

 Dependable infrastructure, transportation links, and political stability are

prerequisites for long term entrance to the global core

 Globalization creates both homogeneity AND spatial difference

 The world’s topography is more varied than flat

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Thanks!

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