GEN 005: THE CONTEMPORARY WORLD (SAS 6) Effects of Horizontal Integration
It provides more competitive advantages
LESSON TITLE: Global Economy and Market Integration
Market Integration
• Market integration refers to how easily two or more markets can trade with each
other. Foreign trade helps the Integration of markets because it reduces barriers
to trade and increases fluidity between markets. For example, Facebook buys out
WhatsApp and Instagram.
Reasons for market integration:
• To remove transaction costs
• Foster competition
• Provide better signals for optimal generation and consumption decisions.
• Improve the security of supply
Market integration
• occurs when prices among different locations or related goods follow similar
patterns over a long period. Groups of goods often move proportionally to each
other. When this relation is apparent among different markets, it is said that the
markets are integrated. Thus, market integration is an Indicator that explains how
much different markets are related to each other. A marketer plays the role of an
integrator in the sense that he collects feedback or vital inputs from other
channel members and consumers and provides product solutions to customers
by coordinating multiple organization functions.
What is market integration, for example?
1. Establish wholesaling facilities by food retailers and set up another plant by a milk
processor.
2. Facebook buyout of Instagram and WhatsApp to have a bigger market for image
sharing.
Types of market integration
• Horizontal integration
• Vertical Integration: Forward, Backward and Balanced Vertical Integration
• Conglomeration
Horizontal Integration.
• This occurs when a firm or agency gains control of other firms or agencies
performing similar marketing functions at the same level in the marketing
sequence In this type of Integration, some marketing agencies combine to form
a union to reduce their effective number and actual competition in the market.
It is advantageous for the members who join the group.
7.
• Buying out a competitor in a time-bound way to reduce competition. Effects of Vertical Integration
• Gaining a larger share of the market and higher profits.
• Attaining economies of scale. • More profits by taking up additional functions
• Specializing in the trade. of Horizontal Integration • Risk reduction through improved market co-ordination
• Improvement in bargaining power and the prospects of influencing prices
• Lowering costs through achieving operational efficiency
Advantages of Horizontal Integration
3. Conglomeration
1. Lower costs. (2)Higher efficiency. (3)Increased differentiation, (4)Increased market • A combination of agencies or activities not directly related to each other may be
power. (5)Reduced competition. (6)Access to new markets. (7)Economies of scale. termed a conglomeration when it operates under unified management.
(8)Economics of scope. (9)International trade. Examples: Companies using horizontal
Integration: Hp. Compaq, Facebook, WhatsApp, Google Motorola
Examples:
2. Vertical Integration. This occurs when a firm performs more than one activity in the
SM Group of Companies, Lucio Tan Group of Companies, Gokongwel Group of
sequence of the marketing process. Example: San Miguel Purefoods says "from farm
Companies, PHINMA Group of Companies, Manuel Villar Group of Companies
to platter goodies"; Apple
• It links two or more functions in the marketing process within a single firm or Effects of Conglomeration
under single ownership.
• Risk reduction through diversification
• This type of Integration makes it possible to exercise control over the product's
• Acquisition of financial leverage
quality and quantity from the beginning of the production process until the
• Empire-building urge.
product is ready for the consumer.
• It reduces the number of mediators in the marketing channel. Example Meat What are the effects of market integration?
industry buys all the functioning plants needed for running this meat industry.
• Both producers and consumers gained, but welfare gains were inversely related
3. Forward Integration. to the size of the country and positively to the level of openness to trade. We
infer that welfare gains from international market integration were equivalent to
• Suppose a firm assumes another function of marketing that is closer to the
substantial shares of economic growth in the "long 19th century.
consumption function. In that case, it is a case of forwarding Integration.
Example: wholesaler considering the role of retailing GEN 005: THE CONTEMPORARY WORLD (SAS 7)
1. Backward Integration.
• This involves ownership or a combination of sources of supply-for example: when LESSON TITLE: Global Interstate System; Contemporary Global Governance
a processing firm assumes the function of assembling/purchasing the product
from the villages. TRUE 1. Global Interstate System is the whole system of human interactions, but there is
no one in charge.
2. Balanced vertical integration
• The third type of vertical integration combines the backward and the forward
FALSE 2. An international tribunal is not needed in judging political leaders accused of
vertical Integration.
international war crimes.
Advantages of Vertical Integration
TRUE 3. WTO’s main function is to ensure the trade flows as smoothly, predictably, and
freely as possible.
1. It allows you to invest in highly specialized assets.
TRUE 4. World Health Org.’s objective is the attainment by all peoples of the highest
2. It gives you more control over your business.
possible level of health.
3. It allows for positive differentiation. 4 # requires lower costs of the transaction.
5. It offers more cost control
6. It ensures a high level of certainty when it comes to quality.
 GLOBAL GOVERNANCE
• The North American Free Trade Agreement's purpose is to reduce trading costs, increase
➢ Global governance or world governance is a movement towards political
cooperation among transnational actors aimed at negotiating responses to
problems that affect more than one state or region.
GLOBAL INTERSTATE SYSTEM
• The International Monetary Fund (IMF) is an organization of 189 countries, working to foster
➢ The global Interstate System is the whole system of human interactions. The
modern world-system is structured politically as an interstate system of competing
and allying states. Political Scientists commonly call this the international system,
and it is the main focus of the field of International Relations. Why countries need •
to be in a good economic relationship with each other is evident due to
interdependence.
INSTITUTIONS OF GLOBAL GOVERNANCE
1. United Nations
• The United Nations is an international organization designed to make the enforcement of
international law, security, and human rights; economic development; and social progress•
easier for countries worldwide. The United Nations includes 193 member countries and two
permanent observer entities that cannot vote. The UN Charter sets out four primary purposes:
Maintaining worldwide peace and security. Developing relations among nations. Fostering
cooperation between countries in order to solve economic, social, cultural, or humanitarian
international problems.
2. World Bank
• The International Bank for Reconstruction and Development (BRD), commonly referred to as
the World Bank, is an international financial institution. The purposes include assisting the
development of its member nation's territories, promoting and supplementing private foreign
investment, and promoting long-range balanced growth in international trade.
3. International Criminal Court of Justice
• The International Criminal Court (ICC) is an intergovernmental organization and international
tribunal in The Hague, Netherlands. The ICC has jurisdiction to prosecute individuals for the
international crimes of genocide, crimes against humanity, war crimes, and the crime of
aggression. The establishment of an international tribunal to judge political leaders accused of
international crimes such as the Tokyo-Rome-Berlin Axis that started World War II.
4. World Trade Organization
• The World Trade Organization (WTO) is the only international organization dealing with the
global rules of trade. Its primary function is to ensure that trade flows as smoothly, predictably,
and freely as possible. The WTO has six key objectives: (1) to set and enforce rules for
international trade, (2) to provide a forum for negotiating and monitoring further trade
liberalization, (3) to resolve trade disputes, (4) to increase the transparency of decision-making
processes, (5) to cooperate with other major international economic institutions involved in
global economic management, and (6) to help developing countries benefit fully from the
global trading system.
5. NAFTA
business investment, and help North America be more competitive in the global marketplace.
The agreement is between Canada, the United States, and Mexico.
6. International Monetary Fund
global monetary cooperation, secure financial stability, facilitate international trade, promote
high employment and sustainable economic growth, and reduce poverty worldwide.
7. World Health Organization
The WHO has multiple leadership priorities that include providing access to universal health
care, preventing infectious diseases, and researching factors that affect health. The
Organization's purpose is to direct and coordinate health for its signatory nations, provide
leadership and determine paths for research, WHO's main functions can be summed up as
follows: to act as a directing and coordinating authority on international health work, ensure
good and productive technical cooperation, and promote research-the objective of WHO is the
attainment by all peoples of the highest possible level of health.
8. NATO
The North Atlantic Treaty Organization (NATO)'s essential and enduring purpose is to safeguard
the freedom and security of all its members by political and military means. Collective defense
is at the heart of the Alliance and creates a spirit of solidarity and cohesion among its members
NATO is a formal alliance between the territories of North American and Europe. Its primary
purpose was to defend each other from the possibility of the communist Soviet Union taking
control of their nation from its inception.
➢ These institutions of global governance (The United Nations, the International
Criminal Court, the World Bank World Trade Organization, NAFTA etc.)-tend to have
limited or restricted power to enforce compliance.
➢ Global governance involves multiple states, including international organizations,
with one state having more lead roles than the rest. The modern question of world
governance exists in globalization and globalizing regimes of power politically,
economically, and culturally. In response to the acceleration of worldwide
interdependence, both between human societies and between humankind and the
biosphere, the term "global governance" may name the process of designating laws,
rules, or regulations intended for a global scale. Global governance is not a singular
system. There is no "world government," but the many different regimes of global
governance do have commonalities.
➢ While the modern system of global political relations is not integrated, the relation
between the various regimes of global governance is not insignificant, and the
system does have a common dominant organizational form. The dominant mode of
organization today is bureaucratic rational-regularized, codified and rational. It is
common to all modern political power regimes and frames the transition from
classical sovereignty to what is described as the second regime of sovereignty-liberal
international sovereignty.
➢ The term world governance is broadly used to designate all regulations intended for
organization and centralization of human societies on a global scale. The Forum for
a new World Governance defines world governance simply as "collective
management of the planet."
➢ Traditionally, the government has been associated with "governing" or political
authority, institutions, and, ultimately, control Governance denotes a process
through which institutions coordinate and control independent social relations and
can enforce their decisions. However, authors like james Rosenau have also used
"governance to denote the regulation of interdependent relations in the absence of
an overarching political authority, such as in the international system. Some now
speak of the development of "global public policy. It shows that No country operates
alone, just like No man is an island. We are all interdependent in this world.
IMPORTANCE OF GLOBAL INTERSTATE SYSTEM
➢ The most important feature of the interstate system is that it is anarchic. Unlike
politics within states, relations between states take place in a Hobbesian state of
nature. Since an anarchic system is one in which all states constantly face actual or
potential threats, their main goal is security.
PURPOSE OF GLOBAL, INTERSTATE SYSTEM
1. Stimulate economic progress and world trade.
2. Providing a platform to compare policy experiences.
3. Seeking answers to common problems involving member states.
4. Identify good practices and coordinate domestic and international policies of
its members
How do leaders in the past could be compared to our global leaders today? Let us take
a look back at how the past President of our country ruled the Philippines.
How did President Ferdinand Marcos govern the Philippines?
It was believed that President Marcos ruled the country with his absolute and
centralized power, or dictatorship. What is a dictatorship? What is Martial Law?
DICTATORSHIP
➢ refers to the centralization of power to a single entity. The leader personifies the
entire political structure as/she rules without limitations. Dictatorship is historically
related to performing related to war. It is attributed to expediency and logistic
efficiency, it ranges from autocracy to totalitarianism.
MARTIAL LAW
➢ Martial law is the imposition of direct military control of normal civil functions or
suspension of civil law by a government, especially in response to a temporary
emergency where civil forces are overwhelmed or in occupied territory.
REKINDLING THE PAST: MARTIAL LAW DAYS
➢ More than 25 years since the EDSA People Power revolution that ended Martial Rule
(1972-81) about 40 years ago, Filipinos-especially the young - seem to appear
confused, misinformed, and indifferent about the terrors of dictatorship during the
martial rule and spirit and symbolism of the people power revolution. The Marcoses
are back in power (with Senator BongBong, Congresswoman Imelda and Governor
Imee). A House of Representatives resolution was passed with 193 signatories
supporting the burial of the former dictator in the Libingan ng mga Bayani
DECLARATION OF MARTIAL LAW
➢ On the of September 23, 1972, the late President Ferdinand Marcos appeared on
national television to formally announce that the Philippines was under Martial Law.
This began almost ten years of military rule in the country. Marcos formally ended
Martial Law on January 17, 1981. Still, it was not until 1986 when democracy was
restored - after the dictator and his family were forced into exile, overthrown by a
popular uprising that came to be known as the People Power Revolution.
➢ When Marcos signed Proclamation 1081 on September 21, 1972, he cited the
communist threat as justification. His diary, meanwhile, said the proclamation of
Martial Law became a "necessity," following the supposed ambush of then defense
secretary Juan Ponce Enrile. There were subsequent reports that said the ambush
was staged, with the Official Gazette citing Enrile's admission in 1986 that it was
faked to justify the imposition of Martial Law.
WHAT HAPPENED UNDER MARTIAL LAW?
➢ Through various general orders, Marcos effectively put the entire government
power under the rule of one man; his own. He was to lead the nation and direct
the operation of the whole government. He ordered the armed forces to
prevent or suppress any act of rebellion. Curfew hours were enforced, group
assemblies were banned, privately-owned media facilities were shuttered.
Those considered threats to Marcos - such as prominent politicians and
members of the media - were rounded up and arrested by members of the
military and the notorious Philippine Constabulary. Some hail the discipline
and supposed order of the New Society, as Marcos called it, and considered
that period as among the "best years of the Philippines.
➢ Among the myths: that the Philippines enjoyed a golden age under the
Marcoses: Various reports and historical accounts debunk this. At the same
time, infrastructure spending indeed increased during that period, it came at
a staggering cost: plunging the Philippines in billions of dollars in debt. From
$8.2 billion in 1977, the country's debt ballooned to $24.4 billion in 1982 are
within just five years. The Marcoses also plundered the country's coffers, with
various estimates putting the amount at between 55 billion to $10 billion.
➢ The Presidential Commission on Good Government, the body, going after the
Marcoses' ill-gotten wealth, is still recovering this money, over the past 30
years, at least P170 billion have been recovered.
➢ Aside from the billions in illegally amassed wealth, human rights abuses were
rampant during those days. According to Amnesty International, about
70,000 people were imprisoned and 34,000 tortured, while 3,240 were killed
from 1972 to 1981. During this dark chapter of Philippine history, thousands
of people. were subject to various forms of torture. Prisoners were
electrocuted, beaten up, and strangled. They were burned with a flat iron or
cigars. Water was poured down their throats, then forced out by beating.
Women were stripped naked and raped, various objects forced into their
genitals.
➢ Historian Alfred McCoy wrote about Marcos' elite torture units, whose
specialty was psychological torture and humiliation aside from the physical
pain. It has been many years since then, but the victims have not forgotten -
especially as the Marcoses have neither acknowledged their crimes nor made
reparations for their sins. At the Supreme Court hearing on the proposed
Marcos burial at the Heroes' Cemetery, victims were asked to speak before
the Court to recount their horrifying ordeals President Rodrigo Duterte's
Governance of the Philippines
HIS PROMISE OF REAL CHANGE
➢ On May 10, 2016, Rodrigo Duterte, then seventy-one years old, was elected
President, winning 39 percent of the vote in a five-way race. Charismatic, blunt, and
frequently profane, Duterte combined a Dirty Harry persona with a track record as
a successful mayor of Davao City, Mindanao's largest city.
➢ Within weeks of his inauguration as President of the Philippines in June 2016,
Rodrigo R. Duterte became the most internationally known Filipino leader since
Ferdinand Marcos, the country's infamous dictator, and Corazon Aquino, the iconic
housewife-turned-president who championed the restoration of democracy
in 1985. A great deal of media attention has been paid to Duterte's murderous war
on drugs as well as to his often crass and controversial statements. His embrace of
China and his visceral disdain for the United States have garnered additional
attention in foreign policy circles. He is frequently included in media reports and
scholarly articles on the rise of populism globally.
KEY CONCERNS AND PRIORITIES
➢ The Duterte government's top priorities include combating illegal drugs and crime,
promoting rapid infrastructure development, sustaining economic growth and
making it more inclusive, enhancing peace and development in Mindanao, and
reorienting the Philippines' foreign relations. To support these goals, the
government has significantly increased spending on infrastructure, raised the
salaries of government employees, expanded existing social development
programs, revived the stalled peace process with the Moro National Liberation
Front (MNLF) and the Moro Islamic Liberation Front (MILF), entered into
negotiations with the communist insurgents, and established a closer relationship
with China.
➢ Under President Duterte, progress on the political and security front has been
mixed. This is largely due to the May 2017 occupation of Marawi City, in Lanao del
Sur province, by Islamist extremists affiliated with the self-proclaimed Islamic State.
It took five months of combat operations to regain control over the extensively
damaged city for the Philippine military. In response to the Marawi crisis, Duterte
imposed island-wide martial law, which remains in effect. The most significant
accomplishment about Mindanao was the passage of the Bangsamoro Organic Law
(BOL) in July 2018. The BOL translates many of the 6 those who did/do not acknowledge the (identified) "enemies of the state" are also
provisions included in the 2014 peace agreement between the Aquino government
and the MILF. Under the BOL, a new political entity, the Bangsamoro Autonomous
Region in Muslim Mindanao, would replace the current Autonomous Region in
Muslim Mindanao. The BOL is an important step forward, but multiple challenges
remain including possible objections to its constitutionality, a forthcoming plebiscite
scheduled for late January and early February 2019, and the actual establishment of
the new autonomous entity
SIMILARITIES OF PRESIDENT RODRIGO DUTERTE’S AND PRESIDENT FERDINAND
MARCOS GOVERNANCE
➢ Many Filipinos believe that Ferdinand E. Marcos and Rodrigo Rt. Duterte have many
things in common. They shared the same insatiable drive for power with the ability
to control and destroy democratic institutions to achieve authoritarianism
ultimately,
➢ The varying methods of attaining their goals differ because of the different
circumstances of their times, Marcos's swift and sudden imposition of martial law
in September 1972 caught flat-footed millions of Filipinos, in one fell swoop,
decades of democratic experiment abruptly ended. All media outlets were closed
down, thousands were arrested and detained; Congress was padlocked; the
Supreme Court was castrated, and the long night of oppression descended upon our
land.
➢ In a democracy, no one is supposed to be penalized for holding and expressing their
political beliefs. This latest episode thus begs the question: are we now under a
dictatorship?
SIMILAR STRATEGY: DEMOBILIZING TRADITIONAL OPPOSITION THROUGH FORCE
➢ The demobilization of the opposition through force is often the distinguishing mark
of a dictatorship. Such demobilization also happens in democracies, but it is done
through illegitimate or duplicitous, means in dictatorships. According to Mark R.
Thompson in his (1995)book The Anti-Marcos Struggle: Personalistic Rule and
Democratic Transition in the Philippines, "Marcos demobilized much of the
traditional opposition by abolishing Congress; shuttering pro-opposition
newspapers, radio stations, and television stations: banning demonstrations; and
imprisoning many leaders of the opposition."
➢ In almost one half of his term, similar developments have taken place: (1) while
Duterte has not abolished Congress, he has captured the legislature through a
'supermajority in the House of Representatives and the removal and weakening of
opponents in the Senate, (ii) Duterte tried to "shutter" media institutions such as
Rappler, ABS-CBN and Inquirer (in) Senator de Lima has been in jail for one and a
half years and Senator Trillanes arrest now seems forthcoming, and (iv) Duterte's
intervention in the Judiciary has also been revealed in the ouster of Chief Justice
Sereno through a quo warranto. Moreover, just like Marcos, Duterte has been
looking to the military and the police as a base of support.
➢ Both Marcos and Duterte also made/make use of "enemies as mobilizing factors.
Communists for Marcos, drug users, and pushers for Duterte. Consolidating around
enemies was/is the way by which these leaders separate/d the grain from the chaff
their (Marcos' and Duterte's) enemies.
 ➢ In the regimes between Marcos and Duterte, demobilization of the opposition also •
happened. Still, it came in capturing opposition forces hitherto through material
inducements and political horse-trading (eg, pork barrel) What sets Duterte apart•
from these regimes and makes him more similar to Marcos is his use of force to
quell dissent and mobilize support.
➢ All this has fostered a politics of fear and a culture of violence exactly what Marcos
built and what Duterte is now rebuilding. In Marcos' time, this kind of politics and
culture resulted in more than 70,000 imprisonments, 34,000 torture victims, and
3,240 deaths (as per Amnesty International). In Duterte's time, the number is just
as alarming: more than 20,000 deaths. The dominance of fear and violence makes
Duterte's regime a defacto dictatorship - even without the Marcos-style
proclamation of Martial law. Alexis Romero (Philstar.com) posted on January
16, 2017, the statement made by Chief Presidential Legal Counsel Salvador Panelo
regarding President Duterte from former President Ferdinand Marcos, who placed
the Philippines under Martial Law in 1972 supposedly to curb communist
insurgency and other threats. He also mentioned, "There are safeguards under the
present Constitution, "Let us remember that it is very out of the character of
President Duterte to be abusive. That characterizes his service as mayor and as
President. He hates abuses," he added.
➢ Chief Presidential Legal Counsel, Salvador Panelo, allayed fears sparked by President
Rodrigo Duterte's recent statement on martial law, saying it is not within the chief
executive's character to abuse his powers. Panelo stressed that the President would
only declare martial law under certain conditions. He added, "I think the message of
the President is obvious, It is as he said, 'if. It is when "if the situation. He is telling
us the reality on the ground. If it becomes virulent and if it is needed, then it is his
duty constitutional duty to declare martial law."
GEN 005: THE CONTEMPORARY WORLD (SAS 8)
LESSON TITLE: Benefits of Globalization: Foreign Direct Investment
Global Interstate System 1. The modern world system is a system of competing and
allying states.
Global governance or world governance Relations 2. It is a movement towards political
cooperation among nations.
International Criminal Court of Justice 3. The International Criminal Court is an
intergovernmental organization and international tribunal that sits in The Hague,
Netherlands.
What is a Foreign Direct Investment (FDI)?
➢ A foreign direct investment (FDI) is a purchase of an interest in a company by a
company or an investor located outside its borders. Generally, the term is used to
describe a business decision to acquire a substantial stake in a foreign business or
buy it outright to expand its operations to a new region. It is not usually used to
describe a stock investment in a foreign company.
• Foreign direct investments (FDI) are substantial investments made by a company into a foreign
concern.
The investment may involve acquiring a source of materials, expanding a company’s footprint,
or developing a global presence.
As of 2020, the U.S. is second to China in attracting FDI.
How Foreign Direct Investments (FDI) Work
➢ Companies considering a foreign direct investment generally look only at open
economies that offer a skilled workforce and above-average growth prospects for
the investor. Light government regulation also tends to be prized. Foreign direct
investment frequently goes beyond capital investment. It may include the provision
of management, technology, and equipment as well.
➢ A key feature of foreign direct investment is that it establishes effective control of
the foreign business or substantial influence over its decision-making. In 2020,
foreign direct investment tanked globally due to the COVID-19 pandemic, according
to the United Nations Conference on Trade and Development. The total $859 billion
global investment compares with $1.5 trillion the previous year.
➢ And, China dislodged the U.S. in 2020 as the top draw for total investment,
attracting $163 billion compared to investment in the U.S. of $134 billion.
Special Considerations
➢ Foreign direct investments can be made in various ways, including opening a
subsidiary or associate company in a foreign country, acquiring a controlling interest
in an existing foreign company, or utilizing a merger or joint venture with a foreign
company. The threshold for a foreign direct investment that establishes a
controlling interest, per the Organization of Economic Co-operation and
Development (OECD) guidelines, is a minimum 10% ownership stake in a foreign-
based company. That definition is flexible. There are instances in which effective
controlling interest in a firm can be established by acquiring less than 10% of the
company's voting shares.3
Types of Foreign Direct Investment
➢ Foreign direct investments are commonly categorized as horizontal, vertical, or
conglomerate.
• With a horizontal direct investment, a company establishes the same type of
business operation in a foreign country as it operates in its home country. A
U.S.-based cell phone provider buying a chain of phone stores in China is an
example.
• In a vertical investment, a business acquires a complementary business in
another country. For example, a US, manufacturer might develop an interest
in a foreign company that supplies it with the raw materials it needs.
• In a conglomerate type of foreign direct investment, a company invests in a
foreign business unrelated to its core business. Since the investing company
has no prior experience in the foreign company's area of expertise, this often
takes a joint venture.
Examples of Foreign Direct Investments
➢ Foreign direct investments may involve mergers, acquisitions, or retail, services,
logistics, or manufacturing partnerships. They indicate a global strategy for
company growth. They also can run into regulatory concerns. US, company Nvidia
has announced its acquisition of ARM, a UK-based chip designer. In August 2020,
the U.K.'s competition watchdog had announced an investigation into whether the
$40 billion deal would reduce competition in industries reliant on semiconductor
chips.
FDI in China and India
➢ China's economy has been fueled by an influx of FDI targeting the nation's high-tech
manufacturing and services Meanwhile, relaxed FDI regulations in India now
allow 100% foreign direct investment in single-brand retail without government
approvals. The regulatory decision reportedly 3
facilitates Apple's desire to open a physical store in the Indian market. Thus far, the
firm's (Phones had only been available through third-party physical and online
retailers.
What is the Difference Between FDI and FPI?
➢ Foreign portfolio investment (FPI) is the addition of international assets to a
company's portfolio. an institutional investor such as a pension fund, or an
individual investor. It is a form of portfolio diversification achieved by purchasing
the stocks or bonds of a foreign company. Foreign direct investment (FDI) requires
a substantial investment in a company based in another country. The outright
acquisition of FDI is generally a more significant commitment made to enhance a
company's growth
➢ Both FPI and FDI are generally welcome particularly in emerging nations. Notably,
FDI involves a greater responsibility to meet the country's regulations that host the
company receiving the investment.
What Are the Advantages and Disadvantages of Foreign Direct Investment (FDI)?
➢ FDI can foster and maintain economic growth, both in the recipient country and in
land investing Developing countries have encouraged FDI to finance the
construction of new infrastructure and the creation of jobs for their local workers.
On the other hand, multinational companies benefit from FDI to expand their
footprints into international markets
➢ However, a disadvantage of FDI is that it involves the regulation and oversight of
multiple governments, leading to a higher level of political risk
What Are Some Examples of Foreign Direct Investment (FDI)?
➢ One of the most prominent examples of Foreign Direct Investment (FD) in the world
today is the initiative known as One Belt One Road (OBOR) This program sometimes
referred to as the Belt and Road initiative, involves a commitment by China to
substantial FDI in a range of infrastructure programs throughout Africa, Asia, and
even parts of Europe. The program is typically funded by Chinese state-owned
 enterprises and organizations with deep ties to the Chinese government. Similar
programs are undertaken by other nations and international bodies, including
Japan, the United States, and the European Union
EXERCISE 3:
FALSE 1. Starbucks or Jollibee opening a new outlet in a foreign country is vertical FDI.
TRUE 2. Amazon is opening a new headquarters in Vancouver, Canada; Manila,
Philippines is Horizontal FDI.
TRUE 3. A real state company opening a restaurant chain in another country is a
conglomerate FDI.
TRUE 4. BMW investing in a parts manufacturer in Poland is Vertical FDI.
TRUE 5. McDonald’s could purchase a large-scale farm in Canada to produce meat for
their restaurant is vertical FDI.
GEN 005: THE CONTEMPORARY WORLD (SAS 9)
LESSON TITLE: Benefits of Globalization: Technological Innovation
TECHNOLOGICAL INNOVATION
➢ Technological Innovation is the process where an organization (or a group of people
working outside a structured organization) embarks on a journey where the
importance of technology as a source of Innovation has been identified as a critical
success factor for increased market competitiveness.
➢ Technological innovations comprise new products and processes and significant
technological changes of products and processes. Innovation has been implemented
if it has been introduced on the market (product innovation).
➢ Technology is applying scientific knowledge for practical purposes or the branch of
knowledge concerned with applied sciences.
➢ Innovation is evolutionary and is a response to an unsolved problem and
unexploited opportunity. It is the effort to create purposeful, focused change in an
enterprise's economic or social potential.
Creativity and Innovation
➢ Creativity involves the use of imagination or original ideas to create something. It is
the idea phase In other words, creativity is the idea phase, and Innovation is the
action phase.
➢ Innovation is the act of introducing something new. The word "new" relates to
creativity, and the term "act of introducing' refers to Innovation.
Invention and Innovation
➢ Invention is the creation of a new product or service or process; Innovation
introduces new product or service or process into the marketplace.
➢ Invention may have economic or non-economic motives. Innovation always has
economic reasons. Invention precedes Innovation follows invention
➢ An invention is based on a new idea that is turned into some conceptual model that
demonstrates the feasibility. Innovation is concerned with developing and
implementing new systems, products, or services and is typically based on an
invention.
Why is technology innovation important?
➢ Technology innovation can be a crucial component of any effort to address needs
and better serve individuals and families. This, in turn, encourages experimentation
with various IT providers at low cost and low risk, leading to innovative ways of using
technology to deliver healthcare and human services.
Technological Innovation Examples
➢ The innovations include technological inventions such as wind turbines,
photovoltaic cells, concentrated solar power, geothermal energy, ocean wave
power, and many other emerging innovations.
20 Examples of Innovative Technology Designs
• SA950 3D MONITOR BY SAMSUNG
• Wireless Charging Technology From Ecoupled.
• TROMM Styler Clothes Steamer.
• Touch Mouse by Microsoft.
• Nomad iPad Paint Brush Stylus.
• U-Socket AC and USB Power Outlet.
• Lady Gaga's Polaroid Camera Glasses.
• Robot Scooba 230 Floor Washer.
CHANGES DUE TO TECHNOLOGICAL INNOVATION
1. Transportation.
• Transportation has become faster, like individuals can move rapidly starting
with one place and then the next. In the past, people cannot travel as rapidly
as today because of not having enough modern transportation. This
technology allows vehicles to communicate, via wireless radio signals, driving
information such as speed, lane departure, and environment information to
other cars on the highway. The potential safety benefits of these types of
advancements are impossible to ignore.
2. Communication.
• Technology has changed the way people communicate in the modern
workplace. Communication among the employees, management to
subordinates, or management to management has become fast,
instantaneous, more deliberate, collaborative, and unified. Speed and Costs.
The most significant impact of technology on communication is the spread of
the internet and the possibility of sending emails and chatting. The Internet
has thus increased the speed of communications manifold and reduced the
costs drastically, Communication has changed so much over the years. From
speech to the postal services, there are now telephones, cellphones,
computers, and email, which makes the way we humans communicate
extremely easy and fast. Life has been made pretty much easy because of
these inventions.
3. Education.
• Technological changes in the educational industry have created new ways to
teach and to learn. Technological changes allow teachers to access
information on a global scale via the Internet to 3
enhance their lessons. Likewise, students can use the vast resources of the
Internet to enrich their learning experience. Technology positively affects
student engagement, enabling students to retain and learn more information.
Many students are more stimulated and eager to know when interacting with
the hands-on learning tools that educational technology provides
4. Job Creations
• Technology also created a host of new positions that never before existed.
Think about it: computing specialists, social media managers, digital
marketers, energy engineers, software and app developers, drone operators,
YouTube content creators.
5. Health care
• The Most Significant Medical Innovations of the Past 20 Years Vaccines and
Immunization to prevent outbreaks. Electronic Health Records (EHRS) It is hard
to believe in such a modern era, but fewer than 18 percent of medical
providers used electronic health records a mere decade ago. HIV Combined
Drug Therapy. Minimally Invasive Surgery. Needle-Free Injection Technology.
6. Relationships
• Technology is often introduced into a social system with the stated intention
of making life easier for people. As it becomes more pervasive in everyday life,
the assessment of technology's presence in relationships and its impact on
how humans interact with one another, especially long-distance relationships,
is becoming very popular, giving way to intermarriages between rates.
Sometimes, people's use of technology can create problems between
romantic partners, potentially stirring conflict and dissatisfaction in the
relationship. They also found that younger users were more likely to report
both increased tension and enhanced closeness in their relationships due to
technology.
7. Crime Detection
• As technology is used to commit more sophisticated crimes, law enforcement
officers and those in the legal system increasingly use tech tools to combat
corruption. The criminal justice industry must use cutting-edge software,
tracking systems, and more to keep the public safe and protect human life.
 Modern marvels such as DNA analysis or image enhancement technologies
have made forensic science easier in one respect. Forensic scientists solve for
murders and other violent crimes and for chemical attacks, cybercrimes, and
any other acts of violence that come with the modern territory.
TYPES OF INNOVATION
1. Incremental Innovation
• These are small but important improvements in a product, process or service.
Such innovations are associated with enhanced customer satisfaction.
Example: Intel Pentium III to Pentium IV LAN to WAN Modular Innovation.
These Innovation do not alter the overall product structure, but change can
occur in the component technology. Example: Change in car engine
technology will not change any other features.
1. Architectural Innovation
• These innovations take existing technologies and link new technologies in
novel ways; they are built not on new technological breakthroughs but on
integrating competencies, i.e., product structure change with no important
effect on component subsystems. Example: Change of shape of a car with no
change in engine. Honda's smaller motorcycles,
2. Radical Innovation
• These innovations are revolutionary. Railroads, electricity, computers, the
Internet can be termed as breakthrough innovations. Railroads changed the
way in which goods and people were transported. Electricity changed the way
people lived and used equipment. Computer changed how organizations
worked. The Internet transformed how people communicate, acquire
knowledge and do business. Radical innovations are also known as
breakthrough innovations and discontinuous innovations. Example: Digital
imaging(polaroid) Quartz movements(watches) Radial tires.
Protests in the Digital Era
➢ The following are images of different widespread mass protests worldwide-from the
Arab Spring: Black Lives Matter, #MeToo Movement, Youth Climate Strike to our
very own 1986 People Power Revolution. Why do people protest? What significant
issues do you know that people. are protesting about? Have you ever joined a
protest?
➢ Does sharing posts online count as a protest? Is protesting easier today than in the
past? Why are protests an essential part of democracies, and how has it changed-
for better or worse-in the Digital Era? Read Article III of the Bill of Rights, Section 4
of the 1987 Constitution of the Philippines: "No law shall be passed abridging the
freedom of speech, of expression, or of the press, or the right of the people
peaceably to assemble and petition the government for a redress of grievances."
➢ The constitutional guarantee serves as the foundation for the many freedoms or
civil liberties that we enjoy as citizens of a democracy. Another way to look at it is
these civil liberties are: what we ought to claim, preserve and fight for so that
democracy remains vigorous and vibrant. This is why people protest- because it is
both their right (as part of their freedom of expression) and their responsibility (to
shape the public discourse and the society).
POST TEST
TRUE 1. Technology is applying scientific knowledge for practical purposes or the branch
of knowledge concerned with applied sciences.
TRUE 2. Innovation is evolutionary and is a response to an unsolved problem and
unexploited opportunity.
TRUE 3. Creativity involves the use of imagination or original ideas to create something.
TRUE 4. Innovation is the act of introducing something new; the word “new” relates to
creativity.
TRUE 5. The invention is the creation of a new product or service or process; innovation
introduces a new product or service or process into the marketplace.
GEN 005: THE CONTEMPORARY WORLD (SAS 10)
LESSON TITLE: Risks of Globalization
Risks of Globalization
➢ Globalization has offered the world significant advantages for economic gains and
comfortable living, But in the long run, it has the other side of the balance. The bad
side of Globalization is all about the new risks and uncertainties brought about by
the high degree of integration of domestic and local markets, intensification of
competition, high degree of imitation, price and profit swings, and business and
product destruction, the most prevalent risks are: equity distribution, national
sovereignty and interdependence.
➢ The risks of Globalization are more significant and more varied than the risks of
domestic commerce. Managing them is the key.
The Advantages of Globalization Some positive aspects of Globalization include:
1. Building up the economic and social structures of struggling countries and
economies through free trade
2. Creation of a world-power and less and less compartmentalized power sectors
3. Learning about and sharing new and exciting cultures with one another.
4. The opportunity and desire for prosperous nations to help countries struggling
with severe issues like unemployment, disease, and natural disasters
5. A more significant opportunity for travel and it increases free trade between
nations.
The Disadvantages of Globalization
➢ Though it comes with perks, there are several cons to Globalization that analysts
and critics have noted for years. They include:
1. The oppression of weaker and poorer economies by more robust ones; the
rich get richer, the poor get poorer.
2. The danger of job loss, with specific industries and sectors sending jobs to
countries where workers are willing to do the same amount of work or more
for smaller wages.
3. Multinational corporations often get away with poor, unsafe, unethical, or
exploitative working conditions due to variations in laws and regulations
from one country to another
4. Multinational corporations can exploit tax haven nations, sending large
portions of revenue offshore to avoid taxation.
Equity Distribution.
➢ The benefits of globalization can be unfairly skewed towards rich nations or
individuals. This creates greater inequalities and leads to potential national and
international conflicts. As a result," the rich get richer, the poor get poorer because
the rich countries have more resources and capital to do business. Their industries
produced more chemicals damaging the environment, yet the worst damage was
experienced by the least contributors like the developing countries.
➢ One way globalization can increase inequality is through the effects of increasing
specialization and trade. Although trade based on comparative advantage can
stimulate economic growth and lift per capita incomes, it can also lead to a rise in
relative poverty.
➢ Cross-country studies document that Globalization has been accompanied by
increasing inequality within developing countries, suggesting an offset of some of
the poverty reduction. Finally, the evidence suggests that relying on trade or foreign
investment alone is not enough to alleviate poverty.
How equity differs from equality?
➢ Equality generally refers to equal opportunity and the same levels of support for all
segments of society. Equity goes a step further and refers to offering varying levels
of support depending upon the need to achieve greater fairness of outcomes.
Example: 3 Children are watching games over the fence. The shortest one could not
see, so he was given a stool so they all could see the games over the wall. That is
equity. If all of them were given a seat, that's equality.
Interdependence
➢ Globalization leads to interdependence between nations, which could cause
regional or global instabilities if local economic fluctuations impact many countries
relying on them
➢ How does Globalization lead to interdependence among nations? The need for
countries to rely on each other for these resources creates a global
interdependence. Hence, the drive of Globalization creates a robust interconnection
of world networks through borderless operations of countries, making it easier to
interact, trade, and build a cooperative world.
Interdependence of Human Societies
➢ Interdependence describes when two or more actors impact and rely on each other.
Consider the flour industry, for example. One person specializes in growing crops,
another on milling, packing, distributing and finally selling it. They need each other
to deliver the final product, and if one day the mill stops, everyone is affected; they
are all interdependent.
➢ Think of those individuals as a country and the flour as the products and services we
consume. This gives you an idea of the interdependence of human societies. We
fulfill our needs by relying on a massive network of other people.
➢ Nowadays, most countries are also interdependent because they rely on other
countries to supply local demand and sell local products. This interdependence is
strong, and one nation's actions often have consequences on others. For example,
China's labor costs impact employment in other countries, Russia's policies on gas
affect transport costs in Europe, and air pollution generated in the United States has
global effects.
➢ Most countries are interdependent: Globalization is often defined as the interaction
and integration of people in different world areas. This broad term groups together
economic, social, and political interactions
➢ Since antiquity, human societies have developed forms of Globalization. Galleon
Trade connects Europe and Asia in the 16" century. The Silk Road once connected
China, Central Asia, Persia, and Europe, and facilitated commercial and cultural
exchange. However, the Globalization we are experiencing nowadays is the biggest
and fastest in human history.
➢ Technological advances in communications and falling costs of transportation have
facilitated international exchanges. Multinational companies operating in several
countries, outsourcing of services and operations, global free trade agreements,
internet access, and international migrations are examples of Globalization.
Transportation facilitates Globalization.
Effects of Human Interdependence and Globalization
➢ Human interdependence and Globalization have had both positive and negative
effects on economics, societies, and politics. Let's examine some of these effects.
Economics
➢ Competition is a positive effect. Domestic companies compete with foreign firms,
often raising their standards. Foreign businesses often bring innovations and new
approaches, trying to capture the consumer. This dynamic usually increases the
quality of products and services and makes them more affordable. For example,
American oil companies operate in many developing nations and have formed independence of a state, combined with the right and authority of regulating its
alliances with local capitals, bringing Technology, employment, and huge internal affairs without foreign interference.
investments. ➢ Some see the rise of nation-states, multinational or global firms, and other
➢ Most nations have opened to international trade, creating a global market and international organizations as a threat to sovereignty. Ultimately, this could cause
directing investments into developing countries. Companies from industrialized some leaders to become nationalistic or xenophobic.
nations look for new needs and possibilities and sometimes open operations in new ➢ The sovereign States increasingly measure their vulnerability, not to one another
countries, bringing investments and employment. but forces beyond their control. Globalization is frequently discussed as a
counterpoint to national sovereignty. It is commonly asserted that Globalization has
Globalization also affects employment eroded national freedom or that it has rendered borders obsolete.
➢ Globalization has had a dual effect on the nation-state's sovereignty. Yet,
➢ Jobs are generated in new areas but are sometimes lost elsewhere. Imagine you
simultaneously, economic integration has limited the range of policy options
own a company with 100 workers and decide to relocate to Thailand, where labor
available to states. This has diminished their capacity to meet these obligations.
costs are lower. There you hire 150 workers, which means 150 new positions for
Sovereignty is the absolute authority over a specific territory.
Thailand, but 100 people just became unemployed back home. The world has 50
more people earning wages, but there were also losers in this process. The
lower cost of Chinese labor is attractive to many multinational firms.
➢ Globalization has helped some areas progress towards industrialization, including Does Globalization weaken national sovereignty?
India, the Philippines. Mexico, and Brazil. On the other hand, some areas of North
America and Europe have lost jobs and businesses. ➢ Globalization, thus, has powerful economic, political, cultural, and social
implications for sovereignty. Globalization has led to a decline in the power of
More Negative Effects on employment national governments to direct and influence their economies (especially about
macroeconomic management) and determine their political structures.
1. Adverse effects occur due to large-scale technological developments that
accompany this phenomenon, which will reduce the demand for unskilled Radical Innovation 1. These innovations are revolutionary in nature.
labor. Even direct foreign investment does not care for cheap workers but only
for highly skilled workers, Technology 2. It is the application of scientific knowledge for practical purposes or the
2. The traditional nature of "work" might disappear due to the rapid advances in branch of knowledge concerned with applied science.
technology while at the same time creating new and innovative occupations
Invention 3. It is a creation of new product or service or process, innovation is the
in favor of the highly specialized professions
introduction of new product or service or process into the market place.
3. An increase in hidden unemployment, lack of new job openings, and the
deterioration of real wage rates are the consequences of Globalization. In
Architectural Innovation 4. These innovations take existing technologies and link new
most developing economies, which were unable to adopt the latest
technologies in novel ways.
technologies, if the labor clause is enforced through the WTO, this will
negatively impact economic growth and employment in many developing Education 5. Technological changes in the educational industry have created new ways
countries, where child labor exists, and working conditions are miserable, to teach and to learn.
4. Most trade liberalization benefits will be received by the manufacturing-
producing countries. while the smallest share will be going to the agricultural- True 6. Globalization has lots of advantages as well as disadvantages.
producing countries (developing countries).
5. In addition, policies of structural adjustment such as privatization imply an True 7. Businesses are interdependent; there’s no solo business.
increase in unemployment since privatization is usually accompanied by a
True 8. Problems on one side of the equation will destroy the balance of related business
reduction in the demand for labor.
6. Finally, the theoretical predictions about the employment consequences of True 9. Equity is mandatory assistance to the neediest, while equality is assistance for
trade liberalization are based on assumptions of full employment of resources all.
and flexible labor markets. These assumptions might not hold in developing
countries where labor markets are inflexible due to structural factors. True 10. National sovereignty is weakened by the policies of multinational companies
foreign direct investors
National Sovereignty
➢ The supreme, absolute, and uncontrollable power by which an independent state is
governed and from which all specific political powers are derived; the intentional