Globalization

and the
Caribbean

Group 2: David and Rafael

What is a multinational ?

• Put simply multinational corporations (MNCs) are

just a business that has facilities and other assets or
conduct business activities in at least one country
other than its home country.
Some local examples of MNCS are:
• ANSA McAL Group of Companies.
• Neal and Massy
• Angostura

• (TNCs) Trans National Corporations are very similar to

MNCs but were not initially meant to be multination
and thus have a more centralized management
structure.
Globalization
• Globalization in business refers to the growth in movement across
national borders as people, ideas, products, services, and capital become
interconnected (more economic interaction). Through globalization,
social, cultural, and economic exchange becomes more profound and
influential, this poses both positives and negatives which we will dive into
later.

This Photo by Unknown author is licensed under CC BY-ND.

What are the impacts of globalisation? - YouTube
The Impacts Of Globalization On;
Consumer Behaviour
 Consumer Behavior - Choices

• The
• variety of choices; due to globalization consumers will benefit
from a greater variety of goods and services to choose from. Since
the growth of globalization, consumers can acquire products that
were not previously available to them. These new products and
services can now be accessed via modern means such as e-
commerce. Some of these goods may help to increase the
consumers’ standard of living.
• E.g. luxury cars, household appliances, designer clothing.
Consumer Behaviour - Quality

• Some MNCs have the tendency to provide a

higher-quality product to their customers in the
homeland. However, in the absence of stringent
laws or quality standards in the regional countries,
they may produce sub-standard products. To this
end, consumers must ensure that they do not
settle for mediocrity but remain adamant that
quality be maintained by these MNCs. Without
valiant efforts by the consumer the firm may
produce and sell substandard products.

This Photo by Unknown author is licensed under CC BY-SA-NC.

Consumer Behaviour - Rights
• In the social field, globalization has had consequences on the levels and
conditions of employment and on the social rights of workers. Global
competition, accompanied by relocations and off-shoring, push companies
to move production to countries where salaries and social protection of
workers are lowest.
•

• E.g. The current trend of hiring workers from countries where their
currency is worth less than your own
•
Consumer Behaviour -
Responsibilities
• Consumers have the responsibility
to ensure that their rights are not
infringed by MNCs. consumers must
be aware of the fact that MNCs may
flee from the more stringent laws in
their homelands and as such may
not provide the best service to their
current host countries. With this in
mind consumers should hold them
responsible for providing quality
goods and services.
The Impacts Of Globalization On;
Domestic Businesses
Domestic Businesses -
Competition
• Businesses are likely to face increased
competition from foreign firms. As barriers
are reduced and businesses are
deregulated, they can enter markets that
were once difficult to get into.
Globalization also paved the way for new
and innovative firms to enter markets and
compete with existing firms. This may be
detrimental for some small existing firms
which are not able to compete with large
MNCs. The Caribbean is characterized by
small entities that are sometimes
undercapitalised and therefore may not
be competitive.
•
 Domestic Businesses - Pricing Policy
• Globalization can also affect the prices charged by domestic
businesses, where international firms are able to sell their products
at a lower price than domestic firms, the latter may be forced to lower
their prices which would in turn lead to serious losses or reduced
profits for local firms. The main reason of this is that international
firms can experience economies of scale where their fixed costs
can be spread over a larger amount of output which leads to a
reduction in unit cost and a lower price. These firms may also benefit
from purchasing economies as they buy in bulk.
 Domestic Businesses -
Quality Assurance
• This is the guarantee to maintain an agreed or
established set of quality standards.
Regional businesses that desire to sell their products
in foreign countries may have to seek certification to
prove that these products meet international
standards. Two international standards to which the
firm may be certified include;
• The British Standards Institution (BSI) - the national
standards body of the United Kingdom. BSI produces
technical standards on a wide range of products and
services and also supplies certification and
standards-related services to businesses.
• The International Organization for Standardization
(ISO) - The International Organization for
Standardization is an international standard
development organization composed of
representatives from the national standards
organizations of member countries.
• Having certification from these 2 bodies gives a
business a stamp of quality that will facilitate trade on
the international market.
 Domestic Businesses - Creativity
And Innovation
• The process of Globalization can greatly influence the
creativity and innovation of firms that establish themselves
in other countries AND the firms that already exist in the
country that the international firm expands to. The process
goes both ways with;
• International firms can take inspiration from the
businesses that already exist within the country and copy
their practices in an effort to increase their own
productivity and profit.
• Local firms can do the same, i.e. taking influence from the
international firm’s business practices and applying it to
their own business model in an attempt to increase
productivity and profit.
Domestic Businesses -
Staffing
• Firms that move into another, lesser
developed country may make the decision
to, instead of sending an entire workforce to
run the new business, send only a few
specialized workers to oversee processes
and meanwhile hire employees from the
country they expanded to. Using this
method, the international firm can take
advantage of the different strengths of the
currencies of the two countries and pay
workers an average rate, when in reality,
they are spending less on staffing salaries
and wages than they would in their mother
country.
Domestic Businesses - Technological
Advancement
• Businesses gain access to improved technology which can be
used to increase output and productivity. Advanced technology
can also allow the firm to decrease its production costs as older
technology is often inefficient and prone to wastage. The
internet is also a main driver of globalization as it provides
businesses with new opportunities to sell (e-commerce),
purchase, or advertise online.
•
The Impacts Of Globalization On;
Trade Liberalizations
• Trade liberalization is the
removal of barriers to trade
and giving free access to the
market. This access may be
limited to certain products or
it may be a total lifting of the
barriers to trade. These
barriers are explained in the
next section.
• The emphasis on trade
liberalization started in the
Caribbean with the formation
of the Caribbean Free Trade
Association (CARIFTA) in
1965. The association’s
main aims were to increase,
liberalize and diversify trade
among the member states.
• In 1973, CARICOM was established with the main aim of improving on CARIFTA and aiding with
economic integration in the Caribbean.

• Today, CARICOM has grown into the Caribbean Single Market and Economy (CSME).
Who has outined the following as their objectives:

• 1. Improved standards of living and work

• 2. Full employment of labour and other factors of production
• 3. Accelerated, coordinated and sustained economic development and convergence
• 4. Expansion of trade and economic relations with third states
• 5. Enhanced levels of international competitiveness
• 6. Organisation for increased production and productivity
•
• The concept of trade liberalization has also taken the spotlight in
the world economy. This was evident with the establishment of
the General Agreement on Tariffs and Trade (GATT) in 1947. Its
main objective includes the regulation of trade among about 150
countries. It sought to ‘significantly reduce tariffs and other trade
barriers and eliminate preferences, on a reciprocal and mutually
advantageous basis’. GATT was later replaced by the World Trade
Organization (WTO) in 1995.
•
The Essential Functions Of The WTO Are;
Administering and
Administering and implementing the multilateral trade agreements that collectively make up the WTO
implementing

Acting Acting as a forum for multilateral trade negotiations

Seeking Seeking to resolve trade disputes

Reviewing Reviewing national trade policies

Cooperating Cooperating with other international institutions involved in global economic policy making.
The WTO embraces the two main operational
principles of the original GATT:

2. The ‘Most Favoured

1. Reciprocity – arranging
Nation’ Rule – requiring
for countries to receive
that a country should apply
foreign tariff reductions in
its lowest tariff for any
return for tariff cuts of
particular product to all its
their own
suppliers.
Advantages
of Globalization
to the Caribbean
A major advantage of globalization to the
Caribbean is the access it brings to talent and
resources:
• The Caribbean isent that big on a global scale
thus, Globalization allows small Caribbean
countries to access a diverse pool of talent and
resources from different parts of the world.
Facilitating the recruitment of skilled employees,
leverage of foreign expertise, and tapping into
specialized resources that may not be available
domestically, for example, it is because of
globalization that we were all able to get here today,
via: car, maxi, plane, doesn't matter, Trinidad does
not produce ANY! Motor vehicles and thus relies on
imports to satisfy its need for transport.
• Increased market opportunities:
Globalization allows Caribbean countries to
access larger markets beyond their domestic
boundaries.
This opens up new avenues for growth and
expansion, as they can tap into a global
customer base.
 Disadvantages of
Globalization to
the Caribbean
Globalization also imposed some difficulties for the
Caribbean economy such as:
 Brain Drain
• Brain drain is one of the major
disadvantages of globalization to the
Caribbean, and is especially prevalent here in
Trinidad and Tobago, it is a term that
describes the migration of skilled and
educated people from less developed or
developing countries such as our own, to
more developed countries like the USA. As
globalization creates more opportunities and
incentives for people to seek better jobs,
living conditions and technological
advancement in other countries, the home
country which has already invested in their
education and development through public
education, school feeding and programs such
as GAPP. Migration of recpiants of such
programs mean the loss of 'human capital',
innovation and future economic
Increased Competition
• With globalization comes
intensified competition, as local
businesses would now face
competition not only from
domestic players but also from
foreign multinational
corporations, who likely have far
greater capital, business
experience and lower cost of
producing a likely superior
product. This can lead to price
wars, reduced profit margins, and
the need for government
intervention.
 Advantages of
Globalization to
Multinationals
Cost efficiencies
Globalization enables multinationals to take advantage of cost efficiencies through factors such as
outsourcing, offshoring, and access to cheaper labor and resources. This can lead to reduced
production costs and increased profitability.
 By operating in multiple countries,
Diversification multinationals can spread their business
risks across different markets. This helps
of risk to mitigate the impact of economic
downturns or market-specific challenges
in a particular region.
Disadvantages of
globalization to
Multinationals
Political and economic instability
• Multinationals operating globally are exposed to political and
economic risks. Changes in government policies, trade barriers,
currency fluctuations, or geopolitical tensions can disrupt operations
and impact profitability. While uncertainty associated with an
unstable political environment may reduce investment and the pace
of economic development leading to lower profits for MNCs.
Cultural and language barriers
Global expansion requires multinationals to adapt
to different cultural norms, languages, and
consumer preferences. Failure to understand and
respect local customs can lead to marketing
failures and difficulties in building relationships
with customers.
QUESTIONS
Which of the following best describes how Globalization affects consumer choices?

1-Makes them angrier

2-Widens the variety of choices available to them
3-Makes them more prone to spending
4-Forces them to buy from certain businesses only
Answer
• The answer is… 2!
• Widens the variety of choices available to the consumer
Is the statement “Globalization can affect the
standard of living of person within a given
society”

True or False ?
Answer
• The answer is…1!
• True
Which of the following is an essential function
of the WTO ?
• Resolve trade disputes
• Fight for the jedi
• Aid SMEs in the manufacture of goods
• Maintain order among businesses
Answer
• The answer is…1
• Resolve trade disputes
The End