GED 104-

THE CONTEMPORARY WORLD

THE STRUCTURES
OF GLOBALIZATIOn

Batangas State University-

The National Engineering University
TOPICS TO DISCUSS:

The Global Economy

market integration

The Global Interstate System

Contemporary Global Governance

 Learning
Objectives:
define economic globalization
explain the two major driving forces of
global economy
differentiate economic globalization from
internationalization
trace the origin of economic globalization
.
LESSON 2.2

market
integration
 market
integration
Refers to how easily two or more Groups of prices often move
markets can trade with each other. It proportionally to each other and when
occurs when prices among different this relation is very clear among different
locations or related goods follow markets it is said that the markets are
similar patterns over a long period of integrated
time.
 market
integration
The term is further used in identifying related phenomenon of market of
goods and services experiencing similar patterns of increase or decrease
in prices of products.
It may also refer to the movement of prices of related goods and services
sold in a defined geographical location in similar patterns. When
government implement certain strategy to control the direction of
economy then integration is intentional while shiftin n supply and demand
that has a spillover effect on several markets is another factor of market
integration.
market integration
One way of helping integration of market by
reducing barriers to trade and increasing fluidity
between markets is through foreign trade.

Market integration exists when there are exerted

effects that prompt similar changes or shifts in
other markets that focus on related goods on
events occurring within two or more markets.
example:
Types of Related Markets where
Market Integration Occur
1.Stock Market Integration 2.FinancialMarket Integration
This is a condition in which stock
markets in different countries trend
together and depict same expected
risk adjusted returns. Two markets
are perfectly integrated if investors
can pass from one market to another
without paying any extra costs and if
there are possibilities of arbitration
which ensures the equivalence of
stock prices on both markets
It is an open market economy between
countries facilitated by a common currency
and the elimination of technical, regulatory
and tax differences to encourage free flow
of capital and investment across borders.
It occurs when lending rates in several
different markets begin to move in tandem
with one another. Emergence of similar
patterns within the capital, stock, and
financial markets with those trends coming
together to exert a profound influence on
the economy of that nation is involved in the
integration within a nation.
global corporation

A business that operates in

two or more countries. It also
goes by the name
"multinational company"
global corporation
Several advantages are offered by global
expansion of business over running a strictly
domestic company.
Success in different types of economies is
achieved by means of multiple countries
operation while it causes also logistic and
cultural challenges.
Expanding revenue opportunities and
diversifying business risk are the purposes of
becoming global corporation.
Access to more customers and capital is
obtained through a model that works
domestically well and translates foreign
example:
One can find more customers in a
country whose economy is vibrant
and expanding in lieu of stagnant
local and domestic economy or
market share that has hit a plateau.
 HISTORICAL
PERIODS OF
GLOBAL
CORPORATION
An approach to the study of globalization that locates the phenomenon itself in
early patterns of trade and exchange is known as historical globalization
In early historical periods as both cities and
countries extended their reach beyond their own
borders, a form of globalization was initiated
which then followed complex patterns of
interactive engagements organized through
trade and industry directly influenced by the
emergent and subsequently dominant
technologies especially in shipping and
navigation
The entities operating within this environment
were functionally and organizationally not
different from contemporary organizations
being possessed with head offices, foreign
branch plants, corporate hierarchies,
extraterritorial business law, and even bit of
foreign direct investment and value-added
activities
Combination of invention and social organization
resulting to increase in worldwide capital and wealth
of nation is allowed by modern nation state system
that emerged in the period prior to the end of World
War II.
American Corporations led the economic recovery and
expansion after the World War II destruction.
This period up to the reentry of Japanese and
European corporation to the global scene is viewed as
multinational corporations (MNCs) (61).
From the end of World War II to the present is
considered the period of transformation of global
corporation
 THE FINANCE
FUNCTION IN A
GLOBAL
CORPORATION
As corporations go global, capital markets open up within them, giving companies a power
mechanism for arbitrage across national financial markets. Chief financial officers (CFOs
must balance the opportunities with the challenges of operating in multiple environments
managing their internal markets in building an advantage.
 three functions can be created by
CFOs through exploiting their
internal capital
1.financing
A group’s tax bill can be reduced
by the CFO like borrowing in
countries with high tax rates and
lending to operations in countries
3.Capital budgeting
with lower rates. Getting smarter on valuing
investment opportunities CFOs
2.Risk Management can add value.

Global firms can offset natural

currency exposures through
worldwide operations instead of
managing currency exposures
through financial
 FOREIGN
DIRECT
INVESTMENT
(FDI)
A corporate origin. It is a major driver of extended global corporate development
Foreign Direct Investment (FDI)
It is an investment made by a company or individual in one
country in business interests in another country, in the form
of either establishing business operations or acquiring
business assets in the other country, such as ownership or
controlling interest in a foreign company and the key feature
of foreign direct investment is that it is an investment made
that establishes either effective control of, or at least
substantial influence over, the decision making of a foreign
business.
Foreign Direct Investment (FDI)
Made open to economies; frequently involves more than just
a capital investment and includes provision of management
or technology as well.

There are many methods to establish FDIs such as opening a

subsidiary or associate company in a foreign country;
acquiring a controlling interest in an existing foreign
company, or by means of a merger or joint venture with a
foreign company.
 BRICS
ECONOMIES
Brazil, Russia, India, China and South Africa (BRICS)
BRICS
(BRICS) is an acronym for the combined economies of
Brazil, Russia, India, China and South Africa. BRIC, without
South Africa, was originally coined in 2003 by Goldman
Sachs, which speculates that by 2050 these four
economies will be the most dominant. South Africa was
added to the list on April 13, 2011 creating "BRICS"

These five countries were among the fastest growing

emerging markets as of 2011.
BRICS
Further, Brazil, Russia, India and China (BRIC) refer to the
idea that China and India will, by 2050, become the
world's dominant suppliers of manufactured goods and
services, respectively, while Brazil and Russia will become
similarly dominant as suppliers of raw materials.
Due to lower labor and production costs in these
countries now including a fifth nation, South Africa, many
companies have also cited BRIC as a source of foreign
expansion opportunity i.e. promising economies in which
to inves
 GENERAL
AGREEMENT
ON TRADE
IN SERVICES
(GATS)
The first multilateral agreement covering trade in services which was negotiated
during the last round of multilateral trade negotiations, called the Uruguay Round,
and came into force in 1995.
gats
Provides a framework of rules governing services
trade, establishes a mechanism for countries to
make commitments to liberalize trade in services
and provides a mechanism for resolving disputes
between countries

GATS has similar principle with the General

Agreement on Tariffs and Trade (GATT) that deals
with trade in goods.
REFERENCES:
REFERENCES:
 UNIT 2

THANK YOU!
PRESENTATION IN GED 104

Prepared by: Ms. Jiselle Anne B. Boongaling