THE

CONTEMPORARY
WORLD
Market Integration and the
Global Interstate System
Prepared by:
Ma. Janda Ira Felina M. Benedictos
Instructor 1
Philippine Merchant Marine Academy
 Market Integration
• Contemporary Global Corporation
– Simultaneously and commonly referred to
as a:
• Multinational Corporations (MNC)
– Have investment in other countries, but do
not have coordinated product offerings in
each country.
– They are more focused on adapting their
products and services to each individual
local market
 Market Integration
• Transnational Corporations (TNC)
– Are more complex organizations which have
invested in foreign operations, have a central
corporate facility but give decision making, research
and development (R&D) and marketing powers to
each individual foreign market
– As defined by the United Nations Center on
Transnational Corporations (UNCTC) is an enterprise
that engages in activities which add value
(manufacturing, extraction, services, marketing,
etc.) in more than one country (1991)
 Market Integration
• International Companies
– Importers and exporters, typically without
investment outside of their home country
• Global Companies
– Invested in and are present in many
countries.
– They typically market their products and
services to each individual local market.
(Iwan, 2012)
 Market Integration
• US Corporations
– Has enormous advantages during the
immediate post war period as they are:
» Virtually alone in the world
» Emerging from the war with their
productive, organization, and
distributional capacities intact
 Market Integration
• Contemporary Globalization
– Started from the economic recovery of
capital structures in Japan and Europe and
the reentry into global markets of their
national corporations
 Market Integration
• Three fundamental innovations that substantially
changed the character of the global corporation:
– The advent and impact of digitalization and
instantaneous global communications
– The structural transformation of global commerce
from producer driven community chains to buyer
driven
– The increasing role performed through the global
system by financial elements and the emergence of
the global financial firm
 Market Integration
• Three Structural periods

– Investment-based globalization (1950-1970)

– Trade-based globalization (1970-1995)
– Digital-based globalization (1995-onwards)

- Geriffi, 2001
 Market Integration
• Foreign Direct Investment (FDI)
– Defined initially and primarily as the entry of
private capital marker from a source
external to a country into a receiving
country. Usually referred to as ‘out-ward’
and ‘in-ward’ flows.
– Examining the sources and levels of FDI is
another way of projecting the growth of
globalization.
 Market Integration
• Producer Driven commodity or
value chains
– Dominated the investment-based period
– Dominated by firms characterized by large
amounts of concentrated capital focused on
large-scale or capital-intensive
manufacturing or extractive industries.
– Mostly organized within the frame of
‘Fordist’ management principles.
 Market Integration
• How global corporations work
– Gereffi argued persuasively that this is
largely determined by whether they are
situated in producer-driven or buyer-driven
commodity chains.
 Market Integration
• Producer-driven Commodity Chains

Retailers
Manufacturers Distributors and
Dealers
 Market Integration
• Buyer-driven Commodity Chains
OVERSEAS U.S. MARKET

Branded
Marketers

Traders
Factories
Retailers
Overseas
Buyers

Branded
Manufacturers
 Market Integration
• Branding
– Created and owned by global corporations
– Due to the increasing value and importance place
on it; the status of symbolic capital within the global
marketplace is very evident
• Brand Finance
– A new discipline that ranks corporations in global
league tables on the value of their brand in a
manner parallel to their ranking by various entities
in terms of their aggregate revenue, earnings, etc.
 Market Integration
• Digitalization is transforming the classic
value chain of manufacturing focused on
innovation which:
– Product design and innovation are replaced with driving
innovation through digital product design
– Labour intensive manufacturing is replaced by digitizing the
factory shop floor
– Supply chain management is replaced by globalizing through
digital supply chain management
– Marketing sales and service is replaced by digital customization
-Capgemini, 2012
 Market Integration
• Buyer driven value streams
–Have increasingly become digital
with companies’ specialization in
Internet retailing of goods and
services continuing to gain market
share over fixed in place
marketing and selling.
 Market Integration
• Other approaches to answer
the question how global
corporations work are:
–Viewing them as a complex global
activity
–Examine the network of corporate
control
 Market Integration
• What is Different about this Phase of
Global Corporate Development
–Developing Economies and those
of BRICS (Brazil, India and China)
Economies have become the most
dynamic sector of Global
Corporate Growth
 Market Integration
• What is Different about this Phase of Global
Corporate Development
–State Owned Corporations
»May include both national and sub-national governments
such as regions, provinces and cities
»Defined as ‘enterprises comprising parent enterprises and
their foreign affiliates in which the government has a
controlling interest (full, majority, or significant minority)
»Whether or not listed on a stock exchange are playing a
significant role in these emergent economies (UNCTAD-
WIR, 2011-28)
 Market Integration
• What is Different about this Phase of
Global Corporate Development
–Concerns on the entry of state owned
corporations
»Unwelcome market competitors
»Unfair competitive advantage
• These are mainly focused on China
»National security issues
»Issues of transparency and corruption
 Market Integration
• What is Different about this Phase of
Global Corporate Development
–State owned corporations are also viewed as a
“new face” of global corporate reality
–They have the propensity to invest is so called
Greenfield ventures
»Greenfield venture is a form of FDI in which the
parent firm starts a new venture in a foreign
country by creating facilities from the ground up
 Market Integration
• What is Different about this Phase of Global Corporate
Development
–Non-equity modes of production (NEMS)
»Have become an increasingly important form of global corporations within
the emerging economies veering away from the traditional form of
internalization
»Represent an increasingly vast network of relationships in which global
production chains are assembled through:
• contract manufacturing;
• Services outsourcing;
• Contact farming;
• Franchising;
• Licensing ; and
• Management contracts
 Market Integration
• What is Different about this Phase of
Global Corporate Development
–Non-equity modes of production (NEMS)
»Viewed as externalization for the
corporation
»Characterized by vertical integration
»It has outpaced the growth of base industry
growth in electronics, pharmaceuticals,
footwear, retail, toys, and garments
 Market Integration
–Three general types of global corporations
within the emerging economies
»Those that have arisen as a result of
growing national power of the host
country
»Focused on replicating major consumer
pathways in both developed and
developing pathways
»NEMS
 Market Integration
• Regulatory dynamic
– Affects global corporations and has
manifested itself into two conflicting thrusts
• Progressive and steady regulatory movement
at both international and national levels of
liberalization
• National regulatory charges targeted usually at
specific industries or investment patterns
 Market Integration
• CSR (Corporate Social responsibility)
– A self-regulatory pattern that has been
brought to global corporations in an
effort to render them more
accountable across the range of their
many and varied stakeholders.
 Market Integration
• Three complex interactive global
patterns that continue to frame
contemporary globalization and its
possible features:
– Global inequality
– Systematic stability and viability of the global
financial system
– Climate issues