What is globalisation?
The globalisation of the world economy is characterized by a greater degree of interdependence of national economies than that created by the links of international trade
Extend on globalisation?
Porter argues that nations need not be well endowed with factors, they can be created through investment for infrastructure and highly specialized training of the workforce
Globalization implies that national economies lose some of their independence
What have channels of globalisation created?
Channels of Globalisation have created a GLOBAL VILLAGE with GLOBAL PRODUCTS
Why do larger businesses prefer global markets?
Because it allows for them to have a standardized products that is accepted everywhere
Why are some products globally accepted?
- common products associated with common needs of functions, with little differentiation other than price (raw products, industrial products and financial products)
- the nature of the product
(strong brand name, converging consumer tastes and consistency of expectations) - global rivalary
- persusaive advertsing
- infotainment media (cross promotion of all media types promoting a ‘lifestyle’ and a world wide accepted image)
- franchising system
- increased mobility of populations
- diffusion of technology particularly in the relam of communication
- urbanisation
What are the challenges from global firms?
- backlash from local communities not wanting to be in the global ‘herd’
- being able to cater for local market preferences and tastes
- PR image of being monolithic, amoral and manipulative
- social media and AI
What are factors accelerating globalisation?
- relaxation of government controls and the widespread adoption of free trade
- improved availability of new technology including the internet
- the mobility of capital and investment by transitional businesses
- faster more efficient transport and communications
- a belief that globalisation will improve our living standards
What is the impact of MNC’s?
- economic power
- tax incentives
- imbalance in economic power of nations
How can the level of globalisaiton be mapped?
- trade intensity
- law of one price
What is transfer?
The movement of scientific methods of production or distribution from one enterprise, institution or country to another
What is capital mobility?
The ability to move private funds across national boundaries in pursuit of higher returns
What is slowbalisation?
Slowbalisation refers to the slowing down of globalisation characterized by a decline in the growth of cross-border trade, investment and economic integration
What is hyperglobalisation?
Hyperglobalisation is an intense phase of globalisation marked by rapid expansion in cross-border trade investment, and economic integration, it is often driven by technological advancements and liberalized trade policies, resulting in highly interconnected global markets and economies.
What is nationalistic movement?
Nationalistic movement refers to the policies and actions by a country aimed at prioritizing and protecting domestic industries, jobs and resources over global economic integration, often through measures like tariffs, trade restrictions and subsidies to strengthen national economic independence
What do international firms look for?
- low wages
- low tax
- ease of capital mobility
- political stability
What is the law of one price?
A measure of economic integration based on the theory that the price of similar products traded in linked markets should converge to one price
What is trade intensity?
Is the ratio of trade to output. It is the measure of integration of product markets in the world economy.
What is the impact of globalisation on Australia’s economy?
- lower consumer prices paid for good and services (+)
- possibility of reduced national sovereignty (-)
- deregulation of wages in the labour market with short-term rise in unemployment (-)
- pressing need for governments to cut tax rates and improve infrastructure (+ -)
- greater consumer choice and satisfaction of wants (+)
- faster average rate of economic growth (+)
- adverse effect on environment due to increased transport and production levels (-)
- possibility of higher average incomes and material living standards (+)
- greater need to become more informed and ethical consumers (?)
What are the factors driving globalisation? (7)
- market expansion
- location economies
- core competencies
- competitive strategies
- risk diversification
- government incentives
- technology transfer
What is market expansion?
- firms exploit economies of scale with access to larger international markets
- average fixed costs for each unit produced is reduced and the firms competitiveness is improved
What is location economies?
- production facilities to foreign sites may keep a firm internationally competitive
- taking advantage of: cheaper labour
lower tax rates
closer supply chains
What are core competencies?
- these are unique characteristics that give a firm a competitive advantage
What are competitive strategies?
- firms will often follow major customers abroad as means of getting a foothold in foreign market
- establishing production facilities abroad enables a firm to protect its foreign markets by overcoming import barriers and guaranteeing essential supplies
What is risk diversification?
Firms with multiple foreign locations can offset risk
- changes in local economic conditions
- changes in employment
- changes in supply chain
