ECONOMIC GLOBALIZATION Drivers of Globalization MULTINATIONAL CORPORATIONS

Two factors underlie globalization

What is Economic Globalization?
 is a historical process, the result of human
innovation and technological progress.
 increasing integration of economies around the
world, particularly through the movement of
goods, services, and capital across borders.
 movement of people (labor) and knowledge
(technology) across international borders.
The phenomenon can thus have several
interconnected dimensions, such as:
(1) the globalization of trade of goods and services;
(2) the globalization of financial and capital markets;
(3) the globalization of technology and
communication; and
(4) the globalization of production.
What is a global market?
1. The proliferation of the Internet and the
emergence of market places like eBay.
2. Tramp shipping, international shipping industry, a
certain market segment in which vessels that operate
do not trade regularly between certain fixed ports.
3. The market for foreign exchange is the largest
market in the world in terms of turnover.
1. “Decline in barriers to the free flow of
goods, services, and capital” that has
occurred since the end of World War II.
2. Technological change.
Declining Trade and Investment Barriers
During the 1920s and ‘30s, many
nations erected formidable barriers to
international trade and foreign direct
investment
Advanced industrial nations of the
West committed themselves after World War
II to removing barriers to the free flow of
goods, services, and capital between nations.
Average Tariff Rates on Manufactured
Products
Multinational corporation (MNC) is
usually a large corporation incorporated in one
country which produces or sells goods or services in
various countries. The two main characteristics of
MNCs are their large size and the fact that their
worldwide activities are centrally controlled by the
parent companies.
How do global corporations function?
International companies are importers and
exporters, typically without investment outside of
their home country.
Multinational companies have investment in
other countries, but do not have coordinated product
offerings in each country.
Multinational companies have investment in
other countries, but do not have coordinated product.

GLOBALIZATION
Globalization has been around since the 15th
century when European exploration & colonization
created global empires & markets, but most
historians and economists agree that today is special
by the extent of interdependence and the speed by
which it has occurred.

THE ROLE OF TECHNOLOGY
 Technology is the vital force in the modern
form of business globalization.
 Technology has revolutionized the global
economy and has become critical competitive
strategy.
 The technological advancement has helped a lot
in creation and growth of global market.
 Lowering of trade barriers made globalization
possible;
 Technology has made it a transforming
movement
 “World Wide Web” has exploded in last 20
years
 Computers can move money around the world =
“finance capital”
 Silicon Valley is 9th largest economy in world!
Why it is called Silicon Valley? 1. Free-market Economy - proposed by Adam
Smith in his book, Wealth of the Nations, 1776
A region on the San Francisco
Peninsula in California where the 2. Division of labor - the separation of a work
miniaturized electronics industry is centered, process into a number of tasks, with each task
so called because most of the devices built performed by a separate person or group of persons.
there are made of semiconductors such as It is most often applied to systems of mass
silicon. production and is one of the basic organizing
principles of the assembly line.
What companies are located in Silicon 3. Competition - serves as the driving force for
Valley? creative innovation, the mechanism by which market
supplies and demands are brought into coordinated
balance ...
TODAY: Economies are increasingly linked
together.
NAFTA- The North American Free Trade
Agreement
(NAFTA) is a treaty entered into by the United
States, Canada, and Mexico; it went into effect on
January 1, 1994. (Free trade had existed between the
U.S. and Canada since 1989.
ECONOMIC GLOBALIZATION
Economic globalization refers to the
increasing interdependence of world
economies as a result of the growing scale of
cross-border trade of commodities and
services, flow of international capital and
wide and rapid spread of technologies.
EARLY CAPITALIST IDEAS
The first stage of capitalism came
about during the 17th century, when
merchants gradually became more involved
in the production of goods by supplying
materials and paying wages. The merchant
made the transition to capitalism by making
profits from the ownership and control of the
means of production.
It has three main ideas: