2. Whatis Globalisation?
Globalisation is the growing interdependence
between nation as a result of the free movement of
labour, goods and services and capital. There is
world wide economic activities because there is a
borderless world or global village.
3. FactorsaffectingGlobalisation
Technological changes- has played an important role in
globalisation the world’s economy. More powerful computers
and communication technology have allowed the easy transfer
of data. The internet has revolutionised the way in which
consumers purchase products.
Cost of transportation- the cost of transportation has fallen.
The single most important factor in the falling cost of
transportation has been the revolution in the use of
containerised transport. The ability to load a contain at a factory,
take it by road or rail to a port, transport it by sea and then
delivered to the customer at the other end has considerably
reduced the cost of transport.
It could be argued that certain factors have contributed to the
growth of globalisation
4. Cost of communication- the cost of communication has fallen.
The coast of making a phone call has fallen over time.
Communication has also been revolutionised by the use of the
internet and email which allows very low cost written
communication to take place.
Deregulation- the deregulation of business. Throughout the
1980s, 1990s and early twenty first century many businesses
were privatised in countries throughout the world. In the UK the
privatisation of former state owned monopolies allowed
competition. The removal of restrictions on foreign businesses
operating in eastern European and Asian countries also
increased the ability of businesses to operate globally. New
markets were opened up to foreign competition.
The liberalisation of trade- trade protection has been reduced
due to the operation of organisations such as the World Trade
Organisation(WTO). For example, reduction of restrictions on
trade in textiles is likely to have opened up markets in Asia and
the west.
6. Facilitators of globalisation
World Trade Organisation(WTO)- in brief, the world trade
organisation is the only international organisation dealing with
the global rules of trade between nations. The World Trade
Organisation came into begin in 1995. Its main function is to
ensure that trade flows.
• The result is assurance. Consumers and producers know that
they can enjoy secure supplies and greater choice of the
finished products, components, raw materials and services that
they use. Producers and exporters know that foreign markets
will remain open to them. The result is also a more prosperous,
peaceful and accountable economic world. Decisions in the
WTO are typically taken by consensus among all member
countries and they are ratified by members‘ parliaments. Trade
friction is channelled into the WTO's dispute settlement process
where the focus is on interpreting agreements and
commitments, and how to ensure that countries' trade policies
conform with them.
7. That way, the risk of disputes spilling over into political or
military conflict is reduced. By lowering -trade barriers, the
WTO's system also breaks down other
barriers between peoples and nations.
• At the heart of the system-known as the multilateral trading
system- are the WTO's agreements, negotiated and signed by a
large majority of the worlds trading nations, and ratified in their
parliaments. These agreements are the legal ground-rules for
international commerce. Essentially, they are contracts,
guaranteeing member countries important trade rights. They
also bind governments to keep their trade policies within agreed
limits to everybody's benefit. The agreements were negotiated
and signed by governments. But their purpose is to help
producers of goods and services, exporters, and importers
conduct their business.
• The goal is to improve the welfare of the peoples of the member
countries.
8. The WTO’s overriding objective is to help trade flow smoothly, freely,
fairly and predictably. It does this by:
• Administering trade agreements
• Acting as a forum for trade negotiations
• Setting trade disputes
• Reviewing national trade policies
• Assisting developing countries in trade policy issues, through technical
assistance and training programmes
• Cooperating with other international organisations.
Benefits of the WTO
• Helps promote peace
• Handles disputes constructively
• Rules make life easier for all
• Freer trade reduces cost of living
• Provides more choice of products and qualities
• Trade raises incomes
• Trade stimulates economic growth
• The basic principles make life more efficient
9. International Monetary Fund- This is an international leading
agency/organisation based in Washington that provides short
term credits to its 184 members. It is a specialized agency of the
United Nations but it practices in Japan, UK, USA, Germany
France and Saudi Arabia govern the fund.
The fund was established:
To encourage international cooperation in the monetary field
and the removal of foreign exchange restrictions
To stabilize exchange rates
To facilitate a multilateral payments system between member
countries.
10. World Bank- Also known as the international bank for
Reconstruction and development, it came into being following
the Bretton Wood Conference in 1944 and began operation in
1946. World bank provides long term loans to assist economic
development. In the early years it was engaged in helping to
finance the reconstruction of war damaged Europe. Its main
roles is to channel flows of capital from the rich countries of
western Europe, North America, Japan to the poor and mainly
agriculture countries of Africa, Asia and South America.
It finances projects such as infrastructure development( road,
communication, power stations, water suppliers, irrigation and
rural development, as well as health care, education etc. Its
financial assistance takes the form of long term loans. In
addition to financial help it can offer a variety of financial and
technical services to developing countries. Its engineers,
surveyors, accountants, economists and other experts help
countries plan and implement their development projects.
11. Transnational organisations- This is a business
organisation/corporation/ enterprise that has its
headquarters(parent company) in one country and has
branches/subsidiaries/franchises and plants in many countries.
They seek out the best profit opportunities and are largely
unconcerned with issues such as poverty, inequality and
unemployment alleviation.
Firms develop into MNC’s in order to:
• Obtain control over the supply of resources
• Take advantage of the lower costs of foreign labour and
material
• Avoid paying tariffs on imported goods
• To avoid high production cost and taxes associated with certain
operations in the home country
12.
13. Disadvantages of MNC’s
• Pose a threat to local industries
• Create social cost- pollution
• Repatriation of profits to home base
• Creates competition for local business and may
sometimes create unemployment.
• Exploitation of labour and natural resources
• Some western- base businesses, such as
McDonald's, have been accused of imposing
‘Western culture’ on other societies by the power of
advertising and promotion. This could lead to a
reduction in cultural identity.
17. Impact and response of Globalisation and
Development
Industry and commerce- industries are not longer limited to
suppliers in the country in which they operate. They now have
access to other resources from all parts of the world. Sometimes
even in the remote parts of the world where raw materials and
stock can be sourced at a better quality and at an affordable
price as well. This would lower the cost of production for many
firms. Therefore they could expand their operations and benefit
from economies of scale. This would increase the economic
growth in the country. Customers would benefit in that they
would be getting a range goods and services of a good quality
at an affordable price. Thus this would improve their standard of
living and their quality of life.
18. Distribution sector(Supermarkets, department stores)- with
globalisation there is free trade. It facilitates multinational
companies in the country. If these companies are located in the
country they would reduce the cost of distribution of the goods
and services in the country since the goods would be carried in
a shorter distribution channel. The shorter the distribution
channel the lower the cost incurred to the business. Therefore
this reduces the cost of production for the firm. As a result this
low cost is passed onto the consumers, they would now be able
to purchase goods and services at a reasonable price.
19. Labour- with globalisation businesses have less difficulties in sourcing
labour. Since they are no longer limited to the labour in the country in
which they operate. They are able to source labour from all parts of the
world. Migration have been much easier and common because of
globalisation. Immigrants are also willing to do work that locals would
refuse to do and sometimes at a cheap rate. This therefore lower the
cost of production for the business. They could increase output thus
increasing the economic growth of the country. Trade both create and
destroys jobs. If exports are increased, then it is likely that this is based
on jobs in the country that produces the exports. However, when there
are increases in imports this usually means that those items which
could have been made locally are not. Jobs, then, are lost when a
society imports more and more of its needs and wants. Other countries
with more competitive advantage will food the markets of developing
countries with cheap goods( for example China today is able to flood
both the developed and developing world with mass- produced goods).
The result of these processes is a balance of payments problem and a
loss of jobs in the importing countries.
20. Technology- globalisation has allowed business to get better
technology for the business. Since there is free trade they can
import freely. They would be able to improve their productivity
and efficiency. This would lead to and increase in economic
growth of the country. They would now be able to compete on a
global market. Technology have also changed the way in which
we purchase good. With the use of the internet consumers can
buy goods online. Ecommerce has allowed the to have a large
share of the market . Therefore increasing the profitability of the
business. Not only do they enable businesses to communicate
with suppliers and customers in a timely what but computer
technology have now become an indispensible part of the actual
production. Whether it is in the bottling of soft drinks, the
manufacturing of furniture or retailing, key areas of operation are
computerized.
21. Ideology- An ideology is a set if ideas, doctrines or beliefs that
forms the basis about how someone or a group thinks of the
political, economic, religious or some other system. People have
strong views about globalisation, even when they do not
understand it. They may feel that it is inevitable and bring about
modernisation and development. If they commit to such views,
even in the face of evidence to the contrary, then this is an
example of casting globalization as an ideology.
22. Thank You for your time and
attention!
Hope this presentation was
educational and helpful to you