Summarized Report of Group 1

Globalization- usually refers to the increased When people trade, how do both sides
flow of trade, people, investment, technology, benefit?
culture, and ideas among countries it can also
be defined as a process of rapid economic, Countries specialize in producing products
where they have a comparative advantage. This
cultural, and institutional integration among
countries. means that instead of producing everything for
themselves, they specialize in producing the
Ex. When your family buys fruit from the local goods that they can make at a lower opportunity
supermarket, you may end up buying apples cost than their trading partners. When they
from China, bananas from U.S and oranges from trade these goods, consumers in both countries
Korea. benefit by being able to buy a greater variety of
goods at lower prices.
Types of Globalization
What roles do the International Monetary
1. Economic: Countries that trade with Fund (IMF), the World Bank and the World
many others and have a few trade Trade Organization (WTO) play in
barriers are economically globalized. Globalization?
2. Social: A measure of how easily The International Monetary Fund (IMF)- It gives
information and ideas pass between advice to member countries and make loans to
people in their own country and its members that have shortages of currency
between different countries (includes necessary for trade.
access to internet and social media
networks). The World Bank- to fight world poverty by
promoting economic development. It does this
3. Political: The amount of political co- by providing loans, policy advice and technical
operation there is between countries. assistance for development projects in poorer
4 Basic Questions about Globalization countries

How new is globalization? The World Trade Organization (WTO)- enforces

rules to promote free international trade, and
The term globalization is a current buzzword helps countries negotiate to reduce trade
frequently used in the news. The term probably barriers.
was coined in the 1960’s and came into wide use
in the 1990’s but globalization itself has been Advantages of Globalization
around for centuries. Although globalization has Cheaper Goods for Consumers and Better
been going on for centuries, historians and Product Quality-Increase competitiveness may
economists agree that today we are in a period also lead to decline in the price goods,
of rapid globalization and that it is on the improvements in quality of goods and choice of
increase worldwide. goods.
What has led to increased Globalization? Increased in Skilled Workers-Increased
Major importance is the fact that trade barriers international labor mobility has led to an
have gradually been reduced around the world, increase in skilled workers
as have restrictions on the free flow of
investment capital between countries. The
growth and sharing of technology are also Cultural Diversity-Increased movement of labor
important. Methods of transportation have leads to an increase in the spread of different
improved, making it easier for people to travel cultural ideas.
and to move goods and services across borders.
Reducing Poverty-GDP of the developing
countries has increased twice as much as before

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Transportation-Globalization has led to
tremendous in transport services across the
globe.
Disadvantages of Globalization GLOBAL MARKETS

Increased Commodity Price-Prices then and now Goods

have increased tremendously
Exploitation of Cheap Labor-Workers working
day and night to produce goods for a very little
money
Increased Relative Poverty/Equality-We have
everything by globalization, we have nothing by
globalization.
Increased Vulnerability and Instability-
International coffee chains are causing a serious
threat to local coffee shops. Labor

Disparity-The economic system that has

generated tremendous wealth disparity that
really seems unfair.
What is GLOBAL ECONOMY?
*A system of trade and industry across the world
that emerged due to globalization.

Capital

*International spread of capitalism

*Worldwide economy GLOBAL TRADE
Exchange Rate- How much your currency is
worth when you trade it to another country’s
currency
Net Exporter- a country or territory whose value
of exported good is higher than its value of
imported goods over a given period of time.

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TRADE SURPLUS DIFFERENT TYPES OF TRADE BARRIERS
• The amount by which the value of a 1. Import quota
country's export exceeds the cost of its
import. 2. Voluntary Export restraint

• Occurs when the value of exported 3. Tariff

goods and services is higher than 4. Informal Barriers
imported.
-Government Licensing Restrictions
• Positive balance of trade
-Government Health and Safety Requirements
• Net inflow
Effects of Trade Barriers
TRADE DEFICIT
They limit supply
• Economic condition that occurs When a
country Is importing more goods Than its 1. Increased price of foreign goods
exporting. 2. Trade wars- Economic conflict resulting for
• Outflow of domestic currency to foreign extreme protectionism.
Markets.
• Negative balance of trade
Why do nations trade? According to Paul
Krugman
1. Countries trade, because they are different
from each other nations, like individuals can
benefit from their differences.
2.Countries trade to achieve economies of scale
in production. Placing high tariffs on imports and limiting the
number of foreign goods to protect local
Trade Barriers-Preventing a foreign product businesses.
from freely entering into a nation's territory.
POSITIVE
• Protect jobs
• Protect infant industries
• Enhance national security
NEGATIVE
• Reduces global living standards
• Limits attempts for international peace.

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Market Integration Disadvantages of Horizontal Integration
a process which refers to the expansion of firms • Destroyed value
by consolidating additional marketing functions
and activities under a single management. • Legal repercussions

Example: Establishments of wholesaling facilities • Reduced flexibility

by food retailers and the setting up of another Vertical Integration-occurs when a firm
plant by milk processor. performs more than one activity in the sequence
Types of Market Integration of the marketing process.

Horizontal Integration-occurs when a firm or

agency gains control of other firms or agencies
performing similar marketing functions at the
same level in the marketing sequence

a) Forward Vertical integration-if a firm

assumes another function of marketing
which is closer to the consumption
Effects of Horizontal Integration function, it is a case of forward
integration.
• Buying out a competitor in a time bound
way to reduce competition. Ex: wholesaler assuming the function of retailing

• Gaining larger share of the market and b.) Backward Integration- this involves
higher profits. ownership or a combination of sources of supply.

• Attaining economies of scale. Ex: when a processing firm assumes the function
of assembling/purchasing the produce from the
• Specializing in the trade. villages
Advantages of Horizontal Integration C.) Balanced Vertical Integration- the third type
of vertical integration is a combination of the
• Lower costs
backward and the forward vertical integration.
• Higher efficiency
Advantages of vertical integration
• Increased differentiation
1. It allows you to invest in assets that are
• Increased market power highly specialized.
• Reduced competition 2. It gives you more control over your
business.
• Access to new markets
3. It allows for positive differentiation.
• Economics
4. It requires lower cost of transaction.
• International trade
5. It offers more cost control
6. It ensures a high level of certainty when
it comes to quality.

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7. It provides more competitive Measurement of Market Integration
advantages.
Measurement or assessment of the extent of
Disadvantages of vertical integration market integration is helpful in the formation of
appropriate policies for increasing the efficiency
1. It can have capacity-balancing problems. of marketing process.
2. It can bring about more difficulties. Integration among firms of a market
3. It can result in decreased flexibility. • The extent of vertical integration in a
4. It can create some barriers to market market may be assessed by counting the
entry. number of functions performed by each
firm in the market
5. It can cause confusion within the
business. • The extent of horizontal integration may
be measured by studying the number of
6. It requires a huge amount of money. firms performing the same marketing
Conglomeration-A combination of agencies or function but operating under one
activities not directly related to each other may, common management.
when it operates under a unified management,
be termed of conglomeration.
Effects of conglomeration
• Risk reduction through diversification
• Acquisition of financial leverage
• Empire – building urge
Reasons for Market Integration
• To remove transaction costs
• Foster competition
• Provide better signals for optimal
generation and consumption decisions
• Improve security of supply
Degree of Integration
Ownership Integration-this occurs when all the
decisions and assets of a firm are completely
assured by another firm.
Example: a processing firm which buys a
wholesale firm
Contract Integration-this involves an agreement
between two firms on certain decisions, while
each firm retains its separate identity
Example: tie up of a dhal mill with pulse traders
for supply of pulse grains

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