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Ib&exim (M1)

The document discusses globalization, including its definition and key facets like the globalization of markets and production. It covers the declining of trade and investment barriers over time and the role of technological changes in enabling greater globalization. Both positive and negative impacts of globalization are highlighted.

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vuppalashrimanth
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8 views

Ib&exim (M1)

The document discusses globalization, including its definition and key facets like the globalization of markets and production. It covers the declining of trade and investment barriers over time and the role of technological changes in enabling greater globalization. Both positive and negative impacts of globalization are highlighted.

Uploaded by

vuppalashrimanth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 16

Globalization

• What is Globalization?
 Integration and Interdependence

 Integration of Domestic Economy with the World/Global


Economy

 Interdependence of nations

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Globalization (cont.)
Globalization has several facets including:

1. Globalization of Markets

2. Globalization of Production
Globalization of Markets
• This refers to the merging of historically distinct and
separate national markets into one huge global market
place.
• Falling barriers to cross-border trade have made it
easier to sell internationally.
• Global Market: Because of the convergence of the
tastes and preferences of consumers in different
nations.
Globalization of Production
• This refers to the sourcing of goods and services from
locations around the globe to take advantage of
national differences in the cost and quality of factors
of production.
• Factors of Production: land, labour, capital, and
energy
• Low overall cost structure
• Improvement in quality
• Improvement in Functionality
The Global Economy of the 21st Century
• Rapid Changes in Global economy in the past quarter
century
• The volume of cross border trade and investment has
been growing
• Single, interdependent, global economic system
Growth of Globalization
• Two macro factors for the greater Globalization
1. Declining Trade and Investment Barriers

2. The Role of Technological Change


Trade and Investment Barriers
• During 1920s and 30s, many of the nation-states
erected formidable barriers to international trade and
investment.

• Barriers: High tariffs (to protect domestic industries


from foreign competition)

• Great Depression of 1930s


Declining Trade and Investment Barriers
• After World War II, advanced industrial nations in the
West committed themselves to remove barriers to the
free flow of goods, services, and capital between
nations.

• General Agreement on Tariffs and Trade (GATT)

• World Trade Organization (WTO)

• Removal of restriction to foreign direct investment


Results of Declining Trade and
Investment Barriers
• Enables the firms to view the world, rather than a
single country, as their market

• Allows firms to base production at the optimal


location for that activity
The Role of Technological Change
• Major advances in communication, information
processing, and transportation technology

• Explosive emergence of Internet and World Wide


Web

• Telecommunication is creating a global audience

• Transportation is creating a global village


The Role of Technological Change (Cont.)

• Microprocessors and Telecommunications


– Revolutionized global communication by development in
satellite, wireless technologies, and internet

– Drastic fall in the cost of communication

• The Internet and World Wide Web


– Allows businesses (both small and large) to expand global
presence at lower cost
The Role of Technological Change (Cont.)

• Transportation Technology
– Development of commercial jet aircraft

– Reduction of time required to travel from one place to another

– Introduction of Containerization

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Impact of Globalization
• Both positive and negative impacts
 Merits/Pros/Positive Impacts

 Demerits/Cons/Negative Impacts

 Globalization is not all good and it has its critic

 Antiglobalization Protests
Positive Impact of Globalization
• Stimulates Economic Growth
– Job creation
– Improved standard of living
• Economies of Scale
– Lower prices for goods and services
• Increased Competition/Better Products
• Foreign Direct Investment
– Transfer of technology
• Foreign Exchange Reserves
• Extension of Market
Negative Impact of Globalization
• Loss of jobs and income
– Loss of jobs in advanced economies such as USA and UK
because of movement of business activities to the countries
where wage rates are low.

• Exploitation of labour and Environment


– MNCs tend to shift their business to less developed countries
that lack adequate labour laws and environmental regulations

• Spread of Economic Problems


Globalization in India (LPG 1991)
• 1991 Economic Crisis
 Political Instability
 Gulf War and Rise in Petroleum Price
 Break down of Union of Soviet Socialist Republics (USSR)
 Low Foreign Exchange Reserve

• Loan from IMF


• Liberalization, Privatization and Globalization Policy
(Economic Liberalization Reforms)

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