PRINCIPLES OF GLOBAL BUSINESS MANAGEMENT
(MNB370-1)
LEARNING UNIT 1: CHAPTER 1: GLOBALISATION AND INTERNATIONAL BUSINESS
1.3 DEFINING GLOBALISATION
Globalisation refers to the increasing integration of production, development and
communication amongst nations on a worldwide/international scale.
Globalization is a process of interaction and integration among the people, companies,
and governments of different nations, a process driven by international trade and
investment and aided by information technology. Globalisation is the process by which
businesses or other organisations develop international influence(s) or start operating on
an international scale.
The key interlinked factors influencing the tendency towards globalisation are as follows:
- GATT (General Agreement on Tariffs and Trade (GATT) Definition: Multilateral
international trade treaty first created in 1947 and frequently amended. ... GATT was
active under that name from 1947 until 1994, when WTO was founded. The records
of GATT are now managed by WTO in Geneva) and WTO (The World Trade
Organization (WTO) is the only global international organization dealing with the rules
of trade between nations. At its heart are the WTO agreements, negotiated and
signed by the bulk of the world's trading nations and ratified in their parliaments.)
- Structural shift in the world economy
- Integration and operational velocity of financial markets
- Diffusion of computer-based technologies and information systems
- The “agile” corporation
- Competitiveness based on supply chains
Perspectives of globalisation
Culture- process of transformation in the spatial organisation of social relations and
transactions that generate flows and networks of activity.
Economic- the growing, interdependence of countries worldwide through the increasing
volume and variety of cross-boarder transactions in goods and services, international
capital flows and technological advances.
Forces of globalisation
1. Political forces – factors such as trade barriers , recognition of intellectual
property rights, move towards privatisation as well as establishing common
technical structures.
2. Economic forces – includes increasing world trade, rising income levels, efficient
financial markets, increasing competition and trafficking government
involvement.
3. Social forces – includes growing consumerism, conveying consumer tasks and
improving lifestyles, education and skills.
Page 1 of 54
, 4. Technological forces – includes industrialisation of nations, improved
transportation and networks and the influence of the information and
telecommunication revolution, including the internet and e-commerce.
The face of globalisation (Capitalist globalisation)
Globalisation involves:
- economic integration
- the transfer of policies across borders
- the transmission of knowledge
- cultural stability
- the reproduction, relations and discourse of power
- it is a global process, a concept, a revolution and an establishment of the global
market free from socio-political control
This suggests a free society where the invisible interchange of supply and demand
regulates sales and purchases.
The good
Globalisation has collapsed the world into a small village. The tremendous increase in
world exports is in line with the increase in firms taking advantage of location-specific
advantages. Improvements in world exports have contributed to employment creation,
trade-creation, national prosperity and human prosperity.
Globalisation has helped improve life expectancy from 52.5 years in 1960 to 71.2 years
in 2013. Almost every country has benefited from medical advances that are stimulated
by globalisation.
The distribution of technology has helped reduce associated costs and has improved
accessibility to state-of-the-art technology by less privileged communities in the world.
Cost reduction and accessibility have transformed the way people communicate and
interact. The advancement of transport technology has made it faster, safer and more
comfortable to travel across global geographies at a relatively cheaper rate.
The concept of location-specific advantages has helped create sustainable jobs in some
offshore locations that were previously unattractive for locating production facilities. The
multiplier effects of economic gains have trickled down to the greater number of the
population and have helped reduce the household poverty level.
The bad
Unfortunately, globalisation is not impervious to weaknesses, fiduciary risks, crookedness
and malignity. The allotment of the proceeds is lopsided and the level of
underdevelopment in less privileged societies has worsened. Labour maltreatment has
been challenged.
Prominent among the arguments levied against globalisation is the unintended
consequence of job losses. The pressure created by international competition has
necessitated the relocation by MNC’s of their production facilities to lower cost
production centres, thereby depriving the higher cost facility.
Africa has not really benefited from economic globalisation. The dependence on its
resources has been worsened by globalisation. Many manufacturing firms have been
Page 2 of 54
,forced to close operations while existing ones are producing far below capacity as a
result of intense competition from MNC’s from advanced economies. The dumping of
goods on developing markets by MNC’s from advanced economies has worsened market
development in the less-privileged communities. Culprits of dumping are agricultural
producers from USA and UK due to lopsided regulatory provisions per the General
Agreement on Tariffs and Trades (GATT). Agricultural tariffs from the Uruguay Round hurt
less privileged countries which the frameworks were meant to help emancipate from
abject poverty. Raw materials from Africa attract no import duties yet it is a crime if any
beneficial material is exported from Africa to European Union. As far as tariff barriers are
concerned, explains why more than 90% of the global coca-producing countries produce
less than 4% of global chocolates.
The main injustice adopted by Western countries and strictly enshrined in the Dispute
Settlement Understanding (appendage of the WTO’s framework) says it is fair to
subsidise agricultural produce in the advanced economies at the expense of less-
equipped farmers in the developing world. Farm produce from Africa is deemed inferior
and inadmissible to Western markets except for products regarded as raw materials.
The ugly
With the current form of globalisation, millions of avoidable losses of livelihood are being
recorded among smallholder farmers globally especially in the developing world. Within
its current form, globalisation advances the interests of capitalism at the expense of the
globally poor and the working class. Anti-globalisation in this context stands for the
dislike towards the current form of corporate personhood and all forms of economic
suppression of the less privileged community and its members.
The first renowned global scale anti-globalisation protest was in 1999 and was targeted
at the Ministerial Conference of the WTO where China’s entry into the WTO was
approved. China created wealthy Chinese individuals at the expense of the global poor.
Cheap Chinese imports have killed so many domestic firms and the few struggling for
survival may not be saved owing to the intense pressure for cost reduction in order to
compete with Chinese products.
The world has witnessed various socioeconomic mishaps over the past few years proving
anti-globalisation protesters right. The 2008/2009 financial crises that originated in USA
through financial recklessness spread through the world with devastating effects on less
privileged countries. UK recorded its highest unemployment rate in recent years and
Italy and France experienced one of the worst periods of political instability for many
years. USA was at the edge of total capital market collapse and the resulting social
unrest was unprecedented.
All dissensions towards the current form of globalisation have a single goal – to seek a
globally inclusive solution to unfair global trade and unfavourable capital market
systems.
The journey ahead – new thinking
Across the world advocates of reforms to the current formula of economic globalisation
have suggested a rewrite of guiding principles of the allotment of global goods in an
equitable manner. This appeals to the global poor, victims of environmental pollution and
Page 3 of 54
, weak political states which are victims of intimidation from MNC’s. There should be a
redefinition of ‘world order’.
1.4 HISTORICAL DEVELOPMENT OF GLOBALISATION
The evolution of globalisation is rooted in historical events. Indeed, this was a
forerunner of inter-regional, symbiotic trading arrangements between people,
countries and nation-states. It served as a catalyst to the development of
undeveloped countries, foreshadowing a greater degree of regulated trade in these
countries.
But, the real focus of the historicity of globalisation concentrates on the advent and
duration of slavery and colonisation, as more countries fell under the political
jurisdiction of more powerful nations such as the United Kingdom and France. This
state of affairs persisted for centuries; only the emancipation of slaves and the
liberalisation of these countries served as a stimulus to further globalisation.
The evolution of modern trading and investment arrangements, with their
corresponding financial and capital operations, together with various economic
integrations, stemmed, it is argued, from this emancipation process. Ultimately it also
gave rise to unprecedented political and economic alliances.
1.5 TYPES AND FORMS OF GLOBALISATION
1. Globalisation of markets
- Merging of historically distinct markets into one global market
2. Globalisation of products
- Sourcing of goods and services from locations around the globe to take advantage
of location specific advantages.
- Cheaper labour, energy, land and capital
The manifestation of globalisation are determined by the scope of production and market
processes. Complementing these manifestations are the unique structures of the supply
side of globalisation, as epitomised by multinational corporations (MNCs) and the
location of their production facilities, so as to minimise barriers, while maximising global
economic relations.
Drivers of Globalisation
1. Changes in political environment
The Changes in the political environment can be credited with two developments,
namely the creation of global economic/trade regulatory bodies - the General
Agreement on Tariffs and Trade (GATT) in 1947,; - and the collapse of communism.
A series of protectionist measures that characterised much of the twentieth century
prevented many firms from realising their dreams of foreign expansion.
The collapse of communism infused a paradigm shift in the global business
landscape.
2. Changes in technological environment
While foiling trade barriers and the shift in political ideologies have aided the process
of globalisation, technological invention and innovation are accelerating the process.
Page 4 of 54
(MNB370-1)
LEARNING UNIT 1: CHAPTER 1: GLOBALISATION AND INTERNATIONAL BUSINESS
1.3 DEFINING GLOBALISATION
Globalisation refers to the increasing integration of production, development and
communication amongst nations on a worldwide/international scale.
Globalization is a process of interaction and integration among the people, companies,
and governments of different nations, a process driven by international trade and
investment and aided by information technology. Globalisation is the process by which
businesses or other organisations develop international influence(s) or start operating on
an international scale.
The key interlinked factors influencing the tendency towards globalisation are as follows:
- GATT (General Agreement on Tariffs and Trade (GATT) Definition: Multilateral
international trade treaty first created in 1947 and frequently amended. ... GATT was
active under that name from 1947 until 1994, when WTO was founded. The records
of GATT are now managed by WTO in Geneva) and WTO (The World Trade
Organization (WTO) is the only global international organization dealing with the rules
of trade between nations. At its heart are the WTO agreements, negotiated and
signed by the bulk of the world's trading nations and ratified in their parliaments.)
- Structural shift in the world economy
- Integration and operational velocity of financial markets
- Diffusion of computer-based technologies and information systems
- The “agile” corporation
- Competitiveness based on supply chains
Perspectives of globalisation
Culture- process of transformation in the spatial organisation of social relations and
transactions that generate flows and networks of activity.
Economic- the growing, interdependence of countries worldwide through the increasing
volume and variety of cross-boarder transactions in goods and services, international
capital flows and technological advances.
Forces of globalisation
1. Political forces – factors such as trade barriers , recognition of intellectual
property rights, move towards privatisation as well as establishing common
technical structures.
2. Economic forces – includes increasing world trade, rising income levels, efficient
financial markets, increasing competition and trafficking government
involvement.
3. Social forces – includes growing consumerism, conveying consumer tasks and
improving lifestyles, education and skills.
Page 1 of 54
, 4. Technological forces – includes industrialisation of nations, improved
transportation and networks and the influence of the information and
telecommunication revolution, including the internet and e-commerce.
The face of globalisation (Capitalist globalisation)
Globalisation involves:
- economic integration
- the transfer of policies across borders
- the transmission of knowledge
- cultural stability
- the reproduction, relations and discourse of power
- it is a global process, a concept, a revolution and an establishment of the global
market free from socio-political control
This suggests a free society where the invisible interchange of supply and demand
regulates sales and purchases.
The good
Globalisation has collapsed the world into a small village. The tremendous increase in
world exports is in line with the increase in firms taking advantage of location-specific
advantages. Improvements in world exports have contributed to employment creation,
trade-creation, national prosperity and human prosperity.
Globalisation has helped improve life expectancy from 52.5 years in 1960 to 71.2 years
in 2013. Almost every country has benefited from medical advances that are stimulated
by globalisation.
The distribution of technology has helped reduce associated costs and has improved
accessibility to state-of-the-art technology by less privileged communities in the world.
Cost reduction and accessibility have transformed the way people communicate and
interact. The advancement of transport technology has made it faster, safer and more
comfortable to travel across global geographies at a relatively cheaper rate.
The concept of location-specific advantages has helped create sustainable jobs in some
offshore locations that were previously unattractive for locating production facilities. The
multiplier effects of economic gains have trickled down to the greater number of the
population and have helped reduce the household poverty level.
The bad
Unfortunately, globalisation is not impervious to weaknesses, fiduciary risks, crookedness
and malignity. The allotment of the proceeds is lopsided and the level of
underdevelopment in less privileged societies has worsened. Labour maltreatment has
been challenged.
Prominent among the arguments levied against globalisation is the unintended
consequence of job losses. The pressure created by international competition has
necessitated the relocation by MNC’s of their production facilities to lower cost
production centres, thereby depriving the higher cost facility.
Africa has not really benefited from economic globalisation. The dependence on its
resources has been worsened by globalisation. Many manufacturing firms have been
Page 2 of 54
,forced to close operations while existing ones are producing far below capacity as a
result of intense competition from MNC’s from advanced economies. The dumping of
goods on developing markets by MNC’s from advanced economies has worsened market
development in the less-privileged communities. Culprits of dumping are agricultural
producers from USA and UK due to lopsided regulatory provisions per the General
Agreement on Tariffs and Trades (GATT). Agricultural tariffs from the Uruguay Round hurt
less privileged countries which the frameworks were meant to help emancipate from
abject poverty. Raw materials from Africa attract no import duties yet it is a crime if any
beneficial material is exported from Africa to European Union. As far as tariff barriers are
concerned, explains why more than 90% of the global coca-producing countries produce
less than 4% of global chocolates.
The main injustice adopted by Western countries and strictly enshrined in the Dispute
Settlement Understanding (appendage of the WTO’s framework) says it is fair to
subsidise agricultural produce in the advanced economies at the expense of less-
equipped farmers in the developing world. Farm produce from Africa is deemed inferior
and inadmissible to Western markets except for products regarded as raw materials.
The ugly
With the current form of globalisation, millions of avoidable losses of livelihood are being
recorded among smallholder farmers globally especially in the developing world. Within
its current form, globalisation advances the interests of capitalism at the expense of the
globally poor and the working class. Anti-globalisation in this context stands for the
dislike towards the current form of corporate personhood and all forms of economic
suppression of the less privileged community and its members.
The first renowned global scale anti-globalisation protest was in 1999 and was targeted
at the Ministerial Conference of the WTO where China’s entry into the WTO was
approved. China created wealthy Chinese individuals at the expense of the global poor.
Cheap Chinese imports have killed so many domestic firms and the few struggling for
survival may not be saved owing to the intense pressure for cost reduction in order to
compete with Chinese products.
The world has witnessed various socioeconomic mishaps over the past few years proving
anti-globalisation protesters right. The 2008/2009 financial crises that originated in USA
through financial recklessness spread through the world with devastating effects on less
privileged countries. UK recorded its highest unemployment rate in recent years and
Italy and France experienced one of the worst periods of political instability for many
years. USA was at the edge of total capital market collapse and the resulting social
unrest was unprecedented.
All dissensions towards the current form of globalisation have a single goal – to seek a
globally inclusive solution to unfair global trade and unfavourable capital market
systems.
The journey ahead – new thinking
Across the world advocates of reforms to the current formula of economic globalisation
have suggested a rewrite of guiding principles of the allotment of global goods in an
equitable manner. This appeals to the global poor, victims of environmental pollution and
Page 3 of 54
, weak political states which are victims of intimidation from MNC’s. There should be a
redefinition of ‘world order’.
1.4 HISTORICAL DEVELOPMENT OF GLOBALISATION
The evolution of globalisation is rooted in historical events. Indeed, this was a
forerunner of inter-regional, symbiotic trading arrangements between people,
countries and nation-states. It served as a catalyst to the development of
undeveloped countries, foreshadowing a greater degree of regulated trade in these
countries.
But, the real focus of the historicity of globalisation concentrates on the advent and
duration of slavery and colonisation, as more countries fell under the political
jurisdiction of more powerful nations such as the United Kingdom and France. This
state of affairs persisted for centuries; only the emancipation of slaves and the
liberalisation of these countries served as a stimulus to further globalisation.
The evolution of modern trading and investment arrangements, with their
corresponding financial and capital operations, together with various economic
integrations, stemmed, it is argued, from this emancipation process. Ultimately it also
gave rise to unprecedented political and economic alliances.
1.5 TYPES AND FORMS OF GLOBALISATION
1. Globalisation of markets
- Merging of historically distinct markets into one global market
2. Globalisation of products
- Sourcing of goods and services from locations around the globe to take advantage
of location specific advantages.
- Cheaper labour, energy, land and capital
The manifestation of globalisation are determined by the scope of production and market
processes. Complementing these manifestations are the unique structures of the supply
side of globalisation, as epitomised by multinational corporations (MNCs) and the
location of their production facilities, so as to minimise barriers, while maximising global
economic relations.
Drivers of Globalisation
1. Changes in political environment
The Changes in the political environment can be credited with two developments,
namely the creation of global economic/trade regulatory bodies - the General
Agreement on Tariffs and Trade (GATT) in 1947,; - and the collapse of communism.
A series of protectionist measures that characterised much of the twentieth century
prevented many firms from realising their dreams of foreign expansion.
The collapse of communism infused a paradigm shift in the global business
landscape.
2. Changes in technological environment
While foiling trade barriers and the shift in political ideologies have aided the process
of globalisation, technological invention and innovation are accelerating the process.
Page 4 of 54
