Summary MNB3701_ EXAM STUDY NOTES NOV 2021.

MNB3701_ EXAM STUDY NOTES NOV 2021. MNB3701 - Global Business Management IA. 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 lessequipped 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 Evidence suggests that four main components of technological innovation have contributed immensely to the global exchange of ideas and opinions, trade and investments, research and education, as well as the movement of people, products and services. These main components of technological innovation are:  e-mail and  videoconferencing,  the Internet and the World Wide Web,  company Intranets and Extranets  advances in transportation technology 1.6 CAPITALIST GLOBALISATION AND ANTI-CAPITALISTS These aspects of globalisation are covered in section 4 of the chapter. This section highlights the benefits of globalisation in the face of anti-globalisation protests. The positive aspects of globalisation are the benefits of economic integration, trade liberalisation, knowledge transmission and diffusion, cultural stability, power coalitions, globalisation and free markets and the phenomenon of socio-political control, coupled with improvements in world health care. These affirmations are constantly being countered by the antagonism emanating from the anti-globalists who argue against the alleged benefits of globalisation. They do so, citing the “impervious weaknesses” of globalisation as evidenced by negatives such as the risks involved, the inequitable apportionment of resources to the disadvantage of poor countries, and the capricious policies of institutions such as the IMF (The International Monetary Fund is an international organization that aims to promote global economic growth and financial stability, to encourage international trade, and to reduce poverty.), the World Bank (The World Bank is an international financial institution that provides loans to countries of the world for capital programs. It comprises two institutions: the International Bank for Reconstruction and Development (IBRD), and the International Development Association (IDA), the WTO (deals with the global rules of trade between nations. Its main function is to ensure that trade flows smoothly, predictably and freely as possible), and the International Labour Organisation (ILO) (The ILO has integrated many of its existing technical projects into five flagship programmes, designed to enhance the efficiency and impact of its development cooperation with constituents on a global scale(.. It is enlarged upon with reference to the poor employed in agricultural communities, who are feeling the effects of the imposition of agricultural tariffs. The aggressive manifestation of globalisation in the form of the establishment of international trade agreements (such as the North American Free Trade Agreement (NAFTA), with its preference for tariff eradication, at the expense of the poor) is also discussed in this chapter. The extent to which these initiatives have elicited antiglobalisation protests, is investigated in this section. The Seattle protests feature Page 5 of 54 prominently in this discussion, highlighting the “war against capitalist globalisation”. The geographical scope of these protests has vindicated the extent of their grievances. NAFTA- has two supplements: the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labour Cooperation (NAALC). Most economic analyses indicate that NAFTA has been beneficial to the North American economies and the average citizen, but harmed a small minority of workers in industries exposed to trade competition. Economists hold that withdrawing from NAFTA or renegotiating NAFTA in a way that re-establishes trade barriers will adversely affect the U.S. economy and cost jobs. However, Mexico would be much more severely affected by job loss and reduction of economic growth in both the short term and long term. 1.7 THE FUTURE OF GLOBALISATION