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Transcript of Globalisation
What is Globalization and how does it change the business environment?
Increased standard of living: creation of new jobs in developed and emerging countries through division of production and new technologies
MNCs pay higher wages than local firms
Transfer of technology and expertise to raise efficiency
Increased economic growth in host countries of MNCs (i.e. China, India) and participation in global economy leads to economical and social enhancement
Consumer is better off due to cheaper prices through the division in production
Complaints about globalization
Subsidies and Tariffs
Globalization is desirable but doesn't bring yet the welfare effects we wished for
Globalization is not yet completed? Governments must intervene more?
It is difficult to measure welfare and in what extent globalization affects it.
What is Globalization and how does it change our environment?
According to G. Bekaert (2014),
"Globalization refers to the increasing connectivity and integration of countries and corporations and the people within them in terms of economical, political and social activities."
Multinational Corporations dominate the corporate landscape
"A financially open country allows foreigners to invest in domestic capital markets and allows citizens to invest abroad." (
G. J. Bekaert, 2014
From 1980s countries began to reduce their barriers to capital flows and deregulate foreign investment
Companies receive subsidies from government
Advanced industrial countries maintain tariffs against poor countries
Poverty increases and local businesses (agriculture) cannot survive anymore.
Governments must help to better spread newly created wealth through intern. trade
Trade Liberalization: Countries are more open to trade.
Gain from trade if country specialize in the production of those goods in which it has a
Promotion of WTO, EU, NAFTA, ASEAN
Parent company which has operating subsidiaries, branches abroad
In early 1990s, there were 37,000 international companies, now there are 82,000 (UNCTAD)
How they enter foreign markets?
Foreign direct investment
J. E. Stiglitz,
Making Globalization work
, The Economics and Social Review, Vol. 39, No. 3, Winter, 2008, pp. 171-190
Peter S. Heller, Global Economic Symposium,
Geert J. Bekaert, 2014, International Financial Management, Pearson Education Limited
C. Tisdell, 2013, Globalization, Social Welfare and Market Inequalities,
Hatzichronoglou, T. (1996), “Globalisation and Competitiveness: Relevant Indicators”, OECD Science, OECD Publishing
Greater connection between economies -> downturns can impact other economies quicker
Countries have high levels of debt
Shocks can quickly influence different sectors
Increase in protectionism and problems can affect viability of current welfare states
Competitive pressures faced by domestic producers -> restraining realization of wage gains, risk of unemployment and bad working conditions
Greater need for social safety, welfare and unemployment benefits