Globalisation 12.1
Today….
• Nature and trends in globalisation:
– Growth of global trade
– Globalisation of production
– Changes in the financial, labour and consumer
markets
– Role of government
– Australia’s role
Globalisation Recap
• In short:
• Globalisation refers to a trend towards a more
integrated global economic system.
• Globalisation is the movement across nations
of trade, investment, technology, finance and
labour. In the business world, globalisation
refers to the process of businesses becoming
transnational, and locating and conducting
their operations in many countries.
Globalisation also means change, as
businesses work to deliver world-class
products and services.
1. Growth of Global Trade
1945-1960 – United States domination of global
trade
• At the end of WWII, only the US had an
economy able to produce goods on a large
scale
• Europe and Japan had suffered enormous
damage to their industrial reasons
• US transnational corporations dominated
global business
1960-1980 – Japan and Europe re-emerge
• By the end of the 1950s they had rebuilt their
industries
• European brands such as Nestle, Philips and
Unilever emerged
• Japanese brands such as Panasonic, Toyota
and Sony emerged
1980 – present
• The process of globalisation accelerated from the
early 1980s.
• Integration of the world’s markets has
dramatically altered the nature and pattern of
global trade
• The US, EU and Japan still dominate the world
economy, producing and consuming the majority
of the world’s production of goods and services.
2. Globalisation of Production
• The globalisation of production refers to the
practice of many businesses to purchase their
inputs from around the globe as well as the
tendency to manufacture components in lowcost locations.
Question:
• What are the advantages to low cost global
production?
• What are the disadvantages?
3. Changes in Financial, Labour and
Consumer Markets
Financial Markets
• Finance is now more mobile and flows
relatively easily between countries
• Controls on foreign exchange trading were
phased out in the 1970s
• By 1980, global foreign exchange trading was
10x the value of world trade
• By 2005 it was 85x the value of world trade
Labour Markets
• Overall, the labour market has not been freed
up to the same degree as other markets
• Political barriers have made migration
between countries more restricted
• Even within the EU, only a small proportion of
workers travel across national borders
Two trends that have resulted in the
movement of workers:
• The movement of large
numbers of temporary
migrant workers in
Europe and Asia. Filipino
workers are a good
example of this.
• The growing demand for
highly trained employees
means that such people
are increasingly mobile.
Question:
• What trends have resulted in the movement
of workers internationally?
Consumer Markets
• Countries are achieving cost savings by
specialising in products they can produce
efficiently
• This results in cheaper prices on the world
market
• Increased sales in existing markets
• New consumer markets emerge in developing
countries
Question:
• We often talk about ‘economies of scale’.
What does this term mean?
Economies of Scale
“The cost advantage that arises with increased
output of a product.”
www.investopedia.com
4. Role of Government
• Globalisation of companies enables some
firms to take advantage of government
policies in both their home country and in the
country they visit.
With great competition between nations to
attract foreign investment, some governments
are willing, for instance, to:
• pay out generous subsidies (cash payments) to visiting
multinationals
• provide lower tax rates (or even tax holidays) and other
concessions (e.g. cheap power, water, transport) to
transnational businesses
• ignore their concerns or dilute their environmental
standards
• protect visiting firms from import competition using tariffs.
All these aspects can help to seduce overseas companies
to relocate offshore in search of improved profits. For
instance, some well-known multinational chemical, car
and electronic companies have acted for these sorts of
reasons. More specifically, a French multinational rubber
product manufacturer did not like its government’s
decision to introduce indicative economic planning some
years back so it set up three plants overseas for every one
factory it built at home.
Question:
• What are some ways that governments will try
to attract foreign investment?
5. Australia’s Role?
• Improved technologies and communications
have changed consumer markets
• With the advent of the Internet, Australian
businesses may reach much larger markets
and take advantage of economies of scale
Question:
• Can you think of a small Australian busniness
that has benefitted from globalisation?
Today we covered….
• Nature and trends in globalisation:
– Growth of global trade
– Globalisation of production
– Changes in the financial, labour and consumer
markets
– Role of government
– Australia’s role