MNB3701
PRINCIPLES OF GLOBAL BUSINESS MANAGEMENT
2022 Summarized notes as per prescribed MNB3701
textbook
LEARNING UNIT 1:
CHAPTER 1: GLOBALIZATION AND INTERNATIONAL BUSINESS
1.3 DEFINING GLOBALIZATION
Globalization 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. Globalization is the process by which businesses or
other organizations develop international influences or start operating on an international
scale.
The key interlinked factors influencing the tendency towards globalization 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 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. Focus areas:
- 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
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,WTO – The World Trade Organization and GATT – General Agreements on Tariffs and Trades
WTO is the only global international organization feeling with the rules of trade between
nations. Its purpose is to ensure that global trade commences smoothly, freely and
predictably. It creates and embodies the ground rules for global trade among member
nations, offering a system of international commerce. At its heart are the WTO agreements,
negotiated and signed by the bulk of the world's trading nations.
GATT – mainly deals with trade in goods, it is used for ordering international trade
relationships which brought the WTO into being.
PERSPECTIVES OF GLOBALIZATION
Culture - process of transformation in the spatial organization 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-border 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 privatization as well as establishing common technical structures.
2. Economic forces – includes increasing world trade, rising income levels, efficient
financial markets, increasing competition and tracking government involvement.
3. Social forces – includes growing consumerism, conveying consumer tasks and
improving lifestyles, education and skills.
4. Technological forces – includes industrialization of nations, improved transportation
and networks and the influence of the information and telecommunication revolution,
including the internet and e-commerce.
The face of capitalist globalization 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.
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,MNCS – MULTINATIONAL CORPORATIONS
A corporate organization that owns/controls production of goods or services in at least one
country other than is home country. MNCs see both benefits and furnaces of globalization.
Globalization gives businesses access to markets that would have been difficult to react in
the past, access labor at cheap prices.
THE GOOD
Globalization 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.
Globalization 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
globalization.
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, globalization 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. Labor maltreatment has been challenged.
Prominent among the arguments levied against globalization 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 centers, thereby
depriving the higher cost facility.
Africa has not really benefited from economic globalization. The dependence on its
resources has been worsened by globalization. Many manufacturing firms have been 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 as per the General Agreement on Tariffs and
Trades GATTs. 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
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, 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 frameworks says it is fair to subsidize
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 globalization, millions of avoidable losses of livelihood are being
recorded among smallholder farmers globally especially in the developing world. Within its
current form, globalization advances the interests of capitalism at the expense of the
globally poor and the working class. Anti-globalization 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 world has witnessed various socioeconomic mishaps over the past few years proving
anti-globalization protesters right. All dissensions towards the current form of globalization
have a single goal, which is – to seek a globally inclusive solution to unfair global trade and
unfavorable capital market systems.
THE JOURNEY AHEAD – NEW THINKING
Across the world advocates of reforms to the current formula of economic globalization 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 weak
political states which are victims of intimidation from MNC’s.
1.4 HISTORICAL DEVELOPMENT OF GLOBALISATION
The evolution of globalization 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 globalization concentrates on the advent and duration
of slavery and colonization, 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 liberalization of these countries served as
a stimulus to further globalization.
The evolution of modern trading and investment arrangements, with their corresponding
financial and capital operations, together with various economic integrations, stemmed, it is
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