Defining Globalisation
The term globalisation has been used to reflect the human transition into modernity. This has caused an advanced form of human
assembly. It is the strengthening of economic, political, social, and cultural relations across international boundaries to integrate the
political and socio-economies around the globe.
Globalisation depends on your perspective – for victims of colonisation and slavery, globalisation began with the first invasion imperialists.
From an economic perspective, globalisation is the modern interactions & the engagement of market agents & market participants.
Economic globalisation involves cross border trades, investments, migration, international capital flows & multilateral trade arrangements
Types of Globalisation
From the supply side the ability of MNC’s to locate production facilities in offshore locations is facilitated by the continued relaxation of
various barriers. MNC’s can move a production facility that is underperforming from a region of low efficiency to a region of higher
efficiency. This option is favoured to avoid various operational hurdles such as cost reduction, relocation near to actual or potential market,
closeness to major suppliers and closeness to major competitors.
Globalisation has made world into a small village. Firms have increase to advantages. World exports has
The Good contributed to employment creation, trade-creation, national and human prosperity. Advances of
medicals requirements.
Unfortunately, globalisation is not exempted to weaknesses. The allocation of proceeds is unequal & the
The Bad level of underdevelopment in less privileged societies has worsened. Arguments say globalisation leads
The face of to job losses. Africa has not really benefited from economic globalisation. The dependence on its
globalisation resources has been worsened by globalisation. The pressure created by international competition has
(Capitalist necessitated the relocation by MNC’s of their production facilities to lower cost production centres,
globalisation) thereby depriving the higher cost facility.
Anti-globalisation advocates for the unfairness in the global trade. The less economical privileged are at
The Ugly the bottom of the “food chain” and due to this they are being brought under control. This has been
evident through China creating wealth for the few individuals harming the poor. The cheap production
and imports from China has led to local firms struggling to keep the business going because they are
unable to compete with China’s low-cost production.
The Future of Globalisation
The reformation of guiding principles of the distribution 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.
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Institutional frameworks and the role of government
The socioeconomic and political experiences during and after World War II necessitated an action to stop the destruction of war. The
institutions created were the World Bank, the International Monetary Fund (IMF) and the World Trade Organisation (WTO). The idea was
that greater economic ties and a degree of interdependence among countries would discourage war. These institutions created a platform
to foster respect for the rule of law & for responsible trade behaviours by MNC’s that operate across the borders of many countries. The
workings influence domestic businesses and activities involving the receiving (host) country as well as the sending (home) country. A
country’s regulatory mechanisms must conform to global norms.
Global Institutional Frameworks
The main institutions regulating cross-border exchanges of financial instruments as well as goods and services are the World Bank, the IMF
and the WTO. These institutions serve as watchdogs for trade relations and the various market agents operating within the global
marketplace with specific reference to the exchange of financial assets and trading of value-added products.
World Bank Created in 1944. It was created to finance the reconstruction of European countries out of the destruction caused by
World War II. It expanded their focus on global poverty alleviation as well as various initiatives to boost economic growth
globally. A series of funding opportunities are provided to enhance infrastructural development, skills and capacity
development, education, healthcare, sanitation and improved quality of life and life expectancy. It is guided to the
creation of a business environment conducive to international resource flows especially the promotion of foreign
investment and international trade. The promotion of international capital flows and intellectual property rights are an
important focus. The World Bank is owned by its 188 sovereign member states. and governed by specific statutory
provisions.
IMF The primary focus was to avoid a repeat of the currency devaluations that occurred among the leading economies in
1930’s. The fund was charged with the responsibility of promoting monetary cooperation, capital market integration,
ensuring and regulating financial stability, furthering international trade and investment, enhancing employment creation,
nurturing global economic growth and development, and creating poverty alleviation globally. The IMF is controlled and
governed by the leadership of 188 countries.
WTO WTO Purposes
- Trade liberalisation - removal of all barriers to trade openness. WTO enforces conformity with global rules for
the removal of tariffs and barriers that inhibit free movement of goods and services across international
borders.
- Negotiation of treaties and agreements - It is important to ensure equal partnership in trade agreements, ensure
equity of purpose and equitable allotment of trade proceeds.
- Regulate trade relationships between nations - WTO monitors trade relations among member nations and
ensure free, fair and unrestricted trade arrangements.
- Negotiate trade dispute settlement - Responsible for mediating, resolving and settling trade disputes.
, - Facilitate economic growth through free trade mechanism- Promotes economic growth through free, fair and
unprotected trade to achieve optimal allocation of scarce resources to generate maximum productivity.
Corruption Perceptions Index
Corruption hinders growth & development especially in developing countries. Transparency International is an organisation that uses
barometers for measuring corruption. Corruption occurs mainly in situations of abusing power, bribery, lack of transparency in governance,
little respect for the rule. Corrupt countries are not attractive to clean foreign investments especially if there’s refusal of paying bribe.
Worldwide Governance Indicators
The World Bank has a team of members who report on the performance of countries on specific measurable indicators. There are 6 criteria
to judge countries’ efficient governance
1. Voice and accountability: Measures extent to which citizens are free to express views on issues of public interest without intimidation.
2. Political stability and absence of violence: The peaceful transfer of power from one government to another measures political maturity.
3. Government effectiveness: The skill of politicians recognising & appreciating civil service is a good indication of high performance.
4. Regulatory quality: The quality of regulatory framework are important determinants of regulatory efficiency.
5. Rule of law: This indicator captures perceptions of the public about the level of respect that political leaders have for the rule of law.
6. Control of corruption: The resources in place to control corruption leads to the countries’ attractiveness for foreign investment.
World Bank Investment Climate Survey Database
Finding the level of transparency in the process of establishing a business in any country. There are 7 indicators of competitiveness.
1. Firms perceptions: Evaluations to which a specific range of problems are regarded as major / minor hindrances to the effectiveness of the
daily operations of a business. The measure is an important determinant of a country’s potential to attract investments locally & abroad.
2. Infrastructure and services: For a business to be sustainable it requires access to necessary infrastructure and services. The availability,
access and affordability of basic infrastructure will influence the investment climate of a country.
3. Finance: Working capital is the support of every business. The availability of financial support for a start-up and existing business is
important to attract investments. The ability of firms to manage their operating finance is important.
4. Government policies: A political leader with a democratic philosophy and socialist philosophy will enable environment for entrepreneurial
development and market participation.
5. Conflict resolution and crime: Labour dispute that cause violent protests steer away investors and hurt the perception of investors on the
investment climate of such a country.
6. Capacity and innovation: The ability of a country to provide the necessary support to spur innovation in a way that aids a firm’s
competitiveness will influence the country’s rating.
7. Labour relations: Labour relations and the strength of organised labour unions about dispute resolution is important for a healthy
operational environment as well as a reduction of lost productive hours because of prolonged strike actions.
The Role of Government
Governments have a role to play in ensuring peaceful coexistence among their people and the global world at large.
● Respect for the rule of law: The components of the principle of respect for the rule of law consist of 4 major universal components:
accountability, equitability, accessibility, and integrity. Respect for the rule of law manifests as follows:
The government and its officials and agents, as well as individuals and private entities are accountable under the law.
The laws are clear and unambiguous, publicised, stable, and just, are evenly applied and protect fundamental rights.
The process by which laws are enacted, administered, and enforced is accessible, fair and efficient.
The justice system is delivered timeously, by competent, ethical, and independent representatives and a neutral jury.
● Adjudication and enforcement: The credibility of the judicial system is based on trustworthiness of the entire judicial process, the
integrity and knowledge of judges, and the efficiency of the law enforcements.
● Civil liberty and fundamental human rights: This principle sum up major rights and privileges that are crucial to every human
being and should be applied equally irrespective of nationality, race, gender, social status.
● Peaceful electioneering and transfer of power: Central to the political economy is the electioneering process and peaceful transfer
of power from one democratically elected leader to another.
● Transparency in governance and institution: The state collects taxes & rates and appropriate revenue generated in a transparent
and equitable manner.
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What is culture
Culture, in the context of international business, represents the product of human interaction. Culture is frequently expressed in the
context of nations and societies. Culture comprises a system of values and norms that are shared between a group of people which, when
combined constitute a way of living. Countries can consist of multiple cultures within several societies.
The elements of culture
● Values: Principles or standards of behaviour; one's judgement of what is important in life. It is underpinned by norms.
● Norms: These are social rules that govern people’s actions towards one another, confirming the society’s customs and morals.
● Moral standards (ethics): These include firm standards and practices prohibiting behaviour such as theft, incest, rape etc.
● Attitudes and beliefs: e.g., attitude towards a particular ethnic and racial group.
● Demographic trends: Includes changes in the demographics of global economy. E.g. increase number of teens in African countries.
● Lifestyle preferences & skills orientation: Exemplified in a culture where workers enjoy paternalistic relationship with colleagues.
