Economic Globalization: A Historical Overview and Contemporary Trends | Lecture notes Culture and Globalization

ECONOMIC GLOBALIZATION

Chapter II. Unit 2

MARKET INTEGRATION

Objectives

_____________________________________________________________________________

1. To narrate a short history of global market integration; and

2. To identify the attributes of global corporation.

____________________________________________________________________________

UNIT 2: Market Integration

In this unit, market integration or global market integration is discussed. This

does not pertain only to fusion of markets into one but it includes also the elimination

of barriers that cause price differences among states. The rise of global corporations

coupled with the forging of corporate global networks imbued with neo-liberal policies

facilitate the process of global market integration.

Neo-liberalism is both an ideology and a policy model that gives emphasis on

free market competition. “It is is often characterized in terms of its belief in sustained

economic growth as the means to achieve human progress, its confidence in free

markets as the most-efficient allocation of resources, its emphasis on minimal state

intervention in economic and social affairs, and its commitment to the freedom of trade

and capital” (britanicam.com).

The intensified transnational transaction usually led by global corporations

further the adoption of neo-liberalism as international policy.

I. GLOBAL TRADE

It has been emphasized in various studies that global trade had started centuries

ago. Although scholars have varying views on the real beginnings of economic

globalization, it is interesting to note that almost all agree that the transport revolution

accompanied by technological change and the opening of the Suez Canal made global

economy highly integrated in the 19th century. As a consequence, price differences of

commodities around the globe almost came to close up in this period.

However, the Great Depression of 1930s had witnessed the promulgation and

implementation of reverse economic policies. To protect domestic economy, states began

to adopt protective measures. Since tariffs were imposed by states, locals started to

patronize domestically produced commodities and consumption of foreign-produced

goods declined dramatically. This, however, did not last long. By the end of the 20th

century, a more integrated global economy is observed as transportation cost started to

fall and some trade barriers are reduced.

THE CONTEMPORARY WORLD

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Chapter II. Unit 2

MARKET INTEGRATION

Objectives

_____________________________________________________________________________

1. To narrate a short history of global market integration; and

2. To identify the attributes of global corporation.

____________________________________________________________________________

UNIT 2: Market Integration

In this unit, market integration or global market integration is discussed. This

does not pertain only to fusion of markets into one but it includes also the elimination

of barriers that cause price differences among states. The rise of global corporations

coupled with the forging of corporate global networks imbued with neo-liberal policies

facilitate the process of global market integration.

Neo-liberalism is both an ideology and a policy model that gives emphasis on

free market competition. “It is is often characterized in terms of its belief in sustained

economic growth as the means to achieve human progress, its confidence in free

markets as the most-efficient allocation of resources, its emphasis on minimal state

intervention in economic and social affairs, and its commitment to the freedom of trade

and capital” (britanicam.com).

The intensified transnational transaction usually led by global corporations

further the adoption of neo-liberalism as international policy.

I. GLOBAL TRADE

It has been emphasized in various studies that global trade had started centuries

ago. Although scholars have varying views on the real beginnings of economic

globalization, it is interesting to note that almost all agree that the transport revolution

accompanied by technological change and the opening of the Suez Canal made global

economy highly integrated in the 19th century. As a consequence, price differences of

commodities around the globe almost came to close up in this period.

However, the Great Depression of 1930s had witnessed the promulgation and

implementation of reverse economic policies. To protect domestic economy, states began

to adopt protective measures. Since tariffs were imposed by states, locals started to

patronize domestically produced commodities and consumption of foreign-produced

goods declined dramatically. This, however, did not last long. By the end of the 20th

century, a more integrated global economy is observed as transportation cost started to

fall and some trade barriers are reduced.

Since some tariffs were scrapped off, more and more corporations extend their

reach by investing outside their home countries. These cross-border transactions

initiated by corporations increased tremendously. Since they operate in several nations,

these corporations or companies eventually came to be known as global corporations.

II. GLOBAL CORPORATIONS

Global corporations are often referred to mutinational corporation, transnational

corporation and international or global corporations. However, Iwan (2012) as cited by

Neubauer (2014) offered their distinctions as follows:

(^) International companies are importers and exporters, typically without

investment outside of their home country.

(^) Multinational companies have investment in other countries, but do not

have coordinated product offerings in each country. They are more focused

on adapting their products and services to each individual local market.

(^) Global companies have invested in and are present in many countries. They

typically market their products and services to each individual local market.

(^) Transnational companies are more complex organizations which have

invested in foreign operations, have a central corporate facility but give

decision making, research and development (R&D) and marketing powers to

each individual foreign market.

A. HOW GLOBAL CORPORATIONS OPERATE?

Gereffi has argued persuasively that ‘how global corporations work’ is largely

determined by whether they are situated in producer-driven or buyer-driven

commodity chains (Neubauer, 2014). A commodity chain refers to the whole range of

activities involved in the design, production, and marketing of a product (Gereffi &

Korzeniewicz, 1994). Gereffi also called these commodity chains as international

economic networks.

COMMODITY CHAINS

Producer-driven Buyer-driven Actors involved In this chain, large, transnational manufacturers play the central roles in coordinating production networks. In this type of economic network, industries in which large retailers, marketers, and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in the Third World Production of goods Production is carried out by multilayered production systems that involve thousands of firms (including parents, s u b s i d i a r i e s , a n d subcontractors) Production is generally carried out by tiered networks of Third World contractors that make finished goods for foreign buyers. The specifications are supplied by the large retailers or marketers that order the goods. Types of industries that adopt the commodity chains This type is common in capital- and technology-intensive industries such as automobiles, a i r c r a f t , c o m p u t e r s , semiconductors, and heavy machinery. The pattern of trade-led industrialization has become common in labor-intensive, consumer goods industries such as garments, footwear, toys, h o u s e w a r e s , c o n s u m e r electronics, and a variety of handicrafts. Profits Profits are derived from scale, volume, and technological advances Profits are derived from unique combinations of high-value research, design, sales, marketing, and financial services that allow the retailers, designers, and marketers to act as strategic brokers in linking overseas factories and traders with evolving product niches in their main consumer markets P r o d u c t i o n a n d distribution of goods finished goods are tend to be supplied by transnational corporations in core countries goods are made by locally owned firms in developing countries

Aside from determining the commodity chain in which global corporations

operate, Gereffi also offered three structural periods (starting from 1950s) to understand

the nature of a global corporation as defined by their evolving purposes and extended

reach and abilities.

III. Structural periods

STRUCTURAL PERIODS

Period Covered Features of Global Trade Investment-based globalization 1950-19 (^70) • Dominated by producer-driven commodity or value chains

Dominated by firms characterized by large amounts of concentrated capital focused on large-scale or capital intensive manufacturing or extractive industries (Neubauer, 2014).
International production networks were the primary vehicles for this form of globalization.
Global companies try to manage the world as an integrated unit (Gereffi, 2001). Trade-based globalization 1970-19 (^95) • In the 1970s, there was a marked shift to export-oriented industrialization as a preferred development strategy in many parts of the developing world,(Gereffi & Wyman, 1990).
The^ emphasis^ on^ international^ production networks controlled by the headquarters of TNCs (producer-driven commodity chains) shifted to international sourcing networks controlled by large retailers and global marketers based in developed countries (buyer-driven commodity chains) (Gereffi, 2001; Gereffi & Korzeniewicz, 1994)

REFERENCES:

Gereffi, G. (2001). Shifting governance structures in global commodity chains, with special

reference to the internet. American Behavioral Scientist44(10): 1616–37.

http://dx.doi.org/10.1177/00027640121958087.

Gereffi, G, Humphrey, J. and Sturgeon, T (2005). The governance of global value chains.

Review of International Political Economy12(1): 78–104.

http://dx.doi.org/10.1080/09692290500049805.

Iwan, L. (2012). Difference between a global, transnational, international and

multinational company. Available at: http://leeiwan.wordpress.com/

2007/06/18/difference- between-a-global- transnational-international-

and-multinational-company/

Neubauer, D. (2014). The rise of the global corporation. SAGE Publications Ltd.

LEARNING ACTIVITY

Global Corporations

Instructions:

Enumerate five global corporations and identify their components in

terms of the following:

Name of global corportatio n Logo/Brand name Type (mutination al/ transnation al/ internationa l/global) Commodity Chain/Value Chain Year of establishme nt Operations (name some countries where they have branches) Subsidiarie s/sister companies

Economic Globalization: A Historical Overview and Contemporary Trends, Lecture notes of Culture and Globalization

Related documents

Partial preview of the text

Download Economic Globalization: A Historical Overview and Contemporary Trends and more Lecture notes Culture and Globalization in PDF only on Docsity!

Chapter II. Unit 2

MARKET INTEGRATION

Objectives

_____________________________________________________________________________

1. To narrate a short history of global market integration; and

2. To identify the attributes of global corporation.

____________________________________________________________________________

UNIT 2: Market Integration

In this unit, market integration or global market integration is discussed. This

does not pertain only to fusion of markets into one but it includes also the elimination

of barriers that cause price differences among states. The rise of global corporations

coupled with the forging of corporate global networks imbued with neo-liberal policies

facilitate the process of global market integration.

Neo-liberalism is both an ideology and a policy model that gives emphasis on

free market competition. “It is is often characterized in terms of its belief in sustained

economic growth as the means to achieve human progress, its confidence in free

markets as the most-efficient allocation of resources, its emphasis on minimal state

intervention in economic and social affairs, and its commitment to the freedom of trade

and capital” (britanicam.com).

The intensified transnational transaction usually led by global corporations

further the adoption of neo-liberalism as international policy.

I. GLOBAL TRADE

It has been emphasized in various studies that global trade had started centuries

ago. Although scholars have varying views on the real beginnings of economic

globalization, it is interesting to note that almost all agree that the transport revolution

accompanied by technological change and the opening of the Suez Canal made global

economy highly integrated in the 19th century. As a consequence, price differences of

commodities around the globe almost came to close up in this period.

However, the Great Depression of 1930s had witnessed the promulgation and

implementation of reverse economic policies. To protect domestic economy, states began

to adopt protective measures. Since tariffs were imposed by states, locals started to

patronize domestically produced commodities and consumption of foreign-produced

goods declined dramatically. This, however, did not last long. By the end of the 20th

century, a more integrated global economy is observed as transportation cost started to

fall and some trade barriers are reduced.

Since some tariffs were scrapped off, more and more corporations extend their

reach by investing outside their home countries. These cross-border transactions

initiated by corporations increased tremendously. Since they operate in several nations,

these corporations or companies eventually came to be known as global corporations.

II. GLOBAL CORPORATIONS

Global corporations are often referred to mutinational corporation, transnational

corporation and international or global corporations. However, Iwan (2012) as cited by

Neubauer (2014) offered their distinctions as follows:

investment outside of their home country.

have coordinated product offerings in each country. They are more focused

on adapting their products and services to each individual local market.

typically market their products and services to each individual local market.

invested in foreign operations, have a central corporate facility but give

decision making, research and development (R&D) and marketing powers to

each individual foreign market.

A. HOW GLOBAL CORPORATIONS OPERATE?

Gereffi has argued persuasively that ‘how global corporations work’ is largely

determined by whether they are situated in producer-driven or buyer-driven

commodity chains (Neubauer, 2014). A commodity chain refers to the whole range of

activities involved in the design, production, and marketing of a product (Gereffi &

Korzeniewicz, 1994). Gereffi also called these commodity chains as international

economic networks.

COMMODITY CHAINS

Aside from determining the commodity chain in which global corporations

operate, Gereffi also offered three structural periods (starting from 1950s) to understand

the nature of a global corporation as defined by their evolving purposes and extended

reach and abilities.

III. Structural periods

STRUCTURAL PERIODS

REFERENCES:

Gereffi, G. (2001). Shifting governance structures in global commodity chains, with special

reference to the internet. American Behavioral Scientist44(10): 1616–37.

http://dx.doi.org/10.1177/00027640121958087.

Gereffi, G, Humphrey, J. and Sturgeon, T (2005). The governance of global value chains.

Review of International Political Economy12(1): 78–104.

http://dx.doi.org/10.1080/09692290500049805.

Iwan, L. (2012). Difference between a global, transnational, international and

multinational company. Available at: http://leeiwan.wordpress.com/

2007/06/18/difference- between-a-global- transnational-international-

and-multinational-company/

Neubauer, D. (2014). The rise of the global corporation. SAGE Publications Ltd.