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2013-09-17 Globalization.docx

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Geography 2143A/B
Milford Green

Globalization September 17, 24, 2013 Globalization -The worldwide processes that make the world, its economic system, and its society more uniform, more integrated, and more interdependent -Causes a shrinking of the world -While there is no universally agreed definition of globalization, typically the term refers to international integration in commodity, capital and labour market -globalization: homogeneity of economics -McDonald’s + Coca Cola = epitomization of globalization -globalization: could be good/bad -cultural diversity: globalization is bad then -shrink world -not much different now than before -most major metropolitan areas have huge landmarks -placelessness: you can’t identify big cities without huge landmarks -no globalization actual definition -labour market: most difficult to integrate -can’t own labour, you can rent it (not legal to own) -pay wages Logistics -Globalization requires greatly increased coordination of transport by road, rail, sea, air and now also by an entirely new route to market: the internet -Now companies are having to become more involved in planning their own logistics. -Under relentless pressure to reduce costs and increase sales around the world, firms are outsourcing operations to subcontractors who can do them better and more cheaply, and moving more of their production and services to lower-cost countries. -low cost + rapid -transport + internet must be integrated -competitive environment is cutthroat -companies under pressure to have it faster, cheaper, better -one way is to outsource -attempt to lower costs -consumers might be angry because people who work in the phones only follow instructions (not very flexible) -Far and Wide -firms 1 -sometimes no office – just work at home -not all companies can do that Easy to Install -portable hard drive -example of a product that is expected to be marketed in different countries -e.g. apple juice: could be sourced to a lot of places -e.g. where apple was grown, where the factory was located to manufacture apple juice, etc. Parts Content Info -engine came from Japan -40% of car made in Japan -but other parts could be made elsewhere -e.g. if Toyota makes cars, their cars are not entirely Japanese (some parts might be German,American, Canadian, etc.) -can’t tell by company headquarter location or name plate to determine which parts are from which countries -durable goods (cars) spread over considerable spectrum of where cars are from Industrial Supports -auto production: need to have good transportation system Big Mac 2013 -Prices for identical items can vary dramatically, although they are available globally -McDonald’s usually sells products that cater to its consumers -e.g. France can buy wine in McDonald’s -Big Mac was sold everywhere -China manipulates its currency Globalization of culture -Culture is the total learned way of life of a society -It’s the body of beliefs, social forms, and material traits constituting a distinct social tradition of a large group of people -culture: your way of life -associated with a large group of people whom you share beliefs and traditions with Globalization homogenize culture; make them more and more alike -e.g. mobile phone usage – everyone or most people using the same phone 2 Trends of cultural globalization 1. Globalization of culture is based on increasing levels of shared beliefs, social forms, and material traits 2. Societies display fewer cultural differences than in the past -marketplace for ideas Global Culture 3. The globalization is taking place at different speeds in different places 4. Improved telecommunication systems are speeding the process -some places will buy into global societal perspective more quickly than others -urban environment: more likely to globalize than farmer in small field -globalization is sped up by telecommunication -internet: important component -depends on existence of infrastructure -telecommunications is accelerating change -Using cellphones to surf the Internet is booming in emerging markets, showing how countries with poor fixed-line telecommunications have become important drivers of growth for mobile- technology companies -costs $1 million to build a cellphone tower -cheaper to build cellphone tower than fixed-line towers -countries with most internet users th th -Canada: 10 or 11 on chart** (check graph) -China #1, U.S. #2 -majority on the list are not emerging markets (except Brazil, India, China) -Internet site language use: English is #1, followed by Russian, German, Spanish, Chinese, French, etc. -language of internet users: English #1 with 27%, followed by Chinese (25%), Spanish (8%), etc. -English: de facto language of business Graph: Wireless broadband – Subscriptions per 100 people, December 2012 -Finland #1 (100+ subscriptions), Sweden #2,Australia #3, U.S. #6 (90 subscriptions), Canada #11 (40 subscriptions) Chart: Key Global Telecom Indicators for the World Telecommunications Service Sector in 2011 -cellphones: clearly dominated by developing nations 3 -by far the most popular method (out of all regions, developing nations have highest mobile cellular subscriptions) -penetration rate not as high -average person: 1 to 2.1 phones Ad-ing to the brand Top media agencies -#1 WPP (UK), #2 Omnicom (US), #3 Publicis (France), #4 Interpublic (US), Dentsu (Japan) -major firms: mainly based in developed world -advertisements conditioned by the fact that it’s produced within developed world Global Brands -top 10 brands (9 out of 10 areAmerican firms; 1 of the top 10 is China Mobile) -American firms:Apple, Google, Marlboro, VISA,AT&T, Coca-Cola, McDonald’s, IBM How the World Buys Its Coke 2011 per capita consumption of 8-ounce servings of Coke beverages in selected countries -China: only 38 compared to US 403 and Mexico 728 -China: it’s difficult to break into the tea-drinking culture -some products aren’t sold in all the countries at the same time -e.g.Axe -different launch dates for different places -Foreign Direct Investment -FDI is investment by foreigners in wholly owned facilities that are operated by the foreign owner of a TNC -FDI is investment with the intent to control the firm -Portfolio Investment -the key is that control must be exercised, if not, then it is portfolio investment -you want to control it -portfolio is buying an interest in a company with no intent of exercising managerial control -1970s: everyone thought Japan was going to take over everything (one part of Tokyo was worth more than one Manhattan Island) -didn’t last -Chinese firms trying to buy raw materials (in Canada; got stopped) or microelectronics in US (they were stopped) 4 -US: cannot sell anything that’s defense related Diagram -flows from US out -most flows are associated with core, with odd investment in emerging economy -Chinese FDI geared towards acquisition of raw materials (oil, phosphates, etc.) to try secure supplies -to access them, they have to invest in politically unstable companies that Western companies don’t want to get involved in Graph: World FDI -This series shows net inflows (new investment inflows less disinvestment) in the reporting economy from foreign investors. Data are in current U.S. dollars. -1999-2000: bubble (recession) -2008 market crash: world FDI dipped -FDI recovering after 2008 -FDI patterns reflect the economic cycle on world scale Inward FDI as of 2013 -Canada’s share of world inward FDI is declining -Total inward stock of FDI is steadily increasing -Over 50% comes from the US -It’s concentrated in oil and natural gas (9%), -Insurance (40%) and management (13%) -Canada competing less successfully than other countries in terms of tracking FDI -over 50% of inward FDI comes from US -concentrated in oil and natural gas Chart: Trend Share of Global Inward FDI -Canada vs. US vs. other developed countries -Canada pretty flat in 1990s -US decreasing -other developed countries rising Outward FDI -Outward investment has been increasing -About 58.7% is to US -Target industries are banking, oil and gas, and insurance and finance 5 -money coming out of Canada -target industries are banking (BMO bought out Stockbroker US), oil and gas, and insurance and finance -Canadian economy becoming more interested in FDI -Historically, Canada was short on FDI -had to rely on UK and US -last 50 years: Canada moved on from that CDN M&As (Merger and Acquisition) -Green field investment (investment in a manufacturing, office, or other physical company- related structure or group of structures in an area where no previous facilities exist) vs brown field investment (previously industrialized land and convert it to new use) -contaminated with chemicals: brown field -another way: is to buy Canadian company -most transactions happened in 2007 -value has been going down since then FDI Trends -Investment by ‘core’countries in the LDCs (lesser developed countries) is declining -FDI is becoming more geographically selective -Countries attracting the greatest FDI are those with export led policies -in their economic planning, they attempt to increase level of exports to increase their surplus -TNC able to grow due to transportation -most FDI is inside the core world -exception to that trend is China: it’s in a spending spree to get access to raw materials -less diverse than it used to be and seems to be concentrated in fewer and fewer countries -first TNC: started in the early 1500s -companies like IBM: they are products of post-war period -reasons why TNC was able to grow was because of introduction of transportation, especially the jet aircrafts after mid-1950s (you can have executives visiting various parts of world) - Eastern and Associated Telegraph Companies -it was the utmost of technology back then -everyone wanted to have telegraph -everyone wanted to invest in telegraph Chart: Globalization Isn’t New 6 -first globalization dated beginning of 20 century -the second one began after WWII -government interest in globalization was only 40-50 years old -1930s-1970s = only estimates -shows FDI stocks in 1914 by host economy -host country: country that is receiving the FDI -targets for the money -LatinAmerica receiving majority of FDI (33%) due to raw materials, followed byAsia -Canada: 6% of total-->which is good, considering the size of economy -USAthe best in terms of individual country, bringing in 10% -Canada’s FDI comes from two sources: Great Britain and US -a lot is gone into railroads and infrastructure Chart: 1938 Host Countries -1938* -LatinAmerica and Asia leading (31% and 25% respectively) -Canada grown a bit (10%), US shrunk (7%) -WWII starts in 1939 (for Canada) -WWII starts in 1941 (for US) -after WWI starts, everything changes -1938just before the war started Chart: 1914 Home Countries -home country: where the money is coming from -UK was boss -almost 50% of FDI was from UK (45% to be precise) -followed by Germany and US (14%) -1914: marked beginning of WWI -Canada not on (Canada was net receiver until 1990s) Chart: 1938 Home Countries -UK dropped a bit but US expanded tremendously -this is the last time UK was dominant in FDI; after the war, they are basically broke -Germany only 1% -Netherlands is 10%: most of them is Indonesia, SoutheastAsia (in terms of oil), other investment Chart: 1914 FDI Distribution -Natural resources: 55% -services: 30% of total 7 -indicates that the service economy we have now has further roots than we thought of before -manufacturing: 15% Chart: 1914 Host Rankings -US was #1, Russia #2, Canada #3 -by 1918: Russia falls off the list (Bolshevik revolution) -capital was told to get out and stay out Chart: 1929 Host Rankings -this was the height of world economy for a while -Canada is #1, followed by US -Russia not on the list -some countries on the list were lesser developed or colonial -Cuba, in theory, was “independent” but controlled by US government -India not independent in 1929 (still controlled by Great Britain) Improved Communications -what allows FDI to take place and transnationals to proliferate -Jet air travel -possible to send executives from one place to another -Internet -had a fairly profound impact on economy -not the impact that most people foreseen -internet: distance didn’t matter -but that’s not the case: personal interaction still required -Cell phones -English becoming the world business language - if you participate in international business, command of English is still necessity (more like a requirement) -this doesn’t mean everyone in the world speaks English Two pie charts Languages in which international students are taught -% share by language: English is #1 choice for foreign students (53%) -English-language share by country: US with 43% followed by UK (25%) Chart -Mandarin tops list (12.44%) 8 -Mandarin becoming official dominant language in China -But over 1/3 of population can’t speak it though -Spanish slightly spoken more than English -others at 61% -maj
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