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Geography 2152F/G
Milford Green

Globalization: 22/01/2013 7:40:00 AM  Two extremes:  Hyperglobalists: o Global economy is borderless o Capital, information and innovation flow quickly  enabled by technology  Sceptics: o The opposite  The political right things that the positive economic impacts outweigh the drawbacks  The political left thinks that globalisation is a problem  leads to greater levels of inequality  This occurs at both an international and interregional level  Argue that globalization is a driving force for inequality  Political and moral question as to whether and to what level inequality should grow to  how much is too much? o Two extreme examples of this are china and US, both have high division of classes  Scale needs consideration:  Where does a company put certain offices  Also has to look at local markets  although you may be a global corporation, still have to worry about local conditions  McDonalds! o Success store, have been steadily growing since their founding o 34,000 restaurants in the world o have not been immune to price inflation o big mac index  fairly good indicator of what the currency will do in the next few years o have customized their menu to accommodate local trends  presence of multinationals:  apparent at the local level  as far as cars go, different parts are all from different places, no longer such thing as “American cars”.  Whether or not multinationals belong to one particular country is not clear  Foxconn: o Worlds single largest industrial parts provider o Make iphone materials o Famous for extremely harsh working conditions, particularly in china. o 2011, had over a million employees  when we think of firms, we generally think of a hierarchical structure  true for about 99% of companies, but there are a few that don’t  Automattic web firm: o Claims that they don’t really have a headquarters o Possible to establish a firm without this hierarchical structure o 123 employees, small firm, everyone works at home o size of company is imperative to structure  two globalization periods:  both eras are pretty much identical, save for the current period having more democracy than first period, and that there are fewer wars than in the first period.  Foreign direct investment:  Key ingredient in the integration of global world economy  Creates a stable, long lasting financial relationship between the investor (firm or national level) and country or firm that the money goes to  Outward: money going out  Inward: money coming in  Most countries have both inward and outward FDI  US dominates FDI Scale  Big player before the US was the UK  Canada doesn’t have big enough internal financial market to sustain foreign investments itself, tends to rely on investments from outside  Why would you want to invest externally? o You see investment opportunities somewhere else that you don’t have at home  And investing within? o Provides capital not able to raise and trade of technology  Home country = money comes from here  Host country = receives money  1938, Germany erased from the map in terms of investments due to war o concentrated in relatively few number of countries o UK declining in importance in terms of investment, US rises  FDI Distribution – where did the money go? o 55% natural resources in 1914  FDI Inward stock – who is getting the money: o US, Russia and Canada getting the most o Canada is a sink for money coming in but not a source for money going out.  Globalization Index:  Canada higher up than US  Canadian economy is “branch plant” economy  most of production owned by foreigners. o Profits don’t stay in Canada, go across the border  Country with highest level of investment in Canada = US  Up until around 2008/09, fairly steady growth in globalization  2011, total number of FDI projects increased by 5.6%  Ontario is third most popular site for FDI in North America, also the third largest source of FDI, mostly going to the US  US is interested in Canada, but not the same as it was 10 years ago  coal, oil and natural gas-wise.  FDI Continued:  Luxembourg which is a small country appears fairly high on the list of outflows and inflows of FDI for 2008 o This is due to their low corporate taxes, therefore lots of companies have their headquarters there.  Global scale, Canada is not a big player in terms of global FDI  But given size of Canadian economy, more prevalent than would be expected  1996, net outward FDI grows higher than net inward  compared to global scale, 1980 Canada had about 10% of worlds total.  But, ever since then has declined steadily.  One of biggest ways that FDI is generated is via Mergers and Acquisitions  Peculiar thing about M&A behaviour is very distinct high and low periods  TO KNOW  HORIZONTAL VERSUS VERTICAL MERGERS  Idea of conglomerate merger arose  Must realize that in latest wave of M&A, nowhere near the size of the deals being done 5 or 6 years ago  assumption is that this is just a reflection of the global recession  Typically an M&A advisor gets 10% of value of M&As.  Another way to get money  VENTURE CAPITAL (AKA vulture capital)  Tend to take very big chunk of investment that they participate in  At this point, venture capital is not huge part of global economy  Very famous company started with venture capital  APPLE!  Used to be that VC firms could make 20% return, now it is less than 5  VC is very geographically centered  1 silicon valley, 2 ndis boston o Canada = Toronto  invest in American firms not Canadian.  Transnational sitting in developing country, 6 strategies you can employ to try to become larger:  China and india are biggest st  1 , take brand from local to global o have to go international nd  2 , take local engineering excellence global  3 , pick out very narrow product category and become the best at it.  4 , exploit natural resources at home, boost them with first class marketing and distribution th  5 , have a new or better business model to roll out to many different markets th  6 , acquire natural resources o popular in countries with limited agricultural land  difference between first wave of globalization and one now is level of integration:  first one was shallow  now it is deeply integrated  the corporate form is particularly structured for the execution and utilization of tremendous economies of scale  Standard oil is perfect example  Current kind of globalization we have now is very deeply integrated  Offshore financial centres:  Ask much fewer questions about where you got all this money!  Most localized of all industries  Most often used for laundering money or evading taxes  Reason governments don’t like it is because they cant tax it  OFC’s wont release any financial information about your accounts  Critics think that OFC’s are criminal due to the nature of most deposits.  OFC’s think they are providing a service  Countries where the money leaves think that they are parasitic in their ways.  Most OFC’s do have regulations but which are not often enforced  OFC’s have found niche in the global economy that allow for high income and not a lot of work  GDP:  Bermuda is the highest on the list (for 2006) o What does it have? Banks! Holding Companies!  Canada found at the bottom of the list, honest but poor  BVI’s have 7000 offshore companies registered, good place to be a corporate lawyer.  Cayman  1.4 trillion dollars in assets  Can take advantage of geographic location and nationality in the global economy  Hedge Funds:  Left to individuals in the market who have high intelligence in the financial markets  Must have at least 100K in order to invest in a hedge fund in the US  Most attractive place to relocate and expand asset management operations = London, England  Number of stock markets that deal in large volumes in international issues is steadily decreasing, amalgamating into fewer areas  Most stocks of large Canadian corporations are already traded on New York Exchange  Toronto Stock Exchange  specializes in mining  Major Stock Exchanges:  Top two are headquartered in new york city  NYSE Euronext & the NASDAQ  Largest sector of finance on exchange market is currency exchange  QUIZ:  Short answer  File will appear on website full of testable material o Will include any and all information that will appear on the quiz.  Likes charts and diagrams asked to identify what they refer to  At least one question on each article, mainly to determine that we have read it  EX: what is day trading?  Don’t have to write prose, in fact point form is preferred  Will start at 330, cant stay longer than 420  More on Globalization: 22/01/2013 7:40:00 AM Internationalizing processes:  Simple extension across national boundaries  Quantitative changes leading to more extensive geographic patterns Globalizing processes:  Involves functional integration of internationally dispersed activities  Qualitative changes in ways economic activities are organized  Better communication, better supply chains, all leads to integration of the parts Map of Employment levels for multinationals in US for ’09:  Canada = 1 million  branch plant economy o Level of penetration from multinationals into Canada is very high o Investment is not all natural resources, partly other sectors  Isn’t a lot of US based employment in all parts of the world o Centred in main parts of the world  china, india (popular for outsourcing services), mexico (cheap labour  almost equal with the chinese) o Vietnam and Cambodia poised to take over china’s end of the market Lot of multinationals have been involved in the service sector:  Chinese labour force is starting to get fed up with standards  Parents don’t want to see their kids go into the manufacturing sector  ties in with one child rule  Look at US multinationals  still have majority of investments in the US Both brand rankings, dominated by American multinationals  Were first off the block post WW2 to begin multinational corporations  Mcdonalds is prime example of this When company goes international, may alter products to cater to market or they may not  Price discrimination between geographic markets does exist  People intuitively believe this  duty free shops  Cheapest place to buy ipad is hong kong Regionalizing processes:  Operation of globalizing process at a more geographically limited scale  Macrolevel structures affect connectivity with and between regions, leads to unequal geographic distribution of good and services Analyzing globalization:  Dominant stream of analysis is NETWORKS o Processes (links) o Agents or actors (nodes) o Relational structures (networks) o Network does not serve all parts of the world equally  Would be screwed if you were in Africa Production chains (aka manufacturing):  All production processes have at their core 4 basic operations o Collection of inputs (raw materials) o Do something to them inside the plant  Transformation o Distribution  to clientele o Clientele consumes it  consumption  Has two sets of flows associated with it o Materials & products o Information process  firm has to coordinate production with distribution and consumption  2 way process, has to flow to production, then get feedback from consumption and then feed back in production process  if you don’t have the money / capital to fund production process, rest is waste of time  financial system is extremely important in allowing this process to occur  as we globalize, so do financial systems  Textiles production chain: o China, Bangladesh, Vietnam, Cambodia  most clothes are all made in these developing countries  Each element depends upon various kinds of technological inputs  Each chain is embedded in a financial system  Each has to be coordinated, regulated and controlled Open Supply Chains:  Think of them having dedicated relationship with server  No propriety expertise requir
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