Globalisation 13.2

Today….

• Key drivers of globalisation:

1. Transnational corporations2. Global consumers3. Technology and communication4. Government5. Deregulation of financial markets

1. Transnational Corporations

• A transnational corporation (TNC) is a business that has productive activities in two or more countries and operates globally.

TNCs:

• Combine economies of scale with benefits of local knowledge

• National borders do not represent barriers – the world is one market

• TNCs often conduct a large percentage of their business outside their home country.

How many TNCs can you list in 1 minute?

• Prize for the person with the longest list!

Some examples of TNCs:

2. Global Consumers

• There is an increasing uniformity of consumers around the world – sometimes referred to as “Westernisation”

• This includes:– Entertainment - TV , movies & music– Food and drink– Fashion

Example: American Apparel

AU site: US site:

3. Impact of Technology

• Transport speeds have improved significantly – Over a 150 year period we have moved from horse & carriage through to jet aircraft & space travel

IT

• Information technology (IT) improvements have increased flows of ideas and information across borders at ever increasing speeds

Communication

• Costs of global communications have decreased and IT tools are becoming available to more people and easier to use.

Question:

• How has technology changed just over your lifetime?

4. Role of Government• Over the last 40 years most Governments have

realised the benefits of international trade. Barriers to trade such as tariffs, subsidies & quotas have been reduced and/or removed to expand trade opportunities

Glossary– Tariff – tax on imported good

– Subsidy – grant provided by Government to encourage consumption or production of a particular good.

– Quota – limit on the number of items that can be imported

– Other barriers include embargos, local content rules, quarantine

Australia’s Role• Read about our current FTAs at

https://www.austrade.gov.au/Export/Free-Trade-Agreements

5. Deregulation of Financial Markets

• Deregulation: removing Government regulation (rules, oversight, laws)

• Globally the financial markets have progressively been deregulated over the last 40 years. This has encouraged Foreign Direct Investment (FDI – actively controlling companies or assets outside your home country)

In Australia, successive Governments have:

• Floated Australian $ on FOREX market• Allowed foreign banks to enter Australian market• Relaxed laws on foreign ownership of Australian

companies

Questions

1. Explain how business practices of TNCs have acted as a catalyst for globalisation.

2. How has technology sped up globalisation?3. How has the development of the “global consumer”

encouraged the process of globalisation?4. How do tariffs act as a barrier to world trade?5. Why do Governments want to establish Free Trade

Agreements?6. Explain the relationship between deregulation of

financial markets and foreign direct investment.

Today we covered….

• Key drivers of globalisation:

1. Transnational corporations2. Global consumers3. Technology and communication4. Government5. Deregulation of financial markets