Overview
of Globalisation from the HSC Onlinehttp://hsc.csu.edu.au/business_studies/global_business/globalisation/globalisation.html
Return to Higher School Certificate Index
Overview
of Globalisation from the HSC Online
http://hsc.csu.edu.au/business_studies/global_business/globalisation/globalisation.html
The overview of globalisation describes trends in global business, global business and domestic business, drivers of globalisation and two cases studies Campbells Soups and The Market for Passsenger Aircraft.
Article
on the processes of globalisation by Mike the Webmaster
This is an article on the main processes in globalisation, it dicusses the four processes in globalisation with business examples.
The
World Trade Organisation - Benefits of the Global Trade System
http://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b00_e.htm
The world trade organisation ( WTO ) and the new international trading global system are described and explained in this part of the world trade organisation menu.
Austrade
http://www.austrade.gov.au/GETTINGREADYTOEXPORT/
Getting ready to export is a useful part of the Austrade menu. This is an export readiness test - complete the test to identify whether your business is ready to export This site also has a variety of notes about why it is important to export.
Boeing
Aircraft
http://www.boeing.com
Boeing is an useful example of a global business that sells its products globally. Use the site to identify Boeings products and why they sell and produce internationally.
Return toTopic 5 Global Business Index
This
is a case study about global business strategies.
Case Study of Global
Business and Global Business Strategy
A case study from the financial sector of Merril Lynch HSBC
HSC
Online Global Business Strategies
http://hsc.csu.edu.au/business_studies/global_business/strategies/swal.html
This site from the HSC online describes some of the main aspects of global business strategies, including reasons for global expansion and two case studies on Southcorp andCSL
Return toTopic 5 Global Business Index
Nike
http://nikebiz.com
Nike is an interntional business that produces and sells globally. NaominKlein in her book No Logo describes Nike as one of the new Brand business that basically consist of a brand that is produced and sold everywhere. But, how does Nike do it? Use the site to identfy the influences that would influence Nike's business.
Return toTopic 5 Global Business Index
The
May Day Organisation and Protest
http://www.s11.org/m1/
This is the may day site of anti globalisation and anti transnational protestors. There is a history of the May Day movement, on line forums, anti globalisation position papers, around the world protests against global corporations and globalisation, diabtribes on the World Trade Organisation and much more! A must visit site for students who wish to discuss globalisation issues.
Anti
Nike protests
http://www.melbourne.indymedia.org/front.php3?article_id=12676&group=webcast
Example of anti nike protests. Also the may day site has more details on the continuing protests against Nike and other multinational corporations.
Free
Trade Site
http://www.freetrade.org/faqs/faqs.html
This is one of the many sites from the United States devoted to defending and arguing for free trade ( The Cato Center ).The frequently asked questions site is a useful guide to some of the main arguments and ideas supporting free trade. Open the FAQ's and read through some of the questions and answers.
Return toTopic 5 Global Business Index
Business
For Social Responsibility
http://www.bsr.org/
This site provides guidance for ethical and socially responsible business practice. The Mission for Business For Social Responsibility is described as Business for Social Responsibility (BSR) is a membership organization for companies seeking to sustain their commercial success in ways that demonstrate respect for ethical values, people, communities, and the environment. Its sister organization, the Business for Social Responsibility Education Fund (BSREF), is a non-profit charitable organization serving the broader business community and the general public through research and educational programs. Use this website to find the latest news and in-depth reports on corporate social responsibility." The website contains a wealth of information on the ethical and social responsibility of business. There are examples of ethical and socially responsible practices. The site also provides information for both domestic and global businesses.
Open the website and scan the topics on the homepage.
Open the Corporate Social Responsibility menu bar. Briefly explain
Open the Environmental Responsibility menu bar. Explain briefly
Community
Aid Abroad - One of the main Anti Nike Sites
http://www.caa.org.au/campaigns/nike/
Contains much anti Nike information, also the Nikewatch part of the Community Aid Abroad menu can be found at http://www.caa.org.au/campaigns/nike/action/links
The
Global Alliance Supporting the work of Nike
http://www.theglobalalliance.com/
The frequently asked questions outlines the provision of work and technical skills for employees working for Nike brings in countries like Thailand and Vietnam. Read the survey of Nike workers and contrast this to the sweatshop type ideas discussed on the caa and may day sites.
Return toTopic 5 Global Business Index
IN THE FINANCIAL SERVICES SECTOR.
Omnipresent corporate brands Coke, Microsoft, and McDonalds can be seen on the streets, billboards and screens of consumers the world over. The Internet and e-commerce promise to further internationalise business by enabling firms that were once restricted by their geography to pitch to the world market.
This power shift in the way we do business is a result of rapid advances in communications, technology and transport. It has also been accompanied by major changes to the world trading system. Trading blocs such as the European Union (EU), North American Free Trade Agreement (NAFTA), Asia Pacific Economic Cooperation (APEC) and the World Trade Organisation (WTO) are aimed at breaking down tariffs and regulatory impediments to free trade.
Nations no longer look to protect inefficient domestic industries against efficient foreign competitors. Instead, each nation is expected to produce for and supply markets with goods and services in which it has a comparative advantage. While this article seeks to identify the advantages of doing business internationally, it would be fair to say that in many industries, competing internationally is as much of an imperative as it is an advantage. We have long taken for granted the commoditization of soft drinks and fast food and what we may now be seeing is the commoditization of industries that until recently were tightly held over regulated monopolies and oligopolies.
In this increasingly open world economy, characterised by interdependence, unimpeded capital flows and instant communications, change continues at a breathtaking pace. Certainly, some of the world's biggest industries, such as pharmaceuticals, telecommunications and the financial services industry, are currently undergoing a period of intense consolidation in an effort to reap hitherto undreamed of economies of scale.
The creation of advanced telecommunications networks and the de-regulation of the financial services industry has created perhaps the world's most dynamic industry. Until the early 1980s, foreign involvement in the Australian financial services industry was heavily restricted. It wasn't until 1984 that the then Treasurer, Paul Keating, freely allowed foreign banks to open for business. By 1997 there were 53 banks in Australia, of which 37 were foreign-owned HSBC (Hong Kong and Shanghai Banking Corporation) included amongst them as one of the earliest international banks to take advantage of this change in the regulatory environment.
Also in 1997, the then Government adopted the recommendations of the Wallis Inquiry into Banking and sweeping reforms were introduced. This resulted in companies that had previously been involved in other financial services, such as insurance, or that had been altogether excluded from providing banking services, entering the banking market. The result was rapid fragmentation of the financial services sector into the myriad of specialist and niche providers we see today.
Back to the International Menu
Headquartered in London, HSBC Holdings plc is one of the largest banking and financial services organisations in the world. Serving more than 27 million customers, HSBC's international network comprises some 6,500 offices in 79 countries and territories in the Asia-Pacific region, Europe, the Americas, the Middle East and Africa.
Through this international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services: personal, commercial, corporate, investment and private banking; trade services; cash management; treasury and capital markets services; insurance; consumer and business finance; pension and investment and management; trustee services; and securities and custody services.
Like all of today's international business leviathans, HSBC's origins were humble. The Bank was formed in 1865 by a group of traders in Hong Kong and Shanghai needing to deal locally for their trade financing requirements. As the Bank's customers grew, HSBC grew with them, providing trade services wherever there was demand. This geographic diversification brought with it greater access to markets and customers than the Bank had enjoyed in China and Hong Kong alone. Soon the Bank was taking the opportunity to provide for the domestic demand for trade financing alongside the needs of its original customers. It is this access to broader and larger markets, and therefore additional revenue streams, that is perhaps the most obvious benefit of international business along with economies of scale.
Geographic diversity also brings with it less obvious advantages, such as protection against regional economic downturns. A company relying too heavily on continued economic growth within one region may experience problems in a serious recession. For example, during the Asian economic downturn of 1997, banks that had grown their business primarily in Asia incurred high levels of bad debt and declining business volumes. However, prior to 1997 HSBC had diversified out of Asia into markets in Europe and the Americas mitigating what could otherwise have become a potential weakness. It was this regional diversification that served it so well during the recent Asian downturn. Business from Europe, the Americas and Middle East allowed HSBC to ride out the leaner years in Asia far better than some of its immediate Asia based competitors.
Regional diversification has also brought additional advantages to HSBC. The Bank's business has often been characterised as international and yet local. By following a strategy of acquisition HSBC has been careful to absorb businesses deeply rooted in their local markets. That overwhelmingly means businesses employing local staff who understand the dynamics of their local market and how to get things done. There is immense intellectual strength in this cultural diversity. Where things work well in one market, HSBC is by its international nature able to transport these as best practice into its broader markets. This is true of all aspects of its operations, not just its intellectual resources. Whether products, services, information technology or back-office processes, the Bank is well practiced at transporting these wherever they may be of value or offer a competitive advantage.
A significant example of transporting best practice has its inception here in Australia. In 1998 HSBC noted the growing demand from technology-savvy Australian investors for discount share broking services. It designed, built and launched its own service from scratch. It leads the market as a technological innovation. Since then, HSBC has transported the service, its technology, back-office processes and those possessing the intellectual know-how to other markets around the world with considerable success.
Today it is impossible for international travellers to determine whether the airline booking centres they are talking to are located in the same city as them or thousands of miles away in on another continent. In a similar manner HSBC has also taken the opportunity to transfer routine work-flow to the most cost-effective locations. In Guangzhou, China and Hyderabad, India, HSBC has recently established international processing centres handling work from as far away as Europe. International businesses reap the advantage of cost economies while local communities benefit from investment and the transfer of intellectual capital.
But what of the customer and how the internationalisation of business affects them? Apart from the obvious competitive benefits of driving up quality and costs down, how are customers affected? Let's look at a couple of examples, one from the everyday world of personal banking and the other from business itself.
Back to the International Menu
Mr Burns banks with HSBC in the UK and recently arrived in Australia. He hadn't bothered to bring either traveller's cheques or Australian dollars with him. He knew that he could withdraw local currency from his UK account from one of HSBC's local ATMs, just as if he was in the UK.
Mr Burns and his wife were visiting Australia because they had decided they would like to buy a home in Sydney in preparation for retirement in two years time. Mr Burns visited HSBC's Bridge Street branch to discuss investing in an Australian property. The branch manager was able to recommended trusted solicitors to talk to and appropriate real estate agents through his own local contacts. Once Mr Burns had identified a property, he was able to talk to the HSBC in Australia about organising the financing of the property. The Bridge Street branch was able to check Mr Burns' creditworthiness by contacting his local UK branch. Mr Burns was then able to purchase the property.
One morning, Burns was relaxing and watching TV. During the business news he heard mention of an investment opportunity he had been following in the US. Several of his friends, on the advice of their UK based stockbrokers, had already invested considerable sums and were urging him to do so as well. He'd spoken to his HSBC stockbroker who had given him a report compiled by HSBC in New York warning of problems with the target company. Just as well he'd taken the advice of someone on the ground in the US who knew the market. The company had gone bust.
Recently, his decision to bank with HSBC was confirmed when his daughter rang him from Brazil asking for emergency funds. Burns was in The United Arab Emirates and was able to go to HSBC's branch in Dubai and ask if funds could be immediately transferred from his UK account to an HSBC branch in Brazil with instructions to the branch that his daughter was coming in to collect the money. Burns appreciated the ease of this transaction. Where once it would have involved a number of third parties, everything seemed to happen so simply within the one organisation.
Back to the International Menu
Ms Jones is the Chief Financial Officer (CFO) of a company engaged in international trade. She manages the collection of receipts across many countries as well as all other aspects of the company's trade financing .
Traditionally, Ms Jones' company banked with a domestic bank and when collecting receipts in foreign currencies, dealt with third parties in Indonesia, the United States, Argentina and the UK. As a result Ms Jones knew the company lacked control of the receipt collection process and decided to look for a solution.
The CFO selected HSBC's Hexagon global electronic banking service that is specifically designed for the business market, because it gave control back to her company. Hexagon gives her access to one of the largest banking and financial services organisations in the world 24 hours a day, 7 days a week.
Now receipts are paid to HSBC in each of the countries in which Ms Jones' company trades. Through Hexagon, Ms Jones has access to all the statement information of her company accounts and is now able to manage the transfer of cash between the company's accounts as well as the company's exposure to foreign currencies, all from her PC. It has made doing business internationally more efficient, accurate and has reduced costs.
Hexagon has allowed Ms Jones to fully automate the collection process and manage transfers between accounts and payments to third parties in foreign currencies from anywhere in the world.
Through Hexagon she can manage her international trade transactions because of the ability to view in summary or in detail her outstanding documentary credits and bills. Ms Jones is able to track the whole export process - from the point when the documentary credit is opened or bill is presented through to when settlement is made. Because all aspects of the trade financing are dealt with by HSBC at the points of export and import, whenever Ms Jones has a query she knows she is dealing with one set of systems and one process at both ends of the transaction.
Back to the International Menu
Examples like these are evidence of how the changing organisational nature of global business is impacting at a local level. To survive and to gain economic efficiencies, businesses in many strategic industries are amalgamating. Businesses benefit from lower costs when overheads are spread over a larger market share. Benefits may accrue to consumers from more competitive pricing and access to a range of technologies.
Back to the International Menu
Globalisation is the buzz word of the late 1990's. Every day new books and articles are published about it. In Australia two members of the Australian Labour Party have published books on the impact of globalisation on Australian politics and economics. Civilising Global Capital by Mark Latham suggests that nations like Australia must develop new policies and institutions because they have lost the ability to manage their economies and economic policies in the age of globalisation. In Britain the Labour Party Government of Tony Blair is pioneering the Third Way &endash; an economic and political policy making that takes into account the global context. International financial crises have occurred since the Asian currency crises in 1997.
Some commentators have suggested that a new depression is possible. And George Soros the world's leading currency trader has written that the global financial system is in crisis &endash; reportedly after he lost more than a billion US dollars when the rouble fell in value due to the Russian financial crisis in 1998.
But what does globalisation mean? Why has it become so important?
The Meaning of Globalisation.
As can be seen from the explanations given above globalisation is a contested concept. Globalisation means different ideas for different people. However, there is agreement that globalisation involves four processes or dimensions &endash; all occurring at the same time.
The Processes of Globalisation
The Power of Technology &endash; The New Global
Culture.
Technologically the world has shrunk. Technology refers to both new
products that are invented and then bought and sold &endash; and new
ways ( or processes ) of doing things and the education and training
required to do them. New process technologies such as
containerisation of cargoes for shipping spread quickly and are
available to all economies. The new communication technologies such
as the Internet or World Wide Web have spread rapidly and make
possible
-new products, such as software for web pages and
communication
-new processes such as electronic funds transfer, EFTPOS,
-new interactions and networks like buying US CD's from Australia
using the Internet.
New technologies allows new global production. Australian telephone books are typed by word processing specialists in the Philippines at a fraction of the costs than in Australia &endash; the product is transported electronically back and forward. When a Video produced by the Korean firm Lucky Goldstar is sold in an Australian
Department store or supermarket the point of sale computer in the
cash register may
-send a message to the retailers wharehouse asking for more stock to
be delivered to the store
-inform the Goldstar manufacturing plant which is actually located in
Wales in the United Kingdom, allow the manufacturing plant to order
raw materials like steel, electrical cable, wires and electronic
components like motors from suppliers all over the world including
Australia.
BHP Australia's largest company made only 60% of its sales from Australian production. Bryan and Rafferty report that BHP borrows money in the US, produces in many countries and sells allover the world. " we simply have no choice but to operate globally if we want to grow. Today we can and will fund projects any where in the world if they meet our criteria ( BHP Chief Economist &endash; reported in Bryan and Rafferty ). It is well known that a company like Nike produces its products in Indonesia and India, markets and sells all over the world and may have its accounting division in one country and its headquarters in another and its advertising and marketing in another. New technologies allow production to be carried out globally in this way.
Some have suggested that globalisation is shorthand for the cultural changes that technology makes possible. Everyone in the world knows the coca cola logo. English is becoming more common &endash; as english is the medium of growing international business communication. Globalisiation means that every society is industrialising to some extent. It also means that new industries created and old ones are eliminated. Technology allows production to take place anywhere in the world where it is most efficient. The TV show Baywatch can be made in the US or Hawaii or Avalon Beach in Australia &endash; technologically it can be produced anywhere in the world. It was the technological superiority of the West and its role in global production that lead to the downfall of the Soviet Union and communism. As the technology of the Soviet Union fell behind its production became less and less efficient &endash; it could not compete with the West.Technology allows producers to develop and to seek the most efficient and lowest cost production and allows global markets to develop.
The Power of World Markets The Global Market For Goods and
Services
In 1999 all economies are networked by technology. For many
products and some services there is world wide supply and world wide
demand. For these products such as raw materials and manufactured
goods world wide supply and demand means that prices are set
internationally. This means that domestic prices for many consumer
goods, financial assets, stocks, even labour are not set domestically
but fluctuate with global prices. More importantly the conversion
from local to global markets is growing rapidly &endash; buying and
selling on the internet is making possible a borderless supply and
demand world. Electronic commerce has the potential to further make
prices global. Nowadays, Australian consumers can purchase a book
over the Internet by searching the Amazon Book Company Database and
ordering the book, paying for it electronically after it has been
mailed from the US.
As would be expected as global markets develop there has been an enormous increase in international trade. For example between 1945 and 1995 world trade increased twelve fold, twice as fast as real world production. As a result imports and exports are a larger and larger component or sector of a nations economy. When prices are set internationally &endash; i.e. reflecting world supply and demand - then economic decision making is almost global. Producers, for example, can purchase factors of production from any where in the world &endash; globally. Gray gives two examples
However, if productivity and skill of Chinese workers rose Osram's would be likely to move their production to China to reduce the cost of production. If they did not do this then their competitor light bulb manufacturers would and Osram's would become uncompetitive and their prices would be higher than their competitors. This process of seeking lower prices for factor prices internationally leads to a process termed factor equalisation. The price of a factor of production internationally tends to coverge &endash; become more similar in all countries. International markets price, profitability, and productivity has two major implications. Wages tend to be forced down internationally and jobs become less secure as they are more mobile.
The Power of Capitalism The Triumph of Liberalisation
The collapse of the Soviet and the Communist system of command
production by 1989 signalled the triumph of capitalism. There are
now, no alternatives to capitalism &endash; prices and free markets -
as a system for production and economic organisation.
The more markets set prices, allocate resources and organise production then the greater production, wealth and income will be. As a result of this philosophy all over the world both within economies ( domestically) and among economies ( internationally ) markets have been made more free from regulations. Markets
have been liberated. The World Trade Organisation ( WTO ), the Asia Pacific Economic Coperation ( APEC ) attempts to reduce tariffs and protection and make international markets more liberal. Most countries, including Austalia, freed capital controls so now capital can move freely across international borders.
In the Australian economy, economic policy making has been dominated by what Bryan and Rafferty call the The competitiveness agenda &endash; the role of most economic policy is to make Australia ' more internationally competitive '. Privatisation, wage flexibility, education reform, trade policy, outsourcing, investment and industry policy all are dominated by giving markets more freedom to work &endash; set prices and allocate resources. The same competitiveness policies have followed in all countries in the world. The reason being that a nation risks becoming uncompetitive globally unless these policies are followed &endash; unless a country is part of global supply and demand its income and wealth will fall.
An example of the triumph of capitalism is the role of transnational corporations. Multi national firms like Shell, Nike, Genral Electric, and the makers of Coca-Cola account for a third of world output and two thirds of world trade. In the 1990's a quarter of world trade occurs within multinationals, the same company trading between itself in different countries &endash; part of a new system of called global capital.
The Power of Global Finance The Creation of the Virtual
Economy
In the 1990's there is world market for capital. More than any
other factor of production there is world wide supply and demand for
funds. Investment decisions by investors are global in scope and
funds can be transferred almost instantly anywhere in the world.
Daily transactions in financial markets represent buying and selling of 1.2 trillion worth of stocks bonds, financial instruments and currencies. This over 50 times greater than daily world trade. The daily volume of transactions on world currency ( foreign exchange )markets is approaching 900 billion. The scale of the global market can be illustrated from a David Clark report " A decade ago, official capital flows &endash; largely lending by government and international institutions &endash; to developing countries were much higher than private capital flows. Today, annual private capital flows to developing countries around the world are more than seven times larger than official flows. In 1996, more than $250 billion in private capital flowed to emerging markets &endash; compared to roughly $ 20 billion ten years earlier." Of course, what can flow in &endash; can flow out very quickly. In 1996 banks invested $56 billion into Indonesia, Korea, Thailand, Malaysia and the Philippines &endash; in 1997 the banks withdrew $27 billion. In the 1990's the scale and size of international capital flows are unprecedented.
Also interest rates are being set more and more internationally. Athough there are differences between counties interest rates; these have been getting smaller and smaller in the 1980's and 19990's.
The size and scale of global finance has created what is called the virtual economy or hyper economy where the financial flows have become disassociated from real production flows. Ominously it also been termed the casino economy. The size and volatility of these financial flows have now created pressures to develop new systems to manage globalisation, especially global finacial captial flows.