I mentioned in my email to you yesterday that this series will start with a bang, and the following fact certainly hit me like a ton of bricks: Anyone who started investing after has never experienced a bear market in Treasuries.
Economic globalization Economic globalization is the process of increasing the financial integration amongst countries.
Consequently, economic globalization leads to the development of a "global marketplace" or "a single world market".
Economic globalization is enhanced by the accession of multinational enterprises, which result into the rise of the profits of that "global marketplace". It is hard to define a multinational enterprise MNE as definitions change over time. As Maurice Bye proposed a company is considered an MNE only depending on the amount of countries it occupies.
Specifically he said " MNE was purely given the name by the amount of countries a company occupied". However, inJ. Dunning defined an multinational enterprise as " Following the above descriptions, someone would wonder, how companies become multinational.
Indeed, the development of a firm into a multinational company is a long-lasting, expensive and difficult procedure, which we will discuss later. At this point, it would be good to mention that a firm is any business such as a corporation or partnership. A firm differs from a multinational company by means of the firm's market being mainly in the country it sells into and having no FDI Foreign Direct Investment in any other apart from the one, which it sells to.
This phenomenon greatly influences the world's economy. There are many reasons why firms become multinational enterprises. To begin with, by becoming multinational, a company can spread risks. More specifically, if the economy in one country is slow, or demand is decreasing, it is highly possible that economy will be prospering in another country.
As a result, if a company sells products into a country where the demand is thriving, not only will the profits of the specific company increase, but the country's GDP will also increase. Also, via expanding globally i. For example, if 1 out of 6 UK citizens are interested in an X product, it is obvious that respectively, more citizens in the world's market will be interested in the same product.
Therefore, becoming "multinational" not only contributes in the augment of the firms' profits and gives exposure to more markets but also adds more costumers to the company's potential database. Moreover, expanding a company's market, helps increase the world's GDP, something that constitutes a crucial factor in the outcome of the world's economy.
Furthermore, as the market is becoming more global-especially through internet- it is a case of "multinational to survive". More specifically, various companies use the Internet, the greatest innovation of our times, in order to advertise and sell their products.
Hence, the amount of companies that use the Internet in order to sell their products rapidly increases, making the market global, interconnecting several countries' market and leading to the boost of multinational corporations.
Moreover, another important factor for firms to develop into multinational companies is cheap labour and cheaper raw materials in several countries abroad. These two factors have a great impact on a company's profits since they reduce unit costs and hence increase the final profit.
Therefore, a firm developing into a multinational company, not only by augment of income since the company's product will be available for a larger population but also by means of reduction of unit costs.
Hence, at the simultaneously a company can reduce its unit costs and increase its incomes by just joining another country's market i. To continue with, by getting into a group of more "technologically developed" countries and companies, firms can benefit in improving their production.
More specifically, by integrating with larger companies, firms incorporate better technological equipment. As a result, firms can produce more efficiently and hence, enhance their profits.
At this point it would be useful to mention the phenomenon of "government subsidizing". When a government notices a decrease in the country's GDP i. In that way, companies will become increase their popularity and eventually become multinational. However, it is of great importance for firms to obey to specific criteria in order for them to be in fact considered "multinational".
It is true, that the improvement of technological equipment, transportation of products and development of production processes and communications play a great role in the consideration of a company as "multinational".(ii) Globalization of Economic activities: Another characteristic of globalisation is the control of economic activities by domestic market and international market.
It also established coordination among the national economy and world economy.
(iii) Free Trade: One of the important characteristics of globalisation is free trade between counties. JSTOR is a digital library of academic journals, books, and primary sources.
The era of globalization has seen growth in world trade exceeding world economic growth, and to discuss the impact of globalisation on South Africa would thus require a discussion on the impact of increased trade in South Africa. Keywords: globalization sri lanka, sri lanka economy globalization Globalization is a multifaceted, multidisciplinary topic in its broadest reach.
It is an integration of countries and people which is made possible by the reduction of transportation and communication cost.
McKinsey Global Institute Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Positive and negative effects of globalization Globalization refers to the overall development as well as modernization of a community as a whole. The reason why globalization is important is because it helps a community in gaining international recognition, influence as well as operation.