The Structures of

Globalization
Lesson 2 Global Economy
Lesson 3 Market Integration
Lesson 4 Global Interstate System & Global Governance
Lesson 2
Global Economy
INTRODUCTION :

The global economy has changed in significant ways

during the past several decades, and these changes
are rooted in how the global economy is organized
and governed. These transformations affect not only
the flows of goods and services across national
borders, but also the implications of these processes
for how countries move up (or down) in the
international system.
Economic Globalization is defined;
According to Claudio and Abinales (2018, p.
12), the International Monetary Fund (IMF)
regards economic globalization as a
historical process representing the
outcome of human innovation and
technological development. It can be
described through the increasing
integration of economies in the world
through the motion of goods, services, and
capital across borders.
Economic Globalization is defined;

The term sometimes also refers to the movement

of people (labor) and knowledge (Technology)
across international boarders.(IMF, 2008)
International Monetary
Fund (IMF)
and
International Monetary
System (IMS)
 International Monetary Fund
(IMF)
works to achieve sustainable growth and
prosperity for all its 190 member countries. It
does so by supporting economic policies that
promote financial stability and monetary
cooperation, which are essential to increase
productivity, job creation, and economic well-
being. The IMF is governed by and accountable to
its member countries.
International Monetary Fund (IMF)
has three missions;
• furthering international monetary cooperation
• encouraging the expansion of trade and
economic growth
• discouraging policies that would harm
prosperity.

To fulfill these missions, IMF member countries

work collaboratively with each other and with
other international bodies.
What does IMF do?

The IMF fosters International Financial Stability by offering:

a. Policy Advice – monitoring the economic and financial policies of
member countries and providing them with policy advice, an activity
known as surveillance.

b. Financial Assistance – Providing loans and other financial aid to

member countries. The IMF provides financial assistance and works with
governments to ensure responsible spending.

c. Capacity Development - Capacity development can help countries to

improve tax collection and bolster (boost/ strengthen) public finances. It
can help countries to modernize their monetary and exchange rate
policies, develop legal systems, or strengthen governance.
 International Monetary
System (IMS)
refers to a system that forms rules and
standards for facilitating international trade
among the nations and helps in relocating the
capital and investment from one nation to another,
also it refers to the operating system of the
financial environment, which consists of
financial institutions, multinational corporations,
and investors.
 Importance of Currency
Management
Why do economies need money?
Money defines as a unit of account, that is used as a
medium of exchange in transactions Without money,
individuals and businesses would have a harder time
obtaining (purchasing) or exchanging (selling) what
they want, need, or make. Money provides us with a
universally accepted medium of exchange.
What is the purpose of currency?
-To be exchanged for goods and
services.
Exchange Rates
Exchange rate is the ratio at which one currency is
converted into another currency:

 Fixed Exchange Rate: The government manipulates the value of a

country’s currency.
 Floating Exchange rate: The value of a country’s currency changes
based on market forces.Most countries operate under a freely floating
exchange rate system.
• Flexible exchange rate, which is the same as the floating exchange rate
system is a system wherein the value of a currency changes with
market demands. When the demand for a particular currency is high, the
value of that currency goes up. When demand is low, the value goes
down.
 Dimensions of Economic
Globalization

• The globalization of trade of goods and services;

• The globalization of financial and capital markets;
• The globalization of technology and
communications; and
• The globalization of production.
 Economic Globalization
versus Internationalization
There are crucial differences between them.
Globalization means expanding a company’s economic activities and
influence beyond its borders. This includes trade, investment, and
cooperation between nations/companies. Globalization, since its
beginnings, has always supported free trade, and the business world
could not be more grateful for this possibility.
On the other hand, Internalization means making a company or product
available in multiple languages and cultures so that they are not crashing
or causing any problems.
Economic Globalization Today
• Exports, not just local selling of goods and services, make
national economic grow at present.
• Advances in communication and transportation: The internet,
containerization, and other innovations have made it easier and cheaper to
move goods, services, and people across borders.
• Reduction of trade barriers: Countries have increasingly lowered tariffs and
other trade barriers, opening up their markets to foreign goods and
services.Rise of multinational corporations:
Lesson 3
Market Integration
INTRODUCTION
The market integration is always
related to the efficiency of markets. To
understand the market integration, it is
necessary to understand the concept
of “market” and “integration”
separately and the way in which these
are interconnected.
Market – is derived from the Latin word “Mercatus”
which means trading or place of transactions.

Integration - is the process of combining two or more

things to create a whole. Integration allows
information to be shared between the connected
systems.
Market Integration is a term used to identify a
phenomenon in which markets of goods and services
that are related to one another being to experience
similar patterns or increase or decrease I terms of the
prices of those products and services
 There are 9 Concepts of Market

1. Place Concept – “A market can be defined as a place

where buyers and sellers meet and function goods and
services offered for sale and transfer of ownership of title
occur.” (W.J Stanton)
 There are 9 Concepts of Market
2. Commodity Concept - A commodity market is a
marketplace for buying, selling, and trading raw materials
or primary products.
Commodities are often split into Three broad categories;
Hard, Soft, and Spot commodities.
Hard commodities include natural resources that must be
mined or extracted, such as gold, rubber, and oil,
Soft commodities are agricultural products or livestock,
such as corn, wheat, coffee, sugar, soybeans, and pork.
Spot commodities markets involve immediate delivery,
while derivatives markets entail delivery in the future.
 There are 9 Concepts of Market
3. Exchange Concept – The central idea of
the marketing is the exchange of product
between the seller and the buyer.
-Exchange covers the distribution aspect and
the price mechanism of the product.
-The concept resulted in missing out the
essence of marketing that includes the concern
for the customer, generation of value
satisfactions, creative selling and integrated
action for serving the customer.
 There are 9 Concepts of Market
4. Area Concept/ Market Structure
The area concept of the market is related to exchange
concept. This concept gives emphasis on free association
between buyers and sellers to fix the price of goods for
buying and selling.
The price fixed between buyer and seller implies in a certain
area only.
In this concept, it is not necessary for buyers and sellers
to meet in person. For fixing the price buyers and sellers
can regularly take the help of different modern
communication media and exchange goods or services.
 There are 9 Concepts of Market

5. Demand/ Costumer Concept – The customer is

the king of the market. One of the important
perspectives of the market is to assess the need
or demand of the customer. The market can be
studied from the perspective of demand or
customer. According to this concept, the
aggregate demand by potential buyers for any
product is the market.
 There are 9 Concepts of Market
6. Space or Digital Concept – Emergence of Information
Technology gave birth to the new concept of the market
called as Space or Digital Concept. New and sophisticated
E-Commerce Portals and Mobile Applications make buying
and selling easy and convenient for buyers as well as
sellers.
Digital Market can be defined as a “Market which uses
Information Technology for buying and selling of the
products or services and facilitating communication of
quality, features, price, and terms of exchange among
them”.
 There are 9 Concepts of Market

7. Consumer Behavior
–Consumer behavior examines how individuals make
decisions regarding the consumption of goods and
services. Understanding consumer preferences,
motivations, and buying habits is crucial for businesses to
develop successful marketing strategies. For instance, a
company may conduct market research to understand why
customers prefer one brand of sneakers over the another.
 There are 9 Concepts of Market
8. Market Failure – Market failure occurs when the market
mechanism fails to allocate resources efficiently. This
can happen due to externalities (cost or benefits that
affect third parties), information asymmetry, or the
presence of public goods.
Example; Is environmental pollution, where the costs are
nor borne by the polluter but by society as a whole,
leading to an inefficient allocation of resources. These
concepts provide a foundation for understanding how
market function and how various factors influence the
behavior of buyers and sellers.
 There are 9 Concepts of Market

9. Market Equilibrium - Market Equilibrium is the

state where the quantity demanded by buyers
matches the quantity supplied by sellers at a
specific price. The market is said to be in
equilibrium when there is no excess supply
(surplus) or excess demand (shortage).
 There are 2 Types of Integration

1. Negative Integration – reduces non-tariff and tariff barriers to

trade as a main tool for integrating markets.
2. Positive Integration – adjust domestic policies and
institutions through the creation of supranational
arrangements.
Tariff – is a tax imposed by one country in the goods and
services imported from another country.
Supranational Arrangements – is a type of multinational
political union where negotiated power is delegated to an
authority by government of member state.
Evolution of Market Integration
Before people only produced for their family, but
today economy demands the different sectors to work
together to produce, distribute and exchange products and
services.
 The Agricultural Revolution

 New farming techniques and improved livestock breeding led

to amplified food production. This allowed a spike in
population and increased health.
 People learned how to domesticate (tame/ control) plants and
animals. This became the new agricultural economy that led to
major developments like permanent settlements, trade
networks, and population growth.
 The process that ended traditional rights on common land and
restricted land use to the property owner.
 The Industrial Revolution

 This is the rise of industry through new economic tools, like

steam engines, manufacturing and mass production.
• The Industrial Revolution was a period of scientific and
technological development in the 18th century that
transformed largely rural, agrarian (agricultural) societies—
especially in Europe and North America—into industrialized,
urban ones. Goods that had once been painstakingly
(thoroughly/ carefully) crafted by hand started to be
produced in mass quantities by machines in factories, thanks
to the introduction of new machines and techniques in
textiles, iron making and other industries.
 The 2 Economic Models that compete
under Industrial Revolution

1. Capitalism - an economic and political system in which a country's trade

and industry are controlled by private owners for profit. Is a system in which
all-natural resources and means of production are privately owned.
•
a. Monopoly - Monopoly describes a concentration of market share where
competition is limited or nonexistent. The term “monopoly capitalism” is
used to describe an aspect or stage of capitalism in which monopoly
control is widespread and explicit, though the ideological fiction of free
markets and competition is still maintained in public discourse.
- Is when a company has no competitors for customers, to avoid over
pricing governments set minimum wages and rules.
 The 2 Economic Models that
compete under Industrial
Revolution

2. Socialism – is a system that means for production under

collective ownership. The properties are owned by the
government and allocated to all the citizens.
 The 2 Economic Models that
compete under Industrial
Revolution
 Capitalism is an economic system  Socialism is an economic and
under which the means of political system under which the
production are privately owned. means of production are publicly
Production and consumer prices owned. Production and consumer
are based on a free-market system prices are controlled by the
of “supply and demand.” government to best meet the
needs of the people.

 Capitalism is most often criticized  Socialism is most often criticized

for its tendency to allow income for its provision of social services
inequality and stratification of programs requiring high taxes that
socio-economic classes. may decelerate economic growth.
 The 2 Economic Models that
compete under Industrial
Revolution
Capitalism Socialism
Ownership of Means of production owned by Means of production owned by
Assets private individuals government or cooperatives

Income Equality Income determined by free Income equally distributed

market forces according to need
Consumer Prices Prices determined by supply and Prices set by the government
demand
Efficiency and Free market competition Government-owned businesses
Innovation encourages efficiency and have less incentive for
innovation efficiency and innovation
Healthcare Healthcare provided by private Healthcare provided free or
sector subsidized by the government
Taxation Limited taxes based on High taxes necessary to pay for
individual income public services
 The Information Revolution

The Information Revolution led us to the age of the

internet, where optical communication networks play a
key role in delivering massive amount of data. This is
when the technology reduced the role of human labor and
shifting it from manufacturing-based economy to one that
is based on service work and the production of ideas
matter than goods.
 The Information Revolution

Primary Labor Market – Includes job that

provide many benefits to workers, they are
called “white-collar professions”.
 The Information Revolution

Secondary Labor Market – Includes job that

provide fewer benefits and include lower-skilled
jobs. Secondary labor market refers to those
occupations which tend to be located in the most
competitive areas of the economy and are more
labor intensive.
 3 Types of Market Integration

1. Horizontal Integration – is a business strategy in which

one company grows its operations at the same level in an
industry. Horizontal integration help companies grow in
size and revenue, expand into new markets, diversity
(variety) product offerings, and reduce competitions.
 3 Types of Market Integration

2. Vertical Integration – Vertical integration is the

business arrangement in which a company controls
different stages along the supply chain. Instead of relying
on external suppliers, the company strives to bring
processes in-house to have better control over the
production process. The goal of vertical integration is to
streamline (modernize/ update) processes for more
efficient and controlled operations in the long-term.
 Vertical Integration and Horizontal
Integration
Vertical Integration Horizontal Integration
Vertical integration is the Horizontal integration is the
practice of acquiring different practice of acquiring similar
pieces along a supply chain companies to further master
that a company does not what it already does.
currently manage.
Vertical integration makes a Horizontal integration may
company broader (wider/ help it penetrate a specific
larger). market further.
 2 Types of Vertical Integration

Forward V Integration – Forward integration is a business strategy that

involves a form of downstream vertical integration whereby the company
owns and controls business activities that are ahead in the value chain of its
industry, this might include among others direct distribution or supply of the
company's products. This type of vertical integration is conducted by a
company advancing along the supply chain.
Example 1: Integration would be a farmer who directly sells his crops
at a local grocery store rather than to a distribution center that
controls the placement of foodstuffs to various supermarkets.
Example 2 A clothing label that opens up its own boutiques, selling its
designs directly to customers instead of or in addition to selling them
through department stores.
 2 Types of Vertical Integration

Backward V Integration – Backward integration is a form of

vertical integration in which a company expands its role to fulfill tasks
formerly completed by businesses up the supply chain. In other words,
backward integration is when a company buys another company that
supplies the products or services needed for production.
Example:
A company might buy their supplier of inventory or raw materials.
Companies often complete backward integration by acquiring or merging
with these other businesses, but they can also establish their own
subsidiary to accomplish the task.
 3 Types of Market Integration

Conglomeration - A conglomerate is the combination of

two or more business entities engaged in either entirely
different or similar businesses that fall under one
corporate group, usually involving a parent company and
many subsidiaries. Often, a conglomerate is a multi-
industry company and is often large and multinational.
 The Importance of Market Integration

1. It is one of the ways to ascertain in the extent of competitiveness in

market.
2. It helps in the development of a single economic market at national level.
3. It provides better signals for optimal generation and consumption
decisions
4. It improves the security of supply
5. It unites different country’s economic union.
 International Financial Institution
(IFI)

IFI is a financial institution that have been established by

more than one country and are subjects of international
law.
The Financial Institutions and Economic Organizations that
made our Countries closer when it comes to trade are:

1.The Bretton Woods System – all payments are based on dollars

2.The General Agreement on Tariffs and Trade (GATT) – promote
international trade by reducing or eliminating trade barriers such as tariffs
or quotas.
3.The International Monetary Fund (IMF) – purpose to ensure statbility of the
international monetary system
4.World Bank – bank act an S
5.Organizations for Economic Cooperation and Development (OECD) –
6.The Organization of Petroleum Exporting Countries (OPEC) –
7. European Union (EU) –
8.North American Free Trade Agreement (NAFTA) –