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Structure of Globalization
WHAT IS THE MODULE ALL ABOUT?
This module is designed for you who are enrolled in Contemporary World. This is the second of a series of
modules that will help and assist you become an expert pre-service educator.
YOU WILL STUDY THE FOLLOWING TOPICS IN THIS MODULE:
1. The Global Economy
2. Market Integration
3. The Global Interstate System
4. Contemporary Global Governance
GLOBAL ECONOMY
▪ the exchange of goods and services integrated into a huge single global market. It is virtually a world
without borders, inhabited by marketing individuals and/or companies who have joined the
geographical world with the intent of conducting research and development and making sales.
▪ International trade permits countries to specialize in the resources they have. Countries benefit by
producing goods and services they can provide most cheaply and by buying the goods and services
other countries can provide most cheaply. International trade makes it possible for more goods to be
produced and for more human wants to be satisfied than if every country tries by itself to produce
everything it needs.

How does the global economy work?

Globalization is a complex and controversial issue. This is a look at some of the main benefits and costs
associated with the greater globalization of the world economy.
Globalization has involved:
Greater free trade
Greater movement of labor
Increased capital flows
The growth of multi-national companies
Increased integration of global trade cycle
Increased communication and improved transport, effectively reducing barriers between
countries.

Benefits of globalization

1. Free trade is a way for countries to exchange goods and resources. This means countries can
specialize in producing goods where they have a comparative advantage (this means they can
produce goods at a lower opportunity cost). When countries specialize there will be several gains
from trade:
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Lower prices for consumers

Greater choice of goods, e.g. food imports enable a more extensive diet.
Bigger export markets for domestic manufacturers
Economies of scale through being able to specialize in certain goods
Greater competition
2. Free movement of labor Increased labor migration gives advantages to both workers and recipient
countries. If a country experiences high unemployment, there are increased opportunities to look for work
elsewhere. This process of labor migration also helps reduces geographical inequality. This has been quite
effective in the EU, with many Eastern European workers migrating west. Also, it helps countries with labor
shortages fill important posts. For example, the UK needed to recruit nurses from the far east to fill shortages.
However, this issue is also quite controversial. Some are concerned that the free movement of labor can
cause excess pressure on housing and social services in some countries. Countries like the US have
responded to this process by actively trying to prevent migrants from other countries.
3. Increased economies of scale Production is increasingly specialized. Globalization enables goods to be
produced in different parts of the world. This greater specialization enables lower average costs and lower
prices for consumers.
4. Greater competition Domestic monopolies used to be protected by a lack of competition. However,
globalization means that firms face greater competition from foreign firms.
5. Increased investment Globalization has also enabled increased levels of investment. It has made it easier
for countries to attract short-term and long-term investment. Investment by multinational companies can play
a big role in improving the economies of developing countries.
Costs of globalization

1. Free trade can harm developing economies Developing countries often struggle to compete with
developed countries, therefore it is argued free trade benefits developed countries more. There is an infant
industry argument which says industries in developing countries need protection from free trade to be able
to develop. However, developing countries are often harmed by tariff protection, that western economies
have on agriculture.
2. Environmental costs One problem of globalization is that it has increased the use of non-renewable
resources. It has also contributed to increased pollution and global warming. Firms can also outsource
production to where environmental standards are less strict. However, arguably the problem is not so much
globalization as a failure to set satisfactory environmental standards.
3. Labor drain Globalization enables workers to move more freely. Therefore, some countries find it difficult
to hold onto their best-skilled workers, who are attracted by higher wages elsewhere.
4. Less cultural diversity Globalization has led to increased economic and cultural hegemony. With
globalization there is arguably less cultural diversity; however, it is also led to more options for some people.
5. Tax competition and tax avoidance Multinational companies like Amazon and Google, can set up offices
in countries like Bermuda and Luxembourg with very low rates of corporation tax and then funnel their profits
through these subsidiaries. This means they pay very little tax in the countries where they do most of their
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business. This means governments have to increase taxes on VAT and income tax. It is also seen as unfair
competition for domestic firms who don’t use the same tax avoidance measures.
The greater mobility of capital means that countries have sought to encourage inward investment by offering
the lowest corporation tax. (e.g., Ireland offers very low tax rate). This has encouraged lower corporation tax,
which leads to higher forms of other tax.
MARKET INTEGRATION
Market integration occurs when prices among different locations or related goods follow similar patterns over
a long period of time. Groups of goods often move proportionally to each other and when this relation is very
clear among different markets it is said that the markets are integrated. Thus, market integration is an
indicator that explains how much different markets are related to each other. A marketer plays the role of an
integrator in the sense that he collects feedback or vital inputs from other channel members and consumers
and provides product solutions to customers by coordinating multiple functions of organization.
Types of Market Integration
HORIZONTAL INTEGRATION
Occurs when a firm or agency gains control of other firms or agencies performing similar marketing functions
at the same level in the marketing sequence.
EFFECTS OF HORIZONTAL INTEGRATION
• Bullying out a competitor in a time bound way to reduce competition.
• Gaining larger scale share of market and higher profits.
• Attaining economies of scale.
• Specializing in the trade
ADVANTAGES OF HORIZONTAL INTEGRATION
Lower cost
Higher efficiency.
Increased differentiation.
Increased market power.
Reduced competition.
Access to new markets.
International trade.
DISADVATAGES OF HORIZONTAL INTEGRATION
Destroyed value
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Legal repercussions.
Reduced Flexibility.
VERTICAL INTEGRATION
Occurs when a firm performs more than one activity in the sequence of the marketing process.
Types: FORWARD INTEGRATION; BACKWARD INTEGRATION; BALANCED VERTIVAL INTEGRATION
EFFECTS OF VERTICAL INTEGRATION
• More profits by taking up additional functions.
• Risk reduction through improved market coordination.
• Improvement in bargaining power and the prospects of influencing prices.
• Lowering cost through achieving operational efficiency.
CONGLOMERATION
 Combination of agencies or activities not directly related to each other may, when it operates under a
unified management, be termed a conglomeration.
EFFECTS OF CONGLOMERATION
• Risk reduction through diversification. • Acquisition of financial leverage. • Empire-building urge.
ADVANTAGES OF VERTICAL INTEGRATION
Invest in assets that are highly specialized.
More control over your business.
Positive differentiation.
Lower cost transaction.
More cost controls.
High level of certainty.
More competitive advantages
DISADVANTAGES OF VERTICAL INTEGRATION
Capacity-balancing problems.
More difficulties.
Decreased flexibility.
Create some barrier to market entry.
Cause confusion within the business.
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Requires huge amount of money.

Make things more difficult.
GLOBAL INTERSTATE SYSTEM
It is the whole system of human interactions. The modern world-system is structured politically as an
interstate system – a system of competing and allying states. Political Scientists commonly call this the
international system, and it is the main focus of the field of International Relations
STRENGTHS- It will make travel less, cheap, faster and better.
WEAKNESSES- Imposed long-term costs on the country Cut down on competition between shippers and
passenger carriers; Rising consumption of gasoline led to air pollution and a dependence on oil that affected
consumers and foreign policy for generations to come.
Institution that governs International Relations
UNITED NATION
United States President FRANKLIN ROOSEVELT coined the name united nations that was used in the
declaration of United Nation on 1 of January 1942. UN means allies to fight against the Axis Powers in the
Second World War II. Only 26 nation’s representatives pledge their governments to:
1. Each Government pledges itself to employ its full resources, military or economic, against those members
of the tripartite pact and its adherents with which such government is at war.
2. Each Government pledges itself to cooperate with the Governments signatory hereto and not to make a
separate armistice or peace with the enemies.
CONTEMPORARY GLOBAL GOVERNANCE
Global governance brings together diverse actors to coordinate collective action at the level of the planet.
The goal of global governance, roughly defined, is to provide global public goods, particularly peace and
security, justice and mediation systems for conflict, functioning markets and unified standards for trade and
industry. One crucial global public good is catastrophic risk management – putting appropriate mechanisms
in place to maximally reduce the likelihood and impact of any event that could cause the death of 1 billion
people across the planet, or damage of equivalent magnitude.
The leading institution in charge of global governance today is the United Nations. It was founded in 1945, in
the wake of the Second World War, as a way to prevent future conflicts on that scale. The United Nations
does not directly bring together the people of the world, but sovereign nation states, and currently counts 193
members who make recommendations through the UN General Assembly. The UN’s main mandate is to
preserve global security, which it does particularly through the Security Council. In addition, the UN can settle
international legal issues through the International Court of Justice, and implements its key decisions through
the Secretariat, led by the Secretary General.
The United Nations has added a range of areas to its core mandate since 1945. It works through a range of
agencies and associated institutions particularly to ensure greater shared prosperity, as a desirable goal in
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itself, and as an indirect way to increase global stability. As a key initiative in that regard, in 2015, the UN
articulated the Sustainable Development Goals, creating common goals for the collective future of the planet.
Why do we need global governance?
Global governance is necessary because humanity increasingly faces both problems and opportunities that
are global in scale. Today, transnational problems such as violence and pandemics routinely reach across
borders, affecting us all. At the same time, the increasingly integrated global system has also laid the
necessary foundations for peace and spectacular prosperity. Effective global governance will allow us to end
armed conflict, deal with new and emerging problems such as technological risks and automation, and to
achieve levels of prosperity and progress never before seen.1
The most important challenge for humanity to overcome is that of existential risks. One way to look at the
danger of an existential risk is to quantify the level of global coordination needed to deal with it. While best-
shot risks, at one end of the spectrum only require that a single nation, organization or even individual (i.e.,
superhero) has the means and the will to save everyone, weakest-link risks, at the other end of the spectrum,
are dangers that might require literally every country to take appropriate action to prevent catastrophe, with
no room for failure.2 3
We’ve always been at risk of natural disaster, but with advances in our level of technology the risk we pose
to ourselves as a species becomes ever greater. Nuclear weapons are a well-known risk that we still live with
to this day. The progress of technological research exposes us to new dangers such as bioengineered
superbugs, nanotechnological menaces, and the risk of an out-of-control artificial intelligence with ill-intent.
Increased levels of global coordination are needed to combat many of these risks, as described in our article
on the cooperation possibilities frontier.
There are other problems that don’t necessarily threaten the species or even civilization as we know it, but
which are holding back the development of prosperity and progress. Armed conflict, around since the dawn
of history, still haunts us today. Even though wars between great powers appear to be a thing of the past,
regional conflicts still account for tremendous human suffering and loss of life in parts of the world without
stable governance.4
Other problems have emerged precisely because of our successes in the past. The unprecedented
advancement of human wellbeing and prosperity over the past century has been based in large part on the
use of fossil fuels, thus exposing us to climate change. Widespread automation, already a stressor on society,
will put increased pressure on the social and economic fabric of our societies over the next few decades.
Global governance can help alleviate these issues in various ways – we refer the interested reader to the
very detailed work in Ruling Ourselves.
Finally, global governance will increasingly be judged not only by the extent to which it prevents harm, but
also by its demonstrated ability to improve human wellbeing.5 Progress has let us set our sights higher as a
species, both for what we consider to be the right trajectory for humanity and for our own conduct.6 Major
advances in human wellbeing can be accomplished with existing technology and modest improvements in
global coordination