Global Economy

GLOBAL
ECONOMY
THE CONTEMPORARY WORLD
Economy
• Process or system by which goods
and services are produced, sold,
and bought in a country or region
Global Economy
• Economies of countries are more connected
from extraction, production, distribution,
consumption and disposal of goods and services
• Refers to the increasing
Economic interdependence of world
Globalization economies as a result of the
growing scale of cross-border
A definition from the United Nations
trade of commodities and services,
flow of international capital and
wide and rapid spread of
technologies
TYPES OF
ECONOMIES
UNDER
ECONOMIC
G L O B A L I Z AT I O N
Protectionism
• A policy of systematic government intervention in foreign
trade with the objective of encouraging domestic
production. This encouragement involves giving
preferential treatment to domestic producers and
discriminating against foreign competitors
• Comes in the form of tariffs and quota
Trade Liberalization
• Free trade
• Countries sign free trade agreements
• Transportation and communication advancements

facilitate movement of goods and services around the
world
M A R K E T
I N T E G R AT I O N
• a term that is used to identify a
phenomenon in which markets
of goods and services that are
MARKET somehow related to one
INTEGRATIO another being to experience
N similar patterns of increase or
decrease in terms of the prices
of those products.
According to Malcolm Tatum
• a situation in which the prices
of related goods and services
sold in a defined geographical
MARKET location also begin to move in
INTEGRATIO some sort of similar pattern
N
According to Malcolm Tatum
Horizontal Integration
3 Types of
Market Vertical Integration
Integration
Conglomeration
Horizontal Integration
is the acquisition, merger, or
expansion of a business that
increases the market share in its
existing industry.
Vertical Integration
• requires a company's direct
ownership of suppliers,
distributors, or retail locations
to obtain greater control of its
supply chain.
Conglomeration
• The process whereby a
firm expands by supplying
a range of different
products and, as such,
operates in a number of
markets rather than a
single market.
Preferential Agreement
Free Trade Areas
Forms
of Customs Union
Integration
Common Markets
Economic Union
PREFERENTIAL AGREEMENT
• A trade pact between countries that
reduces tariffs and other barriers
for certain products to the countries
who sign the agreement. While the
tariffs are not necessarily
eliminated, they are lower than
countries not party to the
agreement.
• A free-trade area is the region
encompassing a trade bloc
whose member countries have
signed a free trade agreement.
Such agreements involve
cooperation between at least two
countries to reduce trade
FREE barriers, import quotas and
TRADE tariffs, and to increase trade of
AREAS goods and services with each
other.
CUSTOMS UNION
• groups of countries that apply one
common system of procedures,
rules and tariffs for all or almost
all their imports, exports and
transiting goods.
• , countries participating in
customs unions share common
trade and competition policies.
COMMON MARKETS
• an agreement between two or more
countries removing all trade barriers
between themselves, establishing
common tariff and non-tariff barriers
for importers, and also allowing for
the free movement of labour, capital
and services between themselves.
ECONOMIC UNION
• an agreement between two or
more nations to allow goods,
services, money and workers to
move over borders freely.
1. Primary
2. Secondary
3 Sectors of
Economic System
3. tertiary
Primary Sector
• The primary sector
includes all those
activities the end
purpose of which
consists in exploiting
natural resources:
e.g: Agriculture,Fishing, Forestry, Mining
Secondary Sector
• covers all those

activities consisting
in varying degrees
of processing of raw
materials
e.g: manufacturing, construction industries

Tertiary Sector
generally known as the

SERVICE SECTOR.
The tertiary sector consists of

the provision of services
instead of end products.
HISTORY OF
GLOBAL
MARKET
INTEGRATION
HISTORY OF 1. Agricultural Revolution
GLOBAL 2. Industrial revolution
MARKET
INTEGRATIO 3. Information Revolution
N
Agricultural Revolution
I N D U S T R I A L
R E V O L U T I O N
Information
Revolution
FINANCIAL
INSTITUTIONS:
AND ITS ROLES
The Bretton Woods Agreement and System
• a set of unified rules and
policies that provided the
framework necessary to create
fixed international currency
exchange rates.
• gold was the basis for the U.S.
dollar and other currencies were
pegged to the U.S. dollar’s
value.
(IMF) INTERNATIONAL MONETARY FUND
WORLD BANK
(WTO) WORLD TRADE ORGANIZATION/ General Agreement on

Tariffs and Trade (GATT)
(OECD) ORGANIZATION OF ECONOMIC COOPERATION &
DEVELOPMENT
OPEC (ORGANIZATION OF THE PETROLEUM EXPORTING
COUNTRIES)
(EU)EUROPEAN UNION
(NAFTA) NORTH AMERICAN FREE TRADE AGREEMENT

IMF
(INTERNATIONAL MONETARY FUND)
• works to achieve sustainable growth and

prosperity for all of its 190 member countries.
• supporting economic policies that promote

financial stability and monetary cooperation,
which are essential to increase productivity, job
creation, and economic well-being
An international organization dedicated to providing
financing, advice, and research to developing nations to aid
their economic advancement.
The bank predominantly acts as an organization that

attempts to fight poverty by offering developmental assistance
to middle- and low-income countries.
Is an intergovernmental organization that regulates and
facilitates international trade. With effective cooperation in
the United Nations System, governments use the
organization to establish, revise, and enforce the rules that
govern international trade.
ORGANIZATION • A unique forum where the governments
OF ECONOMIC of 37 democracies with market-based
CO-OPERATION economies collaborate to develop policy
& DEVELOPMENT standards to promote sustainable
economic growth.
ORGANIZATION OF
THE PETROLEUM
EXPORTING
COUNTRIES
•an organization that

controls petroleum
production, supplies,
and prices in the global
market.
EUROPEAN UNION
• a supranational political and
economic union of 27 member states
that are located primarily in Europe.
created to bind the
• created to bind the nations ofofEurope
nations Europe closer
together for the
closer together for the economic,
economic, social, and
social, and security welfare ofwelfare
security all. of all.
NORTH AMERICAN FREE TRADE (NAFTA)
• Is created to eliminate all tariff

and non-tariff barriers of trade
and investment between the
United States, Canada and
Mexico.
AT T R I B U T E S O F
G L O B A L
C O R P O R AT I O N
This Photo by Unknown author is licensed under CC BY-SA-NC.

GLOBAL CORPORATION
• also known as a global company, is
coined from the base term "global",
which means all around the world.
These companies that extend beyond
borders of one country are called
MULTINATIONAL (MNC's) or
TRANSNATIONAL
CORPORATIONS (TNC's).
TRANSNATIONAL CORPORATION
(TNC)
• Is "any enterprise that undertakes foreign direct • Apple.
• Microsoft.
investment, owns or controls income-gathering
• Nestlé
assets in more than one country, produces goods or • Shell.
services outside its country of origin, or engages in • Nike.
international production".(Biersteker 1978, p. xii) • Sony.
• Unilever
• Shell
"enterprises comprising of a parent firm which • Procter & Gamble
controls assets of other entities in countries
other than its own"
MULTINATIONAL CORPORATION (MNC)
• Muller defines a multinational corporation
• BDO Unibank
as: a company with its parent headquarters
• Accenture Philippines
located in one country and subsidiary • Nestle Philippines
operations in a number of other countries. • San Miguel Corporation
The central characteristic of a multinational • Unilever Philippines
corporation is that it seeks to maximize the

profits not of its individual subsidiaries, but
rather of the center parent company (Muller
1979: 15).
DIFFERENCES
BETWEEN
TNC VS MNC
TRANSNATIONAL MULTINATIONAL
• Transnational companies have many • Multinational companies operate in

companies around the world but do more than one country and have a
not have a centralized management centralized management system.
system.
Transnational companies do not have Multinational companies own a home
subsidiaries but just many companies. company and its subsidiaries.
• Transnational companies are able to • Multinational companies have a

gain more interest in the centralized management system,
local markets where they maintain there will be some barriers in decision
their own systems. making.
GLOBALIZATION
&
ECONOMIC
CRISIS
GLOBAL CRISIS
• Events such as war, economic decline, pandemic, extreme
natural events that affect all countries in economic, social,
cultural, political, and many other issues.
COLD WAR (March 12, 1947 – December 26, 1991)
GREAT DEPRESSION (1929–39)
THE OPEC OIL PRICE SHOCK (1973)
ASIAN FINANCIAL CRISIS (1997)
THE GREAT RECESSION (2007–08)
Global Crisis

Global Economy

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GLOBAL

• Countries sign free trade agreements

• Transportation and communication advancements

• covers all those

e.g: manufacturing, construction industries

generally known as the

The tertiary sector consists of

(WTO) WORLD TRADE ORGANIZATION/ General Agreement on

(NAFTA) NORTH AMERICAN FREE TRADE AGREEMENT

• works to achieve sustainable growth and

• supporting economic policies that promote

The bank predominantly acts as an organization that

•an organization that

• Is created to eliminate all tariff

This Photo by Unknown author is licensed under CC BY-SA-NC.

corporation is that it seeks to maximize the

• Transnational companies have many • Multinational companies operate in

• Transnational companies are able to • Multinational companies have a

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