TCW Chapter 5

Market integration

process by which economies are becoming more interdependent and interconnected in terms of commodity flows including externalities and spillover of impacts

International Financial Institutions or IFIs

institutions that provide support through loans or grants and technical advices to promote a country's economic and social development

Corporations

private institutions that produce or manufacture goods, products, and services for a more expanded market usually at the reach of regions or the world.

Transnational corporations (TNCs)

have a more complex setting where each foreign subsidiary is given some freedom to develop its own product lines and marketing

Multinational corporations (MNCs)

have more of a home or country base taking care of the R&D and marketing, and focus more on exporting their products and services

Philippines

has 851 BPO companies, more than half of which are call centers (429).

Philippines

the call center capital of the world, accounting to 18 percent of the global market share

Horizontal integration

happens when a firm gains control of other firms performing similar marketing functions at the same level in the marketing sequence.

Pixar

bought by Disney, which is also in the entertainment media, for $7.4 billion

Example of a local market integration

Landbank of the Philippines acquired the Philippine Postal Savings Bank, for the latter to focus on overseas Filipino worker clients.

Vertical integration

happens when one company owns the operations and products from one stage to the other along the supply chain

Example of vertical integration

an iron mining company operates the steel manufacturing firm

Example of vertical integration

McDonald's owns the land where its supplies are located to avoid cost of lease

International Financial Institutions or IFIs

are institutions that provide support through loans or grants and technical advices to promote a country's economic and social development

Global and regional IFIs

include International Monetary Fund (IMF) and multilateral development banks (MDBs) like the World Bank Group, the African Development Bank (ADB), the inter-American Development Bank, and the European Bank for Reconstruction and Development

IFI

provides financial and technical services and products not for profit but for overall economic and social development

IFI

also works with the private sector for investment and policy reforms to promote private sector expansion

Four key issues with IFIs

• legitimacy

• effectiveness

• support conditionality and financial capacity

• sustainability

Paris Declaration on Aid Effectiveness

focuses on the harmonization, alignment, and managing aid for results including monitoring systems and indicators

16th-18th century

the modern capitalist world economy was flourished

First period of globalization

The start of the modern global trade leading to 1914

First period of globalization

This is when trade, capital, and immigration flows grew tremendously and in large volume, but the global institutional architecture to manage these were quite limited

International convention and treaties also served as drivers for these large-scale global movements

• International Telegraph Union in 1865

• Universal Postal Union in 1874

• International Association of Railway Congresses (1884)

• International Sanitary Convention in 1892

The Second World War to the late 1990s

the modern international economic enabling architecture was established

The Second World War to the late 1990s

the expansion of MNCs across the globe, supported by enabling policies and improved communications and transport

Trade liberalization and free flow of capital in the world

resulted from political changes like the fall of the Berlin Wall, establishment of regional networks, and trade agreements

1994/95 Mexico crisis

When Mexico's multi-billion loan from IMF created a negative spillover effect on US, Europe, Portugal, and Spain

From the late 1990s until very recently

Third wave of market integration

Third wave of market integration

• The advent of the modern Internet

• The WTO establishment

• Formal entry of China into the trading system through its accession to international financial institutions

Global corporations

One of the major players in globalization and the modern capitalist market

Modern global corporations

Commonly referred to as multinational corporations and transnational corporations

IFIs and global corporations

Play a significant role in global wealth creation and distribution, including global economic development

Trends that complicates the significant growth of IFIs and global corporation

• Global inequality

• Systematic stability and viability of the global financial system and climate issues

• Issues on human security