Global industries

Global industries

1. Globalisation

   • Increased FDI, exports and imports, migration and trade
   • Aids development
   • Maintains peace and stability
   • Mcdonaldization
   • Exploitation e.g. poor wages

2. Speeding up globalisation

   • Technological progress
     • Internet, improved communication
     • Computers connect markets
     • Lower air costs, easier for businessmen to meet
   • Offshoring
     • Rising economies seen as place of cheap labour and lucrative market, so increase in FDI
   • Liberalisation
     • Deregulation, de-restrictions on trade
     • China joins WTO 2001
   • Laws
     • Growth in trade blocs, leading to harmonisation of laws

3. Diversifying

   • Increasing global trade has led to more competition
     • This leads to more risk and uncertainty
       • Makes planning difficult
       • Businesses can diversify to reduce uncertainty
   • Selling more than one product, or the same product in more than one market
   • Businesses can diversify by exporting, generating orders from new market
     • May invest in a distribution system in the target market e.g. setting up retail outlets
     • Setting up production in target market, building factories or in a joint venture
     • Expansion by merger or takeover, building up portfolio of businesses

4. Inorganic growth

   • When a business expands by taking over or merging with another
   • WHY?
     • Brands and patents
     • Balancing investment (diversifying)
     • Economies of scale
     • Synergy
       • After merger or takeover, the performance of the combined enterprise will exceed that of its previously separate parts
   • Horizontal integration - M/T where both firms are in the same line of production E.g. to achieve larger market share
   • Vertical integration - amalgamating two businesses which have specialised in different parts of the production process E.g. Farmers setting up farm shops

5. Some industries are very able to be globalised: clothing (easy for developing countries to get started as tech can be basic), most manufacturing (wherever labour costs low)

6. BUT, for other industries globalisation isn't possible:

   • Farming - land and climate appropriateness
   • Mining - natural resource availability