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Topic 2 – The Global Economy

Topic 2 – The Global Economy. A – Genesis of the Global Economy B – Multinational Corporations C – International Trade and Transportation. B – Multinational Corporations. Corporations in the Global Economy The Structure of Multinationals Impacts of Multinationals

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Topic 2 – The Global Economy

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  1. Topic 2 – The Global Economy A – Genesis of the Global Economy B – Multinational Corporations C – International Trade and Transportation

  2. B – Multinational Corporations Corporations in the Global Economy The Structure of Multinationals Impacts of Multinationals Large Multinational Corporations

  3. Corporations in the Global Economy • Context • The global economy is organized by trade and infrastructures supporting these exchanges. • Corporations: • Separate legal entity, usually used to conduct business. • Main agents generating trade and using the international transport system. • Some are generators of movements (producers). • Some are attractors of movements (retailers). • Some are involved in transportation and distribution. • The great majority combine elements of the above. • The territory over which a corporation exercises its influence took a new dimension facing globalization.

  4. The Corporation as a Decision, Management and Planning Unit

  5. Conflicting Elements of a Corporation: Reconciling the Needs of Shareholders, Employees, the Society and Customers

  6. Tracking the Performance of America’s Largest Corporations: Dow Jones Industrial Index, 1950-2012

  7. Treasury Department Gross Tax Collection, 1987-2010

  8. The Corporation and its Expansion Activity Coal Extraction Iron Ore Corporation C Corporation B Corporation A Corporation Steel Making Metallic Products Mechanical Products

  9. The Structure of Multinationals • Multinational corporation • A corporation that takes a global approach for: • Its inputs (raw materials, parts). • Its outputs (customers). • Different parts of the industrial system are located in places where they are the most productive. MNC Inputs Outputs

  10. Types of Multinational Corporations by Strategy

  11. Globally Integrated and Multidomestic Corporation

  12. Topper the Trick Terrier Voice Recognition Requirements: (San Francisco) Voice Recognition Programming: (Taiwan) Plastic Eyes: (Shenzhen, China) Plastic Body: (Malaysia) Microfiber for Coat: (Korea) Speaker for voice: (Dongguan, China) Transistors: (Shenzhen, China) Motors for legs: (Shaoguan, China) IC chips: (Taiwan) Plastic legs: (Taiwan) Wiring: (Dongguan, China) Packaging: (Hong Kong)

  13. What Multinational Corporations are Trying to Achieve to Compete?

  14. The Impacts of Multinationals "(A corporation has) neither body to jail nor soul to damn." - Lord Edward Thurlow (1731-1806)

  15. The Growth of Large Multinationals: Three Main Options

  16. The World’s 20 Largest Corporations by Market Value, 2011 ($US millions)

  17. C – International Trade and Transportation Trade and the Global Economy Global Trade Patterns International Transportation

  18. International Trade: A Definition

  19. Trade and the Global Economy

  20. Economic Rationale of Trade Country 1 Country 2 Country 1 Country 2 • Without Trade • Small national markets.Limited economies of scale.High prices and near monopoly.Limited product diversity.Different standards. • With Trade • Increased competition.Economies of scale.Specialization.Lower prices.Interdependencies Country 3 Country 3 Country 4 Country 4

  21. Trends Shaping International Trade

  22. The Trade and Transnational Intensity of Corporations

  23. Global Trade Patterns • Nature • Growing flows of manufactured goods. • Relatively less bulk liquids (such as oil) and more dry bulk and general cargo. • Geographical distribution • Dominance of North America and Western Europe. • Growing share of developing countries of Asia. • China accounting for the most significant growth. • Changes over trans-oceanic trade with Trans-Pacific trade growing faster than Trans-Atlantic trade.

  24. Share of Product Groups in World Merchandise Trade, 1900-2008

  25. Share of Merchandise Exports by Region, 1948-2010

  26. Modal Shares of World Trade by Volume and Value, 2008

  27. Global Trade Patterns • Negative trade balances • Are negative trade balances harmful for an economy? • Trade is not a zero sum game. • Positive trade balances are sought by many export-oriented nations: • Economic growth (produce more than consume). • Accumulation of capital (balance of payments). • Negative trade balances: • Can be positive if the balance is compensated by higher productivity levels and/or cheaper goods. • Can be negative if too imbalanced. • Result in an accumulation of debt (financed by trade partners). • Until this debt is defaulted on.

  28. World’s 12 Largest Exporters and Importers, 2010

  29. American Foreign Trade by Maritime Containers, 2010 (in TEUs)

  30. Cumulative Waves of Transport Development

  31. Geographical Impacts of the Suez and Panama Canals

  32. Maritime Shipping Routes and Strategic Locations

  33. World’s Major Container Ports, 2010

  34. Passenger Traffic at the World’s Largest Airports, 2010

  35. Freight Traffic at the World’s Largest Airports, 2010

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