The Nature and Effects of the Emergence of 'Globalisation' as a Essay

The Nature and Effects of the Emergence of 'Globalisation' as a Feature of the World Economy over the Last 30 Years - Essay Example So what does globalization really mean to the overall world economies in general and what are the real reasons for the increased expansion and global integration of the financial and the general goods and service markets? The concept of globalization is not a new one, with individuals, from scholars, politicians and economists having different viewpoints as to the reasons for globalization as well as the positive and negative consequences of increased economic and industrial integration. Even during the 1960’s and 70’s multinational corporations started to shift their long term operational focus from a domestic to a global operational infrastructure (Colander, 2002).The were a lot of reasons that contributed to the paradigm shift that help drive the globalization of our manufacturing and service infrastructures as well as our financial and monetary systems. Advances in transportation methods such as cheaper air transport made it economically feasible for corporations to transport goods quite quickly and affordably. Starting in the 1980’s, the personal computer has created a revolution in the way business and individuals interact with each other and it has provided cheaper data processing and storage costs. It has increased worker productivity and operational efficiency for all businesses in general. Coupled with the advent of the internet the computer with its inherent functionality of quickly being able to share technical information, ideas and the ability for a team of individuals to be able to cooperate and share information, solutions and ideas seamlessly from different corners of the world has simply revolutionized the way we do business, especially with the wider availability of broadband services starting in the 1990’s (Emilian, Marcel, Hurduzeu, Vlad, 2011). The computer age, technological and communication advances have allowed multinational corporations and nations to expand their economies to more easily integrate themselv es to the global trade and financial markets therefore benefiting from increased economic prosperity for many previously underdeveloped economies. The increased trade has allowed unprecedented levels of economic growth for many of the countries that have successfully positioned themselves in the global arena (Imf, 2008). The ability for a company to choose to operate out of any country is a very important aspect of globalization, where an organization can choose among many nations to source its materials, manufacturing and headquarters and therefore has shifted the industrial operational structure towards one driven by efficiency and profitability instead of national barriers. The nullification of previous import tariffs and general protectionism previously played by many countries has played an important part in the globalization of economic trade by decreasing the amount of tariffs and other obstacles in the international trade of goods and services. It has become a driving factor in the advent of economic and financial globalization. The minimization of trade barriers was created with the idea of optimizing trade, financial flows and providing the maximum level of opportunity for economic benefits to the participating corporations and international economies in a bid to drive a general economic shift to a more fully integrated globalize trade

Why are Oligopolies Tempted to Collude Even if it Means Breaking the Essay

Why are Oligopolies Tempted to Collude Even if it Means Breaking the Law - Essay Example A firm achieves maximum profits when it operates where its marginal revenue equals marginal cost (MC=MR). However, it is mostly not as easy as a question of operating at this point; the more competition the firm faces, the lesser it will be able to manipulate the consumers for its own economic gain (Sloman and Wride, 2009). The two extremes in market structures are (i) Perfect Competition and (ii) Monopoly. However, in real life, firms often operate somewhere in the middle of these two extremes. Such market structures are characterized by Imperfect Competition. There are two main kinds of markets that practice imperfect competition: (i) Monopolistic Competition and (ii) Oligopolies. Some famous oligopolistic firms are Pepsi, Coke, Nike, Adidas, Reebok and Nintendo (Sloman and Wride, 2009). In an oligopoly, the number of competitors is less and limited and there are high barriers which prevent frequent entry of new firms into the market. Barriers of entry may be created in the form of brand names, sunk costs, firm size, economies of scale, and large firm advantage (Boyes and Melvin, 2009). Competition between firms in an oligopolistic market is high and intense, it sometimes leads to price wars which become extremely detrimental for their effective functioning. In other instances, these firms choose to collude amongst themselves to minimize the downsides of operating in an oligopolistic market and to simultaneously maximize their profits. The products these firms make can either be differentiated or homogenous. Depending on the product type, there emerge two distinct kinds of oligopolies: pure oligopolies which produce homogenous products, for example the steel industry. Sometimes, however, an oligopoly may produce differentiated products; such oligopolies are called impure oligopolies. An example of such an oligopoly would be the automobile industry. The demand curve for both types of oligopolistic firms is downward sloping and fairly inelastic, there is also a degree of dependency on the reactions of competitor firms to price changes. Another key feature is mutual interdependence, which means that each firm is affected by the actions of its competitors and thus, whenever any firm is going to take an action, it does so with its competitors’ possible reactions in mind. Due to these circumstances there is a high degree of uncertainty in an oligopolistic industry because firms can never accurately predict how exactly their competitors will react to their actions and this any sort of action involves an inherent degree of risk (Sloman and Wride, 2009). In oligopolistic markets, there is price rigidity because setting product price is not at one firm discretion but a decision in which all firms are factored in. If one firm lowers price below market price, this can cause a price war where all firms start lowering their prices to match the initial decrease and this will continue and form a vicious downward price spiral. However, if one fir m raises its price above set market price, no other firm will raise its price to match it and the firm who raised prices will lose out as all its customers will shift to competitor firms who have the old, lower price (Bhaskar, 2007). Thus, in an oligopolistic market, prices mostly remain rigid and are not often seen increasing or decreasing as the prices in a perfectly competitive market that respond to the dynamic demand and supply levels. Therefore, the demand curve faces a kink at the existing market price level and market price will not change for small changes in production cost etc. (Sen, 2004). This is shown in the diagram below: