Global Economy

THE NEW GLOBAL ECONOMY INTRODUCTION A NEW GLOBAL ECONOMY IS EMERGING TO CONFRONT BUSINESS ENTERPRISES OF THE WEST. CHINA, SOUTH KOREA, MEXICO, INDIA, BRAZIL, TAIWAN, SINGAPORE, AMONG OTHERS EMERGING ECONOMIES, ARE ASSUMING LEADING ECONOMIC ROLES CHALLENGING ESTABLISHED ECONOMIC POWERS FORCES TRANSFORMING THE INTERNATIONAL ECONOMY 1. ACCELERATING RATES OF TECHNOLOGICAL CHANGE, INTERACTING WITH ACCELERATING RATES OF GLOBALIZATION CAUSING MIGRATION OF INDUSTRIES ACROSS THE GLOBE. PAINFUL REALLOCATION OF RESOURCES FROM CAPITAL AND LABOUR INTENSIVE INDUSTRIES TO TECHNOLOGY AND SKILL-INTENSIVE INDUSTRIES. IMPROVEMENTS IN THE SPEED, AVAILABILITY, AND COSTEFFECTIVENESS OF INTERNATIONAL COMMUNICATIONS ARE REINFORCING GLOBALIZATION WE ARE NOW LIVING THROUGH A BURSTING TECHNOLOGICAL TIDE TECHNOLOGY-INTENSIVE INDUSTRIES ARE GLOBAL FROM THE START INTERNATIONAL TRADE IS EXPLODING MASSIVE FOREIGN DIRECT INVESTMENTUNDERTAKEN BY MNCS THE TWIN FORCES OF TECHNOLOGICAL INNOVATION AND GLOBALIZATION ARE NARROWING INTERNATIONAL TECHNOLOGY GAPS AND BRINGING ABOUT A CONVERGENCE OF DEMAND PREFERENCES ACROSS THE INDUSTRIAL COUNTRIES. 2. 3. 4. 5. 6. 7. 8. 9. TODAY THE PROGRESSIVE NARROWING OF INTERNATIONAL TECHNOLOGYGAP IS MOST DRAMATICALLY DISPLAYED IN THE MANUFACTURE AND EXPORT OF HIGH-TECH PRODUCTS FROM EMERGING MARKETS. 10. SHRINKING DEMAND AND IMITATION LAGS HAVE CONTRACTED PRODUCT LIFE CYCLES. KEY NATIONAL ACTORS IN THE GLOBAL ECONOMY A – THE TRIAD: DOMINATING THE GLOBAL ECONOMY THE TRIAD IS MADE UP OF T HE UNITED STATES, JAPAN, AND THE EUROPEAN COMMUNITY THE TRIAD WILL REMAIN AT THE CENTER OF THE GLOBAL ECONOMY INTO THE 21ST CENTURY. THE COMBINED GROSS DOMESTIC PRODUCT (GDP) OF THE TRIAD IS 2/3 THAT OF THE ENTIRE WORLD. THE GEOGRAPHICAL DISTRIBUTION OF FDI FALLS INTO REGIONAL CLUSTERS CENTERED ON EACH TRIAD MEMBER. FOR MOST COUNTRIES OUTSIDE THE TRIAD, A SINGLE TRIAD MEMBER ACCOUNTS FOR MORE THAN HALF OF THEIR FDI THIS PATTERN REFLECTS THE STRATEGIES OF INTERNATIONAL FIRMS TO BUILD UP REGIONALLY INTEGRATED NETWORKS OF SUBSIDIARIES IN COUNTRIES CLUSTERED GEOGRAPHICALLY AROUND THEIR HOME COUNTRIES TRIAD MEMBERS PROTECT AGAINST IMPORTS IN THE SAME DEGREE A – THE EUROPEAN COMMUNITY: COMPLETING THE COMMON MARKET B – THE UNITED STATES AND THE NORTH AMERICAN FREE TRADE AGREEMENT C- JAPAN THE CHALLENGE OF MARKET ENTRY D – EASTERN EUROPE AND CHINA: THE TRANSITION FROM CENTRALLY PLANNED TO MARKET ECONOMIES E – NICS IN THE GLOBAL ECONOMY: THE NEW KIDS ON THE BLOCK IMPLICATIONS OF THE GLOBAL ECONOMY THE GLOBAL ECONOMY IS CREATING BUSINESS ENVIRONMENTS THAT DIFFER RADICALLY FROM THOSE OF THE PAST. TO SURVIVE AND PROSPER IN THE 1990S, COMPANIES WILL NEED TO DEVELOP NEW STRATEGIES. TODAY ALL BUSINESS FIRMS – SMALL OR LARGE, DOMESTIC OR INTERNATIONAL - MUST STRIVE FOR PROFITS AND GROWTH IN AN INTERNATIONAL ECONOMY THAT FEATURES ENORMOUS FLOWS OF PRODUCTS, TECHNOLOGY, CAPITAL, AND ENTERPRISE AMONG COUNTRIES. EVEN WHEN COMPANIES STAY AT HOME, SOONER OR LATER THEY LEARN FROM HARD EXPERIENCE THAT THERE ARE NO DOMESTIC MARKETS, ONLY GLOBAL MARKETS.