Globalization

1
Globalization

• Changing The Economic Landscape

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The three forces Re-shaping the Economic
Landscape.

• Technology
• Free Capital Markets
• Management

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Reinforcing Each Other
Access to Capital
Free Flowing Capital Markets
Access to Technology
New Technologies
Global Management Methods
4
Technology

• Computers Digitalization Internet
• The mobile phone
• Micro Technologies

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The Internet Computers Digitalization

• There are now a quarter of a billion PCs on the
  planet (one for every 24 people).
• In 1998 one in ten families in Shanghai and
  Beijing had a PC.
• In 1990 only a handful of academics had heard of
  the Internet. In 2000 more than 200 million
  people were using it.
• The universal language is not English but binary.
  

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Technology Workers Needed

• By 2006, nearly half the US workforce will be
  employed in industries that produce or use
  information technology, products and services.
• Between mid 70s and 1983 computer industry jobs
  in US grew nearly 80 total US manufacturing
  employment grew only 4.
• Tech workforce is younger than the rest pay is
  higher.
• Tech workers in demand Western Europe has a
  shortage of almost 600,000.

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The Speed of Change
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The Digital Divide

• When it is 130 in New York, it is 1930 in
  London
• Bette Midler

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The Digital Divide

• US 5 of worlds population, 50 of the home
  computers linked to the net.
• More than half of the users of the Internet live
  in the U.S
• High-income households 20 times as likely to be
  connected as lowest income level.
• In 1996 there were only 52 PCs for every 100
  European white-collar workers (half the
  proportion in the U.S)
• One in ten Brazilians and one in 300 Africans
  has a fixed phone line.

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Internet Access by Region May 1999
Africa 1
Latin America 3
Middle east 1
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The Mobile Phone

• A decade ago there were only about 10 million
  mobile phones
• By 2004 there will be a BILLION of them
  exceeding the number of wired phones.
• Started as a yuppie toy but it has become the
  bridge for the poor to plug into the global
  market place.

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Mobile Cellular Subscribers By Region, 1998
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3. Micro Technologies

• Electricity
• Computers

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Downsizing
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Energy

• Pint sized power technologies more suitable for
  power generation in homes, hospitals, small
  businesses
• Small Scale is critical for remote areas
• Ice making
• Water purification and pumping
• Operating rural schools, health clinics and micro
  enterprises.
• Replace massive investments in centralized systems

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Government bureaucracies and Monopolies bound to
die?
People know they cant rely on overextended
welfare state growing interest in equities.
Vested interests and incumbent monopolies resist
change
Butas with telecommunications resistance is
futile.
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The Death of the Middlemen?
Firms
Consumer
Suppliers
Internet Firms
Intermediaries
Intermediaries
Value Producers and Consumers benefit from direct
exchange
Faster communication and less regulation a
factory is never more than a day and a half
away Smart agent technology talk directly to
suppliers.
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From Bricks and Mortar toBits and Networks
Banks and Other Financial Intermediaries
Lend at 7
Pay 4
Internet
Lenders and Borrowers benefit With one rate 6
Profit 3
Death of money as we know it?
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Democratization of Capital

• Decentralization of capital and the
  multiplication of capital-distribution
  technologies channel money toward its most
  productive uses
• Economies with more open and liquid financial
  markets tend to outperform countries that stress
  autonomy and autarky.
• Improving fluency of capital to align the
  interests of consumers, producers,investors and
  entrepreneurs is key.

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Old Barriers Crumpling

• Capital Controls Foreigners buying businesses or
  shares in the country.
• Foreign Exchange Controls How exporters use
  their foreign currency
• Banking Controls Allow banks to serve as
  instruments of government policy

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Popular Capitalism

• Financial firms are amongst the most global
  organizations.
• The number of stock markets in developing
  countries doubled in the 1990s.
• Through the developed world an increasing number
  of relatively poor people have been buying shares
  and liking the results.

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The Advantages of free capital markets

• Efficiency markets allocate money better than
  bureaucrats do.
• Capital market openness, a clear indicator of
  sturdiness to withstand financial crises.
• Markets need openness, competition and information

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Perfect Competition?

• Perfect Information becomes profitable
• There are very few substances without established
  global values.
• Internet allows people to compare prices across
  borders
• Squeezing overpricing and inefficiency out of the
  market.

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Leapfrogging
Countries can profit from coming late into the
game
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Developing Nations Set The Pace
Small size power technologies

• Impaired access to Electricity

Pocket beepers, cellular phones

• Impaired access to Telephones

• Impaired access to Internet/email from high
  illiteracy rates

Use video and audio streaming technologies
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India

• 52 literacy
• Brownouts regular
• PC penetration only 8
• Phone penetration only 49
• 90 of villages w/o phone access

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India Fighting Poverty with Technology

• Large pool of technically skilled, English
  speaking workers.
• Software and Information Technology services will
  add about an extra 1 to GDP growth per year.
• May push growth over the 7 necessary to reduce
  poverty.
• Export earnings from sector reached 3.9 billion
  in 1999.
• Infosys first Indian company to trade on Nasdaq.

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The Government

• Too small to deal with global economy forces
• Too big to connect with the people issues

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Changing the Balance of Power

• During the past two decades, governments have
  divested themselves of responsibilities and
  accepted the rule of the market
• Voluntarily (privatizations and deregulation)
• Involuntarily via loss face to markets.

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The End of Government Controlled Economic Growth

• In the 1960s, government spending accounted for
  about 15 of Americas growth almost the same as
  private investment
• In the 1990s private investment contributed
  more than 30 of growth while government spending
  accounted for only 2.

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Corporations no longer live in a home but a hotel

• they can leave if they do not like the view

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The Government no longer controls Radio and TV
bandwidth

• And the Internet seems impossible to control

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Wounded but not Dead

• The Government has evolved
• Expanding the scope of anti-trust legislation
• From existing abuses to potential ones.
• Changed the measures of competition
• Not just market share
• Not just the size of price markups
• But the whole industrys ability to innovate.
• To protect the companies yet to be born.

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Microsoft might not like the view from his hotel
room

• But it can not survive away from American
  universities and other American computer
  companies

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The Disappearing Nation - State

• The Race to the lowest common denominator

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• Employers Wanted
• Business friendly Labor laws
• No environmental regulations
• No taxes
• Free Capital Markets
• Free Profit Expatriation
• IMF Bonded and insured
• No questions asked