GS 1 – Introduction to Global Studies Professor: Dr. Jean-Paul Rodrigue Hofstra University, Department of Global Studies & Geography Topic 2 – The Global Economy A – Genesis of the Global Economy B – Multinational Corporations C – International Trade and Transportation

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© Dr. Jean-Paul Rodrigue B – MULTINATIONAL CORPORATIONS Corporations in the Global Economy The Structure of Multinationals Impacts of Multinationals Large Multinational Corporations

© Dr. Jean-Paul Rodrigue 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.

© Dr. Jean-Paul Rodrigue The Corporation as a Decision, Management and Planning Unit Management UnitDecision UnitPlanning Unit Nature Maintain operational conditions. Decisions about the allocation of resources. Anticipate market changes and opportunities. Allocate its factors of production. Scope Production, sales, marketing, payroll, distribution. Financial, labor, raw materials, etc. Economic, technological, social and political change. Time frame Short term (production cycles). Short to long term (product cycles). Medium to long term (business cycles).

© Dr. Jean-Paul Rodrigue Conflicting Elements of a Corporation: Reconciling the Needs of Shareholders, Employees, the Society and Customers

© Dr. Jean-Paul Rodrigue Tracking the Performance of America’s Largest Corporations: Dow Jones Industrial Index,

© Dr. Jean-Paul Rodrigue Treasury Department Gross Tax Collection,

© Dr. Jean-Paul Rodrigue The Corporation and its Expansion Vertical IntegrationHorizontal IntegrationOutsourcing Nature Expand backward (suppliers) or forward (customers) along the supply chain. Acquiring or merging with competitors. Some activities performed by another corporation. Goal Lower costs. Enhance and protect product quality. Improve supply chain efficiency. Economies of scale. Product differentiation. Business model replication. Oligopoly. Reduce costs. Focus on core competencies. Issues Higher cost structure of suppliers. More difficult to adapt to changes. Different business cultures, Anti-monopolistic responses Dependency. Loss of competency. Coal Extraction Iron Ore Steel Making Metallic Products Mechanical Products Corporation A Corporation B Corporation C

© Dr. Jean-Paul Rodrigue 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.

© Dr. Jean-Paul Rodrigue Types of Multinational Corporations by Strategy

© Dr. Jean-Paul Rodrigue Globally Integrated and Multidomestic Corporation

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

© Dr. Jean-Paul Rodrigue What Multinational Corporations are Trying to Achieve to Compete?

© Dr. Jean-Paul Rodrigue The Impacts of Multinationals "(A corporation has) neither body to jail nor soul to damn." - Lord Edward Thurlow ( )

© Dr. Jean-Paul Rodrigue The Growth of Large Multinationals: Three Main Options

© Dr. Jean-Paul Rodrigue The World’s 20 Largest Corporations by Market Value, 2011 ($US millions)

© Dr. Jean-Paul Rodrigue C – INTERNATIONAL TRADE AND TRANSPORTATION Trade and the Global Economy Global Trade Patterns International Transportation

© Dr. Jean-Paul Rodrigue International Trade: A Definition

© Dr. Jean-Paul Rodrigue Trade and the Global Economy

© Dr. Jean-Paul Rodrigue Economic Rationale of Trade Country 1 Country 3 Country 2 Country 4 Country 1 Country 3 Country 2 Country 4 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

© Dr. Jean-Paul Rodrigue Trends Shaping International Trade

© Dr. Jean-Paul Rodrigue The Trade and Transnational Intensity of Corporations Domestic ProductionInternational Production High International Trade Trading industries (aerospace, mining, agriculture) Globally integrated (oil, automobile, electronics) Low International Trade Domestic industries (rail, personal services) Multidomestic industries (banking, restoration)

© Dr. Jean-Paul Rodrigue 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.

© Dr. Jean-Paul Rodrigue Share of Product Groups in World Merchandise Trade,

© Dr. Jean-Paul Rodrigue Share of Merchandise Exports by Region,

© Dr. Jean-Paul Rodrigue Modal Shares of World Trade by Volume and Value, 2008

© Dr. Jean-Paul Rodrigue 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.

© Dr. Jean-Paul Rodrigue World’s 12 Largest Exporters and Importers, 2010

© Dr. Jean-Paul Rodrigue American Foreign Trade by Maritime Containers, 2010 (in TEUs)

© Dr. Jean-Paul Rodrigue Cumulative Waves of Transport Development

© Dr. Jean-Paul Rodrigue Geographical Impacts of the Suez and Panama Canals

© Dr. Jean-Paul Rodrigue Maritime Shipping Routes and Strategic Locations

© Dr. Jean-Paul Rodrigue World’s Major Container Ports, 2010

© Dr. Jean-Paul Rodrigue Passenger Traffic at the World’s Largest Airports, 2010

© Dr. Jean-Paul Rodrigue Freight Traffic at the World’s Largest Airports, 2010