INTERNATIONAL ISLAMIC UNIVERSITY ISLAMABAD.

Topic: Globalization

Submitted to :
SIR JAVED KAMRAN

Submitted By:
Muhammad usman 4344
MBA22B (4)
Globalization (or globalization) describes the process by which regional economies,
societies, and cultures have become integrated through a global network of political ideas
through communication, transportation, and trade. The term is most closely associated with
the term economic globalization: the integration of national economies into the international
economy through trade, foreign direct investment, capital flows, migration, the spread
of technology, and military presence.  However, globalization is usually recognized as being
driven by a combination of economic, technological, sociocultural, political, and biological
factors.  The term can also refer to the transnational circulation of ideas, languages, or popular
culture through acculturation. An aspect of the world which has gone through the process can
be said to be globalized.

Globalization has been driven by technological change and financial liberalization, and
sustained by an appreciation among policy makers that an open, liberal, and rules-based
international trading and financial system is essential to global economic progress. The new
economy has become truly global in scope and substance. The free flow of capital, labor, goods
and services within free trade regions, the development of new financial instruments and
institutions, and instantaneous access to information and communication through the new
digital networks, have created a fully integrated global economic system of tremendous scope
and opportunity, and achieved a higher level of international economic inter-dependence and
linkages than ever before.
Because of the globalization of financial markets throughout the world ,entities in any country
seeking to raise funds need not be limited to their domestic financial market nor are investors
in the country limited to the financial assets issued in their domestic market. Globalization
means the integration of markets throughout the word.

The factors that lead to integration are:

 Deregulation or liberalization and activities of market participants in key market

segments.
 Technological advances in monitoring executing and analyzing financial markets.
 Increased institutionalization in financial markets.
 Technological advances have increased the integration and efficiency of financial
markets.
The U.S financial markets have shifted from denomination by retail investor to denomination by
financial institutes.

The shifting of financial markets from dominance by retail investor to institutional investors is
referred as institutionalization .The institutional investors are more willing to transfer funds and
finance assets in foreign countries. The potential portfolio diversification benefits are associated
with people in global investment and also increase their awareness about global investing.

Globalization has various aspects which affect the world in several different
ways

 Industrial - emergence of worldwide production markets and broader access to a range

of foreign products for consumers and companies. Particularly movement of material and
goods between and within national boundaries. International trade in manufactured goods
increased more than 100 times (from $95 billion to $12 trillion) in the 50 years since
1955. China's trade with Africa rose sevenfold during 2000-07 alone.
 Financial - emergence of worldwide financial markets and better access to external
financing for borrowers. By the early part of the 21st century more than $1.5 trillion in
national currencies were traded daily to support the expanded levels of trade and
investment. As these worldwide structures grew more quickly than any transnational
regulatory regime, the instability of the global financial infrastructure dramatically
increased, as evidenced by the Financial crisis of 2007–2010.

 Economic - realization of a global common market, based on the freedom of exchange

of goods and capital.  The interconnectedness of these markets, however, meant that an
economic collapse in one area could impact other areas.  With globalization, companies can
produce goods and services in the lowest cost location. This may cause jobs to be moved to
locations that have the lowest wages, least worker protection and lowest health benefits.
For Industrial activities this may cause production to move to areas with the least pollution
regulations or worker safety regulations.

Almost all notable worldwide ITcompanies have a presence in India. Four Indians were among
the world's top 10 richest in 2008, worth a combined $160 billion. In 2007, China had 415,000
millionaires and India 123,000.
 Job Market- competition in a global job market. In the past, the economic fate of
workers was tied to the fate of national economies. With the advent of the information age
and improvements in communication, this is no longer the case. Because workers compete
in a global market, wages are less dependent on the success or failure of individual
economies. This has had a major effect on wages and income distribution.

 Political - some use "globalization" to mean the creation of a world government which
regulates the relationships among governments and guarantees the rights arising from
social and economic globalization. Politically, the United States has enjoyed a position of
power among the world powers, in part because of its strong and wealthy economy. With
the influence of globalization and with the help of the United States’ own economy, the
People's Republic of China has experienced some tremendous growth within the past
decade. If China continues to grow at the rate projected by the trends, then it is very likely
that in the next twenty years, there will be a major reallocation of power among the world
leaders. China will have enough wealth, industry, and technology to rival the United States
for the position of leading world power.
Among the political effects some scholars also name the transformation of sovereignty. In their
opinion, 'globalization contributes to the change and reduction of nomenclature and scope of
state sovereign powers, and besides it is a bilateral process: on the one hand, the factors are
strengthening that fairly undermine the countries' sovereignty, on the other – most states
voluntarily and deliberately limit the scope of their sovereignty'.

 Informational - increase in information flows between geographically remote locations.

Arguably this is a technological change with the advent of fibre optic communications,
satellites, and increased availability of telephone and Internet.
 Language - the most popular first language is Mandarin (845 million speakers) followed
by Spanish (329 million speakers) and English(328 million speakers). However the most
popular second language is undoubtedly English, the "lingua franca" of globalization:
 About 35% of the world's mail, telexes, and cables are in English.
 Approximately 40% of the world's radio programs are in English.
 English is the dominant language on the Internet.
 Competition - Survival in the new global business market calls for improved productivity
and increased competition. Due to the market becoming worldwide, companies in various
industries have to upgrade their products and use technology skillfully in order to face
increased competition.
 Ecological - the advent of global environmental challenges that might be solved with
international cooperation, such as climate change, cross-boundary water and air pollution,
over-fishing of the ocean, and the spread of invasive species. Since many factories are built
in developing countries with less environmental regulation, globalism and free trade may
increase pollution and impact on precious fresh water resources(Hoekstra and Chapagain
2008). On the other hand, economic development historically required a "dirty" industrial
stage, and it is argued that developing countries should not, via regulation, be prohibited
from increasing their standard of living.

Financial people know in their bones that their profession goes back a long way. Its frequent
association with “the world’s oldest profession ”may simply be because it is almost as old. After
all, the essential technology of finance is simple, requiring little more than arithmetic and
minimal literacy, and the environment in which it applies is universal—that is, any situation that
involves money, property, or credit, all of which are commodities that have been in demand
since humankind’s earliest days.

These financial commodities have been put to use to facilitate trade, commerce, and
investment and to accommodate the accumulation, preservation, and distribution of wealth by
states, corporations, and individuals. Financial transactions can occur in an almost infinite
variety, yet they always require the services of banks, whether acting as principal or as agent,
and financial markets in which they can operate. Banks have predominantly been local
institutions throughout their history, but many have sought international expansion to follow
clients abroad or to offer services not available in other countries.

THE INTEGRATION OF WORLD FINANCIAL MARKET

Banks have a long history: a history rich in product diversity, international scope, and
continuous change and adaptation. Generally, change has been required to adjust to shifting
economic and regulatory conditions, which have on many occasions been drastic. On such
occasions banks have collapsed, only to be replaced by others eager to try their hand in this
traditionally dangerous but profitable business. New competitors have continually appeared on
the scene, especially during periods of rapid economic growth, opportunity, and comparatively
light governmental interference.
Competitive changes have forced adaptations, too, and in general have improved the level and
efficiency of services offered to clients, thereby increasing transactional volume. The one
constant in the long history of banking is, perhaps, the sight of new stars rising and old ones
setting. Some of the older ones have been able to transform themselves into players capable of
competing with the newly powerful houses, but many have not. Thus, the banking industry has
much natural similarity to continuous economic restructuring in general.

It is doubtful, however, that there has ever been a time in the long history of banking that the
pace of restructuring has been greater than the present. Banking and securities markets during
the 1980s and 1990s in particular have been affected by a convergence of several exceptionally
powerful forces—deregulation and re-regulation, disintermediation, the introduction of new
technology and product innovation, crossborder market integration, and greatly increased
competition and consolidation—allof which have occurred in a spiraling expansion of demand
for financial services across the globe. Bankers today live in interesting—if exhausting and
hazardous— times. In this chapter we will have a look at how we got to where we are today, at
the characteristics of the wholesale financial services markets in the early twenty-first century,
and some of the unresolved issues that will affect the industry’s future.

Classification of global financial markets

The global financial markets are classified into internal and external market. Internal market is
also called national market.

The external markets are also called international markets.

Internal markets:

Internal markets are classified into two parts

Domestic market: the market where financial securities are issued and traded domiciled

in the country.

Foreign markets: the market where financial securities are not issued and traded domiciled in
the country. the rules of foreign securities are imposed.

Nick names of companies are also developed like U.S markets are called Yankee markets
,Japanese companies are Samurai companies , UK markets are Bulldog markets ,Netherland
markets are Rembrandt markets and Spanish companies are matador markets.

External market:
It contains two features

At issuance securities are offered simultaneously to investors in different countries.

They issued outside the jurisdiction of any single country.

Importance of Globalization:

 Entities of Companies are recognized throughout the world.

 Goods and people are transported with more easiness and speed
 The possibility of war between the developed countries decreases
 Free trade between countries increases
 Global mass media connects all the people in the world
 As the cultural barriers reduce, the global village dream becomes more realistic.
 There is a propagation of democratic ideals.
 The interdependence of the nation-states increases.
 As the liquidity of capital increases, developed countries can invest in developing ones.
 The flexibility of corporations to operate across borders increases and still the
corporations are capable to maintain their integrity.
 The communication between the individuals and corporations in the world increases.
 Environmental protection in developed countries increases.