Impacts of Economic Globalization - Assignment Example

Impacts of Economic Globalization Outline Introduction 2. Lloyd Marine Hull Insurance i. Marine Hull Insurance Business Operation ii. The ownership structure of Lloyd Marine Hull insurance iii. Global reach of Marine Hull insurance iv. Lloyd Marine Hull insurance labor consequences as a result of economic globalization v. Effects of Marine Hull’s economic globalization on environment vi. The impact of economic globalization on Marine Hull insurance vii. The impact of social changes as a result of economic globalization on Marine Hull insurance 3. Toyota Company i. Toyota Business Operation ii. The ownership structure of Toyota iii. Global reach of Toyota iv. The impact of economic globalization on Toyota v. The impact of economic globalization on Toyota labor vi. The impact of economic globalization on Toyota changes vii. The effect of economic globalization on the society viii. The environmental effect of economic globalization viii. Conclusion Globalization is a term that refers to the international integration of different countries in the provision of ideas, products and others characteristics of the way of life (Nigam 2009, p.1). In relation to this, economic globalization is associated with the reduction or removal of barriers that limit the free movement of exports and imports across national borders (Abdullah, Dost, Faheem & Ch 2011, p.291). In other words, economic globalization is the joining together of the economies, commercial as well as financial markets in the world (Hill 2009, p.117). Economic globalization mainly emphasizes on multiple networks of productive activities and marketing as well as economic developments through extensive use of science and technology (Economic Globalization 2015, p.279). In this paper, I am going to compare and contrast the impacts of economic globalization to the marine insurer but specifically the Marine Hull insurer with Toyota, an automobile organization. Marine Hull Insurance Business Operation Marine insurance is an agreement in which the insurer assumes to cover the insured, in a way as well as to the extent agreed upon, against transit losses (UNCTAD 1982, p.7). In relation to this definition, Marine Hull insurance is concerned with almost everything that floats and moves, ranging from rowing boats to vast ocean going tankers. In addition to these, hull insures non-propelled objects that move occasionally like floating docks, buoys and floating hotels (Din, Mughal & Farooq 2013, p.660). A fundamental principle of Marine Hull insurance is that, in order to give an insurance coverage, there opt to be an equitable relation between the beneficiary of the insurance and the insured material or property (Anchorage Marine Underwriting 2008, p.3). In other words, the business is guided by a policy of marine in which the insurer (underwriter) agrees to the specific terms of the agreement to indemnify the assured for the losses that may be incurred in relation to moving property such as ship or other movables associated with maritime transport. In return for the contract, the assured accepts to pay a premium (the compensation for accepting and running the risk of the insured movables) whether or not the insured movables are lost (UNCTAD 1982, p.25). The ownership structure of Lloyd Marine Hull insurance Lloyd Marine Hull insurer is one of the commercial insurers. Commercial insurers carry out their business by accepting the premium beforehand and keeping it whether or not the insured properties are lost (JLT 2010, p.5). Marine insurers are owned by either the government entities or private corporations. Several marine insurers also group up to form a large competitive market. A good example of marine insurance market structure is the one that belongs to the British Market; it is regarded as the main marine insurance market in the globe (Intriligator 2003, p.19). Lloyd Marine Hull is composed of private individuals who are responsible for the risks underwritten. Lloyd has also authorized intermediaries referred to as Lloyd’s brokers. Global reach of Marine Hull insurance Lloyd Marine Hull insurance provides high quality cover for extensive vessels as well as carriers, on a worldwide basis. This is enhanced by it having an extensive capacity for international business (Nigam 2009, p.1). The Lloyd Marine Hull insurer also makes transactions with many international companies in the world without any restriction to geographical boarders. Lloyd Marine Hull insurance labor consequences as a result of economic globalization Economic globalization is associated with global economic inequality. It is also associated with replacement of secure employment with not only insecure, but also flexible labor (Din, Mughal & Farooq 2013, p.671). In relation to this assertion, it is evident that economic globalization leads to the decrease in number of underwriters in the marine hull insurance. The reduction of the transportation values is associated with reduced premium volumes which as a result lead to low labor costs (Din, Mughal & Farooq 2013, p.660). Effects of Marine Hull’s economic globalization on environment Economic evolution plays a significant role in the change of trade policies which are responsible for the increase in number of markets. In relation to this assertion, it is apparent that economic globalization leads to the increase in number of hull insurance operations as well as increase in number of underwriters (Hamilton & Webster 2009, p.31). The expansion of the marine hull insurance mainly leads to the increase in the transportation of fuels from the Middle East to other countries in the world. The combustion of the fuels is the main producer of carbon dioxide which results not only to greenhouse effect, but also destruction of the ozone layer. The impact of economic globalization on Marine Hull insurance As it was introduced above, globalization provides many opportunities for international trade (Schifferes 2007, p.1). However financial and monetary crises have the potential to cause real economic downturns, associated with the falling in demand as well as GDP and to sometimes depressions. During economic crises, insurers experience new risks to their business (Salvotore 1998, p.291). For instance, economic crises lead to the decrease in value of the insured movables. Policyholders on the other hand neglect their maintenance, assuming that the economic end-results of losses as well as damages will be incurred by insurers. In tandem with this assertion, it is evident that economic globalization affect Marine Hull insurers more than other insurers of other businesses because they are more susceptible to economic fluctuations. According to (EuroStat 2007, p.61), changing circumstances in trade pose a great challenge to marine hull insurer. This is because marine hull insurer extensively depends on previous experiences in making amicable risk assessments. The international character of Lloyd Marine Hull insurance can also be affected significantly by the direct international economic competition (Hill 2009, p.123). This is in relation to the fact that the ships not only reach different ports, but also different countries that are associated with the business within a single journey. In tandem with these assertions, it is evident that economic globalization lead to the pricing challenge which increase pressure to the insurers. The impact of social changes as a result of economic globalization on Marine Hull insurance According to Debrah (2013), economic globalization enhances free movement of capitals. In relation to his argument, it is evident that Marine Hull insurance gets chances of advancing its business activities to many countries in the world. The reduction of tariffs makes the marine hull insurance industry to diversify its business activities with many countries in the world. The rise in tariffs also affects the business significantly; it leads to the reduction in number of ships involved in the transportation of goods. Toyota Business Operation Toyota is an automotive company in Australia that is involved in the manufacturing, distributing and exporting vehicles. It had a market share of 18 percent in 2011 (Toyota 2014, p.1). The company has sales as well as distribution branches within Australian states. Just like the Marine Hull insurance industry, the Toyota industry conducts its business worldwide (Toyota 2014, p.1). Unlike the Marine Hull insurance company which depends on the success of the contract between the insurer and the assured, Toyota Company is associated with the production and selling of its vehicles. Retrieved from http://www.toyota-global.com/company/history_of_toyota/75years/data/company_information/management_and_finances/finances/income/1988_02.html The above graph shows how economic globalization has contributed to the rise of net revenues of Toyota Company from 1990 to 2010. The rise in its net revenue evidence that economic globalization positively impacts on Toyota Company business. The ownership structure of Toyota Just like Marine Hull insurance, Toyota is a corporate company owned by several non-trivial shareholders (Porta, Lopez-de-Silanes & Shleifer 1998, p.13). Toyota is a joint venture of Toyota Motor Corporation, Mitsui & Company Limited as well as GT Capital Holdings (Toyota 2014, p.1). The Mitsui & Company Limited which constitute of four shareholders, Sakura Bank, Mitsui T& B, as well as Mitsui Fire and Mitsui Life, control 12.1 percent of not only capital, but also votes in Toyota. In tandem with this information, the ownership structure of Toyota constitute of GT Capital that own 51% and Toyota Motor Corporation that own 49% of Toyota (Porta, Lopez-de-Silanes & Shleifer 1998, p.13). Global reach of Toyota Toyota is associated with the production of widest view of vehicles (approximately 17 models) that are distributed in 42 outlets within Philippines and other countries in the world (Porta, Lopez-de-Silanes & Shleifer 1998, p.14). In relation to this assertion, Toyota remains one of the global vehicle sales. It is as a result of its continuous success in the production industry that Toyota has remained viable globally for many years. Retrieved from http://www.toyota-global.com/company/history_of_toyota/75years/data/automotive_business/sales/sales_volume/overseas/index.html The above graph shows the extensive production of vehicles by Toyota to meet the world’s demand. From the graph, one can deduce that production of vehicles by Toyota has been increasing since 1974. It is through the production of vehicles that Toyota gets in touch with the whole world. The impact of economic globalization on Toyota As it was introduced above, globalization is a term used in referring to everything including international trade. Some of the key elements of globalization include development of international organizations (Farrell 2007, p.1). The impact of economic globalization on Toyota labor Globalization is associated with the reduction of labor costs (EuroStat 2007, p.69). In the car manufacturing companies such as Toyota, wages covers the largest percentage of input cost for business. This is in relation to the fact that labor varies in some countries; in some it is relatively dear whereas in others it is cheap. It is as a result of this that the Toyota assembles its vehicles in different countries in order to minimize production costs. The impact of economic globalization on Toyota changes Economic globalization plays a part in minimization of transport costs (Salvotore 1998, p.298). It helps minimize not only shipping, but also other transport costs which as a result lead to maximization of profits of corporations such as the Toyota. Minimization of the transport costs enables Toyota to import materials for the production of vehicles at a low cost as well as export their vehicles to other countries at a very low cost (Steger 2009, p.37). Economic globalization has also a significant industrial effect on the Toyota. For instance, Toyota produces vehicles according to the taste of the consumers all over the world. Unlike Toyota, minimization of transport costs affects the running of the Marine Hull insurance industry negatively. This is in relation to the fact that Lloyd Marine Hull insurance business is mainly associated with making profits from keeping of the transport costs. The effect of economic globalization on the society Economic globalization lifts the importance of materialism which is one of the society’s values (Imade 2003, p.5). Indeed, the extensive production of vehicles by Toyota is as a result of increased consumption which has been encouraged by globalization (CNBC 2015, p.1). The business activity of the Toyota Company correlates that of the Lloyd Marine Hull insurance; they both involve working with many nations in the world. In tandem with this, economic globalization leads to the unification of many countries as a result of sharing common products from the two industries (Imade 2003, p.7 and Moutsatsos, p.9). The environmental effect of economic globalization The environmental effects of economic globalization are common between marine hull insurance and the Toyota Company. Just like in the marine hull insurance, economic globalization has contributed significantly to the Toyota’s pollution of the environment (Steger 2009, p.87). The reduction of tariffs leads to the increase in the number of vehicle users which as a result as contributed to the increase in vehicle production. The rise in the use of vehicles is one of the main contributors to the destruction of the Ozone layer. Conclusion In conclusion, globalization impacts the running of industries in the world. Apart from increasing business opportunities, it also results to challenges that affect the running of industries. The marine insurance and the automobile are examples of industries that are directly affected by economic globalization. The two companies rely extensively on economic globalization in order to succeed in the market. The Lloyd Hull Marine insurance as well as Toyota Company is corporate owned industries. Economic globalization results to reduction of labor costs which affects Toyota business positively. Reduction of labor costs is associated with the reduction of tariffs. Economic globalization enhances free movement of capitals; both marine hull insurance and Toyota carry out their business all over the world. The environmental effects of economic globalization are common between marine hull insurance and the Toyota Company. Economic globalization leads to the production of many vehicles to the environment as well as transportation of large volumes of fuel from Middle East. The high number of vehicles is associated with consumption of a lot of fuel which pollute the environment through the emissions. Reference List Abdullah, I., Dost, B. K. M., Faheem, A. M. & Ch., A, M. 2011. Globalization and its Impacts on the World Economic Development. International Journal of Business and Social Science. 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