The term “globalization” became a popular buzzword for describing business practices
in the last few decades, and it appears as if it will continue to be a key word for describing
business management throughout the new century. In this section, we review
a few key trends of the world economy: (i) the emergence of globalized financial markets,
(ii) advent of the euro (iii) continued trade liberalization and economic integration,
and (iv) large-scale privatization of state-owned enterprises.
The 1980s and 90s saw a rapid integration of international capital and financial markets.
The impetus for globalized financial markets initially came from the governments
of major countries that had begun to deregulate their foreign exchange and capital markets.
For example, in 1980 Japan deregulated its foreign exchange market, and in 1985
the Tokyo Stock Exchange admitted as members a limited number of foreign brokerage
firms. Additionally, the London Stock Exchange (LSE) began admitting foreign
firms as full members in February 1986.
Perhaps the most celebrated deregulation, however, occurred in London on October
27, 1986, and is known as the “Big Bang.” On that date, as on “May Day” in 1975 in the
United States, the London Stock Exchange eliminated fixed brokerage commissions.
Additionally, the regulation separating the order-taking function from the marketmaking
function was eliminated. In Europe, financial institutions are allowed to perform
both investment-banking and commercial-banking functions. Hence, the London affiliates
of foreign commercial banks were eligible for membership on the LSE. These
changes were designed to give London the most open and competitive capital markets
in the world. It has worked, and to ...