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The Global Marketplace: Definition & Overview

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  • 0:00 Definition
  • 0:58 Conceptual Framework
  • 1:59 Do We Have a Global Market?
  • 3:03 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
We have been on the fast track to a global market, but are we there yet? In this lesson, we will define global market and discuss some of its key concepts. A short quiz follows the lesson.

Definition

A market is an institutional structure that permits people and organizations to exchange goods, services and labor. The United States, for example, is a market. The United States, Canada, and Mexico form a quasi-free market governed by the North American Free Trade Agreement. The European Union is also a market.

A global market is not limited to specific geographic locations but rather involves the exchange of good, services, and labor anywhere in the world. For example, a business may be located in the United States. It may purchase components for one of its products from Japan, South Korea, Germany, and Mexico. The components may be shipped by a shipping company from Greece to an outsourcing firm in China for assembly, where it is then transported across Chinese and Russian railroads for distribution in European retail stores. The business' stock may be traded on the New York Stock Exchange, Japanese Nikkei Exchange, and the London Stock exchange.

Conceptual Framework

Let's take a look at what a true global market would look like:

  • Standardization: The goods and services traded in the global marketplace should be standardized so that they can be utilized by all market participants. For example, appliances should operate on the standard electrical system. An obvious problem today is that the U.S. still operates on the old English measuring system instead of the metric system utilized by the vast majority of the world. Environmental and safety standards still vary quite a bit between countries. An example of a service standard may be accounting rules.
  • Trust: Global market participants must have confidence that everyone will follow the same rules of the marketplace, and the rules will be uniformly enforced. For example, buyers and sellers need to feel confident that contracts will be honored by all parties and will be enforced by the legal system if there is a breach. Market participants will also often have to rely on third-parties to provided credible information on parties to market transactions.

Do We Have a Global Market?

So, do we currently have a true global market? Not really. We have yet to achieve complete product standardization on a global basis. While strides have been made in creating standardized rules governing international market transactions, not all countries participate in the various treaties and trade conventions currently enacted.

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