01/01/2014 21:07

Policy and Strategy Formulation on the Globalization Process - Emergence of a New World Economic System 

by Dr. Thomas C. Heynen, Principal of GeoCapital Economics

CONTENTS

Abstract

Objective and Scope of the Research

1. Definition and Meaning of the Globalization Process in the Real World
2. Strategic Scenario on the Globalization Process
2.1 Formation of International Relations by Nation States
2.2 Comparative Advantage of Nations
2.3 Integration of Nation States into the World Economy
2.4 Regional Political and Economic Integration
2.5 Emergence of Region States
2.6 New Configurations of Spatial Economic Patterns and Features
2.7 Formation and Reinforcement of Regional States
2.8. New Spatial Structures and Processes
2.9 Public and Private Entities with New Functions
3. Cultural Identity as Competitive Advantage of World Regions
4. New World Economic System: Competitive Advantage of Regional and Local World Markets

References

Bibliography



Abstract

The globalization process is as an aggregate of driving forces a constitutive element of the emerging New World Economic System with its divers structures and dynamics, integrative and competitive functions. Originated in Europe in the sixteenth and seventeenth centuries, it is in scope and complexity expanding to world scale and challenging historical transformation and systematic changes in politics, production and trade, finance and investments. According to the definition of the globalization process, local and regional markets are composing this new system. They are inter-relating, integrating and competing for gaining particular advantage within the multinational system. The globalization process as well the New World Economic System are highly dependent on time and space as main determinants for local and regional economic development. It implies that global markets as medium of national and multinational exchange are bound to local places and regional areas. They are based on significant differences in culture and geographies, political management and economic political concepts, which are one of the main reasons for having competition forming the cultural, political and economic space. Here, the public and private entities have the major function to formulate policies and strategies for setting a regulative framework in which markets on all levels are sustaining their global competitive advantage. For the inter related world markets are locally and regionally situated and depending on the Real World environment, it is important to point out, that the globalization is aggregating integration and competition, diversification and decentralization and is encouraging localization processes as complementary phenomenon. Free markets in modern economies are only beneficial to society and economic welfare of nation states and the whole world community if they are performing dynamic formation, structural development and allocation of factors in particular locations and regions. These market functions enable competition and are not stumbling blocks for global interaction between nation states, local and regional entities on sub-national level. With their policy and strategy formulation and implementation they are required to integrate territorial and cultural differences not by amending them, but to utilize them as individual competitive advantage to the mutual benefit of all sharing new systems in production, finance and other services the world economy is relying on. Here, the nation state as legal entity and its citizen have the most decisive function in the formation of a global culture based on an individual, globally inter related value system sustaining democracy, free economic choice and competitive advantage of markets. Accordingly, Bernstein is claiming a concept of human rationality for making choices and decisions.

Objective and Scope of the Research Paper

Main objective of this Research Paper is to formulate policies and strategies on the globalization process - shown with the strategic scenario in the appendix -, which will require the analysis and the discussion of underlying political and economic forces inducing worldwide integration and promoting global competition. Regarded as recommendations primarily for the policy formulation in management and planning, these policies and strategies will be composed and derived from a strategic scenario - see appendix - in order to create an analytical framework for assessing the micro- and macroeconomic process of globalization. Based on time and space as important parameter of spatial economic structures and policy functions, this strategic scenario will include possible stages of the intensity of spatial competition, and inclusively the policy and strategy formulation regarding the globalization process towards a New World Economic System will be highlighted and discussed. Last, this Paper is also intended to rationalize the discussion on globalization as worldwide phenomenon by choosing a conceptual, applied-scientific, rather qualitative - analytical Real World approach, which is related to the fields of world economics, development economics, economic geography, international relations and world political economy (Krugmann, 1999 and Czinkota 1999).



1. Definition and Meaning of the Globalization Process in the Real World

In the public discussion, the globalization process is seemingly rather understood as worldwide phenomenon being induced by virtual competitive forces and effective bilaterally and multilaterally between states. It is further wrongly identified with certain business sectors or just only competition between nations; it is mostly irrationally regarded as weakening economies and business sectors, cultural identities and so forth. Arguing likewise, the discussion is mostly directed on certain views eliminating rational political and economic argumentation, so it is required to conduct an enlightening analysis of the globalization process and its related structures and functions, its economic, political and cultural implications. In lack of an agreeable and concise definition in the literature, and for the understanding its meaning and meeting assumptions about its future potential, it is intended to establish a definition of the globalization process as following:

The globalization process as aggregate of political, economic and cultural forces means spatial economic integration and competition between inter-dependent regional and local world markets with competitive advantages, divers structures and opportunity sets utilizing resources and allocating factors for production, trade and consumption, finance and investment for national economies shaping the World Economic System.

This definition of the globalization process describes its latest stage, which is indicating the emergence of New World Economic System based on regional disparities and competition between markets as principle driving forces inspiring multilateral exchange and political integration. It applies also that globalization is a process which starts on the domestic level with the formulation of world economic policy and implementation strategy being required to form and adjust the national economic structure as well as infrastructure to the needs and for the functioning of the world economy. Globalization is regarded as a historical process of civilization in cultural, political and economic terms. Since several centuries ago, intercontinental trade and regional exchange were building up international relations promoting the integration of nation states (Chase-Dunn, 1999). Globalization as defined above is a qualitatively new phenomenon and not simply a quantitative expansion of older trends (Sklair, 1999). Main bearer of this process is the cultural space as part of the Real World where political and economic formation elements are establishing market structures (defined by Krugmann 1999 as conditions of competition in economies) with allocation functions and the inducement of market processes. According to their importance for production, consumption and investment, and with their diversity in geographical structure, size, accessibility and volume, the markets initiate competitive advantages and opportunities, which are decisive for asset and value creation being essential for growth and development of the world economy. In the last century, advanced achievements in technology, transportation and communication, finance and banking brought change about managerial patterns in policy and strategy formulation and implementation towards higher dynamic exchange, especially in knowledge and service driven societies. This newly initiated process as part of globalization has different systematic effects on spatial economic structures being decisive for the worldwide integration of markets. With the enhancement of their functioning and conclusively higher intensity of spatial competition between the markets, the latest stage of the globalization process and a higher degree in utilizing the market potential has been reached, and is targeted on the formation of the so called New World Economic System.

2. Strategic Scenario on the Globalization Process

Taking current world economic developments into consideration, the globalization process and its potential economic formations are here divided in eleven stages resulting from the time - space relation. Accordingly, the strategic scenario is highlighting policies and strategies depending on each other consecutively. Although globalization is shown in the scenario as a linear systematic process, it is progressing highly different in its effect for each country depending on its preferred policy framework, geographic structure, market structure and development potential as well on its limited extent of its factor and sector markets. The vertical axis represents the factor "time" correlating with the functions of policies and strategies adopted and implemented in certain consecutive periods referring to each other. The horizontal axis indicates the "space" as bearer of the economic structure, the nation state, the local and regional world markets as shown with the arrow parallel to the horizontal axis, where the intensity of spatial competition results in centralization, decentralization and disintegration as main configurations of spatial economic structures. Both axes, representing main determinants of policy coordination and structural spatial economic formation, are related to the implementation and application tools, being required to manage the globalization process on micro and macro level. Last is resulting in the diagonal slope. As synergy of different economic structures and policy functions targeted on a world economic system with new opportunity sets on local and regional markets, the slope of the globalization process indicates virtually the equilibrium between the real world structures and different levels of the world markets' coordination and allocation functions. In terms of real world analysis, each bar or layer representing one part of the slope describes a particular development stage of market structures, functions and processes as main determinants of the strategic scenario. These layers explaining respectively the underlying parallel progressing economic long-term phenomenon are interrelated and consecutively based on each other, and with the rise of the slope to its highest peak the intensity of the spatial competition is increasing. The following strategic scenario will show with eleven stages of the globalization process that economic wealth will rather depend on the competitive advantage of different factor and sector markets within a nation state - divers spatial structures and different policy implementations - than the competitive advantage between nations.

2.1 Formation of International Relations by Nation States

This description of economic development reflects the political and economic situation of the majority of states sharing the current real world system in terms of international relations and mostly bilateral economic exchange with each other. In a highly regulated environment, transnational co-operations and international organizations are overtaking a multinational coordination function in diminishing national seclusion still prevailing in some states. Instead, in place of old and national seclusion and self-sufficiency, inter-courses in every direction and universal interdependence of nations are existing. This development requires blending geopolitical and geo-economic questions concerning future challenges and therewith long-term projections on world markets and global networks (OECD Information Base, 1999). Focusing on the spatial development within their own region, each government is asked to develop strategic thinking and vision on geopolitical dimensions in forming international relations focusing on the geo-economic diversification of world markets. Already Adam Smith in his "Wealth of Nations" 1776 considered the importance of the relationship between geographic location and international trade (Radelet and Sachs, 1998). Being relevant even today, it is also very decisive where a country is globally positioned and how the access to world markets and trunk routes of major transport means with high connectivity can be utilized for exports and economic growth of a particular country. Production and trade depend on factor endowments and factor intensities, on distance and transport intensities of different goods; import and export costs are increasing with the distance. The combination of distance and being landlocked by neighbors with even poor infrastructure can make transport costs much higher for some developing countries than for most others. With the reference to Heckscher-Ohlin's trade theory and von Thunen's work on the "Isolated State", it is to analyse the trade and production patterns of countries located at varying distances from an economic centre. Justifying a country's production and trade pattern requires knowledge of the country's location, its factor endowments, and the factor and transport intensities. Venables and Lima (World Bank Trade Development Research Group, 1999) analyzed that geography and endowments interact in a way that divides the world up into economic zones with different trade patterns. Nations being located close to the economic center specialize in transport-intensive activities. Countries further out become diversified by producing and trading more goods; the ones far out of the center become import-substituting by replacing imports from the center with local production; in the extreme, regions become autarkic, and more remote locations have lower real incomes (Gallup and Sachs). The globalization process has the potential of changing terms of trade, improving the welfare of regions further out from economic centers and reducing the welfare of closer regions. In the end, the choice of location depends on transport and factor intensity. The country's geographic size, infrastructure, its economic variables in terms of productivity and efficiency, and its macro-economic response to internal and external developments are important for the formation of international relations. As local areas, core, periphery and semi-periphery countries and major world regions manage differently their foreign relations, geopolitical and geo-economic analyses, strategies and policies are required. By exploring the relationship of geography and foreign policy, a decisive meaning of geopolitics is that geographical dimensions of states affect the projection of national power and influence global relations. For improving international relations it is also required to form 'state' as legal entity by establishing national laws, their enforcement and a legislation structure. That is essential for a nation state, its international recognition and acceptance within the international business community. External determinants are based on geography and the nature of international interaction (Amstutz, 1995, p.160/162).





2.2 Comparative Advantage of Nations

Interdependencies between regions and locations are developing through competition and increasing intra- and interregional exchange for utilizing regional disparities as economic strength and comparative advantage. The latter is referring to the identical theory from David Ricardo, who pointed out that countries possess different production endowments (natural resources, labor, technology, management) leading to different relative production capabilities. Regarding the economic welfare and the maximizing national economic output, countries can enhance their comparative advantage on the world market with greater specialization in their production. And international exchange fosters economic development by increasing national welfare (Amstutz, 1995p. 294/295). With growing national and global competition, the world economy provides a large source of supply and demand, so that international trade increases the possibilities for efficient production through specialization, economies of scale and complementary strategies. The scale economies and the market structure - oligopoly, perfect or monopolistic competition - and the economies of location can be seen as the significant factors in the globalization of industries. As central places and locations are regarded as yielding advantages, all these factors are the reason for spatial distribution of economic activities determining the market potential and the conditions of imperfect competition. The existing market structure, the market potential and the expected increasing returns are the leading criteria for firms' decision taking for regional and location investment. The international operating firms and transnational co-operations (TNC) are important market participants in the world trading system. They are directed on the specialization and internationalization of supply being procured from production centers across the world and the international convergence of demand as consumers get aware of worldwide available products. That promotes international specialization and spatial competition as certain production and services are bound to locations and central places to meet comparative advantages and scale economies. The annual trade statistics of GATT/WTO confirm recent trends that trade is becoming more geographically regionalised and even more dispersed (John, 1998). This concerns especially intra- regional exchange, which results in greater openness and regional integration of nation states.

2.3 Integration of Nation States into the World Economy

Multinational sets like international organizations and transnational co-operations are gaining more influence in the determination of the international relations and are regarded as an additional coordination level complementary to the national policy functions. Nation states exercising full sovereignty and jurisdiction on their territory are gradually integrating into the world economy. International Organizations exist in many ways: public or private, unifunctional or multifunctional, global or regional. Their performance and effectiveness measure the progress states are making towards cooperation. Here, the United Nations is the most important factor in coordinating global policies (Henderson, 1997). This kind of global governance is a catalyst for global policy balancing out geopolitical interests, strengthening interdependencies, diminishing regional conflicts and developing international law to enhance cooperation and coordination. The global political framework is needed as the level of world trade is rising; its connectivity and the complex business environment, the worldwide investment and cooperative interaction of the world society are based on security, political sovereignty and territorial integrity to sustain bilateral and multilateral functions. All nation states are sharing the common interest to preserve the existing decentralized world system (Amstutz, 1995, p. 76). This geopolitical claim is not contradictory to integration, but decisive for necessary reforms towards a global market economy favoring competition and decentralization, coordination and allocation of factors, products and services to their most beneficial utilization for the economies.

2.4 Regional Political and Economic Integration

Within this stage, the globalization process is reaching the level of higher spatial integration. It refers to increasing interdependence within societies, which are bound by rules and procedures. Economic integration is based on mutual economic ties of several countries targeted on growth of overall economic activity, spanning national and regional boundaries. This process is informally driven by market forces performing increased trade flows of good and services, and the market factors are leading in the areas of investment, the movement of tangible and intangible forms of capital, such as finance, technology and the ownership of assets. This market-led integration is emerging from the aggregates, supply and demand and the necessary allocation and coordination functions without formal arrangements. However, as integration is regarded as an essential element for economic development and growth within a region, it requires appropriate government policies (Alter and Malyshev, OECD 1996), e.g.

- liberalization of trade and foreign direct investment (FDI) regimes

- deregulation of financial markets

- promotion of competition

- development of infrastructure (transportation and communication)

Not only on the regional level, also on inter-regional level government policies can facilitate co-operations to enhance mutual economic ties of regions which has also geopolitical implications as far as national and regional security is concerned. Institutional agreements and formalizing arrangements on the level of international organizations are equally important.

2.5 Emergence of Region States

Up to this stage, the globalization process and economic development is guided by domestic and bilateral rules, regulations and agreements setting the framework, to which the market participants are bound. In this stage, the international process of factor allocation is getting more competitive and forcing single states and multinational organizations to eliminate barriers to a minimum of structural regulations. Here, the aviation, banking and communication sectors are frontrunners exemplifying this process towards liberalization. While nations are integrating regionally and politically in the form of associations and unions to coordinate and administer common international interests in the way of regional integration arrangements, the economic forces are utilizing the competitive advantage of single states with the effect to foster spatial competition. Therewith, the markets although highly competitive are the dynamic element of the integration process. Emerging as Region State, the nation state is providing industrial areas and special locations (some are assigned as special economic zones) for multinational investments, productions and services.

2.6 New Configurations of Spatial Economic Patterns and Features

Further deregulation policies are leading to new patterns and features of regional development; new dynamic processes are initiating new affinities and relations. All this promotes regional competition and new formation processes are increasing the structural economic diversity. Urban agglomerations and centers overtake new multilateral functions within the region and the surrounding areas have complementary functions. With the upcoming global competition on each region state is easing the investment rules and regulations towards liberalization, privatization and decentralization. With the close policy coordination they are bound to harmonize domestic policies and eliminate trade barriers also to third countries internalizing gains from trade liberalization. Business competition is growing and governmental policies are focusing on the improvement of the competitive advantages; region states are competing with investment promotions targeted on developing regional centers in different, some times complementary sectors. These industrial productions and services are part of global chains and provide worldwide access; their connectivity strengthens the integration of the Region State into the world community. More spatial competition is challenging local and regional economic adjustment on sub-national level; centers are (re-) assigned to certain functions and peripheral areas are promoted with business incentives and financing to develop specialized industrial and service locations which emerge as new configurations of spatial economic patterns and features. These can be for instance preferably declared 'special economic zones' or 'growth triangles' (Ohmae, 1995) as designated cross border set up. Every region and its business sectors are striving to shape and enhance their competitive advantage within the association or union of nation states (Porter, 1990). Intensifying competition is leading to mergers and acquisitions in the finance, manufacturing and production sector.

2.7 Formation and Reinforcement of Regional States

On one hand, the nation state is further integrating and most policies are determined by multinational coordination functions within the region, on the other hand the markets in particular region are consequently getting more competitive. The latter is especially the result of minimizing (geo-) political conflicts in favor of integration policies. The markets sustain the factor allocation in a competitive environment in which the governments challenged by the market participants are setting the framework for free market exchange in accordance to international law. Local and regional markets are emerging to be highly competitive and regional states within the states are (re-) gaining their meaning for providing especially assigned industrial and service areas and locations. Forced by a higher degree of competition in the location, this process is leading to spatial political decentralization, greater power sharing and decision making between the central and local/regional governments on a sub national level. Technological advancements, decreasing transportation costs and higher market efficiency are leading to time-space compression with the consequence that peripheral areas and locations are getting upgraded and overtake the functions as sub centers. Different industries and service providers are shifting their places to the surrounding areas of the centers; new markets are found and contribute with their regional procurement to decentralization and de- industrialization. Spatial disintegration is prevailing and intensifying the globalization process, which also on the other side is challenging geo-economic differentiation. The dynamic functions of the international production system are enhancing the economic significance of differences between places and local areas. The globalising enterprises and markets are interrelating with local structures of places where production and consumption are situated. Regional and local integration is targeted on generating economies of scale and competitive market structures. The localization process on sub-national level is coinciding with the globalization process as it is based on the search for competitive advantage and local initiatives favoring growth and diversity of small and medium sized enterprises. That has decisive implications for the governance not only on the national level, but also on regional and local level with the main focus on supply side policies challenging capacities towards innovation by leveraging and utilizing local endowments. Therewith, the localization process as result of decentralization and disintegration is not contradictory to globalization including liberalization and integration. As both processes are rather coherent and interrelating, localization is regarded as decisive component of globalization for allocating resources efficiently by the market as medium of coordination and exchange. That requires the enhancement of sub-national governance and decision taking for particular region and location. This is also contributing to emerging sense of local identity (Yusuf, IMF 1999). Consequently, decentralization processes are coinciding with democratization and liberalization of economic policies, which in general challenge the formation or reinforcement of regional states.

2.8 New Spatial Structures and Processes

This stage of the globalization is determined by a virtually inconsistent phenomenon, which is based on geopolitical and geo-economic dynamic patterns. On one hand political association and unification in different regions are promoting spatial integration, on the other hand liberalization policies are prevailing and inspire spatial economic localization processes which are moving towards decentralization. Both are seemingly antithetical processes which are indispensable for economic development. As production is situated in a particular place, some countries will appear as attractive investment location encouraging industries to spread from original to new ones. Spatial agglomeration as result of geographically concentrated industrialization of a certain place and location can promote major shifts of markets and countries' economic structure and endowments (Ottaviano and Puga). Markets build up their own centers at different locations overtaking the factor allocation and coordination functions of supply and demand. In accordance with liberalized policies and free investment possibilities on the regional markets the behavior of the market participants is changing. The markets are opening up economic space and create basic functions for the development of the their hinterland. The main forces allocating and coordinating the factors in different places build up the catchment areas being required to utilize the economic opportunities and to sustain important local procurement functions. This results in further disintegration of agglomerations, specialization of industrial and service sectors and functional depreciation of main centers; the competition between the markets intensifies although they are interrelating to each other in the way of spatial economic integration as underlying structural process (Venably). With the erection of multilateral relations progressive time-space compression occurs, and inter linked local and (intra- and inter-) regional markets will gain not only geo-economic, also geopolitical influence by further integration into the world market. This development is leading politically as well economically to transformation and to larger extent in some states - mainly in former central planned economies - also to transition processes, which will encourage systems' changes and initiate new forms of social-economic interaction. Decentralization and sector disintegration are setting new spatial structures and inspiring new processes.

2.9 Public and Private Entities with New Functions

The entire globalization process is not only effecting markets and the intensity of integration and competition; it is also determining particularly the role of nation state as public entity and corporations as private multinational entity in formulating strategies and policies. In opposite to Ohmae's elaboration regarding the end of the nation state, it is still prevailing and maintaining its legal and policy functions to comply with its constitutional commitments to its people, territory and the international community. With their different structures, functions and targets, the nation states are of great significance for integration, coordination and harmonization of the world economy, for its structural diversity and the future development. In terms of international law and the compliance of treaties, conventions and agreements, the states are required to coordinate their international relations and manage primarily integration policies in setting the framework for exchange of the market forces (Jackson). That means, on one side to anticipate structural economic development on the world markets for standardizing procedures domestically and vice versa to represent the own economy internationally. On the other hand, the state is coordinator of decentralization processes to the benefit of the regional states, their international connectivity and performance level. Therewith, the state has not only integration function, but also to balance out the geopolitical and geo-economic interests between centripetal and centrifugal market forces being effective towards spatial economic concentration or decentralization (Krugmann). Besides the nation states, the regional states and the local administrations as public entities are challenged by the globalization as well as localization process to implement economic and structural policies setting the framework for the markets to perform. While the public entities are responsible for the political management of countries' created assets regarding economic growth and structural development, private entities overtake the rather functional task of managing the factor allocation on global and local world markets being based on interdependent relations. Being driving force for globalization and localization processes, especially transnational companies are looking for market led growth to gain greater returns on factors and resources, and efficiency in allocation processes to sustain a certain productivity level which enables to meet the competitive advantage. The global firms have a decisive influence on the spatial economic development as they are bound on a certain location to utilize divers market structures as source of potential advantage (Porter, 1997). That is mostly guaranteed with an oligopoly market structure, where the marginal benefit of invested capital is enabling the competitive forces to utilize research and development for the knowledge based challenge of human and intellectual capital to enhance technological and organizational management capacities.

3. Cultural Identity as Comparative Advantage of World Regions

Diversity of cultural space and differences in political and economic development of nation states are based on different cultural structures, concepts and principles, moral and ethical value levels, intellectual and scientific standards, and world views. These factors determine civilizations, societies, local and regional interests, cooperation and conflict, cohesion and disintegration. To the background of religion, language, history and customs peoples define their cultural identity and use the medium of politics to formulate their interests. As the nation state is remaining its principle function in world affairs, it is its priority to mediate between the globalization and localization processes by promoting the multi civilization as principal of global politics and strengthening the cultural identity of particular regional area within the nation. Here, the nation state has the task to balance out the interests between a common world culture challenged by time-space compression and the regional cultural fundament on which it is based. This ambivalent situation is bearing potential political conflicts, which might be increasing with higher levels of economic interdependence. However, that can be prevented with re-conceptualizing the own cultural identity to cope with the increasing national competitiveness depending on the abilities of people and firms to innovate. It is challenging individualism based on individual rights, liberties and free choice, social and human rights, humanism, pluralism and democratic values (Huntington, 1997). Above factors are basic conditions of the international norm system for cooperation and coordination, governing policies on citizenship, legal equality and on market economic principles providing a regulative framework for markets, asset creation, international exchange, investments and risk reduction, and factor allocation on all regional and local market levels. Harmonization, homogenization and standardization are indicating a higher degree of policy coordination targeted on transforming several national markets into a common market. With greater responsibility in determining policy formulation, competitive advantage and cultural identity, the public entities of the nation state, also its regions and local areas are adjusting to the international norm system promoting integration and diversity, competition and innovation, interregional exchange and higher living standard. The latter is underlining the significance of private entities and the competing markets matching open economies with divers structures. These competing markets are important cornerstones as pivots within the network of global relations. Most markets perform their factor allocation and coordination function in particular regions, areas, locations and places. The oligopoly with imperfect competition would be the preferred market structure as it guarantees sustained investments in technology, education and personnel, product research and market development, and infrastructure in order to maintain the competitive advantage of particular markets. This gives the guidance for the formulation of business culture prevailing in local and regional entities being decisive for each sector market, its performance and efficiency on all levels. With the intensity of exchange on these markets the cultural identity is going to be re-conceptualized towards the self-definition of knowledge driven societies in concerned market areas. Last is a cultural based process in concerned areas and will be an important determinant of the competitive advantage rather than that of a whole nation.

4. New World Economic System - Competitive Advantage of Regional and Local World Markets

Based on the above defined globalization process shown with its different development stages throughout the scenario, the New World Economic System is emerging. Under the combined interplay of public and private entities and their policies and strategies, the markets of any kind and size are the main bearer and driving force in this system. In correlation with the globalization process, the markets and their potential performance are sustaining the factor allocation and coordination functions. These are key elements of modern market economies being directed on globalization and localization, integration and competition. Last are not contradictory, rather antithetical processes; they are purely the result of exchanging interests of supply and demand. The markets are determining the conditions for these processes as they are meeting point and expression of the market participants in different locations. As shown with the scenario, the world markets as virtual phenomena are highly depending on time and space, on policy implementation and spatial structures as leading coordinates for globalization forming the economies, their diversity and interdependence. The nation states as political and legal entities are very much depending on its spatial economic structure and the local and regional markets providing efficiency and productivity to gain competitive advantage on the inter related world markets. As transnational companies manage 75% of the world trade in manufactured goods (Stopford, 1997), they are aiming to promote asset creation and diversity of markets, decrease of real costs of supply by increasing productivity (internal economies of scale) and connectivity and interdependence of local and regional world markets. To what degree the competition is forming the market structures and their variables is highly dependent on the management performance of each political, economic and business entity adopting policy and strategic measures enforcing highest factor allocation for the formation and efficient utilizing of countries' or regions' market potential. Last is correlating with the market functioning, which works differently according to the development stage as shown with the scenario. In general, it is to conclude that within a liberal economic framework set by private and public entities the markets are functioning with the principle 'so much competition as possible and so much regulations as necessary'.





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