Instructional Module: Republic of The Philippines Nueva Vizcaya State University Bayombong, Nueva Vizcaya

Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY

Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No. INTL 1-1STSEM-2020-2021
College : Business Education

Campus:Bayombong, Nueva Vizcaya
DEGREE Bachelor of COURSE NO. INTL 1

PROGRAM Science in
Business
Administration
SPECIALIZATION Financial COURSE TITLE International Business and Trade
Management and
Business
Economics
YEAR LEVEL 2 and 3 TIME FRAME 6 WK NO. 1-2 IM NO. 1
hours
I. UNIT TITLE
Globalization
II. LESSON TITLE
Lesson 1. What is Globalization

Lesson 2. Drivers of Globalization
Lesson 3. The Changing Demographics of the Global Economy
Lesson 4. Managing in the Global Market Place
III. LESSON OVERVIEW
We are moving toward a world in which barriers to cross-border trade and investment are declining.
Perceived distance is shrinking due to advances in transportation and telecommunications technology. Material
culture is starting look similar the world over. An American might drive to work in a car designed in Germany that
was assembled in Mexico. Starbucks coffee shop managed by a Korean immigrant. A world in which products
are made from inputs that come from all over the world. Starbucks has had an impact on consumer behavior
around the world, changing the way people consume coffee and profiting in the process.
IV. DESIRED LEARNING OUTCOMES
Lesson 1. Define globalization.

Lesson 2. Discuss the main drivers of globalization.
Lesson 3. Explain the changing nature of global economy.
Lesson 4. Explain the main arguments in the debate over the impact of globalization.
V. LESSON CONTENT
Lesson 1. What is Globalization

Globalization refers to the shift toward a more integrated and interdependent world economy.
Globalization of Markets refers to the emerging of historically distinct and separate national markets
into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell
internationally. It has been argued for some time that the tastes and preferences of consumers in different
nations are beginning to converge on some global norm, thereby helping to create a global market.
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational purposes
only and not for commercial distribution.”
NVSU-FR-ICD-05-00 (081220) Page 1 of 85
Figure 1.3 Different International Brands
The most global markets currently are not markets for consumer products- but markets for industrial
goods and materials that serve a universal need the world over. Example: wheat, oil, aluminum,
commercial jet aircrafts. In many global markets, the same firms frequently confront each other as
competitors in nation after nation. Example:
Figure 1.4 Different International Brands
Globalization of production refers to the sourcing of goods and services from locations around
the globe to take advantage of national differences in the cost and quality of factors of production (labor,
land, capital). Companies hope to lower their overall cost structure or improve the quality or functionality
of their product offering, thereby allowing them to compete more effectively.
Example: Boeing’s 777
Supplier in Japan– fuselage, doors and wings
Supplier in Singapore- doors for the nose landing gear
Supplier in Italy- wing flaps
Figure 1.5 Boeing’s 777
The Emergence of Global Institutions
All these institutions were created by voluntary agreement between individual nation-states, and
their functions are enshrined in international treaties.
General Agreement on Tariffs and Trade (GATT)-a legal agreement between many countries, whose
overall purpose was to promote international trade by reducing or eliminating trade barriers such
as tariffs or quotas
World Trade Organization (WTO) -Primarily responsible for policing the world trading system and
making sure nation-states adhere to the rules laid down in trade treaties.
International Monetary Fund (IMF)-Established to maintain order in the international monetary system.
Lender of last resort to nation-states whose economies are in turmoil and whose currencies are losing
value against those of other nations.
World Bank-Was set up to promote economic development. Has focused on making low-interest loans
to cash-strapped governments in poor nations that wish to undertake significant infrastructure
investments such as building, dams or roads.
United Nations (UN)-To maintain international peace and security. To develop friendly relations among
nations. To cooperate in solving international problems. To promote respect for human rights
Lesson 2. Drivers of Globalization
Decline in barriers to the free flow of goods, services, and capital that has occurred since the end
of World War II. Technological change, particularly the dramatic developments in recent decades in
communication, information processing, and transportation technologies
Declining trade and investment barriers
International trade occurs when a firm exports goods or services to consumers in another
country. Foreign direct investment (FDI) occurs when a firm invests resources in business activities
outside its home country. Many of the barriers to international trade took the form of high tariffs on imports
of manufactured goods. Tariff is a tax or duty to be paid on a particular class of imports or exports. The
typical aim of such tariffs was to protect domestic industries from foreign competition.
Dumping is a process where a company exports a product at a price lower than the price it
normally charges in its own home market. Why do some company sell their products to other country at
a lower price compared to their home county? One reason is economies of scale. To maximize resources,
manufacturers produce in bulk quantity which lead to overproduction. Those over produced products will
be sold to other countries. Another reason is they want to compete with their rival brand. In order to
penetrate the market, companies are willing to sell their products at a lower price than their competitor’s
price.
Antidumping- a protectionist tariff that a domestic government imposes on foreign imports that
it believes are priced below fair market value. Antidumping was established to protect the local products.
Foreign direct investment is playing an increasing role in the global economy as firms increase their-
cross border investments.
Outsource
Customer service
Call center
Figure 1.6 US Outsource Call Center in Philippines
The Role of Technological Change
Since the end of WW II, the world has seen major advances in communication, information
processing, and transportation technology, including the explosive emergence of the Internet and the
World Wide Web. The cost of microprocessors continues to fall, while their power increases (a
phenomenon known as Moore’s Law, which predicts that the power of microprocessors technology
doubles and its cost of production falls in half every 18 months. The cost of a three-minute phone call
between New York and London fell from $244.65 to $ 3.32.
Transportation Technology
The web makes it much easier for buyers and sellers to find each other, wherever they may be
located and whatever their size. The development of commercial jet aircraft and super-freighters and the
introduction of containerization, which simplifies transshipment from one mode of transport to another.
Containerization is a system of intermodal freight transport using intermodal containers (also
called shipping containers and ISO containers). The containers have standardized dimensions.
Figure 1.7 Containers Used in International Trade
Implications for the globalization of production
Air transportation to speed up the delivery of critical components to meet unanticipated demand
shifts without delaying the shipment of final product to consumers. The Internet has been a major force
facilitating international trade in services. Examples: Through web that allows hospitals in Chicago, USA
to send MRI scans to India for analysis; Accounting offices in San Francisco, USA to outsource tax
preparation work to accountants living in the Philippines
Implications for the globalization of markets
Low-cost global communications networks such as the World Wide Web are helping to create
electronic global marketplaces.
Figure 1.8 Cable Channels Seen in Different Countries
Philippines Tokyo Malaysia
Figure 1.9 McDonalds in Different Countries
Lesson 3. The Changing Demographics of The Global Economy
The Changing nature of the multinational enterprise
A multinational enterprise (MNE) is any business that has productive activities in two or more
countries. The rise of the Internet is lowering the barriers that small firms face building international sales.
Figure 1.10 Different Types of Online Selling
The globalization debate
Increased and cross-border investment will result in

▪ Lower prices for goods and services
▪ Stimulates economic growth
▪ Raises the incomes of consumers
▪ Help to create jobs in all countries that participate in the global trading system.
Antiglobalization protests
▪ Job losses in industries under attack from foreign competitors – instead that you will provide
jobs to your countrymen, other nationalities are benefiting.
▪ Downward pressure on the wage rates of unskilled workers- obviously companies prefer
skilled workers.
▪ Environmental degradation- look at the given picture below. The down side of it was smog or
heavy pollution produced by factories.
▪ Cultural imperialism of global media- culture is no longer practice by some people because
they are already attuned to the culture of other countries. The way other nationalities eat, live,
and dress
Globalization, Jobs, And Income
One concern frequently voiced by globalization opponents is that falling barriers to international
trade destroy manufacturing jobs in wealthy advanced economies such as the United States and Western
Europe. The critics argue that falling trade barriers allow firms to move manufacturing activities to
countries where wage rates are much lower. When a country embraces free trade, there is always some
dislocation but the whole economy is better off as a result.
Example: lost textile jobs at Hardwood Industries
lost call center jobs at Dell
Importing textiles from China leads to lower prices for clothes in the United States, which enables
consumers to spend more of their money on other items. The increased income generated in China textile
exports increases income levels in that country, which helps the Chinese to purchase more products
produced in the United States.
Figure 1.11 Example of Textile Trading
Globalization critics argue that the decline in unskilled wage rates is due to the migration of low-
wage manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers..
Tougher environmental regulations and stricter labor standards go hand in hand with economic progress.
As countries get richer, they enact tougher environmental and labor regulations. Free trade enables
developing countries to increase their economic growth rates and become richer, this should lead to
tougher environmental and labor laws.
Globalization, labor policies, and the environment
Globalization critics often argue that adhering to labor and environmental regulations significantly
increases the costs of manufacturing enterprises and puts them at a competitive disadvantage. An
increase in pollution and result in firms from advanced nations exploiting the labor of less developed
nations.
Lesson 4. Managing In The Global Marketplace
An international business is any firm that engages in international trade or investment. A firm
does not have to become a multinational enterprise, investing directly in operations in other countries, to
engage in international business, although multinational enterprises are international businesses. A firm
has to do its export or import products from other countries.
Managing an international business
Managing international business is different from managing a purely domestic business because of the
following:
1. Countries are different- different in language, culture, food, laws to name a few
2. The range of problems confronted by a manager in an international business is wider and the
problems themselves more complex than those confronted by a manager in a domestic business
3. An international business must find ways to work within the limits imposed by government
intervention in the international trade and investment systems
4. International transactions involve converting money into different currencies- currencies are
fluctuating.
VI. LEARNING ACTIVITIES

MODULE 1
Name:_________________________________ Score:____________
Section:_______________ Date:_____________
Case Study: The Globalization of Starbucks
Thirty years ago, Starbucks was a single store in Seattle’s Pike Place Market selling premium-
roasted coffee. Today, it is a global roaster and retailer of coffee with some 16,700 stores, 40 percent of
which are in 50 countries outside of the United States. Starbucks set out on its current course in the
1980s when the company’s director of marketing, Howard Schultz, came back from a trip to Italy
enchanted with the Italian coffeehouse experience. Schultz, who later became CEO, persuaded the
company’s owners to experiment with the coffeehouse format- and the Starbucks experience was born.
The strategy was to sell the company’s own premium roasted coffee and freshly brewed espresso-style
coffee beverages, along with a variety of pastries, coffee accessories, teas, and other products, in a
tastefully designed coffeehouse setting. The company focused on selling “a third placed experience,”
rather than just the coffee. The formula led to spectacular success in the United States, where Starbucks
went from obscurity to one of the best-known brands in the country in a decade. Thanks to Starbucks,
coffee stores became places for relaxation, chatting with friends, reading the newspaper, holding
business meetings, or (more recently) browsing the web.
In 1995, with 700 stores across the United States, Starbucks began exploring foreign
opportunities. The first target market was Japan. The company established a joint venture with a local
retailer, Sazaby Inc. Each company held a 50 percent stake in the venture, Starbucks Coffee of Japan.
Starbucks initially invested $10 million in this venture, its first foreign direct investment. The Starbucks
format was then licensed to the venture, which as charged with taking over responsibility for growing
Starbucks’ presence in Japan.
To make sure the Japanese operations replicated the “Starbucks experience” in North America,
Starbucks transferred some employees to the Japanese operation. The licensing agreement required all
Japanese store managers and employees to attend training classes similar to those given to US
employees. The agreement also required that stores adhere to the design parameters stablished in the
United States. In 2001, the company introduced a stock option plan for all Japanese employees, making
it the first company in Japan to do so. Skeptics doubted that Starbucks would be able to replicate its
North American success overseas, but by the end of 2009 Starbucks has some 850 stores and a
profitable business in Japan.
After Japan, the company embarked on an aggressive foreign investment program. In 1998, it
purchased Seattle Coffee, a British coffee chain with 60 retail stores, for $84 million. An American couple,
originally from Seattle, had started Seattle Coffee with the intention of establishing a Starbucks-like chain
in Britain. In the late 1990s, Starbucks opened stores in Taiwan, China, Singapore, Thailand, New
Zealand, South Korea, and Malaysia. In Asia, Starbucks most common strategy was to license its format
to a local operator in return for initial licensing fees and royalties on store revenues. As in Japan,
Starbucks insisted on an intensive employee training program and strict specifications regarding the
format and layout of the store.
By 2002, Starbucks was pursuing an aggressive expansion in mainland Europe. As its first entry
point, Starbucks chose Switzerland. Drawing on its experience in Asia, the company entered into a joint
venture with a Swiss company, Bon Appetit Group, Switzerland’s largest food service company. Bon
Appetit was to hold a majority stake in the venture, and Starbucks would license its format to Swiss
company using agreement to those ih had used successfully in Asia. This was followed by a joint venture
in other countries. As it has grown its global footprint, Starbucks has also embraced ethical sourcing
policies and environmental responsibility. Now one of the world's largest buyers of coffee, in 2000
Starbucks started to purchase Fair Trade Certified coffee. The goal was to empower small-scale farmers
organized in cooperatives to invest in their farms and communities, to protect the environment, and to
develop the business skills necessary to compete in the global marketplace. In short, Starbucks was
trying to use its influence to not only change the way people consumed coffee around the world, but also
to change the way coffee was produced in a manner that benefited the farmers and the environment. By
2010, some 75 percent of the coffee Starbucks purchased was Fair Trade Certified, and the company
has a goal of increasing that to 100 percent by 2015.
Case Discussion Questions
1. Where did the original idea for the Starbucks format come from? What lesson for international
business can be drawn from this?
2. What drove Starbucks to start expanding internationally? How is the company creating value for its
shareholders by pursuing an international expansion strategy?
3. Why do you think Starbucks decided to enter the Japanese market via a joint venture with a Japanese
company? What lesson can you draw from this?
4. Is Starbucks a force for globalization? Explain your answer.
5. When it comes to purchasing coffee beans, Starbucks adheres to a "fair trade" program. What do you
think is the difference between fair trade and free trade? How might a fair trade policy benefit
Starbucks?
Source: Hill, C. (2013). International Business Competing in the Global Marketplace. Retrieved August
13, 2019 from https://www.belstu.by/Portals/0/Charles-Hill-International-Business.pdf
VII. ASSIGNMENT
MODULE 1
Name:_________________________________ Score:____________
Section:_______________ Date:_____________
1. Define the following

a. Globalization
b. Globalization of markets
c. Globalization of production
d. Dumping
e. Import
f. Export
Globalization
Globalization of markets
Globalization of production
Dumping
Import
Export
2. Why do countries prohibit dumping?
3. What are the roles of the following organizations in international trade?
GATT- General Agreement on Tariffs and Trade
WTO- World Trade Organization
IMF- International Monetary Fund
World Bank
UN- United Nations
4. What are the advantages of globalization?
5. What are the disadvantages of globalization?
6. What is the benefit of containerization in international trade?
VIII. EVALUATION (Note: Not to be included in the student’s copy of the IM)
IX. REFERENCES
Hill, C. (2013). International Business Competing in the Global Marketplace. Retrieved August 13, 2019
from https://www.belstu.by/Portals/0/Charles-Hill-International-Business.pdf
Kotler, P and Keller, K.L. (2012). Marketing Management 14 th Edition. Jurong, Singapore: Pearson
Education South Asia Pte. LTD
Perreault, W. et al. (2015). Essentials of Marketing A Marketing Strategy Planning Approach 14 th Ed.
Penn Plaza, New York: Mc Graw Hill

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Republic of the Philippines

NUEVA VIZCAYA STATE UNIVERSITY

College : Business Education

DEGREE Bachelor of COURSE NO. INTL 1

II. LESSON TITLE

Lesson 1. What is Globalization

III. LESSON OVERVIEW

IV. DESIRED LEARNING OUTCOMES

Lesson 1. Define globalization.

Lesson 1. What is Globalization

Figure 1.3 Different International Brands

Figure 1.4 Different International Brands

Figure 1.5 Boeing’s 777

The Emergence of Global Institutions

Lesson 2. Drivers of Globalization

Declining trade and investment barriers

The Role of Technological Change

Figure 1.7 Containers Used in International Trade

Implications for the globalization of production

Implications for the globalization of markets

Figure 1.8 Cable Channels Seen in Different Countries

Philippines Tokyo Malaysia

Figure 1.9 McDonalds in Different Countries

Lesson 3. The Changing Demographics of The Global Economy

The Changing nature of the multinational enterprise

Figure 1.10 Different Types of Online Selling

The globalization debate

Increased and cross-border investment will result in

Globalization, Jobs, And Income

Figure 1.11 Example of Textile Trading

Globalization, labor policies, and the environment

Lesson 4. Managing In The Global Marketplace

VI. LEARNING ACTIVITIES

Case Study: The Globalization of Starbucks

Case Discussion Questions

4. Is Starbucks a force for globalization? Explain your answer.

1. Define the following

2. Why do countries prohibit dumping?

3. What are the roles of the following organizations in international trade?

GATT- General Agreement on Tariffs and Trade

WTO- World Trade Organization

IMF- International Monetary Fund

UN- United Nations

4. What are the advantages of globalization?

5. What are the disadvantages of globalization?

6. What is the benefit of containerization in international trade?

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