CHAPTER 1: GLOBALIZATION improve their economies and improve the

standard of living of their people.

Globalization – a shift towards an integrated and
interdependent world economy. 5. United Nations (UN)

 Aims to protect local products.  Promotes peace through international

cooperation and collective security.
The Globalization of Markets - The merging of  193 member countries.
historically distinct and separate national markets into  UN Charter has four basic purposes:
one huge global marketplace.  Maintain international peace and
The Globalization of Production security.
 Develop friendly relations among
 Sourcing goods to take advantage of differences nations.
in cost and quality of factors of production  Cooperate in solving international
o Factors of production include labor, problems and in promoting respect for
energy, land, capital human rights.
 Early outsourcing was confined to  Be a center for harmonizing the actions
manufacturing of nations.
o Modern communications technology
has advanced outsourcing today for Group of Twenty (G20)
service activities (Argentina, Germany, Republic Korea, USA, Australia,
 Robert Reich suggests “global products.” India, Russia, European Union, Brazil, Indonesia, Saudi
 Impediments prevent optimal dispersion of Arabia, Canada, Italy, South Africa, China, Japan, Turkey,
activities. France, Mexico, United Kingdom)
The Emergence of Global Institutions  Comprises finance ministers and central bank
1. General Agreement on Tariffs and Trade (G A T T) governors of the 19 largest economies in the
world plus Representatives from the EU &
2. World Trade Organization (WTO) European Central Bank .
 90% of global GDP & 80% of International
 Polices the world trading system.
Global Trade.
 Ensures nation-states adhere to the rules.
 Facilitates multinational agreements among Drivers of Globalization
members.
 WTO members (as of 2021,164 nations that  Declining Trade & Investment Barriers
account for 98 percent)  1920s - 1930s: many barriers to international
trade and FDI
3. International Monetary Fund (IMF)  International Trade: when a firm exports goods
or services to consumers in another country
 "Lender of Last Resort"
 Foreign Direct Investment (FDI): when a firm
 primarily focused on the stability of the global
invests resources in business activities outside
monetary system and monitoring the currencies
its home country
of the world.
 GATT lowered barriers
4. World Bank  Between 1960 and 2020: the value of the world
economy increased 9 times, while the value of
 Promotes economic development.
international goods increased 19.7 times
 Focused on making low-interest loans to cash-
 Trade in goods & services and the value of FDI
strapped governments in poor nations that wish
have all been growing faster than the world
to undertake significant infrastructure
output
investments.
Role of Technical Change
 Its role is to reduce poverty by lending money
 Communication
to the governments of its poorer members to
  Microprocessor - single most important  Growth in the number of medium- and
innovation since World War II. small-sized businesses.
 Moore’s law predicts that the power of  Internet is lowering barriers that
microprocessor technology doubles. smaller firms faced in international
 The Internet trade.
 acts as an equalizer.  The Changing World Order
 More than half of the world’s  Former communist countries present export
population uses the internet. and investment opportunities
 Transportation technology  Global Economy of the 21st Century
 Implications for the globalization of production:  Barriers to the free flow of goods, services, and
locating production in geographically separate capital have been coming down
locations has become more economical  Strengthened by the widespread adoption of
 Implications for the globalization of markets: liberal economic policies by countries that had
cultural has been reduces and has brought opposed them
some convergence of consumer tastes and
preferences

Containerization CHAPTER 2: DIFFERENCES IN CULTURE

Advantages Cross-cultural literacy - an understanding of how
cultural differences across and within nations can affect
 Flexibility the way in which business is practiced
 Ease of Management
 Speed of Transportations  There may be a relationship between culture and
 Economies of Scale the costs of doing business in a country or region
 Durability  Culture is not static – it can and does evolve
 Safety & Security  Multinational enterprises can be engines of cultural
 Standardization change

Disadvantages Culture - a system of values and norms shared among a

group of people that when taken together constitute a
 Space Constraints design for living.
 Infrastructure Costs
 Container Management Failure Values - Ideas about what a group believes to be good,
 Re-positioning of Empty Containers right, and desirable.
 Smuggling Norms - social rules & regulations that prescribe
The Changing Demographics of the Global Economy behavior in particular situations.

 The changing FDI picture 1. Folkways: customs that we follow but are often
 As barriers to the free flow of goods and not written down, we learn them through
services fell, non-U.S firms increasingly invested intuition when we grow up
across national borders 2. Taboos: "negative norms" things that people
 Outward Stock of FDI: total cumulative value of find offensive and socially inappropriate if
foreign investments by firms domiciled in you're caught doing them
nations outside of that nation's borders 3. Mores: "moral norms" if you break them you be
 The changing nature of the Multinational seen as not just in poor taste but also immoral
Enterprise 4. Laws: norms that are actually defines as being
 Multinational Enterprise (MNE): any business legal and illegal
that has productive activities in 2 or more Society - group of people sharing a common set of
countries values and norms.
 The rise of mini-multinationals:
 Society reflects people who are bound together by Ethnical System - set of moral principles, or values, that
a common culture are used to guide and shape behavior.
 Nation-states are political creations that can
Four dominant religions today
contain a single culture or several
 Many countries have multiple cultures 1. Christianity
within the country o Most widely practiced religion;
monotheistic.
Determinants of Culture

 Religion.
 Political philosophy.
 Economic philosophy. o Max Weber suggested that it was the
 Education. Protestant work ethic (focus on hard
 Language. work, wealth creation, and frugality)
 Social structure. that was the driving force of capitalism
o Protestantism gave individuals more
Social structure - the basic social organization of a freedom to develop their own
society. relationship with God which may have
 Two Dimension to consider paved way to economic freedom
 Individual - the basic building block of social o Generalizations about any religions
organization. influence on sociology and economy
 Group - an association of two or more must be taken with great caution
individuals who have a shared sense of
identity and interact in structured ways 2. Islam
based on common experience.  Second largest religion.
 Monotheistic, one true omnipotent God
Social Stratification - hierarchical social categories often (Allah).
based on family background, occupation, and income.

 Implication: includes unequal access to resources,

power, and opportunities
and violent
 Factors :
1. Economic Status
2. Racial & Ethnic Stratification
upheavals
 Islamic fundamentalism is incorrectly
3. Gender Stratification
associated with militants, terrorists, and
4. Age Stratification
violent upheavals
5. Educational Stratification
6. Caste System
3. Hinduism
7. Religious Stratification
 World’s oldest religion.
Social mobility - Extent to which individuals can move  Moral force in society requires the
out of the strata into which they are born. acceptance of certain responsibilities
called dharma.
 Caste system - is a closed system where social
 Believe in reincarnation and karma.
position is determined by family and change is
 Achieving a complete spiritual
usually not possible.
perfection, called nirvana.
 Class system - is less rigid, and position can be
 Max Weber: Hindus are valued by their
changed through achievement and luck.
spiritual rather than material
Religion- system of shared beliefs and rituals concerned achievements.
with realm of the sacred.
 Culture and Business
4. Buddhism
 Hofstede’s dimensions of culture
 Stresses spiritual growth and the
 Power Distance: refers to how society
afterlife, rather than involvement in this
deals with the fact that people are
world.
unequal in physical and intellectual
 Does not emphasize wealth creation.
capabilities

  Individualism VS. Collectivism: focuses

on the relationship between individuals
and their fellows
 Buddhism does not support the caste
 Uncertainty Avoidance: measures the
system, so individuals do have some
extent to which different cultures
mobility and can work with individuals
socialize their members into accepting
from different classes.
ambiguous situations and tolerating
 Recent trends bring the “Zen”
uncertainty
orientation from Buddhism into
 Masculinity VS. Femininity: looks at the
business in the Western world.
relationship between gender wand
work roles
5. Confucianism
 Long-term VS. Short-term Orientation:
 Practiced mainly in China, Korea, and
the extent to which a culture programs
Japan.
its citizens to accept and delayed
 Teaches the importance of attaining
gratification of their material, social,
personal salvation through right action.
and emotional needs
 High morals, ethical conduct, and
loyalty to others. World Values Survey (WVS) – explores people's values
 Three key teachings of Confucianism: and norms, how they change over time, and what
o Loyalty impact they have in society and business.
o Reciprocal obligations
Cultural Change
o Honesty
 Culture is not a constant; it evolves over time.
Language  In the 1960s, women in management was not
 Spoken Language - Countries with more than accepted, while today it is a welcomed reality.
one language often have more than one  Economic advancement and globalization may
culture. be important factors.
 Mandarin (Chinese) is mother tongue of the  Culture may change as a society becomes
largest number of people. wealthier.
 The most widely spoken language in the
Ethnocentrism - is the belief in the superiority of one’s
world is English.
own ethnic group or culture.
 Unspoken Language - Nonverbal
communication refers to the use of nonverbal
cues to communicate meaning.
 Often culturally bound CHAPTER 3: REGIONAL ECONOMIC
INTEGRATION
Education
Regional Economic Integration - Agreements among
 Formal Education - Medium through which
countries in a geographic region
individuals learn languages and other skills.
 Socializes the young into the values and norms Tariff – taxes that are being imposed on imported and
of a society. exported products.
 Provides a national competitive advantage.
  Import Tariff: a tax/duty levied on imported  Common Market
commodities  No restrictions on immigration,
 Most common form of tariff emigration, or cross -border flows of
 Export Tariff: tax on exported commodities capital among member of countries
 Prohibited by the U.S constitution, but  Requires harmony & cooperation on
occasionally practiced in developing fiscal, monetary, and employment
countries to generate government policies
revenue.  Allows the free movement of goods,
services, capital, and labor
Non-tariff barrier - is a way to restrict using trade
barriers in a form other than a tariff

 Licenses - a license system that allows  Economic Union

authorized companies to import specific  Free flow of products and factors of
commodities that are included in the list of production among member countries
licensed goods and adoption of a common external
 Quotas - quantitative restrictions that are trade policy
imposed on imports and exports of a specific  High Degree of Integration
product for a specified period  Allows free movement of production
 Embargoes - total bans of trade on specific factors such as capital investment and
commodities and may be imposed on imports labor and has a common internal and
and exports or specific goods that are supplied external trading policy.
to or from specific countries  Coordinating Bureaucracy
 Import Duties - form of foreign trade regulation  Sacrifice of National Sovereignty
that requires importers to pay the central bank  Objectives of Economic Union
of the country a specified sum of money for a o Increase Efficiency
definite period o Customer Satisfaction
Levels of Economic Integration o Higher Standard of Living
o Increase Competitiveness
 Free Trade Area Strengthening Diplomacy
Eliminates all barriers to trade goods  Political Union
and services among member countries  Central political apparatus coordinates
 Rules of Origin economic, social, and foreign policy of
 Free Trade Agreement: pact between 2 member states
or more nations to reduce barriers to  Involves a common government
imports and exports among them  Found within nation state
 Pros:
o Increased Economic Growth 10 Major Regional Trading Blocs in the World
o Lower Government Spending  ASEAN
Technology Transfer  APEC
 Cons:  BRICS
o Increased in Outsourcing  EU
o Poor Working Conditions  NAFTA
o Degradation of Natural  CIS
Resources  COMESA
 Customs Union  SAARC
 Eliminates trade barriers and adopts a  MERCOSUR
common external trade policy  IOR-ARC
 Andean Pact (includes Bolivia,
The Case against Regional Integration
Colombia, Ecuador, and Peru)
 Political Case  Maastricht Treaty - committed the EU to adopt
 Linking countries together & making them more a single currency (euro)
dependent on each other promotes political  Denmark, Great Britain, and Sweden, chose not
cooperation to use the euro
 Reduces the likelihood of violent conflict
Benefits of Euro
 Economic Case  Savings from handling a single currency
 All countries gain from free trade and  Lower foreign exchange and hedging costs
investment a positive sum game  Makes it easier to compare prices across
 Assumes an absence of barriers Europe, increasing competition
 Increases investment options
 Impediments to Integration
 While a nation as a whole may benefit from a
regional FTA, certain groups will lose
 It implies a loss of national sovereignty

 Trade Diversion: Higher cost suppliers > Low cost

foreign supplies
 Trade Creation: Low Cost foreign supplies > Higher
cost supplies

Regional Economic Integration in Europe

Europe has 2 trade blocs

 EU
 27 members
 Britain left in 2020
 EFTA
 4 members

Treaty of Rome: established the European Community

5 European Institutions

 European Commission
 Proposes EU legislation, implements it, and
monitors compliance
 European Council
 Ultimate controlling authority within the EU
 Ratifies international agreements
 European Parliaments
 Debates legislation proposed by the
commission and forwarded to it by the
council
 Court of Justice
 1 judge from each country
 Supreme appeals court for EU law
 Court of Auditors

The Establishment of Euro