Unit 02 Globalization

Unit 2
Globalization
Corresponds to Chapter 1 of the textbook:

International Business: Competing in the Global Marketplace, 8 th Ed.
By Charles W. L. Hill
McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
LEARNING OBJECTIVES
Understand the difference between domestic and
international business.
Understand what is meant by the term globalization.
Be familiar with the main drivers of globalization.
Appreciate the changing nature of the global economy.
Understand the main arguments in the debate over the

impact of globalization.
McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
What is an
International Business?
International Business –
 a business whose activities are carried out across
national borders
Foreign Business –
 the operations of a company outside the home or
domestic market
International Company (IC) –
 a business whose activities are carried out across
national borders
either a global or multinational company
1-3
What is an
International Business?
 Global Company (GC) –
an organization that attempts to standardize
and integrate operations worldwide in most or
all functional areas
 Multi-domestic or Multinational Company

(MDC or MNC)
 an organization with multi-country affiliates, each of
which formulates its own business strategy based on
perceived market differences
1-4
Managing an International
Business
Managing an international business differs from
managing a domestic business because
countries are different
the range of problems confronted in an
international business is wider and the problems
are more complex than domestic business
firms have to find ways to work within the limits
imposed by government intervention in the
international trade and investment system
international transactions involve converting
money into different currencies 1-5
What Is Globalization?
The world is moving away from self-
contained national economies toward
an interdependent, integrated global
economic system
Globalization
refers to the shift toward a more
integrated and interdependent world.
1-6
What Is Globalization?
Globalization
Political Social
Economy Ecological/
Environmental
Globalization of Markets
Globalization of Production
1-7
What is The
Globalization of Markets?
Historically distinct and separate national markets
are merging
It no longer makes sense to talk about the
“German market” or the “American market”
Instead, there is the “global market”
 falling trade barriers make it easier to sell
globally.
consumers’ tastes and preferences are
converging on some global norm
firms promote the trend by offering the same
basic products worldwide 1-8
What Is The
Globalization of Production?
 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 like land, labor, and capital.
 Companies can
 lower their overall cost structure
 improve the quality or functionality of
their product offering 1-9
Globalization: Is it Good or Bad?
Supporters believe that increased trade and cross-
border investment mean
 lower prices for goods and services
 greater economic growth
 higher consumer income, and more jobs
Critics worry that globalization will cause
 job losses
 environmental degradation
 the cultural imperialism of global media and MNEs
Anti-globalization protesters now regularly show

up at most major meetings of global institutions
1-10
How Does Globalization Affect
Jobs And Income?
Critics argue that falling barriers to trade
are destroying manufacturing jobs in
advanced countries
Supporters contend that the benefits of this

trend outweigh the costs
 countries will specialize in what they do most
efficiently and trade for other goods—and all
countries will benefit
1-11
Labor Policies And The Environment?
Critics argue that firms avoid costly efforts to
adhere to labor and environmental regulations
by moving production to countries where such
regulations do not exist, or are not enforced.
Supporters claim that tougher environmental and

labor standards are associated with economic
progress
as countries get richer from free trade, they
implement tougher environmental and labor
regulations
1-12
National Sovereignty?
Today’s interdependent global economy shifting
economic power away from national governments
toward supranational organizations like the WTO,
the EU, and the UN?
Critics argue that unelected bureaucrats have the
power to impose policies on the democratically
elected governments of nation-states
Supporters claim that the power of these
organizations is limited to what nation-states agree
to grant
the power of the organizations lies in their ability
to get countries to agree to follow certain actions
1-13
How does Globalization Affect
The World’s Poor?
Is the gap between rich nations and poor nations
is getting wider?
Critics believe that if globalization was beneficial

there should not be a divergence between rich and
poor nations
Supporters claim that the best way for the poor

nations to improve their situation is to;
reduce barriers to trade and investment
implement economic policies based on free
market economies
1-14
What Is Driving
Globalization?
1. The decline in barriers to the free flow of
goods, services, and capital that has occurred
since the end of World War II.
since 1950, average tariffs have fallen
significantly and are now at 4 percent
countries have opened their markets to FDI
2. Technological change
microprocessors and telecommunications
the Internet and World Wide Web
3. Transportation 1-15
Declining Trade And
Investment Barriers
Average Tariff Rates on Manufactured Products as Percent of Value
1-16
What Does Globalization
Mean For Firms?
 Lower barriers to trade and
investment mean firms can
 View the world as their market,
rather than a single country,
 base production in the optimal

location for that activity
1-17
What Does Globalization
Mean For Firms?
 Technological change means
lower information processing and communication
costs - firms can create and manage globally dispersed
production systems
low cost global communications networks - help
create an electronic global marketplace
global communication networks and global media -
create a worldwide culture, and a global market for
consumer products.
 Modern Transportation means - lower transportation
cost- firms can disperse production to economical,
geographically separate locations
low-cost transportation - help create global markets 1-18
The Changing Demographics
Of The Global Economy
 There has been a drastic change in the
demographics of the world economy in the last 30
years
 Two trends are important:
1. the Changing World Output and World Trade

Picture
2. the Changing Foreign Direct Investment Picture
1-19
How Has World Output And
World Trade Changed?
In 1960, the United States accounted for over 40%
of world economic activity
By 2008, the United States accounted for just over
20% of world economic activity
A similar trend occurred in other developed
countries
The share of world output accounted for by
developing nations is rising and is expected to
account for more than 60% of world economic
activity by 2020
1-20
How Has World Output And
World Trade Changed?
The Changing Demographics of World GDP and Trade
1-21
How Has Foreign Direct
Investment Changed Over Time?
In the 1960s, U.S. firms accounted for about two-
thirds of worldwide FDI flows
Today, the United States accounts for less than
one-fifth of worldwide FDI flows
Other developed countries have followed a similar
pattern
In contrast, the share of FDI accounted for by
developing countries has risen
Developing countries, especially China, have also
become popular destinations for FDI
1-22
How Has Foreign Direct
Investment Changed Over Time?
Percentage Share of Total FDI Stock 1980-2007
1-23
Why Do We Need
Global Institutions?
Global Institutions
help manage, regulate, and police the global
marketplace
promote the establishment of multinational treaties to
govern the global business system
Examples include
the General Agreement on Tariffs and Trade (GATT)
the World Trade Organization (WTO)
the International Monetary Fund (IMF)
the World Bank
the United Nations (UN)
1-24
What Do Global
Institutions Do?
 The World Trade Organization – WTO (1995)
 Makes polices for the world trading system
makes sure that nation-states adhere to the rules laid
down in trade treaties
promotes lower barriers to trade and investment
 The International Monetary Fund- IMF (1944) maintains
order in the international monetary system
 The World Bank (1944) promotes economic development
 The United Nations- UNO (1945)
maintains international peace and security
develops friendly relations among nations
cooperates in solving international problems and in
promoting respect for human rights
is a center for harmonizing the actions of nations
1-25

Unit 02 Globalization

Uploaded by

Copyright:

Available Formats

Unit 02 Globalization

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Unit 02 Globalization

Uploaded by

Copyright:

Available Formats

Unit 2

Corresponds to Chapter 1 of the textbook:

Understand what is meant by the term globalization.

Be familiar with the main drivers of globalization.

Appreciate the changing nature of the global economy.

Understand the main arguments in the debate over the

 Multi-domestic or Multinational Company

Anti-globalization protesters now regularly show

Supporters contend that the benefits of this

Supporters claim that tougher environmental and

Critics believe that if globalization was beneficial

Supporters claim that the best way for the poor

 base production in the optimal

1. the Changing World Output and World Trade

You might also like