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Ch01

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Published on May 7, 2008

Author: Sigfrid

Source: authorstream.com

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chapter :  chapter Globalization 1 Chapter 1: Globalization:  Chapter 1: Globalization INTRODUCTION Globalization: the trend towards a more integrated global economic system. Chapter 1: Globalization:  Chapter 1: Globalization Effects of globalization can be seen everywhere: the cars people drive the food people eat the jobs where people work the clothes people wear Chapter 1: Globalization:  Chapter 1: Globalization WHAT IS GLOBALIZATION? Globalization refers to the shift towards a more integrated and interdependent world economy. Chapter 1: Globalization:  Chapter 1: Globalization The Globalization of Markets Globalization of markets: the fact that in many industries historically distinct and separate national markets are merging into one huge global marketplace in which the tastes and preferences of consumers in different nations are beginning to converge upon some global norm. Examples: Sony Playstation Citicorp credit cards Coca-Cola McDonald's hamburgers Chapter 1: Globalization:  Chapter 1: Globalization The Globalization of Production Globalization of production: the tendency among many firms to source goods and services from different locations around the globe in an attempt to take advantage of national differences in the cost and quality of factors of production (such as land, labor, capital, and energy), thereby allowing them to compete more effectively against their rivals. Examples: Boeing Lenovo Chapter 1: Globalization:  Chapter 1: Globalization THE EMERGENCE OF GLOBAL INSTITUTIONS Global institutions: help manage, regulate, and police the global market place promote the establishment of multinational treaties to govern the global business system Chapter 1: Globalization:  Chapter 1: Globalization Examples of Global Institutions: World Trade Organization (WTO): responsible for policing the world trading system and ensuring that nations adhere to the rules established in WTO treaties International Monetary Fund (IMF): maintains order in the international monetary system World Bank: promotes economic development United Nations (UN): maintains international peace and security, develops friendly relations among nations, cooperates in solving international problems and promotes respect for human rights, and is a center for harmonizing the actions of nations Chapter 1: Globalization:  Chapter 1: Globalization DRIVERS OF GLOBALIZATION Two macro factors underlie the trend toward greater globalization: Declining trade and investment barriers The role of technological change Chapter 1: Globalization :  Chapter 1: Globalization Declining Trade and Investment Barriers After WWII, the industrialized countries of the West began the process of removing barriers to the free flow of goods, services, and capital between nations Under GATT, over 100 nations negotiated further decreases in tariffs and made significant progress on a number of non-tariff issues Chapter 1: Globalization:  Chapter 1: Globalization Under the WTO, a mechanism now exists for dispute resolution and the enforcement of trade laws, and there is a push to cut tariffs on industrial goods, services, and agricultural products Removal of barriers to trade has contributed to increased international trade (the export of goods or services to consumers in another country), world output, and foreign direct investment (the investing of resources and business activities outside a firm’s home country) Chapter 1: Globalization:  Chapter 1: Globalization The volume of world trade and investment has accelerated since the early 1980s. Chapter 1: Globalization:  Chapter 1: Globalization The Role of Technological Change The lowering of trade barriers made globalization of markets and production a theoretical possibility, technological change made it a tangible reality. Chapter 1: Globalization:  Chapter 1: Globalization Microprocessors and Telecommunications: Major advances in communications and information processing have lowered the cost of global communication and therefore the cost of coordinating and controlling a global organization The Internet and the World Wide Web: Web-based transactions have grown from virtually zero in 1994 to nearly $7 trillion in 2004 Transportation Technology: the most important developments are probably development of commercial jet aircraft and super freighters and the introduction of containerization, which greatly simplifies trans-shipment from one mode of transport to another Chapter 1: Globalization:  Chapter 1: Globalization Implications for the Globalization of Production Improvements in transportation technology have enabled firms to better respond to international customer demands Chapter 1: Globalization :  Chapter 1: Globalization Implications for the Globalization of Markets Managers today operate in an environment that offers more opportunities, but is also more complex and competitive than that of a generation ago Chapter 1: Globalization:  Chapter 1: Globalization THE CHANGING DEMOGRAPHICS OF THE GLOBAL ECONOMY In the 1960s: the U.S. dominated the world economy and the world trade picture U.S. multinationals dominated the international business scene about half the world-- the centrally planned economies of the communist world-- was off limits to Western international business Chapter 1: Globalization:  Chapter 1: Globalization The changing picture of world output and trade can be seen in Table 1.2. Chapter 1: Globalization:  Chapter 1: Globalization The Changing Foreign Direct Investment Picture The share of world output generated by developing countries has been steadily increasing since the 1960s The stock (total cumulative value of foreign investments) generated by rich industrial countries has been on a steady decline There has been a sustained growth in cross-border flows of foreign direct investment The flow of foreign direct investment (amounts invested across national borders each year) has been directed at developing nations especially China Chapter 1: Globalization:  Chapter 1: Globalization The stock of FDI by the world’s six most important national sources is shown in Figure 1.2. Chapter 1: Globalization:  Chapter 1: Globalization The sustained growth in cross-border flows of FDI and the emergence of developing nations as important destinations for FDI can be seen in Figure 1.3. Chapter 1: Globalization:  Chapter 1: Globalization The Changing Nature of Multinational Enterprises A multinational enterprise is any business that has productive activities in two or more countries. Chapter 1: Globalization:  Chapter 1: Globalization Non-U.S. Multinationals Expect the growth of new multinational enterprises (any business that has productive activities in two or more countries) from the world's developing nations The Rise of Mini-Multinationals The number of mini-multinationals (small and medium-sized companies) is on the rise Chapter 1: Globalization:  Chapter 1: Globalization The Changing World Order The collapse of communism in Eastern Europe represents a host of export and investment opportunities for Western businesses The economic development of China presents huge opportunities and risks, in spite of its continued Communist control Mexico and Latin America also present tremendous new opportunities both as markets and sources of materials and production Chapter 1: Globalization:  Chapter 1: Globalization The Global Economy of the 21st Century Firms must be aware that while the more integrated global economy presents new opportunities, it also could result in political and economic disruptions that may throw plans into disarray Chapter 1: Globalization:  Chapter 1: Globalization THE GLOBALIZATION DEBATE Is the shift toward a more integrated and interdependent global economy a good thing? Anti-globalization Protests Anti-globalization protesters now turn up at almost every major meeting of a global institution Protesters fear that globalization is forever changing the world in a negative way Chapter 1: Globalization:  Chapter 1: Globalization Globalization, Jobs, and Incomes Critics of globalization worry that jobs are being lost to low-wage nations Supporters of globalization argue that free trade will result in countries specializing in the production of those goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently Chapter 1: Globalization:  Chapter 1: Globalization Globalization, Labor Policies, and the Environment Critics of globalization argue that that free trade encourages firms from advanced nations to move manufacturing facilities offshore to less developed countries with lax environmental and labor regulations Supporters of free trade point out that tougher environmental regulation and stricter labor standards go hand in hand with economic progress and that foreign investment often helps a country to raise its standards Chapter 1: Globalization:  Chapter 1: Globalization Globalization and National Sovereignty Critics of globalization worry that economic power is shifting away from national governments and toward supranational organizations such as the World Trade Organization (WTO), the European Union (EU), and the United Nations Chapter 1: Globalization:  Chapter 1: Globalization Globalization and the World’s Poor Critics of globalization argue that the gap between rich and poor has gotten wider and that the benefits of globalization have not been shared equally Supporters of free trade suggest that the actions of governments have made limited economic improvement in many countries Chapter 1: Globalization:  Chapter 1: Globalization MANAGING IN THE GLOBAL MARKETPLACE Managing an international business (any firm that engages in international trade or investment) is different from managing a domestic business because: countries differ managers face a greater and more complex range of problems international companies must work within the limits imposed by governmental intervention and the global trading system international transactions require converting funds and being susceptible to exchange rate changes

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