Globalization: The Collapse of Time

& Distance
• Globalization
 the trend of the world economy toward
becoming a more interdependent system

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Globalization: The Collapse of Time
& Distance
• Reflected in 3 Important Developments:
1. The Rise of “Global Village” and
Electronic Commerce.
• Global Village-refers to the “shrinking”
of time and space as air travel and the
electronic media have made it easier for
the people of the globe to communicate
with one another

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Globalization: The Collapse of Time
& Distance
• E-commerce-or “electronic
commerce”, the buying and
selling of products and services
through computer network

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Globalization: The Collapse of Time
& Distance
2.The World’s Becoming One Market
instead of many National ones (One
Big World Market: The Global
Economy).
• Global Economy-refers to the
increasing tendency of the economies
of the world to interact with one another
as one market instead of many national
markets
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Globalization: The Collapse of Time
& Distance
3. The Rise of both Megafirms and
Internet-enabled Minifirms
Worldwide.
• Megamergers Operating
Worldwide
• Minifirms Operating Worldwide

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Why Learn About International
Management?
International management- is
management that oversees the
conduct of operations in or w/
organizations in foreign
countries, whether it’s through
a multinational corporation or
multinational organization.
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Why Learn about International
Management
• Multinational Corporation- or
“multinational enterprise”, is a business
firm with operations in several countries
(ex. Ford Motor, Toyota-Japan)
• Multinational Organization-nonprofit
organization with operations in several
countries (ex. World Health Organization,
the International Red Cross, the Church
of Latter Day Saints)
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The Successful International
Manager: Geocentric, not
Ethnocentric and polycentric
• Expatriate manager—a manager
living or working in a foreign
country—it’s imperative that you try
to learn everything you can about
the local culture so that you can
deal effectively with it and avoid
being beaten by your competitors.

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Why Companies Expand
Internationally
1. Availability of Supplies
2. New Markets
3. Lower Labor Costs
4. Access to Finance Capital
5. Avoidance of Tariffs & Import
Quotas

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How Companies Expand
Internationally?
• Most companies don’t start out to
be multinationals. Generally, they
edge their way into international
business, making minimal
investments and taking minimal
risks.

5 Ways of Expanding Internationally:

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How Companies Expand
Internationally
1. Global outsourcing
 using suppliers outside the country to
provide labor, goods, or services

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How Companies Expand
Internationally
2. Importing, Exporting, and
Countertrading
• Importing
 a company buys goods outside the country
and resells them domestically
• Exporting
 a company produces goods domestically
and sells them outside the country
• Countertrading
 bartering goods for goods 4 - 18
How Companies Expand
Internationally
3.Licensing and Franchising
• Licensing
 a firm allows a foreign company to pay it a fee to
make or distribute the firm’s product or service
 Used in manufacturing companies

• Franchising
 a firm allows a foreign company to pay it a fee and a
share of the profit in return for using the firm’s brand
name and a package of materials and services
 Used more frequently in service companies.

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How Companies Expand
Internationally
4.Joint Ventures
• Strategic allies—two organizations that
have joined forces to realize strategic
advantages that neither would have if
operating alone
Ex. Joint Venture—also known as
“Strategic Alliance”, with a foreign
company to share the risks and rewards
of starting a new enterprise together in a
foreign country
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How Companies Expand
Internationally
5.Wholly-owned subsidiaries
A foreign subsidiary that is
totally owned and controlled by
an organization.

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Organizations Promoting
International Trade
1.World Trade Organization (WTO)
 designed to monitor and enforce trade
agreements
 Agreements are based on the General
Agreement on Tariffs and Trade (GATT)
 Consist of 151 countries

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Organizations Promoting
International Trade
2.World Bank
 purpose is to provide low-interest loans to
developing nations for improving
transportation, education, health, and
telecommunications

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Organizations Promoting
International Trade
3.International Monetary Fund (IMF)
 designed to assist in smoothing the flow of
money between nations
 Operates as a last-resort lender that
makes short term loans to countries
suffering from unfavourable balance of
payments (roughly the difference between
money coming into a country and money
leaving the country, because of imports,
exports, and other matters).
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Major Trading Blocs

• Trading bloc
 group of nations within a geographic region
that have agreed to remove trade barriers
with one another
 also known as an economic community

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 Major Trading Blocs
1. NAFTA—the Three Countries of the North
American Free Trade Agreement
2. The EU—the 25 Countries of the
European Union
3. ASEAN—Ten Countries of the Association
of Southeast Asian Nations
4. Mercosur—Six Countries of Latin America

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 Major Trading Blocs
1.NAFTA
 Consist of USA , Canada & Mexico encompassing 421
M people.
 Eliminate 99% of tariffs & quota among other countries.
2. European Countries
 Consist of 25 trading partners in Europe, covering
455 M.
 Nearly all internal trade barriers have been eliminated.
 A union of borderless neighbors & the world’s largest
free market.

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 Major Trading Blocs
3. ASEAN Countries( Asian tigers)
Consist of 10 countries: Brunei, Cambodia,
Indonesia,Laos,Malaysia,Myanmar,Vietnam,
Philippines, Thailand & Singapore.

Working in reducing trade barriers among

member countries, promoting the role of
private investment, stimulating the free flow of
capital, & assisting in access to technology.

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Major Trading Blocs

4. Mercosur
 largest trade bloc in Latin America &
has 4 core members: Argentina, Brazil,
Paraguay & Uruguay & 2 associate
members, Chile & Bolivia.
Reduce tariff by 75%
Striving for full economic integration.

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