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27 views

1 Globalisation

Uploaded by

Nudrat Zaheen Chowdhury
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 25

Global Business

Today 7e

by Charles W.L. Hill

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 1

Globalization

1-2
Introduction

In the world economy today, we see


fewer self-contained national economies with high
barriers to cross-border trade and investment
a more integrated global economic system with lower
barriers to trade and investment
over $4 trillion in foreign exchange transactions daily
over $12 million of goods and $3.3 trillion of services
being sold across national borders
the establishment of international institutions

1-3
What Is Globalization?

Question: What is globalization?

Answer:
Globalization refers to the trend towards a more
integrated global economic system
Two key facets of globalization are:
the globalization of markets
the globalization of production

1-4
The Globalization of Markets

Globalization of markets - the merging of


historically distinct and separate national markets
into one huge global marketplace
In many markets today, the tastes and
preferences of consumers in different nations are
converging upon some global norm
Coca Cola, Starbucks, Sony PlayStation, and
McDonald’s hamburgers

1-5
The Globalization of Production

Globalization of production - 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 energy, land, and capital)
Goal: lower overall cost structure or improve the
quality or functionality of their product and
gain competitive advantage

1-6
The Emergence of Global Institutions

Global institutions
manage, regulate, and police the global market place
promote the establishment of multinational treaties to
govern the global business system
the World Trade Organization (WTO) - polices world
trading system and ensures nations adhere to the rules
established in WTO treaties
In 2010, its 154 members accounted for 97% of world
trade
the International Monetary Fund (IMF) - maintains order
in the international monetary system

1-7
The Emergence of Global Institutions

 the World Bank - promotes economic development


 the 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

1-8
Drivers of Globalization

Question: What is driving the move toward greater


globalization?

Answer:
1. declining trade and investment barriers
2. technological change

1-9
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
During the 1920s and 1930s, many nations erected
barriers to international trade and FDI to protect domestic
industries from foreign competition

1-10
Declining Trade and Investment Barriers

After WWII, advanced Western countries began


removing trade and investment barriers
Under GATT (the forerunner of the WTO), over 100
nations negotiated further decreases in tariffs and made
significant progress on a number of non-tariff issues
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

1-11
Declining Trade and Investment Barriers

Lower trade barriers help companies view the world as a


single market and establish production activities in
optimal locations around the globe
This has led to an acceleration in the volume of world
trade and investment since the early 1980s

1-12
The Role of Technological Change

 Since World War II, there have been major advances in


communication, information processing, and
transportation
The microprocessor - lowered the cost of global
communication and the cost of coordinating and
controlling a global organization
U.S. web-based transactions - $133 billion in 2008
1.6 billion Internet users in 2009. >4 billion today
Commercial jet aircraft and super freighters and the
introduction of containerization - simplify trans-
shipment from one mode of transport to another.

1-13
The Role of Technological Change

Question: How does technological change affect the


globalization of markets?

Answer:
Low cost communications networks help create
electronic global marketplaces
Low cost transportation enable firms to create global
markets, and facilitate the movement of people from
country to country promoting a convergence of
consumer tastes and preferences

1-14
Changing Demographics of the Global Economy

In the 1960s:
the U.S. dominated the world economy and world trade
and world FDI
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
Today, much of this has changed.

1-15
Changing World Output and World Trade Picture

In the early 1960s:


U.S. - dominant industrial power accounting for about
40.3% of world manufacturing output
By 2008:
U.S. accounted for only 20.7%
Other developed nations experienced a similar
decline
Rapid economic growth now in countries like
China, India, and Brazil and Bangladesh

1-16
Changing Foreign Direct Investment Picture

The share of world output generated by developing


countries has been steadily increasing since the 1960s
The stock of foreign direct investment (total cumulative
value of foreign investments) generated by rich industrial
countries is declining
The largest recipient of FDI is ? HW

1-17
The Changing Multinational Enterprise

 A multinational enterprise is any business that has


productive activities in two or more countries
 Since the 1960s:
there has been a rise in non-U.S. multinationals
there has been a rise in mini-multinationals

1-18
The Changing World Order

The collapse of communism in Eastern Europe


export and investment opportunities
Economic development in China
huge opportunities despite continued Communist
control

1-19
The Globalization Debate

Question: Is the shift toward a more integrated and


interdependent global economy a good thing?

Answer:
Many experts believe that globalization is promoting
greater prosperity in the global economy, more jobs,
and lower prices for goods and services
Others feel that globalization is not beneficial

1-20
Globalization, Jobs, and Income

Critics claim jobs in advanced economies are being


lost to low-wage nations
Supporters claim while some jobs may be lost, the
economy as a whole is better off
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, and that in doing so, all countries will gain

1-21
Globalization, Labor Policies, and the Environment

Critics argue free trade encourages firms from


advanced nations to move manufacturing facilities
offshore to less developed countries with lax
environmental and labor regulations
Supporters say as countries get richer as a result of
globalization, they raise their environmental and
labor standards
free trade does not lead to more pollution and labor
exploitation, it leads to less

1-22
Globalization and National Sovereignty

Critics worry economic power is shifting away from


national governments and toward supranational
organizations such as the WTO, the European Union
(EU), and the UN
Supporters argue that the power of these organizations is
limited to what nation-states collectively agree to grant
the organizations must be able to persuade
members states to follow certain actions
without the support of members, the organizations
have no power

1-23
Globalization and the World’s Poor

 Critics argue the gap between rich and poor has


gotten wider and the benefits of globalization have not
been shared equally
 Supporters suggest that the actions of governments
have made limited economic improvement in many
countries

1-24
Managing in the Global Marketplace

1. Countries differences require companies to vary their


practices country by country
2. Managers face a greater and more complex range of
problems
3. International companies must work within the limits
imposed by governmental intervention and the global
trading system
4. International transactions require converting funds and
being susceptible to exchange rate changes

1-25

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