Scribd
Upload
8 views

Chapter 1 - Ta

Globalization is characterized by the integration of national economies into a global marketplace, driven by the globalization of markets and production. Key institutions like the WTO, IMF, and World Bank facilitate this process, while technological advancements and reduced trade barriers further propel globalization. The changing demographics of the global economy indicate a shift in economic power towards developing countries, impacting foreign direct investment and international business dynamics.

Uploaded by

haiyennguyen10032005
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
8 views

Chapter 1 - Ta

Globalization is characterized by the integration of national economies into a global marketplace, driven by the globalization of markets and production. Key institutions like the WTO, IMF, and World Bank facilitate this process, while technological advancements and reduced trade barriers further propel globalization. The changing demographics of the global economy indicate a shift in economic power towards developing countries, impacting foreign direct investment and international business dynamics.

Uploaded by

haiyennguyen10032005
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 7

CHAPTER 1: GLOBALIZATION

INTRODUCTION
The world economy today
✓Fewer self-contained national economies with high barriers to cross-border
trade and investment
✓A more integrated global economic system with:
- Over $5 trillion in foreign exchange transactions daily
- Over $19 trillion of goods and $5 trillion of services being sold across national
borders
- The establishment of international institutions
WHAT IS GLOBALIZATION? 1 of 4
▪ Globalization refers to the trend towards a more integrated and interdependent
world economy
▪ Two key facets of globalization
✓ The globalization of markets
✓ The globalization of production
The 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
✓A company does not have to be the size of these multinational giants to
facilitate and benefit from it.
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
(labor energy, land, and capital)
✓Lower overall cost structure
✓Improve the quality or functionality of the product to compete more
effectively
✓Boeing only undertakes engineering design, marketing and sales, final
assembly – everything else is outsourced globally
▪ 80 percent of Boeing’s customers are foreign airlines
▪ Currently rethinking this strategy
✓Early outsourcing was primarily for manufacturing
✓Today, modern communications technology allows companies to outsource
services
✓Impediments to globalization
▪ Formal and informal trade barriers
▪ Barriers to foreign direct investment
▪ Transportation costs
▪ Economic and political risk
▪ Managerial challenge
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
+ World Trade Organization (WTO)
+ International Monetary Fund (IMF)
+ The World Bank
+ The United Nations (UN)
+ The Group of 20 (G20)
▪ World Trade Organization (WTO) - 1995
✓Polices world trading system and ensures nations adhere to the rules
established in WTO treaties
✓Succeeded the General Agreement on Tariffs and Trade (GATT)
✓162 nations accounted for 98% of world trade (2016)
▪ International Monetary Fund (IMF) - 1944
✓ Promotes order in the international monetary system
✓ Lender of last resort
▪ The World Bank
✓ Promotes economic development using low-interest loans
▪ The United Nations (UN) - 1945
✓ Maintains international peace and security
✓ Develops friendly relations among nations
✓ 193 member countries
✓ Promotes respect for human rights
✓ Is a center for harmonizing the actions of nations
▪ The Group of 20 (G20) - 1999
✓ Finance ministers and central bank governors of 19 largest world economies
✓ Represents 90% of global BDP
✓ A forum for a coordinated policy response to the financial crisis of 2008-
2009
DRIVERS OF GLOBALIZATION
Two factors driving the move toward greater globalization
✓Decline in barriers to free flow of goods, services, and capital
✓Technological change
Declining Trade and Investment Barriers
✓International trade: when a firm exports goods or services to consumers in
another country
✓Foreign direct investment: when a firm invests resources in business activities
outside its home country
✓During 1920s and 1930s, many nations put up barriers to international trade to
protect domestic industries
✓After WWII, advanced Western countries reduced barriers
▪ GATT, Uruguay Round, and WTO
✓ We produce more goods and services than ever before but a greater
proportion being traded across national borders
✓Consumers more knowledgeable which drives demand
✓Volume of world trade growing faster than GDP
▪ More companies dispersing parts production
▪ Economies are becoming even more intertwined
▪ World has become significantly wealthier

The Role of Technological Change


✓ Since World War II, there have been major advances in communication,
information processing, and transportation
✓Microprocessors and Telecommunications
▪ Moore’s Law
✓The Internet
▪ Currently, 4.66 billion users (46% of global population)
✓Transportation Technology
▪ Containerization: lowering the costs of shipping goods over long distances
(1920 ->1990: 95$->29$/ton)
✓ Implications for the Globalization of Production
▪ Lower transportation costs
▪ Geographically dispersed production system more economical
▪ Allow firms to better respond to customer demands
✓ Implications for the Globalization of Markets
▪ Low cost communication networks help create electronic global marketplace
▪ Low cost transportation makes it economical to ship products around the
world
▪ A reduction in cultural distance
▪ A convergence of consumer tastes and preferences
THE CHANGING DEMOGRAPHICS OF THE GLOBAL ECONOMY
▪ In the 1960s:
✓U.S. dominated the world economy, world trade, and world FDI
✓U.S. MNEs 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
The Changing World Output and World Trade Picture
✓Early 1960s:
▪ U.S. - dominant industrial power accounting for about 38.3% of world
manufacturing output
✓By 2014:
▪ U.S. accounted for only 22.4%
▪ Germany, France, and the U.K. had a similar decline
▪ Rapid economic growth now in countries like China, India, Russia, and Brazil
▪ Further relative decline by the U.S. is likely

The 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
✓Cross-border flows of foreign direct investment are rising
✓The largest recipient of FDI is China, followed by Brazil, Mexico, and India
The Global Economy of the 21st Century
✓A more integrated global economy
▪ New opportunities for firms
▪ But, political and economic disruptions can throw plans into disarray
QUESTION:
1. What factors have contributed to the growth of India’s software industry?
2. How has India’s software industry changed in recent years? What are the
implications of these changes for American companies like IBM and Microsoft?

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy