CHAPTER I:

GLOBALIZATION
 ONE GLOBAL
MARKETPLACE.

ONE COMMON GOAL.

INTEGRATED ECONOMY.
 GLOBALIZATION OF
MARKETS
BEING OFFERED THE SAME
PRODUCT, THERE WILL BE
CREATED A GLOBAL
MARKET,
 GLOBALIZATION OF
PRODUCTS
FOCUSED ONLY IN THE
GOODS AND SERVICES
PRODUCED AROUND THE
WORLD.
 THE EMERGENCE OF GLOBAL
INSTITUTIONS
• World trade organization (WTO): Policing
the world trade treaties signed by WTO
member states.
• The International Monetary Fund (IMF):
Maintain order in the international
monetary system.
• The World Bank (WB): Promote economic
development.
• United Nations(UN): Maintain
international peace and security,
develop friendly relations among
nations, cooperate in solving
international problems and promoting
respect for human rights.
 DRIVERS OF GLOBALIZATION
2 FACTORS:
- The decline of trade and investment
barriers
- Technological change

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 nature
 THE CHANGING WORLD OUTPUT
• In the early 1960s, the United States was
still by far the world's dominant industrial
power.
UNITED STATES IN 1963
- 40.3 percent of world economic activity,
measured by gross domestic product (GDP)
- 24.l percent of world output, measured by
gross national income (GNI)

• By the end of the 1980s, the U.S. position as

the world's leading exporter was threatened,
the U.S. share of world exports of goods and
services had slipped to 8.6 percent by 2010,
behind that of China.
 THE CHANGING NATURE OF THE
MULTINATIONAL ENTERPRISE
• A multinational enterprise (MNE) is any
business that has productive activities in two
or more countries.
2 notable trends in multinational
enterprise:
-The rise of non-U.S. multinationals
-The growth of mini-multinationals
The rise of the Internet is lowering the barriers
that small firms face in building international
sales.
Lubricating Systems, Inc. which manufactures
lubricating fluids for machine tools, employs 25
people and generates sales of $6.5 million. More
than $2 million of the company's sales are
generated by exports to other countries.
 THE ROLE OF
TECHNOLOGICAL
CHANGE
• Since the end of the World War II, the
world has seen advances in:

1. Communication
2. Information processing
3. Transportation technology (internet
and WWW)
 ADVANCES:
• Microprocessors and Telecomunications

• The internet and the World Wide Web

• Transportation Technology

• Implications of the Globalization of

Products

• Implications of the Globalization of

Markets
 GLOBALIZATION, JOBS AND INCOME

Falling barriers to
international trade
destroy manufacturing Jobs.
 MANAGING IN THE GLOBAL
• International Business
MARKETPLACE
• What makes different IB from others is:

 Countries are different.

In IB problems are more complex.

 Find ways to work within the limits

imposed by government intervention.

 International transactions involve

converting money into different
currencies.
 ANTI-GLOBALIZATION
PROTEST
The demonstrators were protesting against…

• Wide range of issues

• Job losses in industries under attack from foreign competitors
• Environmental degradation
• The cultural imperialism of global media and multinational enterprises

Dominated by what
some protesters
called the "culturally
V WTO
impoverished"
interests and values
of the United States.
S
 THE GLOBAL ECONOMY OF THE TWENTY-
FIRST CENTURY

Cross-borders trade Economies are Example: South

and investment has becoming more Korea and Taiwan
been growing more closely, into a now boast large
rapidly interdependent economies
global economic
system

“The world may be moving toward a more

global economic system, but globalization is not
inevitable. And it also come with it risks”
 GLOBALIZATION, LABOR POLICES AND THE ENVIRONMENT
• Globalization critics often argue that adhering to labor and
environmental regulations significantly increases the costs
of manufacturing enterprises and puts them at a
competitive disadvantage in the global marketplace.
• The supporters argue that
tougher environmental
• Firms deal with this regulations and stricter labor
disadvantage cost by standards go hand in hand with
moving their production economic progress because free
facilities to nations that do trade enables developing
not have such burdensome countries to increase their
regulations economic growth rates and
become richer

• They would be free to pollute the environment

• Employ child labor
• And ignore workplace safety and health issues,
all in the name of higher profits
 Probably not to roll back the trade
liberalization efforts that have fostered
economic growth and globalization, but
to get the nations of the world to agree
to tougher standards on limiting carbon
emissions.

The solution to
the problem is…

As an economy grows and income levels rise, initially pollution levels

also rise. However, past some point, rising income levels lead to
demands for greater environmental protection, then pollution levels fall.
A seminal study by Grossman and Krueger found that the turning point
generally occurred before per capita income levels reached $8,000.
 GLOBALIZATION DEBATE
Is an interdependent global
BENEFITS economy a good thing?
• Lower prices for goods and
services

• It stimulates economic growth

• Raises the incomes of consumers

• Create jobs in all countries that

participate in the global trading
system.
 INTRODUCTION
• In this chapter we will discuss how the different political systems, the
potential benefits, costs, and society itself, shape the global market
causing new challenges for making international business.

• The main function of this chapter is to develop an awareness of an

appreciation for the significance of multicultural world.
 COLLECTIVISM AND
INDIVIDUALISM
• Collectivism: the practice or principle of giving a group priority over
each individual in it.
• Individualism: a social theory favoring freedom of action for individuals
over collective or state control.
 DEMOCRACY AND
TOTALITARIANISM
• Democracy: a government in which the supreme power is vested in the
people and exercised by them directly or indirectly through a system of
representation usually involving periodically held free elections
• Totalitarianism: a system of government that is centralized and
dictatorial and requires complete subservience to the state.
 ECONOMIC SYSTEMS
• Politics and economy

Types of Economic Systems:

• Market Economy
• Command Economy
• Mixed Economy
 MARKET ECONOMY
• Privately owned
• Production: supply and demand
 COMMAND ECONOMY
• Owned by the government
• Quantity and prices
• The good of society
 MIXED ECONOMY
• Combines characteristics
• Benefits
• Government help
 Legal systems

The legal system of a country refers to the rules,or laws,that regulate behavior along with the processes by which the laws are enforced and through
which redress for grievances is obtained. The legal system of a country is of immense importance to relational business.

Different
legal
systems
There are three main types of legal systems:
1.-Common Law
Common law is based on tradition, precedent, and custom. Tradition refers to a country's legal history, precedent to cases that have come before the
courts in the past, and custom to the ways in which laws are applied in specific situations.
2.-Civil Law
A civil law system is based on a detailed set of laws organized into codes. When law courts interpret civil law, they do so with regard to these codes.
A civil law system tends to be less adversarial than a common law system, since the judges rely upon detailed legal codes rather than interpreting
tradition, precedent, and custom.
3.-Theocratic Law
A theocratic law system is one in which the law is based on religious teachings.

Islamic law is primarily a moral rather than a commercial law and is intended to govern all aspects of life .
 Differences
in contract
law

A contract is a document that specifies the condi­tions under which an exchange is to occur and details the rights and obligations of the parties involved.
Some form of contract regulates many business transactions. Contract law is the body of law that governs contract enforcement. The parties to an
agreement normally resort to contract law when one party feels the other has violated either the letter or the spirit of an agreement.

Property
rights and
corruption

term property refers to a resource over which an individual or business holds a legal title, that is, a resource that it owns.

Private
action

In this context, private action refers to theft, piracy, blackmail, and the like by private individuals or groups.
 Public action
and corruption

Public action to violate property rights occurs when public officials, such as politicians and government bureaucrats, extort
 income, resources, or the property itself from prop­erty holders. This can be
done through legal mechanisms such as levying excessive taxa-
tion, requiring expensive licenses or permits from property holders, taking assets into state ownership without compensati
ng the owners, or redistributing assets without com­ pensating the prior owners. It can also be done through illegal means,
or corruption, by demanding bribes from businesses in return for the rights to operate in a country, indus­try, or location.
However, there are systematic differences in the extent of corruption.
 Foreign corrupt
practices art

In the 1970s, the United States passed the Foreign Corrupt Practices Act following revelations that

U.S. companies had bribed government officials in foreign countries in an attempt to win lucrative contracts.
This law makes it illegal to bribe a foreign government official to obtain or maintain business
over which that foreign official has authority, and it requires all publicly traded companies to keep
detailed records that would reveal whether a violation of the act has occurred. 
 THE PROTECTION OF INTELLECTUAL PROPERTY

Copyrights
. Intellectual property

Are the exclusive legal rights of Refers to property that is the product of
intellectual activity. Patents, copyrights, and
owners to publish and disperse their
trademarks establish ownership rights over
work as they see.
intellectual property.

Trademarks Patent
Are designs and names, by which merchants or
manucturers designate and differentiate their Grants the inventor of a new product or
products. Intellectual property has become an process exclusive rights for a defined
increasingly important source of economic value
businesses. period to the manufacture, use, or sale
of that invention.
 THE PROTECTION OF
INTELLECTUAL PROPERTY
➔ The protection of intellectual property rights differs greatly on
country to coun­try. This has been the case even among many
of the 183 countries that are now members of the World
Intellec­tual Property Organization, all of which have signed
international treaties designed to protect intellectual property.

➔ The philosophy behind intellectual property laws is to

reward the originator of a new invention and the like, for
his or her idea and effort. Such laws stimulate innovation
and creative work. They provide an incentive people to
search novel ways of doing things, and they reward
creativity.
 THE PROTECTION OF
INTELLECTUAL PROPERTY
International businesses have a number of possible responses to
violations of their intellectual property. They can lobby their respective
governments to push for interna­tional agreements to ensure that
intellectual property rights are protected and that the law is enforced.
Partly as a result of such actions, international laws are being
strengthened.

Firms may also choose to stay out of countries where intellectual property laws
are lax, rather than risk having their ideas stolen by local entrepreneurs. Firms
also need to be on the alert to ensure that pirated copies of their products
produced in countries with weak intellectual property laws don't tum up in their
home market or in third countries.
PRODUCT SAFETY AND PRODUCT
LIABILITY
Product safety Product
liability
Laws set certain safety
standards to which a product Can be much greater if a
must adhere. Product liability product does not conform to
involves holding a rm and its o required safety standards.
icers responsible when a Both civil and criminal
product causes injury, death, product liability laws exist.
or damage.
● Civil liability laws call
payment and monetary
damages.
● Criminal liability laws
result in fines or
imprisonment.
 PRODUCT SAFETY AND PRODUCT
LIABILITY

Liability laws are typically least extensive

in less developed nations.

Country differences in product safety and

liability laws raise an important ethical
issue for firms doing business abroad.

The ethical thing to do is to adhere to

home-country standards, firms have
been known to take advantage of lax
safety and liability laws to do business in
a manner that would not be allowed at
home.
 KAHOOT
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