Chapter 1 Globalization Case Study The Globalization of
Chapter 1: Globalization Case Study The Globalization of Production at Boeing: from 5% - 65% Vertically Integrated • an arrangement in which the supply chain of a company is owned by that company. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. Example Heineken – is also vertically integrated, using local partners for distribution
Chapter 1: Globalization Case Study The Globalization of Production at Boeing Q. Why did Boeing first globalize their production of airplanes? 1. If you want to sell to foreign countries, it helps to give them business as well Reciprocate - when you return a favor, return a compliment 2. Give production contracts to those companies who are the • best in the world at what they do - specialization 3. Reduce the costs and risks associated with production facilities – put that on the outsourced suppliers instead
Chapter 1: Globalization Case Study The Globalization of Production at Boeing Q. What did Boeing retain (keep) for itself? 1. Engineering design 2. Marketing and sales 3. Final assembly
Chapter 1: Globalization Case Study The Globalization of Production at Boeing Q. What problems came with this globalization of production? 1. Coordination of a global production system – timing of parts 2. Coordination of a global production system – parts fitting together properly 3. Coordination of a global production system – engineering problems by suppliers slowing down production Result – airplanes coming out of the final assembly plant
Chapter 1: Globalization Case Study The Globalization of Production at Boeing Q. What were some of the ‘fixes’ by Boeing? 1. Bring some outsourced production back ‘in-house’ 2. Bring expertise back ‘in-house’ (keep knowledge in-house)
Chapter 1: Globalization The Globalization of Markets • The merging of distinct and separate national markets into one The Globalization of Production • The sourcing of goods and services from locations around the world • Advantage of costs • Expertize in quality
Chapter 1: Globalization The Globalization of Production • What kind of work can be outsourced? Ø Call centers Ø Website, software, cloud services Ø Accounting Ø Health services Ø Education
Chapter 1: Globalization The Globalization of Production • What will happen to the United States? • Read on page 5 • What will happen to Vietnam? • RESEARCH: FIND the same data for Vietnam • Per capita GDP • GDP • Labour force breakdown
Chapter 1: Globalization The Globalization of Production • What will happen to Vietnam? • RESEARCH: FIND the same data for Vietnam • Per capita GDP • $2, 111. 1 – source The World Bank (2015) • GDP • $193. 599 billion – source The World Bank (2015) • Labour force breakdown • agriculture: 48% industry: 21% services: 31% (2012)
Chapter 1: Globalization The Emergence of Global Institutions • Needed to help manage, regulate and police the global marketplace • Needed to promote / establish international treaties 1. General Agreement on Tariffs and Trade (GATT) 2. World Trade Organization (WTO) 3. International Monetary Fund (IMF) 4. The World Bank 5. The United Nations (UN)
Chapter 1: Globalization The Emergence of Global Institutions World Trade Organization (WTO) • Successor to the GATT • Primary role – policing the world trading system • Ensure nations follow rules in trade treaties signed by WTO members • Promote new treaties between members • 162 nations as of November 2015 Ø Has its own challenges and critics
Chapter 1: Globalization The Emergence of Global Institutions International Monetary Fund (IMF) & The World Bank • IMF - to maintain order in the international monetary system • Lends to nations in turmoil • Argentina, Mexico, Russia, South Korea, Thailand • String attached • Nations have to adopt certain economic policies • Criticisms include issue around nation sovereignty • WB – to promote economic development, offering low interest loans to governments in poor countries
Chapter 1: Globalization The Emergence of Global Institutions The World Bank Victoria Kwakwa Vice President, East Asia and Pacific • oversees a portfolio of more than $32 billion in loans, grants, credits, and trust funds across 23 countries. VIDEO • previously the World Bank’s Country Director for Vietnam, overseeing a multibillion-dollar lending portfolio and an innovative knowledge program • She earned her doctorate and master’s degree in economics from • Queen’s University in Canada.
Chapter 1: Globalization The Emergence of Global Institutions United Nations (UN) • Committed to preserving peace through international cooperation and collective security • 193 members – almost every nation in the world • Not, Vatican City, Palestine, Taiwan • Members agree to accept the basic principles of the UN Charter • 4 basic purposes
Chapter 1: Globalization The Emergence of Global Institutions United Nations (UN) • 4 Basic Purposes 1. Maintain international peace and security 2. Develop friendly relations among nations 3. Cooperate in solving international problems and promoting respect for human rights 4. To be a center for harmonizing the actions of nations
Chapter 1: Globalization The Emergence of Global Institutions G 7 • The Group of Seven (G 7) is an informal bloc of industrialized democracies--the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom--that meets annually to discuss issues such as global economic governance, international security, and energy policy. G 20 • Reps from 19 of the largest economies + EU
Chapter 1: Globalization The Emergence of Global Institutions – What About Vietnam Business Forum
Chapter 1: Globalization The Emergence of Global Institutions – What About Vietnam Business Forum • established in 1997 • a not-for-profit, non-political channel for nurturing public-private dialogue • to develop a favorable business environment that attracts domestic and foreign private sector investment • stimulates sustainable economic development in Vietnam. • done primarily through high profile bi-annual Forums between the business community and Vietnamese leadership and through specialized Working Groups cutting across sectors.
Chapter 1: Globalization The Emergence of Global Institutions – What About Vietnam Business Forum
Chapter 1: Globalization The Emergence of Global Institutions – What About Vietnam Business Forum Working Groups Agribusiness Investment & Trade Education & Training Banking Tourism Infrastructure Customs Automotive Mining Governance & Integrity Capital Market
Chapter 1: Globalization Project: Country Economic Information
Chapter 1: Globalization Project: Country Economic Information May: China Dao: Japan Long: S. Korea Nhan: Canada Thao: Australia Peter: Singapore Tu: Thailand Alpha – asleep Do you want to be in this class?
Chapter 1: Globalization Drivers of Globalization Declining Trade & Investment Barriers Trends toward greater globalization 1. Decline in barriers to free flow goods, services and capital 2. Technological change – developments in communication, information processing and transportation
Chapter 1: Globalization Drivers of Globalization Declining Trade & Investment Barriers 1. Decline in barriers to free flow goods, services and capital • Increase in international trade in general (GATT, WTO, etc…) • FDI – foreign direct investment – when a firm (company) invests in business activities outside its home country • Asian Coast Development Ltd – The Grand Ho Tram • Phu My Hung Corporation • Sun Life – PVI Sung Life • Coca Cola - The group is planning to invest another $300 million in Vietnam over the next few years. Coca-Cola has already invested $700 million here between 1994 -2015
Chapter 1: Globalization Drivers of Globalization Declining Trade & Investment Barriers 2. Technological change – developments in communication, information processing and transportation • Has helped make the globalization of markets and products a reality A. Development of the microprocessor • Higher and more computing power and low cost • Increasing the amount of information that can be processed (by companies and individuals) • Advancements in communications – satellites, fiber optics, wireless tech, Internet
Chapter 1: Globalization Drivers of Globalization Declining Trade & Investment Barriers B. Internet • Information backbone of the global economy • The great equalizer – removes constraints related to location, scale and time zones • Easier for buyers and sellers to find each other - Alibaba • The great equalizer • Enable global coordination and control over dispersed production systems
Chapter 1: Globalization Drivers of Globalization Declining Trade & Investment Barriers B. Transportation Technology • Commercial aircraft and superfreighters: less time • Containerization – lowered cost of shipping over long distances, less manpower, lowered transportation costs
Chapter 1: Globalization Drivers of Globalization Declining Trade & Investment Barriers Implications for the Globalization of Production • Real costs of information processing and communications have declined • This allows firms to create and manage their production systems, further facilitating their global production lines Implications for the Globalization of Markets • Creation of global electronic marketplaces – Alibaba, Amazon, • Low cost transportation makes it economical to ship products around the world • Global communication – CNN, BBC, HBO, Netflix received in many countries
Chapter 1: Globalization The Globalization Debate Is it a good thing? Who thinks so and why? • Many economists, politicians, business leaders • Leads to greater prosperity for all Who doesn’t think so?
Chapter 1: Globalization The Globalization Debate Anti-globalization Protests • Dates back to Dec 1999, WTO, Seatle, USA, 40, 000 protesters • From that first protest, more protesters now show up at other meetings of global institutions • Concern over - Job losses, lower wages, environmental degradation, cultural imperialism (by the US mostly) over other cultures – degrading other cultures Examples of Cultural Degradation • Mc. Donald’s restaurants in France (food culture) • Starbucks, Gloria Jeans, Coffee Bean in Vietnam (coffee culture) • What examples can you think of?
Chapter 1: Globalization The Globalization Debate Globalization, Jobs, and Income • Falling trade barriers = loss of manufacturing jobs in wealthy countries to developing countries • Question – does that mean wages in developing countries are kept low due to the large pool of workers? • Wage in US - $9 / hr compared to $0. 48 / hr in South America - ? Exporting services by IBM, DELL, Citigroup leads to higher unemployment and lower living standards - ? Question – OR – do the benefits outweigh the costs? • • • Free trade results in specialization by counties = better products • Some loss of jobs here leads to more jobs there = results in a better economy as a whole
Chapter 1: Globalization The Globalization Debate Globalization, Labour Policies, Environment • • • Concern over adequate regulations to protect labour and the environment from unscrupulous corporations. Free trade supporters – as countries get richer, they enact tougher labour and environmental policies • Free trade leads to less pollution and labour exploitation by creating wealth • Do you think this is correct? Examples • China – labour exploitations by Apple • Suicide nets • Alberta Oil Sands
Chapter 1: Globalization The Globalization Debate Globalization and National Sovereignty • Economic power moves away from national governments towards global institutions (WTO, EU, UN). • Unelected people vs those elected by people to represent them in their government • Example: the WTO • WTO can instruct members to change their trade polices. If not done, other members are allowed to impose trade sanctions • READ: passage by Ralf Nader, p 28 • Supporters say the WTO exists to support the whole – collective interest of memberstates • Member-states can also withdraw their support of the WTO • What is a benefit and a consequence of withdrawing from the WTO?
Chapter 1: Globalization The Globalization Debate Globalization and the World’s Poor • The gap b/w rich and poor nations is getting wider Note: many poor nations have achieved rapid economic growth – S. Korea, Thailand, Malaysia But, the poorest nations continue to be poor with little growth • Totalitarian governments • • • Economic corruption • War • Afghanistan, Cuba, Haiti, Iraq, Libiya, Nigeria, Sudan • Vietnam is also mentioned – recent changes though in economic policy are having a positive effect – joining the WTO, willingness to be a part of the TPP, increased FDI
Chapter 1: Globalization Managing the Global Marketplace • • In class group reading of this section International vs Domestic • Countries are different politically, culturally, economic systems, legal systems, level of development • Marketing strategies must be different, adjusted, tweaked, …. • Management of workers must be different, adjusted, tweaked, …. • Relations with different levels of government must be different, adjusted, tweaked, … • Business strategies must be different, adjusted, tweaked, … • How to deal with a crisis must be different, adjusted, tweaked, … • Summary – 1) countries are different, 2) management is more difficult, 3) government intervention, limitations and restrictions is different, 4) challenge of dealing with international transactions and currencies
Chapter 1: Globalization Case Study: Who makes the Apple i. Phone? • Reading – page 32 • Answer the case discussion questions
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