Chapter 1 Globalization What Is Globalization Globalization the

Chapter 1 Globalization

What Is Globalization? Ø Globalization - the shift toward a more integrated and interdependent world economy ØThe world is moving away from self-contained national economies toward an interdependent, integrated global economic system 1 -2

What Is The Globalization of Markets? Ø Historically distinct and separate national markets are merging and creating the “global market” Øfalling trade barriers make it easier to sell globally Øconsumers’ tastes and preferences are converging on some global norm Øfirms promote the trend by offering the same basic products worldwide 1 -3

What Is The Globalization of Production? Ø Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like land, labor, energy, and capital Ø Companies can Ølower their overall cost structure Øimprove the quality or functionality of their product offering 1 -4

Why Do We Need Global Institutions? Ø Global institutions Ø manage, regulate, and police the global marketplace Ø promote the establishment of multinational treaties to govern the global business system Ø General Agreement on Tariffs and Trade (GATT) Ø World Trade Organization (WTO) Ø International Monetary Fund (IMF) Ø World Bank Ø United Nations (UN) Ø G 20 1 -5

What Is Driving Globalization? Ø Declining barriers to the free flow of goods, services, and capital Ø more favorable environment for FDI Ø facilitates global production Ø Technological change Ø microprocessors and telecommunications Ø the Internet and World Wide Web Ø transportation technology 1 -6

What Is A Multinational Enterprise? Ø Multinational enterprise (MNE) - any business that has productive activities in two or more countries 1 -7

How Will The Global Economy Of The 21 st Century Look? Ø The world is moving toward a more global economic system… Ø But globalization is not inevitable Ø there are signs of a retreat from liberal economic ideology in Russia Ø Globalization brings risks Ø the recent financial crisis that started in the U. S. 1 -8

Is An Interdependent Global Economy A Good Thing? Ø Supporters believe that increased trade and cross-border investment mean Ø lower prices for goods and services Ø greater economic growth Ø higher consumer income, and more jobs Ø Critics worry that globalization will cause Ø job losses Ø environmental degradation Ø the cultural imperialism of global media and MNEs Ø Anti-globalization protesters now regularly show up at most major meetings of global institutions 1 -9

How Does The Global Marketplace Affect Managers? Ø Managing an international business differs from managing a domestic business because Ø countries are different Ø the range of problems confronted in an international business is wider and the problems more complex than those in a domestic business Ø firms have to find ways to work within the limits imposed by government intervention in the international trade and investment system Ø international transactions involve converting money into different currencies 1 -10