globalization slide for everyone in college

international business

1. GlobalizationGlobalization
1

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•Identify the types of companies that participate in
international business
•Describe the process of globalization and how it affects
markets and production
•Describe the two forces causing globalization to increase
•Summarize the evidence for each main argument in the
globalization debate
•Describe the global business environment and identify its
four main elements
Chapter ObjectivesChapter Objectives
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International BusinessInternational Business
We experience international
transactions daily
Imports/exports reach us
even in remote areas
Technology and e-business
promote trade
Global talent contributes to
efficiency/competitiveness
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International Business
•International Business
–Sum of all business transactions that cross the borders
of two or more nations.
•Imports
–All goods and services brought into a country that were
purchased from organizations located in other
countries.
•Exports
–All goods and services sent from one country to other
nations.

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Key PlayersKey Players
Business that has
direct investments
abroad in multiple
countries
Small companies and
individuals becoming
increasingly active in
international trade
and investment
Adopts a global
perspective and
engages in international
business from or near
its inception
Multinationa
l
Corporation
Small Businesses
and Entrepreneurs
Born Global
Firm
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Global Firms vs. NationsGlobal Firms vs. Nations
Comparing
revenue of
the world's 10
most global
firms to the
gross
domestic
product of
nations
Source: Based on data obtained from “Fortune Global 500: The World’s Largest Corporations,” Fortune, July 23, 2012, pp. F1–F7; World Bank
data set available at data.worldbank.org.
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GlobalizationGlobalization
Trend toward greater economic, cultural, political
and technological interdependence among national
institutions and economies
Globalization of
markets
Convergence in buyer
preferences in markets
around the world
Globalization of
production
Dispersal of production
activities worldwide to
minimize costs or
maximize quality
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Developed markets (latest technologies
to produce sustainable products in
sustainable manner): 1 billion people
Emerging markets (catching up with
rich nations, overloading
infrastructure): 2 billion people
Traditional markets (sustainability
means teaching farming practices,
environmental stewardship, disease
awareness): 4 billion people
Global Sustainability:Global Sustainability:
Three Markets, Three StrategiesThree Markets, Three Strategies
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Benefits of Global MarketsBenefits of Global Markets
Levels income
Stream
(selling seasonal products)
Reduces
marketing costs
(Standardized marketing strategy)
Creates new market
opportunities
(Home market is small or saturated)
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Benefits of Global ProductionBenefits of Global Production
Access to production inputs
unavailable
or more costly at home
Access to lower-cost labor
Access to technical expertise
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Labor and ResourcesLabor and Resources
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Companies can access workers and resources in favorable
business climates almost anywhere in the world.
e.g: Electronics company outsourcing in Indonesia,
Volkswagen producing automobiles in Brazil then exporting
some to other markets

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Discussion QuestionDiscussion Question
What benefits might
companies obtain
from the globalization
of markets and the
globalization of
production?
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Answer to Discussion QuestionAnswer to Discussion Question
Global markets can reduce
marketing costs, create new
market opportunities abroad,
and level income streams.
Global production can allow
access to lower-cost
workers, technical expertise,
and production inputs.
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Globalization Drivers (1)Globalization Drivers (1)
Falling BarriersFalling Barriers
•The General Agreement on Tariffs and Trade (or GATT) – set up
in 1944 – promoted free trade by reducing tariffs and nontariff
barriers.
•WTO – a of GATT- was created to lowered tariffs and subsidies
for agricultural products, protected IPRs.
•WTO goals: helping the free flow of trade, negotiating further
opening of markets, settling trade disputes among member
nations: now 162 members and 21 observers.
•Regional trade agreements:
–NAFTA: Canada, Mexico, US
–European Union: 28 countries
–APEC: 21 member economies committed to creating a free-
trade zone around the Pacific.

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Globalization Drivers (1)Globalization Drivers (1)
Falling BarriersFalling Barriers
Regional trade
agreements
GATT
WTO
Remove barriers to trade
and investment
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Trade Exceeds OutputTrade Exceeds Output
Years
$

V
a
l
u
e
GDP Global Exports
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Globalization Drivers (2)Globalization Drivers (2)
Technological InnovationTechnological Innovation
Email and
videoconferencing
Internet, intranets,
and extranets
Transportation
Advancements (GPS)
Better
coordination
and control
across
borders
Improved
communications
and management
More efficient,
dependable
shipping
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Globalization Drivers (2)Globalization Drivers (2)
Technological InnovationTechnological Innovation
•Electronic mail (e-mail): managers stay in contact with
international operations and respond quickly.
•Videoconferencing: meetings among different branch
offices and engineers to view models of new products
from remote locations.
•Private networks of company Web sites and other
information sources (intranets) allow access to
information from distant locations.
•Extranets: distributors and suppliers access to a
company’s database to place orders or restock
inventories electronically and automatically.

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Measuring GlobalizationMeasuring Globalization
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Measuring GlobalizationMeasuring Globalization
•Economic Globalization: trade and investment volumes.
•Political Globalization: Political cooperation with other
countries.
•Social Globalization: dissemination of information and
ideas.
•Richest nations: most global, with most in Europe: 9
countries out of top 10 positions.
•Least global nations: in Africa, East Asia, South Asia, Latin
America, and the Middle East.
•US ranks 35
th
place overall, 79
th
in Economic Globalization,
29
th
Social Globalization, 22
nd
Political Globalization.
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Discussion QuestionDiscussion Question
__________ is the value of all
goods and services produced
by a country’s domestic and
international activities over a
one-year period.
a. Gross Domestic Product
b. Gross National Product
c. GNP Per Capita
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Answer to Discussion QuestionAnswer to Discussion Question
__________ is the value of all
goods and services produced
by a country’s domestic and
international activities over a
one-year period.
a. Gross Domestic Product
b. Gross National Product
c. GNP Per Capita
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Globalization is controversial?
WHY?

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Jobs and WagesJobs and Wages
 Eliminates jobs in
developed nations
 Lowers wages in
developed nations
 Exploits workers in
developing nations
 Increases wealth and
efficiency everywhere
 Generates labor market
flexibility in developed
countries
 Advances economies
of developing nations
SupportersOpponents
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Salaries of IT WorkersSalaries of IT Workers
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Source: Based on data obtained from the International Average Salary Income Database (www.worldsalaries.org).

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Labor, Environment, & MarketsLabor, Environment, & Markets
– Globalization lowers
labor standards
– Weakens protection of
the environment
– Exploits workers in
poor nations
+ Investments in developing
nation’s EPZs help raise
labor standards
+ show evidence that pollution-
intensive firms invest in
countries with stricter, not
weaker, environmental
standards
+ Companies concerned
for future markets
Opponents Supporters
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Manager’s Briefcase:Manager’s Briefcase:
The Keys to Global SuccessThe Keys to Global Success
 Communicate effectively
 Know the customers
 Emphasize global awareness
 Market effectively
 Monitor global markets
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Income Inequality debate Income Inequality debate
The rich get richer in wealthy nations?
or
The poor get richer in developing
nations?
Inequality within NationsInequality within Nations
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Gap widens between rich and poor nations?
or
Poor trading nations grow faster than rich ones?
Inequality between NationsInequality between Nations
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Income Inequality debate Income Inequality debate
Gap between rich and poor greater everywhere?
or
Inequality has fallen but extent unknown?
Global InequalityGlobal Inequality
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Discussion QuestionDiscussion Question
What does the
evidence suggest
for each branch of
the debate on
globalization and
income inequality?
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Answer to Discussion QuestionAnswer to Discussion Question
Inequality within nations: Studies
suggest that developing nations boost
incomes of their poor by integrating
them into the global economy.
Inequality between nations: Nations
open to trade and investment seem to
grow faster than wealthy nations, while
sheltered economies grow worse off.
Global inequality: Global poverty has
fallen in recent decades but experts
disagree on the extent of the drop.
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Impact on CultureImpact on Culture
Opponents
• Destroys cultural
diversity
• Homogenizes our
world
• Bankrupts local
small businesses
Supporters
• Specialize and trade
to obtain other
goods
• Import cultural
goods from other
nations
• Protect deeper
moral and cultural
norms
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Culture Matters:Culture Matters:
The Culture DebateThe Culture Debate
Material Desire
A Force for Good
Artistic Influence
Deeper Values
Western Values
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The Culture DebateThe Culture Debate
•Critics say global marketing
promotes material desires in
developing nations.
•Globalization supporters argue poor
nations have a strong artistic
influence on rich nations.

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The Culture DebateThe Culture Debate
•Critics say local values and
traditions are being replaced by
“Western” values.
•Supporters say globalization fosters
tolerance and diversity and is a force
for good.

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National SovereigntyNational Sovereignty
Supporters
Globalization has
benefited societies by
helping to spread
democracy worldwide
Opponents
Supranational
institutions reduce
autonomy of national,
regional, and local
governments
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Global Business EnvironmentGlobal Business Environment
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Global Business EnvironmentGlobal Business Environment
•National Business Environment (IBE): all elements external to a
company but affect its performance:
Cultural forces: people’s aesthetics, values and attitudes,
manners and customs, social structure, religion, personal
communication, education, physical and social environment.
Political and legal forces: matters of governmental and
regulatory importance influencing the management of businesses –
stability of political system, the rule of law.
Economic forces: market or non-market traditions, GDP
levels, financial infrastructure variables.
•Foreign Business Environment (FBE): all elements external to our
company but affect its performance in potential overseas market.
SAME THREE FORCES.

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Global Business EnvironmentGlobal Business Environment
•National Business Mgmt: Things internal to a
company that it can control, e.g. HR decisions,
marketing and production decisions.
•International Business Mgmt (IBM): elements over
which a company can exercise a greater measure of
control—such as management, marketing and
production.
- How to analyze potential markets?
- How to select ways of entering new markets?
- How to manage new international activities –
mktg, pdcn, etc.

41. Copyright © 2014 Pearson Education, Inc.
Discussion QuestionDiscussion Question
The textbook you are using in this
course describes a model of
international business as
occurring within a dynamic and
integrated system called the
__________.
a. Cultural Business Model
b. Globalization Environment
c. Global Business Environment
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42. Copyright © 2014 Pearson Education, Inc.
Answer to Discussion QuestionAnswer to Discussion Question
The textbook you are using in this
course describes a model of
international business as
occurring within a dynamic and
integrated system called the
__________.
a. Cultural Business Model
b. Globalization Environment
c. Global Business Environment
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stored in a retrieval system, or transmitted, in any form or by any
means, electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of the publisher.
Printed in the United States of America.
Copyright © 2014 Pearson Education, Inc.
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