IBUS1101 Lecture Notes - Lecture 2: Habitat Destruction, North American Free Trade Agreement, Distributed Transaction
24 Jun 2018
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Department
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Globalisation of markets and
internationalisation of the Firm
Meaning of globalisation of markets
- Globalisation and technological advances have altered the international business
landscape in recent times more than any other trends
- Market globalisation refers to the growing interconnectedness of national economies and
the growing interdependence of buyer, producers, suppliers, and governments
worldwide
- Globalisation allows firms to view the world as potentially one large marketplace for
goods, services, capital, labour, and knowledge
Phases:
1. 1830-1880
- Railroads and ocean transport
2. 1900-1930
- Rise of electricity and steel production
- Emergence and dominance of early MNEs
3. 1948-1970
- Formation of General Agreement on Tariff and Trade (GATT)
- Industrialising Western countries to reduce trade barrier
4. 1980s- now
- Privatisation of state enterprises in transition economies
- Revolution in information, communication and transportation technologies
- Rapid growth in cross-border trade of products, services, and capital
- Rise of internationally active SMEs and services firms
Anti-globalisation/ de-globalisation movement
- Brexit, Trump steel/ aluminium tariffs
- Countries becoming richer do they become liberal democracies?
- All going to be the same
- Global financial crisis?
- BRICS= brazil, russia, india, china, south africa
Drivers of Market Globalisation
- Worldwide reduction of barriers to trade and investment
- Trend is facilitated by the World Trade Organisation (WTO)
- Market liberalisation and adoption of free markets
- China and Russia revolutions marked the opening of roughly ⅓ of the world to
freer trade- bigger potential since the 1980s
- Industrialization, economic development, and modernisation
- From low-value to higher-value goods eg electronics and computers
- Rising living standards have made these countries more attractive as target
find more resources at oneclass.com
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markets for sales and investment
- Integration of world financial markets
- Enables firms to raise capital, borrow funds, and engage in foreign currency
transaction wherever they go
- Banks now provide a range of services that facilitate global transactions
- More integrated
- Advances in technology
- Reduced the cost of doing business internationally, by allowing firms to interact
cheaply with suppliers, distributors, and customers worldwide
- Facilitates the internationalisation of companies
Information and Communications Technology (ICT)
- Major advances have occurred in computes, digital technologies, telephony and the
Internet
- MNEs leverage ICTs to optimize their performance
- ICTs opened the global marketplace to firms that historically lacked the resources to
internationalise
Manufacturing and transportation technologies
- Revolutionary developments permit manufacturing that is low-scale and low cost, via
CAD, robotics, and IT-managed production lines
- In transportation, key advances include fuel-efficient large aircraft, gian ocean-going
freighters, and containerised shipping
- The cost of international transportation has decline substantially, spurring rapid growth in
global trade
- Collectively, technological advances have greatly reduced the costs of doing business
internationally
Dimensions of Market Globalisation
- Integration and interdependence of nation economies
- Governments contribute by lowering trade and investment barriers
- Rise of regional economic integration blocs
- Free trade areas are formed by two + countries to reduce or eliminate barriers to
trade and investment
- Eg NAFTA, APEC, ASEAN, EU
- Growth of global investment and financial flows
- Associated with rapid growth in foreign direct investment, currency trading, and
global capital markets
- Convergence of buyer lifestyles and preferences
- Facilitated by global media, which emphasise lifestyles found in the US, Europe,
or elsewhere
- Firms often market standardised products
- Globalisation of production
- To cut costs, firms manufacture in low labour-cost location
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Globalisation of markets and internationalisation of the firm. Globalisation and technological advances have altered the international business landscape in recent times more than any other trends. Market globalisation refers to the growing interconnectedness of national economies and the growing interdependence of buyer, producers, suppliers, and governments worldwide. Globalisation allows firms to view the world as potentially one large marketplace for goods, services, capital, labour, and knowledge. Emergence and dominance of early mnes: 1948-1970. Formation of general agreement on tariff and trade (gatt) Industrialising western countries to reduce trade barrier: 1980s- now. Privatisation of state enterprises in transition economies. Revolution in information, communication and transportation technologies. Rapid growth in cross-border trade of products, services, and capital. Rise of internationally active smes and services firms. Brics= brazil, russia, india, china, south africa. Worldwide reduction of barriers to trade and investment. Trend is facilitated by the world trade organisation (wto) Market liberalisation and adoption of free markets.
