MGMT1101 Lecture Notes - Lecture 1: Containerization, Emerging Power, Tripolar
MGMT1101 Notes
Week 1: Course Overview
1. Explain the process and drivers of globalisation and the opportunities and challenges it
creates for international business
What is Globalisation?
Globalisation: A shift towards a more integrated and interdependent world economy
Globalisation
of markets
• Merging of historically distinct and separate national markets into one huge global
marketplace
• Falling barriers to cross-border trade
• Tastes and preferences of consumers in different nations are converging on some
global norm (e.g. McDonalds, iPhones)
• The most global of markets are for industrial goods and materials (which serve
universal needs) not for consumer goods (differences in tastes and preferences +
other factors)
• In many global markets, the same firms frequently confront each other as
competitors in nation after nation (companies will follow rivals as they enter new
markets to prevent their competitor from gaining an advantage).
• These firms bring assets they have gained from other markets incl. their products,
operating strategies, marketing strategies and brand names which creates some
homogeneity across markets.
• A company does not have to be a multinational giant to facilitate and benefit from
globalisation of markets (i.e. small Australian firm have experienced success)
• However, national differences still require customised marketing strategies, product
features and operating practices
Globalisation
of production
• Sourcing goods and services from locations around the globe to take advantage of
national differences in the cost and quality of various factors of production (i.e.
labour, technology, land and capital).
• Companies hope to lower overall cost structure or improve the quality of their
product offering (timely delivery of quality service + responding rapidly to demand)
• Early outsourcing and offshore production were primarily in manufacturing
enterprises.
• Companies are using modern communications technology (i.e. internet) to outsource
service activities to low=cost producers and provide more timely services (from data
entry, call centres etc.)
• However, challenges still remain incl. formal and informal barriers to trade, barriers
to FDI, transportation and supply chain management costs, economic and political
risk.
Emergence of
global
institutions
• Institutions are needed to help manage, regulate and police the global marketplace
and to promote the establishment of multinational treaties to govern the global
business system.
• Important global institutions include:
o General Agreement on Tariffs and Trade (GATT) which is now the World Trade
Organisation (WTO):
➢ Polices the world trading system and making sure nations adhere to trade
treaty rules agreed to by 157 nations.
➢ Promotes lowering of barriers to trade and investment
➢ Critics: hurting national sovereignty of nations and failing to respond to
fundamental shifts in global economy
o International Monetary Fund (IMF) and World Bank
find more resources at oneclass.com
find more resources at oneclass.com
➢ Prevent recurrence of trade wars in the 20s/30s where international trade
and investment were severely restricted by tariffs and exchange rate
devaluations.
➢ IMF: maintain order in international monetary system. Often lends to
troubled countries, however requires nation to adopt specific economic
policies. Critics: inappropriate policy recommendations + also hurting
sovereignty + failing to reflect shifting economic power to emerging
economies
➢ World Bank: promote economic development, primarily by offering low-
interest loans to governments of poorer nations.
o United Nations
➢ International organisation of 192 countries charged with keeping
international peace, developing cooperation between nations and promoting
human rights and centre for harmonising the actions of nations.
➢ Also promotes higher standards of living and full employment and conditions
for economic and social progress and development (UNCTAD)
o G20
Drivers of Globalisation:
1. Declining trade and investment barriers to the free flow of goods, services and capital
• International trade: when a firm exports goods or services to buyers in another country
• FDI: when a firm invests resources in business activities outside its home country, giving it
some control over those activities
Trade
• Process:
o Traditionally, high tariffs on manufactured goods protected domestic industries
o After WW2, advanced Western countries removed barriers
o Under GATT, 100+ nations negotiated further decreases in tariffs
o However, discrepancy in tariffs between old and emerging powers has hindered
agreements in current trade negotiations
o Current DOHA round: aim to further free global trade and investment (esp.
agricultural tariffs)
• Currently:
o Merchandising trade (manufactured, agricultural and mining products) and
commercial services (services that support international transactions e.g.
transportation, financial, insurance etc) are growing
o More production is for export and not just domestic market
o More firms are dispersing parts of production to different locations
o Nations are becoming more dependent on each other for important G+ S
FDI
• FDI Stock: total accumulated value of foreign-owned assets at a given time
• FDI Flow: amount of FDI undertaken over a given time
• FDI is a long-term commitment so tends to be more volatile
• FDI grew more rapidly than trade before GFC because:
o Businesses still faced protectionist pressures (FDI allows businesses to circumvent
trade barriers)
o Increase in FDI driven by political and economic changes in many developing nations
(i.e. shift towards democracy + free markets)
o Globalisation had a positive impact on volume of FDI (firms use FDI to make sure
they have significant presence in many regions)
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Week 1: course overview: explain the process and drivers of globalisation and the opportunities and challenges it creates for international business. Globalisation: a shift towards a more integrated and interdependent world economy. Polices the world trading system and making sure nations adhere to trade treaty rules agreed to by 157 nations. Promotes lowering of barriers to trade and investment. Critics: hurting national sovereignty of nations and failing to respond to fundamental shifts in global economy: international monetary fund (imf) and world bank. Prevent recurrence of trade wars in the 20s/30s where international trade and investment were severely restricted by tariffs and exchange rate devaluations. Often lends to troubled countries, however requires nation to adopt specific economic policies. Critics: inappropriate policy recommendations + also hurting sovereignty + failing to reflect shifting economic power to emerging economies. World bank: promote economic development, primarily by offering low- interest loans to governments of poorer nations: united nations.
