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Lecture 1

BUSI 2701 Lecture Notes - Lecture 1: General Agreement On Tariffs And Trade, International Trade, Natural Disaster

5 pages67 viewsFall 2015

Course Code
BUSI 2701
Daniel Gulanowski

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Chapter 1
The Interdependent Global Economy
• In today’s world, national economies are merging into an interdependent economic system.
In an interdependent economic system:
• barriers to cross-border trade and investment are falling,
• perceived distance is shrinking due to advances in transportation and telecommunications
• material culture is starting to look similar the world over, (ex: iPhone, Samsung)
• and national economies are merging into an interdependent global economic system.
Going global is not without problems
• The hard reality is that for all the superficial similarities in material and popular culture and in
business systems, doing business in foreign nations still has unique challenges.
• Because of different tastes and preferences, what sells in Britain may not sell in Thailand.
• Business processes that give a retailer a competitive advantage in the United States may be
difficult to implement in Mexico
. • A brand that means something in Texas may mean little in Indonesia.
What Is Globalization?
Globalization refers to the shift toward a more integrated and interdependent world economy.
Globalization has several different aspects, including:
• Globalization of Markets
• Globalization of Production
• Globalization of Consumers
Globalization of Markets
- Refers to the merging of separate national markets into one huge global marketplace.
-Low-cost transportation has made it more economical to ship products around the world,
thereby helping to create global markets.
-Low-cost global communications networks such as the World Wide Web are helping to create
electronic global marketplaces
-While modern communication and transportation technologies are ushering in the “global
village,” very significant national differences remain in culture, consumer preferences, and
business practices.
Globalization of Production
Refers to the sourcing of goods and services from locations around the world to take advantage
of national differences, costs, and quality of factors of production.
As transportation costs associated with the globalization of production declined, dispersal of
production to geographically widespread locations became more economical.
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Globalization of Customers
-Refers to the merging of separate national markets into one huge global marketplace.
Global Institutions
As markets globalize business activities and transcend national borders, institutions need to help
manage and regulate the global marketplace.
Including the following organizations:
• GATT – 1947 to 1994
• World Trade Organization (WTO) – 1995
• International Monetary Fund (IMF) - 1944
• World Bank - 1944
• United Nations (UN) - 1945
‘The World Trade Organization (WTO) deals with the global rules of trade between nations.
Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.’
• polices the world trading system
• makes sure that nation-states adhere to the rules laid down in trade treaties
• promotes lower barriers to trade and investment
• Essentially a world trade referee for countries wanting to grieve that parties to trade agreements
have broken the agreements
IMF: to maintain order in the international monetary system,
• Help countries deal with erratic exchange rates
• The IMF is often seen as the lenderof-last-resort to nation-states whose economies are in
turmoil and currencies are losing value against those of other nations.
• The point being that if a country has a currency that is of a small value, it makes it hard for
them to trade with other countries
And this effects global trade for everybody
• The IMF loans come with strings attached
• In return for loans, the IMF requires countries to adopt specific policies aimed at returning their
troubled economies to stability and growth
• These “strings” have generated the most debate
• Some critics argue that the IMF’s policy recommendations are often inappropriate
World Bank: to promote economic development
• Development after a war or natural disaster
-is not one single entity but rather a group comprised of the following:
• IBRD - the International Bank for Reconstruction and Development
• IDA - International Development Association
• IFC - International Finance Corporation
• MIGA - Multilateral Investment Guarantee Agency
• ICSID - International Centre for Settlement of Investment Disputes
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