ADM 3318 Lecture Notes - Lecture 3: Foreign Direct Investment, Consumerism, Arbitrage

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Globalization
Globalization has created a world of cross linkages
Products are designed in one location, manufactured in other located and
usually sold in many different countries
Globalization is an integrated interdependent economy of
Market
One huge market?
Convergence of tastes?
Convergence of product acceptance?
Yes and no
Yes … applies substantially in B2B, commodities,
industrial goods
®
No … tastes differ, costs, PPP, value perception
®
Production
Global production
Global skills, learning, services, operational strategies
brands, licensing
®
There are many operational efficiencies that companies
have to go through to find out what is the most efficient
operation
®
There are also many regulations that need to be met in
each country fir production to be done
®
Consumers
What do we see?
Global trade has increased every year for the last 2 decades
It has made the world seem flat, created a level playing field
Ideas and resources have mobility
Communism is down, consumerism us up
Regulations are down, trade barriers are down
Markets are opening up and foreign direct investment (FDI) is up,
up and up
The rise of global institutions
After WWII most countries in Europe didn’t have money
This is where barriers were lowered for trade and investments
§
International Monetary Fund
This was created to maintain the monetary systems
§
Structured loans, regimen, country led plans, restructuring
§
The World Bank
This was created for funding at concessional rates
§
Infrastructure project loans
§
The United Nations
Peace for humanity
Global standards of living, social progress, development,
poverty eradication
§
Key drivers of globalization
Declining trade and investment barriers
More FDI, lower tariffs
§
Excepts on agriculture products
§
Declining business barriers
Power of technology felt across the world
The chip
§
The web
§
Logistics and transportation
§
Cost arbitraging - production
§
Global marketplace
§
The global change of order
The New Dynamic (Funding)
Power Shift in Trade
Post WWII, US companies gained dominance in the global
market
Companies went from being a national company into a
multinational company
The US stated domination the FDI
The US became dominant in multinational enterprise (MNE)
West Bloc vs. East Bloc
After the Berlin wall had fallen, it had opened a huge
opportunity between the west and easy block of Europe
®
Countries that couldn’t trade could now trade
®
§
FDI Distribution
US firms no longer dominate
Non-US firms disperse production
BRIC draws in investments from other countries
Leading to a cycle of growth
§
The World Order
No East Bloc vs. West Block
Half vs. Half is now one (almost)
Open-world embracing trade
Huge opportunities
Only trading blocs
§
The New MNE's
The Emergence of the New Wave of MNE's
The non-US MNE's
®
Large MNE's
®
The Regional MNR's
®
ME becoming transnational
®
§
Is globalization good?
Lower barriers provide markets and opportunities
Money flows down the path of least resistance
Counter perception of job loss
Income depreciation in developed countries
People are concerned that someone in another country will
take away their job
People are terrified of losing their jobs and not having a
way to support their family
®
§
Counter argument - companies survive because they are able to
arbitrage
§
Implications on labour policy
Child Labour - Nike in Viet Nam
§
Safety measures - Bangladesh Fire, Walmart, C&A
§
Policing the environment
Sustainable development
Ethics and policy on human abuse
IPR Protection and policing
Stakeholder appreciation
TL;DR
The genie is out of the bottle
Globalization appears to be the way to protect status quo, in some
sense multilateralism is the anchor
§
If clampdown were to happen - the Damocles sword of a depressed
economy is hanging
§
Canada is not immune, i.e. the tariff on lumber
§
Learning to manage in a cross cultural environment is the order of the day
Class 3 -Jan. 15th
Monday, January 15, 2018
09:56
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Document Summary

Globalization has created a world of cross linkages. Products are designed in one location, manufactured in other located and usually sold in many different countries. Yes applies substantially in b2b, commodities, industrial goods. No tastes differ, costs, ppp, value perception. Global skills, learning, services, operational strategies brands, licensing. There are many operational efficiencies that companies have to go through to find out what is the most efficient operation. There are also many regulations that need to be met in each country fir production to be done. Global trade has increased every year for the last 2 decades. It has made the world seem flat, created a level playing field. Markets are opening up and foreign direct investment (fdi) is up, up and up. After wwii most countries in europe didn"t have money. This is where barriers were lowered for trade and investments. This was created to maintain the monetary systems. This was created for funding at concessional rates.

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