ADM 3318 Chapter 1: ADM 3318 - GLOBAL BUSINESS TODAY
16 Jun 2018
School
Department
Course
Professor
Globalization
Globalization
There is a fundamental shift happening the world's economy
We are slowly shifting away from self-contained entities, into a world in
which barriers to cross-border trade and investments are tumbling
ā
ā¢
Globalization has increased the opportunities for a firm to expand its revenues
by selling around the world and reduce its costs by product in nations where key
inputs are cheap
ā¢
What is Globalization?
Globalization refers to the shift toward a more integrated and interdependent
world economy
ā¢
The globalization of markets
This refers to the merging of historically distinct and separate national
markets into one huge global marketplace
ā
The fall of barriers to cross-border trade have made it easier to sell
internationally
ā
When a company offers a standardized product worldwide they help
create a global market
ā
Most global markets are made for industrial goods and materials that
serve a universal need
ā
In many global markets, the same companies frequently confront each
other as competitors in nation over nation
ā
ā¢
The globalization of production
This refers to sourcing goods and services from locations around the globe
to take advantage of national differences in the cost and quality of factors
of production
ā
Small companies are also tapping into the global marketplace
ā
ā¢
The Emergence of Global Institutions
As markets globalize and an increasing proportion of business activity
transcends national borders, institutions need to help manage, regulate, and
police the global marketplace
ā¢
In the past few decades a number of global institutions have been created to
help police and promote the establishments of multinational treaties
General Agreement on Tariffs and Trade (GATT)
This is an international treaty that committed signatories to
lowering barriers to the free flow of goods across national borders
Ā§
ā
World Trade Organization (WTO)
They were created to primarily responsible for policing the world
trading system and making sure nation-states adhere to the rules
laid down in trade treaties
Ā§
As of July 2016 164 countries were in the WTO
Ā§
ā
International Monetary Fund (IMF) and the World Bank
The task of the IMF is to maintain order in the international
monetary system
They are seen as the lender of last resort to nation-statesā”
If a country receives a loan from IMF, they have some specific
policies they have to adopt
ā”
Ā§
The task of the World Bank is to focus on low interest rate loans to
cash-strapped governments in poor nations that wish to undertake
significant infrastructure investments
Ā§
ā
United Nations
It was established to preserve peace through international
cooperation and collective security
Ā§
The UN has four purposes
To maintain international peace and securityā”
To develop friendly relations among nations ā”
To cooperate in solving international problems and promoting
respect for human rights
ā”
To be a centre for harmonizing the actions of nations ā”
Ā§
ā
ā¢
Drivers of Globalization
Two macro factors seem to underlie the trend toward greater globalization
The decline in barriers to the free flow of goods, services, and capital
During the 20s and 30s many nations erected formidable barriers to
international trade and foreign direct investment
International trade occurs when a firm exports goods and
services to consumers in another country
ā”
Foreign direct investment occurs when a firm invests
resources in business activities outside its home country
ā”
Ā§
Many countries have also been progressively removing restrictions
to foreign direct investment
These trends facilitate both the globalization of markets and
the globalization of production
ā”
Lowering barriers to international trade enables forms to view
the world as their market
ā”
Lowering trade barriers allows firms to based production at
the optimal location for that activity
ā”
Ā§
ā
Technological change, particularly the dramatic developments in recent
years in communication, information, processing, and transportation
technologies
Telecommunications is creating a global audience ā”
Transportation is creating a global villageā”
Microprocessors and telecommunications
Microprocessors enable the explosive growth of high-power,
low-cost computing, vastly increasing the amount of
information that can be processed by individuals and firms
ā”
Much of today's technology relies on microprocessors to
encode, transmit, and decode the vast amount of information
ā”
The Moore's Law states that as the power of the
microprocessor technology doubles the cost of production
falls by half every 18 months
ā”
Ā§
The internet and World Wide Web
The WWW has developed into the information backbone of
the global economy
ā”
The Web is emerging as an equalizerā”
The Web makes it much easier for buyers and sellers to find
each other
ā”
It allows businesses of all sizes to expand into the global
market
ā”
Ā§
Transportation Technology
Some of the most important transportation innovations since
WWII may be the development of the commercial jet aircraft,
and the introduction of containerization
The commercial jet travel has reduced the time needed
to get from one location to another
Ā®
Containerization has revolutionized the transportation
business, but significantly lowering costs of shipping
goods over long distances
Ā®
ā”
Ā§
The Globalization of Production
As transportation costs associated with the globalization of
production declined, dispersal of production to geographically
widespread locations became more economical
Thatās why the real costs of information processing and
communications have fallen
Ā®
This allows companies to create and then manage a
globally dispersed production system
Ā®
ā”
A worldwide communications network has become essential
for many international businesses
ā”
Ā§
The Globalization of Markets
Technological innovations have also facilitated the
globalization of markets
ā”
Low-cost transportation has made it more economical to ship
products around the world
ā”
WWW is helping create electronic global marketplaces ā”
Ā§
ā
ā¢
The Changing Demographics of the Global Economy
The changing world output and world trade picture
In the early 1960s the US was the world's dominant industrial power by
far
They measures for 38.3% of the world's output
Ā§
ā
Even though the US isn't as strong as it used to be, its not because its
growth decreased, its because other countries grew faster than the US
ā
Many of tomorrow's economic opportunities may be found in the
developing nations of the world
ā
ā¢
The changing foreign direct investment picture
As the barriers to the free flow of goods, services, and capital fell, and as
other countries increased their shares of world output, non-U.S. firms
increasingly began to invest across national borders
The motivation for much of the FDI by non-US firms was the desire
to disperse production activities to optimal locations and to build a
direct presence in major foreign markets
Ā§
ā
ā¢
The changing nature of the multinational enterprise
A multinational enterprise (MNE) is any business that has productive
activities in two or more countries
ā
There are two notable trends in the demographics of the multinational
enterprise
The rise of non-US multinationals
The globalization of the world economy together with Japan's
rise to the top rank of economic powers has resulted in a
relative decline in the dominance of US firms
ā”
Ā§
The growth of mini-multinationals
Many medium-sized and small businesses are becoming
increasingly involved in international trade and investment
ā”
Ā§
ā
ā¢
The changing world order
Between 1989 and 1991 a series of democratic revolutions swept the
Communist world
Country after country, Eastern Europe and eventually the Soviet
Union itself, Communist governments collapsed
Ā§
ā
Before these countries were closed to Western international business,
and then they host a number of exports and investments
ā
The potential consequences for international business are enormous
On one hand, China represents a huge and largely untapped market
Ā§
On the other hand, China's new firms are proving to be very capable
competitors and they could take global market share away from
Western and Japanese enterprises
Ā§
ā
ā¢
The global economy of the twenty-first century
The last quarter century has seen rapid changes in the global economy
ā
As economies advance, more nations are joining the ranks of the
developed world
ā
Current trends indicate that the world is moving rapidly toward an
economic system that is more favourable for the practice of international
business
ā
ā¢
The Globalization Debate
Anti-globalization protests
There are many reasons why some people may be against globalization
Job losses in industries under attack from foreign competitors
Ā§
Downward pressure on the wage rate of unskilled workers
Ā§
Environmental degradation
Ā§
Cultural imperialism of global media and multinational enterprises
Ā§
ā
Large sections of the population in many countries believe that
globalization harms living standards and the environment
ā
ā¢
Globalization, Jobs, and Income
Outsourcing jobs to developing countries has provoked fears that this
process will have long-term harmful effects on the country
ā
Fears have arisen with respect to services, which has increasingly been
outsourced to nations with lower labour costs
ā
Supporters of globalizations maintain that the declining real wage rates of
unskilled workers owe far more to technology-induced shift within
advanced economies away from jobs where the only qualification was to
turn up for work every day
ā
Growing income inequality is a result of the wages for skilled workers
being bid up by the labour market
ā
ā¢
Globalization, Labour Policies, and the Environment
Critics often argue that adhering to labour and environmental regulations
significantly increases the costs of manufacturing enterprises
Firms deal with this cost disadvantage, the theory goes, by moving
their production facilities to nations that do not have such
burdensome regulations
Ā§
ā
Supports argue that tougher environmental regulations and stricter
labour standards go hand in hand with economic progress
Tree trade enable developing countries to increase economic
growth rates and become richer
Ā§
As an economy grows and income levels rise, initially pollution
levels also rise
Past some point, rising income levels lead to demands for
greater environmental protection, and pollution level then fall
ā”
Ā§
ā
While pollution levels are rising in the world's poorer countries, they have
been falling in developed nations
ā
Supporters of free trade argue that it is possible to tie free trade
agreements to the implementation of tougher environmental and labour
laws in less developed countries
ā
ā¢
Globalization and National Sovereignty
Another concern is that today's increasingly interdependent global
economy shifts economic power away from national governments and
toward supranational organizations
The power of supranational organizations such as the WTO is
limited to that which nation-states collectively agree to grant
Ā§
ā
ā¢
Globalization and the World's Poor
Critics argue that because of free trade and investment, the gap between
the rich and poor nations of the world has gotten wider
ā
In recent history we see that the world's poorer nations are capable of
rapid periods of economic growth
ā
The highly indebted poorer countries (HIPCs) on average the government
debt burden is equivalent to 85% of the value of the economy
With such debt, the government has no money to invest in
important public infrastructure projects
Ā§
HIPCs are trapped in a cycle of poverty, and debt that inhibits
economic development
Ā§
ā
ā¢
Managing In The Global Marketplace
As organizations grow, managers need to recognize that managing an
international business differs from that of managing a purely domestic business
ā¢
Differences between countries requires that an international business vary its
practices country to country
A food chain may have to change their menu according to the culture and
people's diets
ā
ā¢
A country must also develop a policy for money exchange
If the money exchange isn't done properly, the company can lose a lot of
money
ā
ā¢
Chapter 1
Sunday, January 14, 2018
23:46
Globalization
Globalization
There is a fundamental shift happening the world's economy
We are slowly shifting away from self-contained entities, into a world in
which barriers to cross-border trade and investments are tumbling
ā
ā¢
Globalization has increased the opportunities for a firm to expand its revenues
by selling around the world and reduce its costs by product in nations where key
inputs are cheap
ā¢
What is Globalization?
Globalization refers to the shift toward a more integrated and interdependent
world economy
ā¢
The globalization of markets
This refers to the merging of historically distinct and separate national
markets into one huge global marketplace
ā
The fall of barriers to cross-border trade have made it easier to sell
internationally
ā
When a company offers a standardized product worldwide they help
create a global market
ā
Most global markets are made for industrial goods and materials that
serve a universal need
ā
In many global markets, the same companies frequently confront each
other as competitors in nation over nation
ā
ā¢
The globalization of production
This refers to sourcing goods and services from locations around the globe
to take advantage of national differences in the cost and quality of factors
of production
ā
Small companies are also tapping into the global marketplace
ā
ā¢
The Emergence of Global Institutions
As markets globalize and an increasing proportion of business activity
transcends national borders, institutions need to help manage, regulate, and
police the global marketplace
ā¢
In the past few decades a number of global institutions have been created to
help police and promote the establishments of multinational treaties
General Agreement on Tariffs and Trade (GATT)
This is an international treaty that committed signatories to
lowering barriers to the free flow of goods across national borders
Ā§
ā
World Trade Organization (WTO)
They were created to primarily responsible for policing the world
trading system and making sure nation-states adhere to the rules
laid down in trade treaties
Ā§
As of July 2016 164 countries were in the WTO
Ā§
ā
International Monetary Fund (IMF) and the World Bank
The task of the IMF is to maintain order in the international
monetary system
They are seen as the lender of last resort to nation-states
ā”
If a country receives a loan from IMF, they have some specific
policies they have to adopt
ā”
Ā§
The task of the World Bank is to focus on low interest rate loans to
cash-strapped governments in poor nations that wish to undertake
significant infrastructure investments
Ā§
ā
United Nations
It was established to preserve peace through international
cooperation and collective security
Ā§
The UN has four purposes
To maintain international peace and security
ā”
To develop friendly relations among nations
ā”
To cooperate in solving international problems and promoting
respect for human rights
ā”
To be a centre for harmonizing the actions of nations
ā”
Ā§
ā
ā¢
Drivers of Globalization
Two macro factors seem to underlie the trend toward greater globalization
The decline in barriers to the free flow of goods, services, and capital
During the 20s and 30s many nations erected formidable barriers to
international trade and foreign direct investment
International trade occurs when a firm exports goods and
services to consumers in another country
ā”
Foreign direct investment occurs when a firm invests
resources in business activities outside its home country
ā”
Ā§
Many countries have also been progressively removing restrictions
to foreign direct investment
These trends facilitate both the globalization of markets and
the globalization of production
ā”
Lowering barriers to international trade enables forms to view
the world as their market
ā”
Lowering trade barriers allows firms to based production at
the optimal location for that activity
ā”
Ā§
ā
Technological change, particularly the dramatic developments in recent
years in communication, information, processing, and transportation
technologies
Telecommunications is creating a global audience ā”
Transportation is creating a global villageā”
Microprocessors and telecommunications
Microprocessors enable the explosive growth of high-power,
low-cost computing, vastly increasing the amount of
information that can be processed by individuals and firms
ā”
Much of today's technology relies on microprocessors to
encode, transmit, and decode the vast amount of information
ā”
The Moore's Law states that as the power of the
microprocessor technology doubles the cost of production
falls by half every 18 months
ā”
Ā§
The internet and World Wide Web
The WWW has developed into the information backbone of
the global economy
ā”
The Web is emerging as an equalizerā”
The Web makes it much easier for buyers and sellers to find
each other
ā”
It allows businesses of all sizes to expand into the global
market
ā”
Ā§
Transportation Technology
Some of the most important transportation innovations since
WWII may be the development of the commercial jet aircraft,
and the introduction of containerization
The commercial jet travel has reduced the time needed
to get from one location to another
Ā®
Containerization has revolutionized the transportation
business, but significantly lowering costs of shipping
goods over long distances
Ā®
ā”
Ā§
The Globalization of Production
As transportation costs associated with the globalization of
production declined, dispersal of production to geographically
widespread locations became more economical
Thatās why the real costs of information processing and
communications have fallen
Ā®
This allows companies to create and then manage a
globally dispersed production system
Ā®
ā”
A worldwide communications network has become essential
for many international businesses
ā”
Ā§
The Globalization of Markets
Technological innovations have also facilitated the
globalization of markets
ā”
Low-cost transportation has made it more economical to ship
products around the world
ā”
WWW is helping create electronic global marketplaces ā”
Ā§
ā
ā¢
The Changing Demographics of the Global Economy
The changing world output and world trade picture
In the early 1960s the US was the world's dominant industrial power by
far
They measures for 38.3% of the world's output
Ā§
ā
Even though the US isn't as strong as it used to be, its not because its
growth decreased, its because other countries grew faster than the US
ā
Many of tomorrow's economic opportunities may be found in the
developing nations of the world
ā
ā¢
The changing foreign direct investment picture
As the barriers to the free flow of goods, services, and capital fell, and as
other countries increased their shares of world output, non-U.S. firms
increasingly began to invest across national borders
The motivation for much of the FDI by non-US firms was the desire
to disperse production activities to optimal locations and to build a
direct presence in major foreign markets
Ā§
ā
ā¢
The changing nature of the multinational enterprise
A multinational enterprise (MNE) is any business that has productive
activities in two or more countries
ā
There are two notable trends in the demographics of the multinational
enterprise
The rise of non-US multinationals
The globalization of the world economy together with Japan's
rise to the top rank of economic powers has resulted in a
relative decline in the dominance of US firms
ā”
Ā§
The growth of mini-multinationals
Many medium-sized and small businesses are becoming
increasingly involved in international trade and investment
ā”
Ā§
ā
ā¢
The changing world order
Between 1989 and 1991 a series of democratic revolutions swept the
Communist world
Country after country, Eastern Europe and eventually the Soviet
Union itself, Communist governments collapsed
Ā§
ā
Before these countries were closed to Western international business,
and then they host a number of exports and investments
ā
The potential consequences for international business are enormous
On one hand, China represents a huge and largely untapped market
Ā§
On the other hand, China's new firms are proving to be very capable
competitors and they could take global market share away from
Western and Japanese enterprises
Ā§
ā
ā¢
The global economy of the twenty-first century
The last quarter century has seen rapid changes in the global economy
ā
As economies advance, more nations are joining the ranks of the
developed world
ā
Current trends indicate that the world is moving rapidly toward an
economic system that is more favourable for the practice of international
business
ā
ā¢
The Globalization Debate
Anti-globalization protests
There are many reasons why some people may be against globalization
Job losses in industries under attack from foreign competitors
Ā§
Downward pressure on the wage rate of unskilled workers
Ā§
Environmental degradation
Ā§
Cultural imperialism of global media and multinational enterprises
Ā§
ā
Large sections of the population in many countries believe that
globalization harms living standards and the environment
ā
ā¢
Globalization, Jobs, and Income
Outsourcing jobs to developing countries has provoked fears that this
process will have long-term harmful effects on the country
ā
Fears have arisen with respect to services, which has increasingly been
outsourced to nations with lower labour costs
ā
Supporters of globalizations maintain that the declining real wage rates of
unskilled workers owe far more to technology-induced shift within
advanced economies away from jobs where the only qualification was to
turn up for work every day
ā
Growing income inequality is a result of the wages for skilled workers
being bid up by the labour market
ā
ā¢
Globalization, Labour Policies, and the Environment
Critics often argue that adhering to labour and environmental regulations
significantly increases the costs of manufacturing enterprises
Firms deal with this cost disadvantage, the theory goes, by moving
their production facilities to nations that do not have such
burdensome regulations
Ā§
ā
Supports argue that tougher environmental regulations and stricter
labour standards go hand in hand with economic progress
Tree trade enable developing countries to increase economic
growth rates and become richer
Ā§
As an economy grows and income levels rise, initially pollution
levels also rise
Past some point, rising income levels lead to demands for
greater environmental protection, and pollution level then fall
ā”
Ā§
ā
While pollution levels are rising in the world's poorer countries, they have
been falling in developed nations
ā
Supporters of free trade argue that it is possible to tie free trade
agreements to the implementation of tougher environmental and labour
laws in less developed countries
ā
ā¢
Globalization and National Sovereignty
Another concern is that today's increasingly interdependent global
economy shifts economic power away from national governments and
toward supranational organizations
The power of supranational organizations such as the WTO is
limited to that which nation-states collectively agree to grant
Ā§
ā
ā¢
Globalization and the World's Poor
Critics argue that because of free trade and investment, the gap between
the rich and poor nations of the world has gotten wider
ā
In recent history we see that the world's poorer nations are capable of
rapid periods of economic growth
ā
The highly indebted poorer countries (HIPCs) on average the government
debt burden is equivalent to 85% of the value of the economy
With such debt, the government has no money to invest in
important public infrastructure projects
Ā§
HIPCs are trapped in a cycle of poverty, and debt that inhibits
economic development
Ā§
ā
ā¢
Managing In The Global Marketplace
As organizations grow, managers need to recognize that managing an
international business differs from that of managing a purely domestic business
ā¢
Differences between countries requires that an international business vary its
practices country to country
A food chain may have to change their menu according to the culture and
people's diets
ā
ā¢
A country must also develop a policy for money exchange
If the money exchange isn't done properly, the company can lose a lot of
money
ā
ā¢
Chapter 1
Sunday, January 14, 2018 23:46
Document Summary
There is a fundamental shift happening the world"s economy. We are slowly shifting away from self-contained entities, into a world in which barriers to cross-border trade and investments are tumbling. Globalization has increased the opportunities for a firm to expand its revenues by selling around the world and reduce its costs by product in nations where key inputs are cheap. Globalization refers to the shift toward a more integrated and interdependent world economy. This refers to the merging of historically distinct and separate national markets into one huge global marketplace. The fall of barriers to cross-border trade have made it easier to sell internationally. When a company offers a standardized product worldwide they help create a global market. Most global markets are made for industrial goods and materials that serve a universal need. In many global markets, the same companies frequently confront each other as competitors in nation over nation.
