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Chapter 1

ADM 3318 - Chapter 1 Notes - Globalization

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thADM 3318International BusinessSeptember 8 2012Chapter 1 GlobalizationWhat is GlobalizationGlobalization The shift toward a more integrated and interdependent world economyThe Globalization of Markets The merging of historically distinct and separate national markets into one huge global marketplaceFalling barriers to crossborder trade have made it easier to sell internationallyA company does not have to be the size of a multinational giant to facilitate and benefit from the globalization of markets The most global markets currently are not markets for consumer productswhere national differences in tastes and preferences are still importantbut markets for industrial goods and materials that serve a universal needThe Globalization 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 productionFactors of Production Components of production such as labor energy land and capitalBy doing this companies hope to lower their overall cost structure or improve the quality of functionality of their product offering thereby allowing them to compete more effectivelyThe internet is great facilitator for the globalization of productionThe Emergence of Global InstitutionsOver the past half century a number of important global institutions have been created to help manage regulate and police the global marketplaceGeneral Agreement on Tariffs and Trade GATT International treaty that committed signatories to lowering barriers to the free flow of goods across national borders let to WTOWorld Trade Organization WTO The organization that succeeded the GATT and now acts to police the world trading systemoAs of 2006 149 nations that collectively accounted for 97 percent of world trade were WTO members thereby giving the organization enormous scope and influenceInternational Monetary Fund IMF International institution set up to maintain order in the international monetary systemoThe IMF is seen as the lender of last resort to nationstates whose economies are in turmoil and currencies are losing value against those of other nationsoIn return for the loan the IMF requires nationstates to adopt specific economic policies aimed at returning their troubled economies to stability and growthWorld Bank International organization set up to promote economic development primarily by offering lowinterest loans to cashstrapped governments of poorer nationsoWas set up to promote economic development
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