The Global Context I
What is Globalization?
-One that involves many more players than a local business and its domestic market.
-Involves many stakeholders, including domestic and foreign competitors, workers
industries, governments, national cultures and economies.
-A process involving integration and interdependence of world economies.
-A process involving integration and interdependence of world markets-
consumer preferences are converging around the world, marketing their goods and
services worldwide, Businesses will set up operations wherever it is least costly to
Globalization can be considered a process that is expanding the degree and
forms of cross border transactions among people, assets, goods and services.
Refers to the growth of in direct foreign investment in regions across the
Reflects the shift toward increasing economic interdependence: the process
of generating one, single, world economic system or global economy.
Sources Encouraging Global Business Activity
-Pull Factors- the reasons a business would gain from entering the international
context. (What is happening in other countries)
-Push Factors- are forces that act upon all businesses to create an environment
where competing successfully means competing globally.(What is happening in
-Potential for sales growth.
-Obtaining needed resources. (people, materials, technology)
-Reduce Trade barriers.
-Help business expand its market and increase sales.
-Large portion of sales among the worlds largest firms generated from outside the
home country. Ex; Starbucks Corp.
-Having the world as your market offers almost limitless potential beyond domestic
-Access to foreign consumers also may soften the negative effects of domestic
downturns in demand for the businesses’ product of service.
-Businesses may choose to engage in global businesses to obtain resources that are
unavailable, too costly with in domestic borders.
-Acquiring foreign imports is a case of obtaining needed resources.
-Locating your businesses in developed or undeveloped nations means to access
cheap labour. Push Factors:
-The force of competition:
-Domestic economies are increasingly being filled with foreign competitors in many
-Businesses must compete against foreign and domestic competitors.
-Business may be pushed into a global business because it forced to compete with a
-First mover advantage- benefit of being the first to establish positions in world
-Later entries into foreign markets may have difficulties establishing them selves.
-Shift toward Democracy (Cross cultural Business Talent):
-Reduction is Trade Barriers:
-Growth in businesses due to the reduction in trade and investment restrictions.
-Improvements in Technology:
-Have efficiently facilitated cross-border transaction.
-Innovations, Transportation have made it easier to transfer information, products,
services, capital and human resources around the world.
Channels of Globalization:
-at lower level of interconnectedness, a business can export or import
goods/services to or from other countries.
-at higher level, may choose to outsource some aspect of business operations, may
choose to license some aspect, arrange for franchise operations into foreign
Global Business Channels. ( Exporting/Importing, Outsourcing,
Licensing/Franchising, Direct Investments in Foreign Operations, Joint
Ventures/Strategic Alliances, Mergers/Acquisitions, Establishing Subsidiaries.)
Exporting And Importing:
-Likely to be involved in importing and exporting then any other business activity.
-Merchandise exports: Physical goods transferred out of country
-Merchandise imports: Goods brought into country.
-Service exports or imports: banking, insurance or management services can be
preformed at international level, use of company assets, things like patents,
trademarks, copyrights or expertise, arranged through licensing agreements.
-Canada exports over 40% of production, (major trading nation)
-Canada is 5 largest exporter/importer which means they keep generating jobs.
-Largest trading partners with U.S, sending more raw commodities then
manufactured goods to U.S. Outsourcing/Offshoring:
-Involves hiring external organizations to conduct work in certain functions of the
company. Ex; Payroll, accounting, and legal work can be assigned to outsourced
-Going global- the fear that higher-paying North American jobs will be lost if
business decides to outsource manufacturing functions to cheaply paid labour in
third worlds countries.
-May be profit making but there is also a great amount of jobs that would be lost,
even if there loyal employees, anti-offshoring claiming that all they care about is
Licensing and Franchising Arrangements:
-Arrangement where by owner of product or process is paid a fee or royalty from
another company for granting permission to produce or distribute the product or
-Fees paid to foreign firms in return for the performance of a service would result in
a service import.
-Fees earned by businesses would result in serv