2. What is Globalization?
The shift toward a more
integrated and
interdependent world
economy
Two components:
The globalization of markets
The globalization of production
3. Globalization of
Production
Vizio flat panel TV is
designed in a small office in California
assembled in Mexico
From
panels made in South Korea
electronic components made in China
microprocessors made in the U.S.
4. Not just manufacturing…
Globalization of production has
historically been about manufacturing
Increasingly companies are using
modern communications to outsource
service activities to low-cost nations
5. Globalization of markets
In the past, each country had
its own companies in many
industries and its own products
I never saw Japanese media (and I saw
little non-US media) in college
7. But the most global markets
are for standard goods
Aluminum
Wheat
Microprocessors
Aircraft
For many consumer end-products,
huge differences still exist among
national markets
Entertainment, food, clothing
8. Drivers of Globalization
Two factors underlie globalization
“Decline in barriers to the free flow of
goods, services, and capital” that has
occurred since the end of World War II
Technological change
9. Declining Trade and
Investment Barriers
During the 1920s and ‘30s, many of
nations erected formidable barriers to
international trade and
foreign direct investment
Advanced industrial nations of the West
committed themselves after World War II
to removing barriers to the free flow of
goods, services, and capital between
nations.
10. Average Tariff Rates on
Manufactured Products
1913 1950 1990 2002
France 21 % 18 % 5.9 % 4.0 %
Germany 20 % 26 % 5.9 % 4.0 %
Italy 18 % 25 % 5.9 % 4.0 %
Japan 30 % -- 5.3 % 3.8 %
Holland 5 % 1 % 5.9 % 4.0 %
Sweden 20 % 9 % 4.4 % 4.0 %
UK -- 4% 5.9 % 4.0 %
US 44 % 14 % 4.8 % 4.0 %
11. Affects of Lowering Trade
Barriers
Figure 1.1: Volume of World Trade and World
Production, 1950-2004
100
600
1100
1600
2100
2600
3100
1
9
5
0
1
9
5
4
1
9
5
8
1
9
6
2
1
9
6
6
1
9
7
0
1
9
7
4
1
9
7
8
1
9
8
2
1
9
8
6
1
9
9
0
1
9
9
4
1
9
9
8
2
0
0
2
Index
1950=100
Total Merchandise Exports World Production
12. The Role of Technology
Lowering of trade barriers made
globalization possible;
Technology has made it a
transforming movement
13. Internet Usage Growth
Figure 1.3: Internet Users per 1000 People, 1990-
2003
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Internet
U
sers
per
1000
people
Japan United States European Monetary Union World
14. Globalization is acceleration
of trends of the last 10,000
years
People lived for 250,000 years in
hunter-gatherer bands
Rise of agriculture 10,000 years ago led
to rise of empires and nation-states
Science and ‘enlightenment’ after 1680
produced global trade and empires
Free trade and tech after 1980
produced globalization
15. The Emergence
of Global Institutions
Notable global institutions include
the World Trade Organization (WTO) which is
responsible for policing the world trading
system and ensuring that nations adhere to
the rules established in WTO treaties
In 2008, 151 nations accounting for 97% of world
trade were members of the WTO
the International Monetary Fund (IMF) which
maintains order in the international monetary
system
16. The Changing Roles of Countries
in
the Global Economy
In the 1960s:
The U.S. dominated the world economy and
the world trade picture
U.S. multinationals dominated the
international business scene
About half the world-- the centrally planned
economies of the communist world-- was off
limits to Western international business
Today, much of this has changed.
17. The Changing World Output
and World Trade Picture
In the early 1960s, the U.S. was the world's
dominant industrial power accounting for
about 40.3% of world manufacturing output
By 2007, the U.S. accounted for only 20.7%
Other developed nations experienced a
similar decline
18. The Changing Nature of
the Multinational Enterprise
Since the 1960s,
there has been a rise in non-U.S.
multinationals
there has been a rise in mini-multinationals
19. The Globalization Debate
Pro
Lower prices for goods
and services
Economic growth
Increase in consumer
income
Creates jobs (for many)
Countries specialize in
production of goods and
services that are
produced most
efficiently
Con
Destroys manufacturing
jobs in wealthy nations
Wage rates of unskilled
in advanced countries
decline
Companies move to
countries with fewer
labor and environment
regulations
Loss of sovereignty
Homogenized cultures
20. Managing in the Global
Marketplace
Much of this course is concerned
with managing an international
business
i.e., any business with international
sales,
sourcing, or
Investment
21. Managing an international
business is different
Countries are different
International transactions involve converting
money into different currencies
Range of problems in an international
business is wider and problems are
more complex
International business must cope with
different, conflicting government rules
and systems
Different strategic approaches required
22. Key terms
An international business – any
business with international sales,
sourcing, or investment
A multinational business – any
business with productive activities
in 2 or more countries
A global business – a business that
takes a global approach to
production and sourcing (Coca-Cola, Intel)
23. The Emergence
of Global Institutions
the World Bank which promotes economic
development
the United Nations (UN) which maintains
international peace and security, develops
friendly relations among nations, cooperates
in solving international problems and
promotes respect for human rights, and is a
center for harmonizing the actions of nations
