2. The process of globalization
◦ Globalization
The process whereby national economies and business systems are becoming deeply interlinked
with each other
◦ Market economy
An economy in which businesses are privately owned and prices are set by the interaction of
supply and demand
Socialist economy
An economy in which businesses are owned by the state and prices are set by state planners
3. Falling barriers to trade
◦ International trade
The sale of a good or service across boarder
◦ Foreign direct investment
Investment by a company based in one nation in business activities in another nation
◦ Tariffs
A tax on import
◦ Quotas
A limit on number of items of a good that can be imported from a foreign nation
◦ Regional trade agreements
Agreements to remove barriers to trade between nations within a geographic region
4. Implications of globalization
◦ New trends have resulted in a massive surge in the volume of international trade and foreign
direct investment.
5. The globalization of production
◦ Sourcing goods and services from locations around the globe to take advantage of national
differences in the cost and quality of factors of production
6. The globalization of market
◦ The merging of historically distinct and separate national markets into one huge global
marketplace
◦ Technology: the great facilitator
7. Constraints on globalization
◦ Protectionist countertrends
◦ National differences in consumer behavior
◦ Differences in social culture
8. The benefits of going global
◦ Expanding the market
◦ Realizing scale economies
◦ Realizing location economies
◦ Global learning
9. Management challenges in the global
enterprise
◦ Global standardization or local customization
◦ Entry mode
Exporting
Licensing
Franchising
Joint venture
Wholly owned subsidiary
o Locating activities
10. Managing people in Multinationals
◦ Expatriates
Home country executive sent to foreign post
◦ Geocentric staffing
a staffing policy that seeks the best people for key jobs throughout the organization, regardless of
nationality
◦ Ethnocentric staffing
A staffing policy in which all key management positions are staffed by home country nationals
◦ Polycentric staffing
A staffing policy in which key management positions in a subsidiary are staffed by host country
nationals
