Each day, an average person makes use of goods and services of multiple origins—for instance, the Finnish mobile Nokia and the US toy-maker’s Barbie doll made in China but used across the world; a software from the US-based Microsoft, developed by an Indian software engineer based in Singapore, used in Japan; the Thailand-manufactured US sports shoe Nike used by a Saudi consumer.

1. Globalization
International Business

2. Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
Kindly restrict the use of slides for personal purpose.
Please seek permission to reproduce the same in public forms and presentations.

3. Global World
• Each day, an average person
makes use of goods and
services of multiple origins—
for instance, the Finnish
mobile Nokia and the US toy-maker’s
Barbie doll made in
China but used across the
world; a software from the
US-based Microsoft,
developed by an Indian
software engineer based in
Singapore, used in Japan; the
Thailand-manufactured US
sports shoe Nike used by a
Saudi consumer.

4. Definition
The IMF defines globalization
as “ the growing economic
and interdependence of
countries worldwide through
increasing volume and
variety of cross border
transactions in goods and
services and of international
capital flow and also through
the more rapid and
widespread diffusion of
technology”.

5. Factors affecting Globalization

6. Mover and restraining factors of globalization

7. Movers of Globalization

8. Movers of Globalization
1. Economic liberalization.
2. Technological breakthroughs .
3. Multilateral institutions.
4. International Economic Integrations.
5. Move towards free marketing system .
6. Rising R&D cost.
7. Advents in Logistics Management.
8. Emergence of global customer segment.

9. Economic Liberalization
• Economic liberalization, both
in terms of regulations and
tariff structure, has greatly
contributed to the
globalization of trade and
investment. The emergence of
the multilateral trade regime
under the WTO has facilitated
the reduction of tariffs and
non-tariff trade barriers. In the
coming years, the tariffs are
expected to decline
considerably further.

10. Technological breakthroughs
• The breakthroughs in science
and technology have
transformed the world virtually
into a global village, especially
manufacturing, transportation,
and information and
communication technologies.

11. Multilateral institutions
• A number of multilateral
institutions under the UN
framework, set up during the
post-World War II era, have
facilitated exchanges among
countries and became prominent
forces in present-day
globalization. Multilateral
organizations such as the GATT
and WTO contributed to the
process of globalization and the
opening up of markets by
consistently reducing tariffs and
increasing market access through
various rounds of multilateral
trade negotiations.

12. International Economic Integrations
• Consequent to World War II, a
number of countries across the
world collaborated to form
economic groupings so as to
promote trade and investment
among the members. The Treaty
of Rome in 1957 led to the
creation of the European
Economic Community (EEC) that
graduated to the European Union
(EU) so as to form a stronger
Economic Union. The US, Canada,
and Mexico collaborated to form
the North American Free Trade
Agreement (NAFTA) in 1994.

13. Move towards free marketing system
• The demise of centrally
planned economies in Eastern
Europe, the former USSR, and
China has also contributed to
the process of globalization as
these countries gradually
integrated themselves with the
world economy. The
Commonwealth of
Independent States (CIS)
countries—all former Soviet
Republics—and China have
opened up and are moving
towards market-driven
economic systems at fast
pace.

14. Rising R&D cost
• The rapid growth in market
competition and the ever-increasing
insatiable consumer
demand for newer and
increasingly sophisticated
goods and services compel
businesses to invest huge
amounts on research and
development (R&D). In order
to recover the costs of massive
investments in R&D and
achieve economic viability, it
becomes necessary to
globalize the business
operations.

15. Example
• For instance, software
companies such as
Microsoft, Novel, and
Oracle, commercial aircraft
manufacturers like Boeing
and Airbus, pharmaceutical
giants such as Pfizer, Glaxo
SmithKline, Johnson &
Johnson, Merck, and
Novartis, etc., can hardly be
commercially viable unless
global scale of operations
are adopted.

16. Advents in Logistics Management
• Besides these, the greater
availability of speedier and
increasingly cost-effective
means of transport,
breakthroughs in logistics
management such as
multimodal transport
technology, and third-party
logistics management
contributed to the faster
and efficient movement of
goods internationally.

17. Emergence of global customer segment
• Customers around the world
are fast exhibiting convergence
of tastes and preferences in
terms of their product likings
and buying habits.
Automobiles, fast-food outlets,
music systems, and even
fashion goods are becoming
amazingly similar across
countries. The proliferation of
transnational satellite
television and
telecommunication has
accelerated the process of
cultural convergence.

18. Factors restraining of
globalization

19. Factors restraining of globalization
1. Regulatory controls .
2. Emerging trade barriers.
3. Cultural Factors.
4. Nationalism.
5. War and civil disturbances.
6. Management Myopia .

20. Regulatory controls
• The restrictions imposed by
national governments by way
of regulatory measures in their
trade, industrial, monetary,
and fiscal policies restrain
companies from global
expansion. Restrictions on
portfolio and foreign direct
investment considerably
influence monetary and capital
flows across borders. The high
incidence of import duties
makes imported goods
uncompetitive and deters
them from entering domestic
markets.

21. Emerging trade barriers
• The integration of national economies
under the WTO framework has
restrained countries from increasing
tariffs and imposing explicit non-tariff
trade barriers. However, countries are
consistently evolving innovative
marketing barriers that are WTO
compatible. Such barriers include
quality and technical specifications,
environmental issues, regulations
related to human exploitation, such as
child labour, etc. Innovative technical
jargons and justifications are often
evolved by developed countries to
impose such restrictions over goods
from developing countries, who find it
very hard to defend against such
measures.

22. Cultural Factors
• Cultural factors can restrain
the benefits of globalization.
For instance, France’s
collective nationalism favours
home-grown agriculture and
the US fear of terrorism has
made foreign management of
its ports difficult and
restrained the entry of the
Dubai PortWorld.

23. Nationalism
• The feeling of nationalism often
aroused by local trade and
industry, trade unions, political
parties, and other nationalistic
interest groups exerts
considerable pressure against
globalization. The increased
availability of quality goods at
comparatively lower prices
generally benefits the mass
consumers in the importing
country but hurts the interests
of the domestic industry.

24. War and civil disturbances
• The inability to maintain
conducive business
environment with sufficient
freedom of operations restricts
foreign companies from
investing. Companies often
prefer to expand their business
operations in countries that
offer peace and security.
Countries engaged in prolonged
war and civil disturbances are
generally avoided for
international trade and
investment.

25. Management Myopia
• A number of well-established
business enterprises
operating indigenously
exhibit little interest in
expanding their business
overseas. Besides, several
other factors such as resource
availability, risks, and the
attitude of top management
play a significant role in the
internationalization of
business activities.

26. World Is flat

27. World is Flat
• The flat-world view is largely credited to
Thomas Friedman and his 2005 best seller,
The World Is Flat. Many people consider
globalization a modern phenomenon, but
according to Friedman, this is its third stage.

28. Globalization 1.0
• The first stage of global development, what
Friedman calls “Globalization 1.0,” started
with Columbus’s discovery of the New World
and ran from 1492 to about 1800. Driven by
nationalism and religion, this lengthy stage
was characterized by how much industrial
power countries could produce and apply.

29. Globalization 2.0
• “Globalization 2.0,” from about 1800 to 2000,
was disrupted by the Great Depression and both
World Wars and was largely shaped by the
emerging power of huge, multinational
corporations. Globalization 2.0 grew with the
European mercantile stock companies as they
expanded in search of new markets, cheap labor,
and raw materials. It continued with subsequent
advances in sea and rail transportation. This
period saw the introduction of modern
communications and cheaper shipping costs.

30. Globalization 3.0
• “Globalization 3.0” began around 2000, with
advances in global electronic interconnectivity
that allowed individuals to communicate as never
before. In Globalization 1.0, nations dominated
global expansion. Globalization 2.0 was driven by
the ascension of multinational companies, which
pushed global development. In Globalization 3.0,
major software advances have allowed an
unprecedented number of people worldwide to
work together with unlimited potential.

31. How the World Got Flat
• Friedman identifies ten major events that
helped reshape the modern world and make it
flat:

32. How the World Got Flat
• 11/9/89: When the walls came down and the
windows went up.The fall of the Berlin Wall
ended old-style communism and planned
economies. Capitalism ascended.
• 8/9/95: When Netscape went public. Internet
browsing and e-mail helped propel the
Internet by making it commercially viable and
user friendly.

33. How the World Got Flat
• Work-flow software: Let’s do lunch. Have your
application talk to my application. With more
powerful, easier-to-use software and improved
connectivity, more people can share work. Thus,
complex projects with more interdependent parts
can be worked on collaboratively from anywhere.
• Open-sourcing: Self-organizing, collaborative
communities. Providing basic software online for
free gives everyone source code, thus
accelerating collaboration and software
development.

34. How the World Got Flat
• Outsourcing: Y2K. The Internet lets firms use
employees worldwide and send specific work to
the most qualified, cheapest labor, wherever it is.
Enter India, with educated and talented people
who work at a fraction of US or European wages.
Indian technicians and software experts built an
international reputation during the Y2K
millennium event. The feared computer -system
breakdown never happened, but the Indian IT
industry began handling e-commerce and related
businesses worldwide.

35. How the World Got Flat
• Offshoring: When it comes to jobs leaving and factories
being built in cheaper places, people think of China,
Malaysia, Thailand, Mexico, Ireland, Brazil, and
Vietnam. But going offshore isn’t just moving part of a
manufacturing or service process. It means creating a
new business model to make more goods for non-US
sale, thus increasing US exports.
• Supply-chaining: Eating sushi in Arkansas. Walmart
demonstrates that improved acquisition and
distribution can lower costs and make suppliers boost
quality.

36. How the World Got Flat
• Insourcing: What the guys in funny brown shorts
are really doing. This kind of service collaboration
happens when firms devise new service
combinations to improve service. Take United
Parcel Service (UPS). The “brown” company
delivers packages globally, but it also repairs
Toshiba computers and organizes delivery routes
for Papa John’s pizza. With insourcing, UPS uses
its logistics expertise to help clients create new
businesses.

37. How the World Got Flat
• Informing: Google, Yahoo!, MSN Web Search. Google
revolutionized information searching. Its users conduct
some one billion searches annually. This search
methodology and the wide access to knowledge on the
Internet transforms information into a commodity
people can use to spawn entirely new businesses.
• The steroids: Digital, mobile, personal, and virtual.
Technological advances range from wireless
communication to processing, resulting in extremely
powerful computing capability and transmission. One
new Intel chip processes some 11 million instructions
per second (MIPS), compared to 60,000 MIPS in 1971.

38. Now
• These ten factors had powerful roles in making
the world smaller, but each worked in isolation
until, Freidman writes, the convergence of three
more powerful forces: (1) new software and
increased public familiarity with the Internet, (2)
the incorporation of that knowledge into
business and personal communication, and (3)
the market influx of billions of people from Asia
and the former Soviet Union who want to
become more prosperous—fast. Converging,
these factors generated their own critical mass.