Thanks

1. Chapter
INTRODUCTION
&
OVERVIEW
1

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International Business, 5/e
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2
Case: Wal-mart’s global expansion
■ Largest retailer in the world –Over 4500 stores
■ International expansion in 1991begins with Mexico
in response to market saturation in the US
■ Localization strategy adopted after trial and error
■ Global buying power has allowed it to reap
economies of scale
■ Wal-mart faces significant competition from other
global retailers, but has the first mover advantage in
some markets

3. McGraw-Hill/Irwin
International Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
3
What is globalization?
■ The shift towards a more integrated and
interdependent world economy
■ Two components:
■ The globalization of markets
■ The globalization of production

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International Business, 5/e
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Globalization of markets
■ The merging of distinctly separate national
markets into a global marketplace
■ Tastes and preferences converge onto a global
norm
■ Firms offer standardized products worldwide
creating a world market

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International Business, 5/e
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Globalization of markets
■ Significant differences still exist between
national markets on many relevant dimensions
■ These differences require that marketing and
operating strategies and product features be
customized to best match conditions in a
country.

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International Business, 5/e
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Globalization of markets
■ Countries are different
■ Range of problems are wider and more
complex
■ Government intervention in trade and
investment creates problems
■ International investment is impacted by
different currencies

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International Business, 5/e
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Globalization of production
■ Refers to sourcing of goods and services from
locations around the world to take advantage
of
■ Differences in cost or quality of the factors of
production
■ Labor
■ Land
■ Capital

8. McGraw-Hill/Irwin
International Business, 5/e
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Swan Optical
Manufacturing
1-5
Design
Global Production
Example 1

9. McGraw-Hill/Irwin
International Business, 5/e
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9
Volume of world trade and production,
1950-2002
Fig: 1.1

10. McGraw-Hill/Irwin
International Business, 5/e
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10
Emergence of global institutions
■ Globalization has created the need for
institutions to help manage, regulate and
police the global marketplace
■ GATT
■ WTO
■ IMF
■ World bank
■ United Nations

11. McGraw-Hill/Irwin
International Business, 5/e
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11
Global drivers
■ Macro factors that underlie trend towards
greater globalization
■ Decline in trade barriers
■ Technological change

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International Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
12
Pattern of declining tariffs

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International Business, 5/e
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Declining barriers to trade
■ Globalization of markets and production has
been facilitated by
■ Reduction in trade barriers
■ Removal of restrictions to foreign direct
investment

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International Business, 5/e
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The changing pattern of world output and
trade

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International Business, 5/e
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Percentage share of total FDI stock
Fig: 1.3

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International Business, 5/e
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Volume of FDI inflows, 1994-2002
($ billions)
Fig: 1.4

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International Business, 5/e
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The role of technological change
■ Microprocessors and telecommunications
■ The internet and world wide web
■ Transportation technology

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International Business, 5/e
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The shrinking globe
Fig: 1.2

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International Business, 5/e
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Changing demographics of the world
economy
■ World output and trade
■ Changing foreign direct investment
■ Changing nature of multinationals
■ Mini multinationals
■ Non US multinationals

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International Business, 5/e
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National origin of largest multinational
corporations
Fig: 1.5

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International Business, 5/e
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Globalization debate-Pro
■ Lower prices for goods and services
■ Economic growth stimulation
■ Increase in consumer income
■ Creates jobs
■ Countries specialize in production of goods
and services that are produced most efficiently

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International Business, 5/e
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Environmental performance and
income
Fig 1.6

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International Business, 5/e
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Globalization debate-Con
■ Destroys manufacturing jobs in wealthy,
advanced countries
■ Wage rates of unskilled workers in advanced
countries declines
■ Companies move to countries with fewer
labor and environment regulations
■ Loss of sovereignty