SlideShare a Scribd company logo
Because learning changes everything.®
Globalization
Chapter 1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
© McGraw Hill, LLC
Learning Objectives
1-1 Understand what is meant by the term globalization.
1-2 Recognize the main drivers of globalization.
1-3 Describe the changing nature of the global economy.
1-4 Explain the main arguments in the debate over the
impact of globalization.
1-5 Understand how the process of globalization is creating
opportunities and challenges for management practice.
2
© McGraw Hill, LLC
What Is Globalization? 1
The Globalization of Markets
The merging of historically distinct and separate national
markets into one huge global marketplace.
• Falling barriers to cross-border trade and investment.
• Global tastes.
• Benefits small and large companies.
• Significant differences between national markets.
• Products that serve universal needs are global, such as oil.
• Competitors may not change among nations.
3
© McGraw Hill, LLC
What Is Globalization? 2
The Globalization of Production
Sourcing goods to take advantage of differences in cost and
quality of factors of production.
• Factors of production include labor, energy, land, capital.
Early outsourcing was confined to manufacturing.
• Modern communications technology has advanced
outsourcing today for service activities.
4
© McGraw Hill, LLC
What Is Globalization? 3
The Globalization of Production continued
Robert Reich suggests “global products.”
Impediments prevent optimal dispersion of activities:
• Formal and informal barriers to trade.
• Barriers to foreign direct investment.
• Transportation costs.
• Political and economic risk.
• Challenge of coordinating globally dispersed supply chain.
5
© McGraw Hill, LLC
The Emergence of Global Institutions 1
Institutions needed to help manage, regulate, and police
global marketplace.
• General Agreement on Tariffs and Trade (GATT).
• World Trade Organization (WTO).
• International Monetary Fund (IMF).
• World Bank.
• United Nations (UN).
6
© McGraw Hill, LLC
The Emergence of Global Institutions 2
World Trade Organization (WTO)
• Polices the world trading system.
• Ensures nation-states adhere to the rules.
• Facilitates multinational agreements among members.
• As of 2021,164 nations that account for 98 percent of
world trade were WTO members.
7
© McGraw Hill, LLC
The Emergence of Global Institutions 3
International Monetary Fund (IMF)
• Established to maintain order in the international monetary
system.
• Often seen as the lender of last resort.
• In return for loans, requires nation-states to adopt specific
economic policies aimed at returning their economies to
stability and growth.
8
© McGraw Hill, LLC
The Emergence of Global Institutions 4
World Bank
• Promotes economic development.
• Focused on making low-interest loans to cash-strapped
governments in poor nations that wish to undertake
significant infrastructure investments.
9
© McGraw Hill, LLC
The Emergence of Global Institutions 5
United Nations (UN)
Promotes peace through international cooperation and
collective security.
193 member countries.
UN Charter has four basic purposes:
• Maintain international peace and security.
• Develop friendly relations among nations.
• Cooperate in solving international problems and in
promoting respect for human rights.
• Be a center for harmonizing the actions of nations.
10
© McGraw Hill, LLC
The Emergence of Global Institutions 6
Group of Twenty (G20)
• Comprises finance ministers and central bank governors of
the 19 largest economies in the world, plus representatives
from the European Union and the European Central Bank.
• Represents 90 percent of global GDP and 80 percent of
international global trade.
11
© McGraw Hill, LLC
Drivers of Globalization 1
Declining Trade and Investment Barriers
1920s to 1930s: Many barriers to international trade and
foreign direct investment.
• International trade: when a firm exports goods or services
to consumers in another country.
• Foreign direct investment (FDI): when a firm invests
resources in business activities outside its home country.
GATT lowered barriers.
• Uruguay Round extended GATT and established WTO.
12
© McGraw Hill, LLC
Drivers of Globalization 2
Declining Trade and Investment Barriers continued
Between 1960 and 2020, the value of the world economy
increased 9 times, while the value of international goods
increased 19.7 times.
• Trade in goods and services and the value of foreign direct
investment have all been growing faster than world output.
• More firms dispersing production process to different
locations around the globe.
• Economies of the world’s nation-states are becoming more
intertwined.
• World has become significantly wealthier in the past two
decades.
13
© McGraw Hill, LLC
Figure 1.1 Value of World Merchandised
Trade and World Production 1960 to 2021
Access the text alternative for slide images
14
© McGraw Hill, LLC
Drivers of Globalization 3
Role of Technological Change
Communications.
• Development of the microprocessor single most important
innovation since World War II.
• Moore’s law predicts that the power of microprocessor
technology doubles and its cost of production falls in half
every 18 months.
The internet.
• More than half of the world’s population uses the internet.
• Global e-commerce sales close to $4 trillion.
• The internet acts as an equalizer.
15
© McGraw Hill, LLC
Drivers of Globalization 4
Role of Technological Change continued
Transportation technology.
• Commercial jets, superfreighters, and containerization
have all “shrunk the globe.”
Implications for the globalization of production:
• Locating production in geographically separate locations
has become more economical.
Implications for the globalization of markets:
• Cultural distance has been reduced and has brought some
convergence of consumer tastes and preferences.
16
© McGraw Hill, LLC
The Changing Demographics of the Global
Economy 1
The Changing World Output and World Trade Picture
1960s: U.S. accounted for 38.3 percent of world output.
2020: U.S. accounted for 24.7 percent of world output.
This reflects the faster economic growth of several other
economies, particularly China.
• China and BRIC countries growing more rapidly.
• Developing nations may account for more than 60 percent
of world economic activity by 2030.
17
© McGraw Hill, LLC
The Changing Demographics of the Global
Economy 2
The Changing Foreign Direct Investment Picture
As barriers to the free flow of goods and services fell, non-
U.S. firms increasingly invested across national borders.
• Desire to disperse production activities to optimal locations
and to build a direct presence in major foreign markets.
• Outward stock of foreign direct investment (FDI): the total
cumulative value of foreign investments by firms domiciled
in nations outside of that nation’s borders.
18
© McGraw Hill, LLC
Figure 1.2 FDI Outward Stock Outward as
a Percentage of GDP
Access the text alternative for slide images
19
© McGraw Hill, LLC
Figure 1.3 FDI Inflows (in Millions of
Dollars), 1990 to 2020
Access the text alternative for slide images
20
© McGraw Hill, LLC
The Changing Demographics of the Global
Economy 3
The Changing Nature of the Multinational Enterprise
Multinational enterprise (MNE) is any business that has
productive activities in two or more countries.
Non-U.S. multinationals.
• In 2003, 38.8 percent of the world’s 2,000 largest
multinationals were U.S. firms.
• By 2019, 28.8 percent of the top 2,000 global firms were
U.S. multinationals, a drop of 201 firms.
21
© McGraw Hill, LLC
Figure 1.4 National Share of the Largest
2,000 Multinational Corporations in 2019
Access the text alternative for slide images
22
© McGraw Hill, LLC
The Changing Demographics of the Global
Economy 4
The Changing Nature of the Multinational Enterprise
continued
The rise of mini-multinationals.
• Growth in the number of medium- and small-sized
businesses.
• Internet is lowering barriers that smaller firms faced in
international trade.
23
© McGraw Hill, LLC
The Changing Demographics of the Global
Economy 5
The Changing World Order
Former communist countries present export and investment
opportunities.
• Signs of growing unrest and commitment to market-based
economic systems cannot be assumed.
• Risks of doing business in these countries are high.
China moving to industrial superpower.
In Latin America debt and inflation are down, more private
investors, expanding economies.
24
© McGraw Hill, LLC
The Changing Demographics of the Global
Economy 6
Global Economy of the Twenty-First Century
Barriers to the free flow of goods, services, and capital have
been coming down.
Strengthened by the widespread adoption of liberal
economic policies by countries that had opposed them.
Globalization is not inevitable:
• Countries may pull back.
• Risks are high.
25
© McGraw Hill, LLC
The Globalization Debate 1
Antiglobalization Protests
Began with 1999 protests at WTO meeting in Seattle.
Protestors now typically show up at major meetings of global
institutions.
Protestors believe globalization causes detrimental effects on
living standards, wage rates, and the environment.
• Theory and evidence suggest these fears may be
exaggerated.
26
© McGraw Hill, LLC
The Globalization Debate 2
Globalization, Jobs, and Income
Critics of globalization argue:
• Falling trade barriers allow firms to move manufacturing
activities to countries where wage rates are much lower.
• Destroy manufacturing jobs in wealthy advanced economies.
• Services also being outsourced:
• Contributing to higher unemployment and lower living
standards in their home nations.
27
© McGraw Hill, LLC
The Globalization Debate 3
Globalization, Jobs, and Income continued
Supporters argue:
• Benefits outweigh the costs.
• Free trade will result in countries specializing in the
production of goods and services that they can produce
most efficiently, while importing goods and services that
they cannot produce as efficiently.
• As a result, the whole economy is better off.
• Companies can reduce their cost structure, and consumers
benefit.
28
© McGraw Hill, LLC
The Globalization Debate 4
Globalization, Jobs, and Income continued
Data suggests the share of labor in national income has
declined over the past two decades.
• Share of national income by skilled labor has increased.
• Unskilled labor experienced a fall in income, but not
necessarily standard of living due to economic growth.
The weak growth rate in real wage rates for unskilled
workers is likely due to a technology-induced shift within
advanced economies.
• Technological change has a bigger impact than
globalization on declining share of national income enjoyed
by labor.
29
© McGraw Hill, LLC
The Globalization Debate 5
Globalization, Labor Policies, and the Environment
Critics argue:
• Labor and environmental regulations increase
manufacturing costs.
• Lack of regulation can lead to abuse.
• Firms move production to nations that do not have
regulations.
Supporters argue:
• Tougher environmental regulations and stricter labor
standards go hand in hand with economic progress.
• Free trade leads to less labor exploitation and less pollution.
30
© McGraw Hill, LLC
Figure 1.5 Income Levels and
Environmental Pollution
Access the text alternative for slide images
31
© McGraw Hill, LLC
The Globalization Debate 6
Globalization and National Sovereignty
Critics argue:
• Shift of power away from national governments toward
supranational organizations.
• WTO, EU, UN.
Supporters argue:
• The power of supranational organizations is limited to what
nation-states collectively agree to grant.
• These organizations exist to serve the collective interests
of member states.
32
© McGraw Hill, LLC
The Globalization Debate 7
Globalization and the World’s Poor
Critics argue the gap between the rich and poor nations has
gotten wider—but has been due to:
• Totalitarian governments.
• Poor economic policies.
• Corruption and lack of property rights.
• Expanding populations in developing countries.
• Debt burdens.
Supporters suggest lowering barriers to trade and investment
and promoting free market policies.
33
© McGraw Hill, LLC
Figure 1.6 Percentage of the World’s Population
Living in Poverty During 1981 to 2015
Access the text alternative for slide images
34
© McGraw Hill, LLC
Managing in the Global Marketplace
Managing International Business
Any firm that engages in international trade or investment is
international.
Managing international business differs from managing
purely domestic business.
• Countries are different.
• Range of problems is wider and problems more complex.
• Must find ways to work within limits imposed by
government.
• Transactions involve converting money into different
currencies.
35
Because learning changes everything.®
www.mheducation.com
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

More Related Content

Similar to LESSON-1-IBAT-globalization and 5 emergence

Globalization ( Chapter no. 1)
Globalization ( Chapter no. 1)Globalization ( Chapter no. 1)
Globalization ( Chapter no. 1)
Qamar Farooq
 
Chapter 2 slides
Chapter 2 slidesChapter 2 slides
Chapter 2 slides
precious ramodike
 
Globalisation
GlobalisationGlobalisation
Globalisation
Sachin Mohanty
 
International business
International businessInternational business
International business
Dr. C. V. Raman University
 
Ibm notes
Ibm notesIbm notes
Ibm notes
Pradeep Kumar
 
Unit 1.pptx
Unit 1.pptxUnit 1.pptx
Unit 1.pptx
Rajesh494875
 
Chap001
Chap001Chap001
Chap001
guest785824
 
Chapter 9 PowerPoint
Chapter 9 PowerPoint Chapter 9 PowerPoint
Chapter 9 PowerPoint
rogergomes14
 
Daniels01 im
Daniels01 imDaniels01 im
Daniels01 im
Keerthi Ram
 
Chapter 01 Globalization (International Business Environment) .pptx
Chapter 01 Globalization (International Business Environment)  .pptxChapter 01 Globalization (International Business Environment)  .pptx
Chapter 01 Globalization (International Business Environment) .pptx
sshahriar2001
 
Chapter 01 Globalization (International Business Environment) .pptx
Chapter 01 Globalization (International Business Environment)  .pptxChapter 01 Globalization (International Business Environment)  .pptx
Chapter 01 Globalization (International Business Environment) .pptx
sshahriar2001
 
BREXIT Unit 1 IBE.pptx
BREXIT Unit 1 IBE.pptxBREXIT Unit 1 IBE.pptx
BREXIT Unit 1 IBE.pptx
PriyankaLunavat
 
Intrnational business environment
Intrnational business environmentIntrnational business environment
Intrnational business environment
Padmakar Mankare
 
Globalization - International Business - Manu Melwin Joy
Globalization - International Business - Manu Melwin JoyGlobalization - International Business - Manu Melwin Joy
Globalization - International Business - Manu Melwin Joy
manumelwin
 
Legal outsourcing
Legal outsourcingLegal outsourcing
Mining and Metals Scenarios to 2030
Mining and Metals Scenarios to 2030Mining and Metals Scenarios to 2030
Mining and Metals Scenarios to 2030
Youth in Mining Foundation
 
International Business P1.pptx
International Business P1.pptxInternational Business P1.pptx
International Business P1.pptx
Alfredo Toledo
 
pros and Cons of Globalization
pros and Cons of Globalizationpros and Cons of Globalization
pros and Cons of Globalization
noor ul ain
 
Globalization and You
Globalization and YouGlobalization and You
Globalization and You
HIMADRI BANERJI
 
Global business today global 8th edition hill test bank.docx
Global business today global 8th edition hill test bank.docxGlobal business today global 8th edition hill test bank.docx
Global business today global 8th edition hill test bank.docx
rightmanforbloodline
 

Similar to LESSON-1-IBAT-globalization and 5 emergence (20)

Globalization ( Chapter no. 1)
Globalization ( Chapter no. 1)Globalization ( Chapter no. 1)
Globalization ( Chapter no. 1)
 
Chapter 2 slides
Chapter 2 slidesChapter 2 slides
Chapter 2 slides
 
Globalisation
GlobalisationGlobalisation
Globalisation
 
International business
International businessInternational business
International business
 
Ibm notes
Ibm notesIbm notes
Ibm notes
 
Unit 1.pptx
Unit 1.pptxUnit 1.pptx
Unit 1.pptx
 
Chap001
Chap001Chap001
Chap001
 
Chapter 9 PowerPoint
Chapter 9 PowerPoint Chapter 9 PowerPoint
Chapter 9 PowerPoint
 
Daniels01 im
Daniels01 imDaniels01 im
Daniels01 im
 
Chapter 01 Globalization (International Business Environment) .pptx
Chapter 01 Globalization (International Business Environment)  .pptxChapter 01 Globalization (International Business Environment)  .pptx
Chapter 01 Globalization (International Business Environment) .pptx
 
Chapter 01 Globalization (International Business Environment) .pptx
Chapter 01 Globalization (International Business Environment)  .pptxChapter 01 Globalization (International Business Environment)  .pptx
Chapter 01 Globalization (International Business Environment) .pptx
 
BREXIT Unit 1 IBE.pptx
BREXIT Unit 1 IBE.pptxBREXIT Unit 1 IBE.pptx
BREXIT Unit 1 IBE.pptx
 
Intrnational business environment
Intrnational business environmentIntrnational business environment
Intrnational business environment
 
Globalization - International Business - Manu Melwin Joy
Globalization - International Business - Manu Melwin JoyGlobalization - International Business - Manu Melwin Joy
Globalization - International Business - Manu Melwin Joy
 
Legal outsourcing
Legal outsourcingLegal outsourcing
Legal outsourcing
 
Mining and Metals Scenarios to 2030
Mining and Metals Scenarios to 2030Mining and Metals Scenarios to 2030
Mining and Metals Scenarios to 2030
 
International Business P1.pptx
International Business P1.pptxInternational Business P1.pptx
International Business P1.pptx
 
pros and Cons of Globalization
pros and Cons of Globalizationpros and Cons of Globalization
pros and Cons of Globalization
 
Globalization and You
Globalization and YouGlobalization and You
Globalization and You
 
Global business today global 8th edition hill test bank.docx
Global business today global 8th edition hill test bank.docxGlobal business today global 8th edition hill test bank.docx
Global business today global 8th edition hill test bank.docx
 

Recently uploaded

8328958814KALYAN MATKA | MATKA RESULT | KALYAN
8328958814KALYAN MATKA | MATKA RESULT | KALYAN8328958814KALYAN MATKA | MATKA RESULT | KALYAN
8328958814KALYAN MATKA | MATKA RESULT | KALYAN
➑➌➋➑➒➎➑➑➊➍
 
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan ChartSatta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results
 
The latest Heat Pump Manual from Newentide
The latest Heat Pump Manual from NewentideThe latest Heat Pump Manual from Newentide
The latest Heat Pump Manual from Newentide
JoeYangGreatMachiner
 
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...
❼❷⓿❺❻❷❽❷❼❽ Dpboss Kalyan Satta Matka Guessing Matka Result Main Bazar chart
 
State of D2C in India: A Logistics Update
State of D2C in India: A Logistics UpdateState of D2C in India: A Logistics Update
State of D2C in India: A Logistics Update
RedSeer
 
Pro Tips for Effortless Contract Management
Pro Tips for Effortless Contract ManagementPro Tips for Effortless Contract Management
Pro Tips for Effortless Contract Management
Eternity Paralegal Services
 
High-Quality IPTV Monthly Subscription for $15
High-Quality IPTV Monthly Subscription for $15High-Quality IPTV Monthly Subscription for $15
High-Quality IPTV Monthly Subscription for $15
advik4387
 
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan ChartSatta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results
 
AI Transformation Playbook: Thinking AI-First for Your Business
AI Transformation Playbook: Thinking AI-First for Your BusinessAI Transformation Playbook: Thinking AI-First for Your Business
AI Transformation Playbook: Thinking AI-First for Your Business
Arijit Dutta
 
IMG_20240615_091110.pdf dpboss guessing
IMG_20240615_091110.pdf dpboss  guessingIMG_20240615_091110.pdf dpboss  guessing
Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...
Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...
Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...
➒➌➎➏➑➐➋➑➐➐Dpboss Matka Guessing Satta Matka Kalyan Chart Indian Matka
 
PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...
PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...
PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...
Ksquare Energy Pvt. Ltd.
 
Pitch Deck Teardown: Kinnect's $250k Angel deck
Pitch Deck Teardown: Kinnect's $250k Angel deckPitch Deck Teardown: Kinnect's $250k Angel deck
Pitch Deck Teardown: Kinnect's $250k Angel deck
HajeJanKamps
 
The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...
The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...
The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...
YourLegal Accounting
 
1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf
1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf
1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf
ISONIKELtd
 
CULR Spring 2024 Journal.pdf testing for duke
CULR Spring 2024 Journal.pdf testing for dukeCULR Spring 2024 Journal.pdf testing for duke
CULR Spring 2024 Journal.pdf testing for duke
ZevinAttisha
 
Kirill Klip GEM Royalty TNR Gold Copper Presentation
Kirill Klip GEM Royalty TNR Gold Copper PresentationKirill Klip GEM Royalty TNR Gold Copper Presentation
Kirill Klip GEM Royalty TNR Gold Copper Presentation
Kirill Klip
 
Registered-Establishment-List-in-Uttarakhand-pdf.pdf
Registered-Establishment-List-in-Uttarakhand-pdf.pdfRegistered-Establishment-List-in-Uttarakhand-pdf.pdf
Registered-Establishment-List-in-Uttarakhand-pdf.pdf
dazzjoker
 
GKohler - Retail Scavenger Hunt Presentation
GKohler - Retail Scavenger Hunt PresentationGKohler - Retail Scavenger Hunt Presentation
GKohler - Retail Scavenger Hunt Presentation
GraceKohler1
 
Best Competitive Marble Pricing in Dubai - ☎ 9928909666
Best Competitive Marble Pricing in Dubai - ☎ 9928909666Best Competitive Marble Pricing in Dubai - ☎ 9928909666
Best Competitive Marble Pricing in Dubai - ☎ 9928909666
Stone Art Hub
 

Recently uploaded (20)

8328958814KALYAN MATKA | MATKA RESULT | KALYAN
8328958814KALYAN MATKA | MATKA RESULT | KALYAN8328958814KALYAN MATKA | MATKA RESULT | KALYAN
8328958814KALYAN MATKA | MATKA RESULT | KALYAN
 
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan ChartSatta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
 
The latest Heat Pump Manual from Newentide
The latest Heat Pump Manual from NewentideThe latest Heat Pump Manual from Newentide
The latest Heat Pump Manual from Newentide
 
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Fin...
 
State of D2C in India: A Logistics Update
State of D2C in India: A Logistics UpdateState of D2C in India: A Logistics Update
State of D2C in India: A Logistics Update
 
Pro Tips for Effortless Contract Management
Pro Tips for Effortless Contract ManagementPro Tips for Effortless Contract Management
Pro Tips for Effortless Contract Management
 
High-Quality IPTV Monthly Subscription for $15
High-Quality IPTV Monthly Subscription for $15High-Quality IPTV Monthly Subscription for $15
High-Quality IPTV Monthly Subscription for $15
 
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan ChartSatta Matka Dpboss Kalyan Matka Results Kalyan Chart
Satta Matka Dpboss Kalyan Matka Results Kalyan Chart
 
AI Transformation Playbook: Thinking AI-First for Your Business
AI Transformation Playbook: Thinking AI-First for Your BusinessAI Transformation Playbook: Thinking AI-First for Your Business
AI Transformation Playbook: Thinking AI-First for Your Business
 
IMG_20240615_091110.pdf dpboss guessing
IMG_20240615_091110.pdf dpboss  guessingIMG_20240615_091110.pdf dpboss  guessing
IMG_20240615_091110.pdf dpboss guessing
 
Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...
Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...
Dpboss Matka Guessing Satta Matta Matka Kalyan panel Chart Indian Matka Dpbos...
 
PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...
PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...
PM Surya Ghar Muft Bijli Yojana: Online Application, Eligibility, Subsidies &...
 
Pitch Deck Teardown: Kinnect's $250k Angel deck
Pitch Deck Teardown: Kinnect's $250k Angel deckPitch Deck Teardown: Kinnect's $250k Angel deck
Pitch Deck Teardown: Kinnect's $250k Angel deck
 
The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...
The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...
The Role of White Label Bookkeeping Services in Supporting the Growth and Sca...
 
1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf
1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf
1 Circular 003_2023 ISO 27001_2022 Transition Arrangments v3.pdf
 
CULR Spring 2024 Journal.pdf testing for duke
CULR Spring 2024 Journal.pdf testing for dukeCULR Spring 2024 Journal.pdf testing for duke
CULR Spring 2024 Journal.pdf testing for duke
 
Kirill Klip GEM Royalty TNR Gold Copper Presentation
Kirill Klip GEM Royalty TNR Gold Copper PresentationKirill Klip GEM Royalty TNR Gold Copper Presentation
Kirill Klip GEM Royalty TNR Gold Copper Presentation
 
Registered-Establishment-List-in-Uttarakhand-pdf.pdf
Registered-Establishment-List-in-Uttarakhand-pdf.pdfRegistered-Establishment-List-in-Uttarakhand-pdf.pdf
Registered-Establishment-List-in-Uttarakhand-pdf.pdf
 
GKohler - Retail Scavenger Hunt Presentation
GKohler - Retail Scavenger Hunt PresentationGKohler - Retail Scavenger Hunt Presentation
GKohler - Retail Scavenger Hunt Presentation
 
Best Competitive Marble Pricing in Dubai - ☎ 9928909666
Best Competitive Marble Pricing in Dubai - ☎ 9928909666Best Competitive Marble Pricing in Dubai - ☎ 9928909666
Best Competitive Marble Pricing in Dubai - ☎ 9928909666
 

LESSON-1-IBAT-globalization and 5 emergence

  • 1. Because learning changes everything.® Globalization Chapter 1 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
  • 2. © McGraw Hill, LLC Learning Objectives 1-1 Understand what is meant by the term globalization. 1-2 Recognize the main drivers of globalization. 1-3 Describe the changing nature of the global economy. 1-4 Explain the main arguments in the debate over the impact of globalization. 1-5 Understand how the process of globalization is creating opportunities and challenges for management practice. 2
  • 3. © McGraw Hill, LLC What Is Globalization? 1 The Globalization of Markets The merging of historically distinct and separate national markets into one huge global marketplace. • Falling barriers to cross-border trade and investment. • Global tastes. • Benefits small and large companies. • Significant differences between national markets. • Products that serve universal needs are global, such as oil. • Competitors may not change among nations. 3
  • 4. © McGraw Hill, LLC What Is Globalization? 2 The Globalization of Production Sourcing goods to take advantage of differences in cost and quality of factors of production. • Factors of production include labor, energy, land, capital. Early outsourcing was confined to manufacturing. • Modern communications technology has advanced outsourcing today for service activities. 4
  • 5. © McGraw Hill, LLC What Is Globalization? 3 The Globalization of Production continued Robert Reich suggests “global products.” Impediments prevent optimal dispersion of activities: • Formal and informal barriers to trade. • Barriers to foreign direct investment. • Transportation costs. • Political and economic risk. • Challenge of coordinating globally dispersed supply chain. 5
  • 6. © McGraw Hill, LLC The Emergence of Global Institutions 1 Institutions needed to help manage, regulate, and police global marketplace. • General Agreement on Tariffs and Trade (GATT). • World Trade Organization (WTO). • International Monetary Fund (IMF). • World Bank. • United Nations (UN). 6
  • 7. © McGraw Hill, LLC The Emergence of Global Institutions 2 World Trade Organization (WTO) • Polices the world trading system. • Ensures nation-states adhere to the rules. • Facilitates multinational agreements among members. • As of 2021,164 nations that account for 98 percent of world trade were WTO members. 7
  • 8. © McGraw Hill, LLC The Emergence of Global Institutions 3 International Monetary Fund (IMF) • Established to maintain order in the international monetary system. • Often seen as the lender of last resort. • In return for loans, requires nation-states to adopt specific economic policies aimed at returning their economies to stability and growth. 8
  • 9. © McGraw Hill, LLC The Emergence of Global Institutions 4 World Bank • Promotes economic development. • Focused on making low-interest loans to cash-strapped governments in poor nations that wish to undertake significant infrastructure investments. 9
  • 10. © McGraw Hill, LLC The Emergence of Global Institutions 5 United Nations (UN) Promotes peace through international cooperation and collective security. 193 member countries. UN Charter has four basic purposes: • Maintain international peace and security. • Develop friendly relations among nations. • Cooperate in solving international problems and in promoting respect for human rights. • Be a center for harmonizing the actions of nations. 10
  • 11. © McGraw Hill, LLC The Emergence of Global Institutions 6 Group of Twenty (G20) • Comprises finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank. • Represents 90 percent of global GDP and 80 percent of international global trade. 11
  • 12. © McGraw Hill, LLC Drivers of Globalization 1 Declining Trade and Investment Barriers 1920s to 1930s: Many barriers to international trade and foreign direct investment. • International trade: when a firm exports goods or services to consumers in another country. • Foreign direct investment (FDI): when a firm invests resources in business activities outside its home country. GATT lowered barriers. • Uruguay Round extended GATT and established WTO. 12
  • 13. © McGraw Hill, LLC Drivers of Globalization 2 Declining Trade and Investment Barriers continued Between 1960 and 2020, the value of the world economy increased 9 times, while the value of international goods increased 19.7 times. • Trade in goods and services and the value of foreign direct investment have all been growing faster than world output. • More firms dispersing production process to different locations around the globe. • Economies of the world’s nation-states are becoming more intertwined. • World has become significantly wealthier in the past two decades. 13
  • 14. © McGraw Hill, LLC Figure 1.1 Value of World Merchandised Trade and World Production 1960 to 2021 Access the text alternative for slide images 14
  • 15. © McGraw Hill, LLC Drivers of Globalization 3 Role of Technological Change Communications. • Development of the microprocessor single most important innovation since World War II. • Moore’s law predicts that the power of microprocessor technology doubles and its cost of production falls in half every 18 months. The internet. • More than half of the world’s population uses the internet. • Global e-commerce sales close to $4 trillion. • The internet acts as an equalizer. 15
  • 16. © McGraw Hill, LLC Drivers of Globalization 4 Role of Technological Change continued Transportation technology. • Commercial jets, superfreighters, and containerization have all “shrunk the globe.” Implications for the globalization of production: • Locating production in geographically separate locations has become more economical. Implications for the globalization of markets: • Cultural distance has been reduced and has brought some convergence of consumer tastes and preferences. 16
  • 17. © McGraw Hill, LLC The Changing Demographics of the Global Economy 1 The Changing World Output and World Trade Picture 1960s: U.S. accounted for 38.3 percent of world output. 2020: U.S. accounted for 24.7 percent of world output. This reflects the faster economic growth of several other economies, particularly China. • China and BRIC countries growing more rapidly. • Developing nations may account for more than 60 percent of world economic activity by 2030. 17
  • 18. © McGraw Hill, LLC The Changing Demographics of the Global Economy 2 The Changing Foreign Direct Investment Picture As barriers to the free flow of goods and services fell, non- U.S. firms increasingly invested across national borders. • Desire to disperse production activities to optimal locations and to build a direct presence in major foreign markets. • Outward stock of foreign direct investment (FDI): the total cumulative value of foreign investments by firms domiciled in nations outside of that nation’s borders. 18
  • 19. © McGraw Hill, LLC Figure 1.2 FDI Outward Stock Outward as a Percentage of GDP Access the text alternative for slide images 19
  • 20. © McGraw Hill, LLC Figure 1.3 FDI Inflows (in Millions of Dollars), 1990 to 2020 Access the text alternative for slide images 20
  • 21. © McGraw Hill, LLC The Changing Demographics of the Global Economy 3 The Changing Nature of the Multinational Enterprise Multinational enterprise (MNE) is any business that has productive activities in two or more countries. Non-U.S. multinationals. • In 2003, 38.8 percent of the world’s 2,000 largest multinationals were U.S. firms. • By 2019, 28.8 percent of the top 2,000 global firms were U.S. multinationals, a drop of 201 firms. 21
  • 22. © McGraw Hill, LLC Figure 1.4 National Share of the Largest 2,000 Multinational Corporations in 2019 Access the text alternative for slide images 22
  • 23. © McGraw Hill, LLC The Changing Demographics of the Global Economy 4 The Changing Nature of the Multinational Enterprise continued The rise of mini-multinationals. • Growth in the number of medium- and small-sized businesses. • Internet is lowering barriers that smaller firms faced in international trade. 23
  • 24. © McGraw Hill, LLC The Changing Demographics of the Global Economy 5 The Changing World Order Former communist countries present export and investment opportunities. • Signs of growing unrest and commitment to market-based economic systems cannot be assumed. • Risks of doing business in these countries are high. China moving to industrial superpower. In Latin America debt and inflation are down, more private investors, expanding economies. 24
  • 25. © McGraw Hill, LLC The Changing Demographics of the Global Economy 6 Global Economy of the Twenty-First Century Barriers to the free flow of goods, services, and capital have been coming down. Strengthened by the widespread adoption of liberal economic policies by countries that had opposed them. Globalization is not inevitable: • Countries may pull back. • Risks are high. 25
  • 26. © McGraw Hill, LLC The Globalization Debate 1 Antiglobalization Protests Began with 1999 protests at WTO meeting in Seattle. Protestors now typically show up at major meetings of global institutions. Protestors believe globalization causes detrimental effects on living standards, wage rates, and the environment. • Theory and evidence suggest these fears may be exaggerated. 26
  • 27. © McGraw Hill, LLC The Globalization Debate 2 Globalization, Jobs, and Income Critics of globalization argue: • Falling trade barriers allow firms to move manufacturing activities to countries where wage rates are much lower. • Destroy manufacturing jobs in wealthy advanced economies. • Services also being outsourced: • Contributing to higher unemployment and lower living standards in their home nations. 27
  • 28. © McGraw Hill, LLC The Globalization Debate 3 Globalization, Jobs, and Income continued Supporters argue: • Benefits outweigh the costs. • Free trade will result in countries specializing in the production of goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently. • As a result, the whole economy is better off. • Companies can reduce their cost structure, and consumers benefit. 28
  • 29. © McGraw Hill, LLC The Globalization Debate 4 Globalization, Jobs, and Income continued Data suggests the share of labor in national income has declined over the past two decades. • Share of national income by skilled labor has increased. • Unskilled labor experienced a fall in income, but not necessarily standard of living due to economic growth. The weak growth rate in real wage rates for unskilled workers is likely due to a technology-induced shift within advanced economies. • Technological change has a bigger impact than globalization on declining share of national income enjoyed by labor. 29
  • 30. © McGraw Hill, LLC The Globalization Debate 5 Globalization, Labor Policies, and the Environment Critics argue: • Labor and environmental regulations increase manufacturing costs. • Lack of regulation can lead to abuse. • Firms move production to nations that do not have regulations. Supporters argue: • Tougher environmental regulations and stricter labor standards go hand in hand with economic progress. • Free trade leads to less labor exploitation and less pollution. 30
  • 31. © McGraw Hill, LLC Figure 1.5 Income Levels and Environmental Pollution Access the text alternative for slide images 31
  • 32. © McGraw Hill, LLC The Globalization Debate 6 Globalization and National Sovereignty Critics argue: • Shift of power away from national governments toward supranational organizations. • WTO, EU, UN. Supporters argue: • The power of supranational organizations is limited to what nation-states collectively agree to grant. • These organizations exist to serve the collective interests of member states. 32
  • 33. © McGraw Hill, LLC The Globalization Debate 7 Globalization and the World’s Poor Critics argue the gap between the rich and poor nations has gotten wider—but has been due to: • Totalitarian governments. • Poor economic policies. • Corruption and lack of property rights. • Expanding populations in developing countries. • Debt burdens. Supporters suggest lowering barriers to trade and investment and promoting free market policies. 33
  • 34. © McGraw Hill, LLC Figure 1.6 Percentage of the World’s Population Living in Poverty During 1981 to 2015 Access the text alternative for slide images 34
  • 35. © McGraw Hill, LLC Managing in the Global Marketplace Managing International Business Any firm that engages in international trade or investment is international. Managing international business differs from managing purely domestic business. • Countries are different. • Range of problems is wider and problems more complex. • Must find ways to work within limits imposed by government. • Transactions involve converting money into different currencies. 35
  • 36. Because learning changes everything.® www.mheducation.com © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

Editor's Notes

  1. Globalization refers to the shift toward a more integrated and interdependent world economy. The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace.
  2. The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital).
  3. Ex. Boeing outsources to foreign suppliers. Consider Boeing’s 777 first introduced in 1995: Eight Japanese suppliers make parts for the fuselage, doors, and wings; a supplier in Singapore makes the doors for the nose landing gear; three suppliers in Italy manufacture wing flaps; and so on.6 In total, some 30 percent of the 777, by value, is built by foreign companies.
  4. Over the past 75 years, a number of important global institutions have been created to help perform these functions, including the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization; the International Monetary Fund and its sister institution, the World Bank; and the United Nations. All these institutions were created by voluntary agreement between individual nation-states, and their functions are enshrined in international treaties.
  5. The WTO was preceded by the General Agreement on Tariffs and Trade (GATT), which was an international treaty that committed signatories to lowering barriers to the free flow of goods across national boarders. The WTO has promoted the lowering of barriers to cross-border trade and investment. In doing so, the WTO has been the instrument of its member states, which have sought to create a more open global business system unencumbered by barriers to trade and investment between countries.
  6. During the past two decades, for example, the IMF has lent money to the governments of troubled states including Argentina, Indonesia, Mexico, Russia, South Korea, Thailand, and Turkey. The IMF took a proactive role in helping countries cope with some of the effects of the 2008–2009 global financial crisis.
  7. The World Bank is considered to be less controversial than the IMF.
  8. Although the UN is perhaps best known for its peacekeeping role, one of the organization’s central mandates is the promotion of higher standards of living, full employment, and conditions of economic and social progress and development—all issues that are central to the creation of a vibrant global economy.
  9. The G20 was originally established to formulate a coordinated policy response to financial crises in developing nations.
  10. The Uruguay Round further reduced trade barriers; extended GATT to cover services as well as manufactured goods; provided enhanced protection for patents, trademarks, and copyrights; and established the World Trade Organization to police the international trading system.
  11. The COVID-19 global pandemic has had a significant impact upon global supply chains, forcing many companies to rethink their globalization strategy. Some companies are reportedly considering moving production closer to home on the theory that local production is less likely to be disrupted by the current pandemic, or other adverse events such as future pandemics, war, terrorism, trade disputes, and the like.
  12. Figure 1.1 charts the growth in the value of world merchandise trade and world production between 1960 and 2020 (the most recent year for which data are available). The data are adjusted to take out the effect of inflation and is indexed at a value of 100 in 1960 to allow for an “apples to apples” comparison. What you can see from the chart is that between 1960 and 2020 the value of the world economy (adjusted for inflation) increased 9 times, while the value of international trade in merchandised goods increased 19.7 times. This actually underestimates the growth in trade, because trade in services has also been growing rapidly in recent decades. It should be noted that the decline in global trade and output in 2020 that can be seen in Figure 1.1 was due primarily to the economic impact of the COVID-19 global pandemic.
  13. Over the past 30 years, global communications have been revolutionized by developments in satellite, optical fiber, wireless technologies, and of course the internet. The internet makes it much easier for buyers and sellers to find each other, wherever they may be located and whatever their size. It allows businesses, both small and large, to expand their global presence at a lower cost than ever before. Just as important, it enables enterprises to coordinate and control a globally dispersed production system.
  14. Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances. And the advent of commercial jet travel has reduced the time needed to get from one location to another. As a result of the technological innovations discussed earlier, the real costs of information processing and communication have fallen dramatically in the past two decades. These developments make it possible for a firm to create and then manage a globally dispersed production system, further facilitating the globalization of production. A worldwide communications network has become essential for many international businesses. In any society, the media are primary conveyors of culture; as global media develop, we must expect the evolution of something akin to a global culture.
  15. As emerging economies such as Brazil, Russia, India, and China—coined the BRIC countries—continue to grow, a further relative decline in the share of world output and world exports accounted for by the United States and other long-established developed nations seems likely. By itself, this is not bad. The relative decline of the United States reflects the growing economic development and industrialization of the world economy, as opposed to any absolute decline in the health of the U.S. economy. Most forecasts now predict a continued rise in the share of world output accounted for by developing nations such as China, India, Russia, Indonesia, Thailand, South Korea, Mexico, and Brazil, and a commensurate decline in the share enjoyed by rich developed countries such as the United Kingdom, Germany, Japan, and the United States.
  16. Beginning in the 1970s, European and Japanese firms began to shift labor-intensive manufacturing operations from their home markets to developing nations where labor costs were lower. In addition, many Japanese firms invested in North America and Europe—often as a hedge against unfavorable currency movements and the possible imposition of trade barriers.
  17. Figure 1.2 illustrates a striking increase in the outward stock of FDI over time. The clear implication is that, increasingly, firms based in a nation depend for their revenues and profits on investments and productive activities in other nations.
  18. Figure 1.3 illustrates two other important trends—the long-term growth in cross-border flows of foreign direct investment that has occurred since 1990, and the increasing importance of developing nations as the destination of foreign direct investment.
  19. In the last 50 years, two notable trends in the demographics of the multinational enterprise have been the rise of non-U.S. multinationals and the growth of mini-multinationals.
  20. These shifts in representation of powerful multinational corporations and their home bases can be expected to continue. Specifically, we expect that even more firms from developing nations will emerge as important competitors in global markets, further shifting the axis of the world economy away from North America and western Europe and challenging the long dominance of companies from the so-called developed world.
  21. Although most international trade and investment is still conducted by large firms, many medium-sized and small businesses are becoming increasingly involved in international trade and investment.
  22. Many of the former communist nations of Europe and Asia have seemed to share a commitment to democratic politics and free market economics. Throughout much of Latin America, debt and inflation are down, governments have sold state-owned enterprises to private investors, foreign investment is welcomed, and the region’s economies have expanded. Brazil, Mexico, and Chile have led the way. These changes have increased the attractiveness of Latin America, both as a market for exports and as a site for foreign direct investment.
  23. The spread of the COVID-19 pandemic around the world in 2020 seriously disrupted global supply chains and called into question the wisdom of relying upon globally dispersed production systems.
  24. Most protests against globalization are tapping into a general sense of loss at the passing of a world in which barriers of time and distance, and significant differences in economic institutions, political institutions, and the level of development of different nations produced a world rich in the diversity of human cultures. However, while the rich citizens of the developed world may have the luxury of mourning the fact that they can now see McDonald’s restaurants and Starbucks coffeehouses on their vacations to exotic locations such as Thailand, fewer complaints are heard from the citizens of those countries, who welcome the higher living standards that progress brings.
  25. For example, by outsourcing its customer service call centers to India, Dell can reduce its cost structure and thereby its prices for computers. U.S. consumers benefit from this development. As prices for computers fall, Americans can spend more of their money on other goods and services. Moreover, the increase in income levels in India allows Indians to purchase more U.S. goods and services, which helps create jobs in the United States.
  26. A solution to the problem of slow real income growth among the unskilled is to be found not in limiting free trade and globalization but in increasing society’s investment in education to reduce the supply of unskilled workers.
  27. Many supporters of free trade point out that it is possible to tie free trade agreements to the implementation of tougher environmental and labor laws in less developed countries. NAFTA, for example, was passed only after side agreements had been negotiated that committed Mexico to tougher enforcement of environmental protection regulations. Thus, supporters of free trade argue that factories based in Mexico are now cleaner than they would have been without the passage of NAFTA.
  28. While the hump-shaped relationship depicted in Figure 1.5 seems to hold across a wide range of pollutants—from sulfur dioxide to lead concentrations and water quality—carbon dioxide emissions are an important exception, rising steadily with higher-income levels.
  29. The World Trade Organization is a favorite target of those who attack the headlong rush toward a global economy. But many economists and politicians maintain that the power of supranational organizations such as the WTO is limited to what nation-states collectively agree to grant. They argue that bodies such as the United Nations and the WTO exist to serve the collective interests of member states, not to subvert those interests.
  30. While recent history has shown that some of the world’s poorer nations are capable of rapid periods of economic growth—witness the transformation that has occurred in some Southeast Asian nations such as South Korea, Thailand, and Malaysia—there appear to be strong forces for stagnation among the world’s poorest nations.
  31. According to data from the World Bank, the percentage of the world’s population living in poverty has declined substantially over the last three decades (see Figure 1.6).
  32. As their organizations increasingly engage in cross-border trade and investment, managers need to recognize that the task of managing an international business differs from that of managing a purely domestic business in many ways. At the most fundamental level, the differences arise from the simple fact that countries are different. Countries differ in their cultures, political systems, economic systems, legal systems, and levels of economic development.