Globalization and Business

By Professor Allan
Globalization and Business
What is Globalization?
Globalization is the process of making something known
worldwide. For example, here in the United States,
globalization is everywhere. You can't walk a couple of blocks
without seeing restaurants that offer foods from Italy (pizza),
Japan (sushi), or even Mexico (tacos!).

There are three important features or aspects of globalization,
which can be seen as follows:

1. The increasing importance o f international trade
2. More and more multinational companies
3. More and more businesses thinking globally about their
strategy.

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.


Globalization of Markets
In the past, each country had its own companies in
many industries and its own products.
Today everyone knows
Nintendo
Starbucks
Coca-Cola
Ikea
McDonalds
Samsung

Factors Affecting Globalization
There are many factors which have contributed to the
growth of globalization, such as:
technological change,
the reduction of transportation costs,
consumer taste changes,
and the growth of new market and competition

Factors Contributing to Globalization
Technological change:
More powerful computers and internet have allowed the easy transfer of data,
which plays an important role in speeding up the globalization.
The reduction of transportation costs:
Air and land transportation have improved the developing environment for
globalization.
Consumer taste change:
More and more consumers today are willing to buy foreign or new products for
fashion or new styles.
The growth of new markets:
New markets have been opened up in countries like former Eastern European
countries and China. The growth of new markets has increased the trend of
globalization.
Competition :
More and more fierce competition has forced businesses to seek opportunities
in the world markets. To compete successfully, businesses today must develop a
global strategy.




The Effects of Globalization on Business
Increasing competition - More and more foreign businesses
have entered local markets so the competition has been
intensified.
Meeting consumer needs in more effective ways - Consumers
have choices for products and services. They can buy the best
products for the best prices.
Being able to enjoy economies of scale - Businesses can enjoy
as large scale of production in the whole world. Their
production costs can thus be reduced.
Increasing mergers or joint-development opportunities in the
world market - Businesses have more partners worldwide.
They can join together to produce goods and services or to
penetrate foreign markets.






Multinational Companies and Their Influences
What is a multinational company?
A multinational company is an organization which owns
or controls production or services facilities outside the
country in which it is based. This means that they do not
just export their products abroad, but actually produce
their products in other countries.
It is commonly understood that a company is called a
multinational company provided it operates in more than
four countries.
Examples of multinational companies are many such as:
HSBC, Toyota, Honda and others.

The Globalization Debate
The Advantages of Globalization:
Supporters of globalization argue that it has the potential to make this
world a better place to live in and solve some deep-seated problems like
unemployment and poverty. The marginal are getting a chance to exhibit in
the world market.
It promotes global economic growth, creates jobs, makes companies more
competitive, and lowers prices for consumers. It also provides poor
countries, through infusions of foreign capital and technology, with the
chance to develop economically.
There is cultural intermingling. Each country is learning more about other
cultures.

The Globalization Debate
The Disadvantages of Globalization
Multinational corporations are accused of social injustice, unfair working
conditions (including slave labor wages and poor living and working
conditions), as well as a lack of concern for the environment,
mismanagement of natural resources, and ecological damage.
Globalization makes it easier for rich companies to act with less
accountability. They also claim that countries individual cultures are
becoming overpowered by Americanization.
Globalization has led to exploitation of labor. Prisoners and child workers
are used to work in inhumane conditions. Safety standards are ignored to
produce cheap goods.