Globalization

Dr. Chansoo Park

Discussion

Managing an international business is different

from managing a domestic business?
Managing an international business is different
from managing a domestic business?

1. Countries are different

2. The range of problems confronted by a manager in an international

business is wider and more complex

3. Managers must find ways to work within the limits imposed by

governments’ intervention

4. International transactions involve converting money into different

currencies
What is globalization?
What is Globalization?
World Economy Perspective: Integrated economy

Globalization refers to the shift toward a more

integrated and interdependent world economy (Textbook)

Globalization

Firm-Level Perspective: Global opportunity

Globalization is the process of firms expanding

beyond their domestic boundaries and competing
worldwide, regardless of national boundaries

Debates:
- Worsening income inequality / environment conditions,
winner-takes-all society
- In recent years, the world economy is simultaneously facing
trends of both globalization and de-globalization

Source : Cullen (1999), Hill (2015) Cuervo-Cazurra, Mudambi & Pedersen (2017), Park and Vertinsky (2016)
From distinct national economic units and toward one
huge global market

⚫ What type of food you ate for breakfast

or lunch (Italian-style coffee, sushi),

⚫ What type of cell phone you have and

where it was made,

⚫ Where your car was designed and

manufactured,

⚫ Where the components for their computer

were manufactured, and so on.
You might drive a car that was:

Car: Ford

 Designed in Germany
 Assembled in Mexico
 Components could be made from
rubber from Malaysia or steel from South Korea
 You may have filled your car with gas from a
service centre owned by a British-Dutch
multinational
Key facets of Globalization

 Globalization of Markets
The merging of separate national markets into one huge
global marketplace.

 Globalization of Production
The sourcing of goods and services from locations around the
world

 Globalization of Customers
Global Convergence of customer needs

8
Globalization of Markets

⚫ Historically distinct and separate national

markets are merging
⚫ In this sense, some argue: No longer makes
sense to talk about the “German market” or
“American market” or “Canadian market”
⚫ The taste and preferences of consumers in
different nations are converging upon some
global norm
- Coca Cola, McDonald’s hamburgers, and
IKEA furniture
 Globalization of Markets:
Starbucks around the world
Globalization of Production

▪ Definition: 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 like (land, labor, energy and
capital)

▪ Companies can
– lower their overall cost structure
– improve the quality or functionality of their product offering
Low price & High quality

▪ Production is becoming global

- For most recent jet airliner, the 787, some 65% of the total value
of the aircraft is outsourced to foreign companies.
Global Convergence of Customer Needs

Global Convergence of
customer needs
Discussion

Why Companies Globalize?

Why Companies Globalize?: The Value of International Strategies

The Growth
Imperative Capture growth opportunities in overseas markets:

The Efficiency Leverage economics of scale and gain access to

Imperative low-cost factors of production: raw materials,
labor, and technology

Globalization New Core Access knowledge and innovation from

Imperative Competencies different regions and new competencies can be
developed

Globalization
of Customers Gain access to new customers for current
products or services

Globalization
of Competitors
Defend against global competitive moves

Managing
Corporate Risk
The value of risk reduction for firms pursuing a
corporate diversification strategy

Source : Govindarajan & Gupta (2001), Barney & Hesterly (2015)

What is Driving Globalization?
 What is Driving Globalization?

Declining The decline in barriers to the free flow of goods, services,

trade and capital that has occurred since the end of World War II
barriers (Free trade agreement)

Lowering of trade barriers made globalization possible;

Technologi
technology has made it a reality
cal change

- Internet
- Telecommunication
- Transportation technology
Time to reach 50 million users

Wall Street Journal (2015)

? 19 Days
In the fourth industrial revolution, a large proportion
of human labor might be replaced by technologies
such as robots, artificial intelligence and the Internet
of Things.
Source: Word Economic Forum (2016)

Ex) 3D printing, Self-driving car, chat with refrigerator

DISCUSSION QUESTIONS

QUESTION

How have changes in technology contributed towards the

globalization of markets and of production? Would the
globalization of products and markets have been possible
without these technological changes?
Nutshell

⚫ Globalization: Understand how the world economy is

becoming more global.

⚫ Key facets of Globalization: Look at the globalization of

‘markets’ and ‘production’ (+ customer).

⚫ Why globalize?

⚫ The main drivers of globalization

The End