IB Business & Management

Unit 1.9
Globalization:
Lesson 1: The Causes & Impacts
Pages: 151-163
 1. Focus Questions
 1. What is globalization?
• 2. What are the causes and
impacts of globalization?
 3. What are some indicators of

globalization?
 …
 Think about it…
 In business, the competition will bite you
if you keep running. If you stand still, they
will swallow you.
~ William Knudsen (1879-1948), former
president of GM.
 2. Overview
 What is globalization?
• The integration of the world’s economies in relation to their
economics, sociology, and politics.
• It is an attempt to produce and sell the same products or services in
different countries.
 Why are companies interested in globalization?
 Is globalization the right move for some companies?
 What are some indicators of globalization?
• See Box 1.9a on page 152.
 …

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 3. Globalization

 Globalization can also be defined as the growing interdependence

of the world’s economies.
• Whereby national economies join together into a single global
economy.
 With globalization, the political and economical decisions of one
country are likely to affect those in other parts of the world, too.
• MNC will design and market their products to the world.
 Products are easily recognizable.

 Same production processes.

 For example… - - - - - - - - - - - - >

 …

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 5. The Effects of Globalization on Business
Activity
• There are
many who
criticize Competition • For a
globalization. business,
• How many Customer globalization
Increased provides both
have watched, Expectations
Customer opportunities
“Super Size &
Base and threats.
Me”? Needs
• Some argue
that The
globalization is Effects
a form of
cultural M & A’s Economies
imperialism. Joint- of
•Do you ventures Scale
agree or
disagree?
Choice
of
Location
IB Business & Management
Unit 1.9
Globalization:
Lesson 2 : Multinational Corporations
Pages: 156-159
 1. Focus Questions
 1. What are the reasons for the
growth of MNCs?
• 2. What role and impact do MNCs
have in the global business
environment?
 …
 2a. Multinational Corporations

 What is a MNC?
• A business that operates in two or more countries.
• It is also called a transnational corporation.
 Can you give examples of some MNC?
• Coke
• Dell
• Samsung
• LG
• Hyundai
• Wendy’s
 …

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 2b. Multinational Corporations
Increased
Sales turnover  So, why become
By widening a multinational?
Customer base
Globalization Gain • For several
of Economies of reasons, such
Markets scale as…
 …
Reasons
for becoming
a MNC…
Avoid
Able to Protectionist
Spread Policies by
Risks Producing
Overseas
Cheaper
Production
Costs
 3. Potential Problems
Lack of  Despite the
Local Knowledge benefits of
expanding
overseas, there
Logistical are certain
Infrastructure Costs will problems that a
Problems Increase MNC will
MNCs encounter.
Run into  …

Political External
& Factors
Economical Influencing
Factors Decisions
 4. MNCs Effect on Host Countries

Create  Despite the

Jobs benefits of
Prone to Benefit the
Takeover Balance of expanding
Bids Payments overseas, there
are certain
problems that a
MNC will
Causes Effects on Boost
encounter.
Unemployment Host Country GDP
• See page 158-
159 of your
Concerned text.
About Technology  …
Social Transfer
Responsibility More
Competition
IB Business & Management
Unit 1.9
Globalization:
Lesson 3: Regional Trading Blocs
Pages: 159-163
 1. Focus Questions
 1. What are trading blocs and what
are their major implications for
businesses? …
 2a. Regional Trading Blocs
Levels
of
“Free” Trade

CEPA Common Market

FTA Customs Union
Closer
Free -Free trade and free
Economic
Trade movement of labor
Partnership
Agreement and capital
Agreement
- NAFTA
- Under the WTO
 RTBs try to…
• eliminate trade barriers
• Establish free international trade….see page 159.
 2b. Regional Trading Blocs
 RTB will also…
• Impose physical barriers to international trade.
 Tariffs: will increase the price of exports, thus

reduce competition.
 Quotas: limits placed on the volume or value of

foreign goods and services.

• This will limit supply and will have two major
effects:
 1. It reduces the amount available for sale.

 2. It raises prices due to limited supply.

 …
2c. Major RTB Around the World
EU
The
European
Union
EFTA
WTO
The
The
European
World Trade
RTB Free Trade
Organization
Around the Association
World

ASEAN
NAFTA
The
The
Association
North American
Of
Free Trade
South East
Agreement
Asian Nations
 2d. Recap
 Regional Trading Blocs (RTB) and Closer Economic
Partnership Agreements (CEPA) aim to:
• Reduce or eliminate tariffs between its members.
• Promote trade and investment facilitation.
 In the end, there will always be winners and losers when
joining these RTBs.
• The winners:
 Trade creation; when a country switches from buying

products at a high cost to buying them from a lower

cost country.
• The losers:
 Trade diversion; when a country switches from
buying products from a low-cost country to buying
them from a higher-cost country.
 The End.