Presentation on

globalization

Presented to
prof Ch abdul khaliq
Presenters:
Names Roll no
Uzma Mc18-201
Rafia Mc18-207
Aqsa Mc18-213
Faryal Mc16-216
Farwa Mc18-219
WHAT DOES GLOBALIZATION MEANS?

• The process by which businesses or other

organizations develop international influence or start
operating on an international scale
• It also means more choices, at lower prices
Examples of companies working globally
• There were two case studies in the notes one is a beverage company COCA
COLA and second is a telecommunication company which is NOKIA.
• Coca cola owns approx 500 beverage brands in approx 200 countries.
• It works globally and there demands never comes down because they do
proper innovation in there products.
Cont:
• On the other hand there is an example of NOKIA which was the
most selling brand in early 21st century in approx 140 countries.
• But there demand comes down because they were unable to bring
the desired innovation in there products.
• Globalization not only means to ensure the availability of the
product but also to make sure what the customers need.
The old and new landscape:
• 1st landscape was a time when all the companies were state
owned and all the companies were centralized.
• Technology at that time was equal to none.
• There were no competition among the companies and that’s
why there where no innovation in the products.
• In the new landscape some technological changes happen.
digital networking was introduced through fiber optics and
competition among the companies started.
The globalization landscape
• It was the time when market started to penetrate all the companies were
ready to give there part in the global market.
• All the companies started to connect with international market
• Companies started merging with each other to give maximum services to
consumers.
• The main purpose of this is to provide the maximum services at lower
prices to every part of the world.
What does global business mean?

• Global business means doing the business activities outside

the boundary of country.
• Here we can take the example that most of us wake up on an
IKEA bed here in our homes made in USA and have a juice
imported from UK.
• This is how all the countries are connected
with each other and making the world
a global village
Age of globalization:
• It is a fashionable thing these days.
• We can find different things around us which gives
the examples of globalization.
• At some point everyone in the world is connected to
globalization.
Global economy:
• Global economy means to form the economy of different
countries at one place.
• Reducing tariffs and other import duties to different products .
• Also government should work for the free flow of trade to
form the economy.
 HISTORY OF GLOBALIZATION
THE BRETTON WOOD’S CONFERENCE
• Held in 1944 and lasted till 1972.
• Aimed to restore the economic activities after the WORLD WAR II.
• IMF ,GATT and WORLD BANK were established.
• Main objectives were designed to facilitate:
• Greater stability of exchange rates.
• Promote international trade & development.
URAGUAY ROUND
• The Uraguay round of GATT negotiated to:
• Reduce agricultural subsidies
• To lift restrictions on foreign investments.
• The patent system that must be adopted and implemented.
• Opening trade in services like banking & insurance.
WHAT DOES GLOBALIZATION MEAN TO YOU?

• As per to the consumer’s perspectives:

• It can be defined as more choices with lower prices.
• The availability of products and services everywhere.
• Globalization has an impact on an individual’s career choices and progression.
GLOBALIZATION:BOON OR BANE

• For DEVELOPED countries it has helped by bringing in opportunities for economic

development.
• For DEVELOPING countries globalization has helped in gaining access to developed
country’s technology and their market.
• Globalization has its own challenges as well:
• Growing inequality with in and across the nation.
• Fluctuations within the financial markets.
• So globalization can be a blessing or a curse it all depends upon the nation.
GLOBALIZATION:DIMENSIONS
• The dimensions can be classified as:
ECONOMIC GLOBALISM
• Refers to the flow of goods, services, capital, information and the perception that
accompany market exchange.
ENVIRONMENTAL GLOBALISM
• The transport of material in the atmosphere that effects the human health and
well being.
SOCIAL AND CULTURAL GLOBALISM
• It involves the movement of ideas, information, images and of the people who
carry those ideas and information with them
Who benefits from Globalization?
• Globalization has its winners and losers. Globalization is higher among
the G7 nations that among the developing and emerging economies, it is
clear that some developing nations (JAPAN) are low on globalization,
while some developing(BOTSWANA) and emerging(MALAYSIA,NIGERIA)
economies are quite high.
• In 2000, for the first time ever multinational firms from developing
countries made it into the ranks of the top 100 global multinationals.
Globalization: The Social Balance…
• It is best to understand globalization in a balanced
light, recognizing its positive and negative aspects, so
as to focus attention on constructive solutions to the
foreign trade and investment debate.
• International economic organization such as the
international monetary fund, the World Bank and
the World Trade Organization provide added
infrastructure to support globalization.
Globalization challenges
• Free flow of imports and exports: It means there should
be no restrictions on any sort of import and export. There
should be less duties and tariffs on imports and exports.
• Heavy competition and influx of new technology:
Technology inflow would be welcome in all those areas
where local technology is not developed fully to meet the
application requirements or to cope with the ever
increasing market demand.
World Trade Organization
• World trade organization (WTO) was established on
1st January 1995.
• It is the only global international organization dealing
with the rules of trade between nations.
• The objective is to help producers of goods and
services, exporters and importers conduct their
business.
 • I n t e r n a t i o n a l Business

∆WHAT IS INTERNATIONAL BUSINESS?

1. international business
(definition)
2. Business transaction
3. Gross international products
INTERNATIONAL BUSINESS REFERS TO
THE TRADE OF GOODS, SERVICES,
TECHNOLOGY, CAPITAL AND/OR
KNOW LEDGE ACROSS NATIONAL
BORDERS AND AT A GLOBAL OR
TRANSNATIONAL SCALE. IT INVOLVES
CROSS-BORDER TRANSACTIONS OF
GOODS AND SERVICES BETW EEN
TWO OR MORE COUNTRIES.
 Business transaction:
A business transaction is an activity or event that can be measured in terms of money
and which affects the financial position or operations of the business entity. Ad. A
business transaction has an effect on any of the accounting elements – assets,
liabilities, capital, income, and expense.
 Gross national product:
Gross national product (GNP) is an estimate of total value of all the final products
and services turned out in a given period by the means of production owned by a
country's residents.
 Multinational enterprise:
Is a business entity which
conducts business operations in
various countries with its
subsidiaries and affiliates. MNEs
possess considerable and wide
human resources, finance,
• MN
expertise and technology as well
E
as enjoy substantial competitive
advantage.
INTERNATIONAL VS\ DOMESTIC BUSINESS:
Why do firm expand internationally?

 Generally the motivations for conducting international

Business includes market motives, economic motives and
strategic motives…
 Economic Strategic
Market
motives:
• Higher motives:
motive:
• Down
revenue
• Offensive •
stream
Up
• Lower costs stream
• Defensive
International Trade Theories
and Application
Banana War
In April 1999,
WTO ruled that EU violated international trade law by
establishing quotas an tariff on bananas from Latin America
imported by US based
•Chiquita brands International
•Dole Foods
•Fresh Del Monte Produce
Cont …

The US complained that an EU scheme

giving banana producers from former colonies in the
Caribbean special access to European markets broke free
trade rules
In a number of countries such as Brazil and India, large
amounts of bananas are produced but consumed mostly
locally. Other regions such as Central America and the
Caribbean include a large number of banana exporters. Some
of the nations in these regions are quite dependent on
banana exports, often to their former colonial rulers.
Cont …

The banana business is hardly lucrative.Retil prices and the sale

of banana have been falling for years, margins are narrow, the
crop is susceptible to disease, and transportation id tricky.

While European bananas prices are double those in US, the

The Latin
grower America
are hardly Nation whose banana export have been
benefit.
restricted in Europe are hopeful that thee WTO will eventually
bear fruit.
In the spring 2001 EU an Us finally reached an agreement that
would alter the tariff and quotas structure until their removal in
2006.
What is the EU's deal with the
Caribbean?
Since 1975, each Caribbean country has a quota of bananas,
enabling them to sell to Europe as many as they wanted to support.
This, the EU hoped, would enable the economies of such developing
countries to grow independently, without depending on overseas
aid.
The effect of this deal has been to protect banana farmers in the
Caribbean from competition from Latin America, whose bananas are
cheaper because they are grown on large-scale, mechanized
plantations run by giant US-based corporations.
Theories
• The Mercantilist Doctrine
• Absolute Advantage Theory
• Comparative Advantage Theory
• Heckscher–Ohlin model
• Country Similarity Theory
• Leontief Paradox
• Global Strategic Rivalry Theory
• National Competitive Advantage Theory
The Mercantilist Doctrine
It is the first theory of international trade.
At that time, Thomas Mun stated that the economic
strength of any country depends on the amounts of
silver and gold holdings. Greater are the holdings,
more economically independent a country is.
Cont …

Under the mercantilist , the government had two goals in

foreign economic policy.

1. The first goal was to increase the wealth of nation by

acquiring gold.
2. The second policy goal was to extract trade gains.
Cont …

❑ mercantilists believed that a country should

increase its holdings of gold and silver by promoting
exports and discouraging imports.
❑ The objective of each country was to have a trade
surplus, or a situation where the value of exports are
greater than the value of imports, and to avoid
a trade deficit, or a situation where the value of
imports is greater than the value of exports.
 Cont …

❖In addition, as demonstrated by David Hume in 1752,

An influx of gold would increase the domestic price level and

boost up the prices of exports. Hence, the country holding the gold
would lose the competitive edge in price that had enabled it to
acquire the gold earlier by exporting more that it imparted.
 Absolute Advantage Theory
In 1776, Adam Smith questioned
the leading mercantile theory of
the time in The Wealth of Nations. Adam Smith, An Inquiry
into the Nature and Causes of the Wealth of Nations
❑Adam Smith focused on the ability of a country to produce a
good more efficiently than another nation.
❑ Smith reasoned that trade between countries shouldn’t be
regulated or restricted by government policy or intervention.
❑ He stated that trade should flow naturally according to market
Example

Wheat(1 unit) Coffee(1 unit)

United states 2 8
Colombia 10 2
Comparative Advantage Theory
Wine(1 gallon) Cloth(1 yard)
England 120 100
Portugal 80 90

A country has a comparative advantage in producing a

good if the opportunity cost for producing the good is
lower at home than in the other country
 Opportunity cost for Opportunity cost for
wine cloth
England 120/100 = 12/10=1.0 100/120 = 10/12=0.83

Portugal 80/90 = 8/9 =0.89 90/80 = 9/8 = 1.13

Heckscher-Ohlin Theory
• This theory is presented by Eli Heckscher and Bertil
Ohlin.
This can just be understood as, if the supply of a
product grows greater than it is in demand In the
market, its price falls and vice versa.
• It is also known as factor proportion theory.
The H–O model makes the following core
assumptions:

• Labor and capital flow freely between sectors

equalizing factor prices across sectors within a
country.
• The amount of labor and capital in two countries
differ (difference in endowments)
• Technology is the same among countries (a long-term
assumption)
• Tastes are the same upon countries
Country Similarity Theory

• Swedish economist Steffen Linder developed the country

similarity theory in 1961, as he tried to explain the
concept of intraindustry trade.
• Linder’s theory proposed that consumers in countries
that are in the same or similar stage of development
would have similar preferences.
• In this firm-based theory, Linder suggested that
companies first produce for domestic consumption.
When they explore exporting, the companies often find
that markets that look similar to their domestic one, in
Product Life Cycle Theory

• Raymond Vernon, a Harvard Business School

professor, developed the product life cycle theory in
the 1960s.
• The theory, originating in the field of marketing,
stated that a product life cycle has three distinct
stages:
(1) new product,
(2) maturing product, and
New trade theory

• NTT came about to help us understand why countries

are trade partners when they are trading similar
goods and services.
• Monopolistic competition is an important element of
New Trade Theory, it suggests that firms are often
competing on branding, quality and not just simple
price. It explains why countries can both export and
import designer clothes.
New new trade theory

• New new trade theory is a theory of international

trade inaugurated by Marc Melitz in 2003
• It discovered that efficiency of firms in a country
changes much and those firms engaged in
international trade have higher productivity than
firms which produce only for domestic market.
• As it is fitted to big data age, the research produced
many follows and the trend is now called New new
trade theory in comparison to Paul Krugman's new