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Learning Concepts – Chapter 2 :
1. Understand globalization and why it is
2. Define globalization & its stages.
3. Discuss the effects/impact of globalization
and why and how globalizationcan be perceived
as a benefit and as a threat.
Copyright, John Wiley and Sons, Inc.
Definition of Globalization
 Buzzword among businesses & countries
 Globalization is not a new phoenomenon.
 Globalization:
 Ongoing process in which regional economies,
societies & cultures become integrated and
 Referred to as economic globalization:
 National economies are integrated into an
international economy by means of trade, FDI ,
capital flows, migration & technology
 Globalization is driven by a combination of economic,
technological, socio-cultural, political & organic
Copyright, John Wiley and Sons, Inc.
Definition of Globalization
 Involves transnational dissemination of
ideas, languages, pop culture
 Process that arises spontaneously in the mkt
& acts by developing international division of
labor, eliminating trade restrictions,
reduction in communication & transportation

Copyright, John Wiley and Sons, Inc.
Forms of Globalization
 Economic globalization – opening &
deregulation of commodity, capital, labor
mkts (neoliberal globalization)
 Political globalization – emergence of
transnational elite & phasing out all powerful
 Cultural globalization – worldwide
homogenization of culture
 Other forms – technological globalization
sharing of R & D, transfer of technology
 Social globalization – interaction of
 Modern globalization – facilitated by
advances in technology which have led to
reduction in cost & free trade

Copyright, John Wiley and Sons, Inc.
An Age of Globalization
Globalization is everywhere. For consumers, it
means more choice, lower prices, and blurred
national identities. For business, it means lower
costs, better supply, and more markets.

Copyright, John Wiley and Sons, Inc.
Impact / Effects of
 Industry – emergence of global production markets
& wider access to markets & wider range of gds &
services fro consumers & industries, increases movt
0f raw material, & gds across border
 Financial – devt of worldwide financial mkts &
access to external financing & global sourcing of
capital & investment funds
 Economic - devt of global common market –
freedom of exchange of gds & services & capital &
labor across border, sourcing of cheap labor in low
wage countries e.g. companies move to China to
take advantage of cheap labor & raw materials
Copyright, John Wiley and Sons, Inc.
Impact / Effects of
 Political – create a world govt that fosters closer
interrelationship among govts & guarantees rights,
political freedom & wider political cooperation
among countries
 Information – enhance info flow between remote
geographic regions with improved communication
 Language – understanding, usage &
communication of different languages among
different cultures, English as lingua franca, rise of
use of Mandarin

Copyright, John Wiley and Sons, Inc.
Effect of Globalization &
 Competition- Markets become more accessible
& open – subject to intense competition creating
a level playing field for domestic & foreign firms
 Argument that globalization leads to corporate
 There is an argument that governments will
surrender their sovereignty to global corporations.
 As domestic firms find it difficult to compete with
larger globalized companies, hence firms must be
cost efficient to compete.
 However, this is not true – globalization does,
however, open governments to the reality of trade
and pluralistic influence.

Copyright, John Wiley and Sons, Inc.
Globalization and the
Does globalization hurt the natural environment?
Arguments against globalization that it could lead to
increased inequality & environmental degradation.
In locations that are unable to adapt or keep pace with
globalization, it has taken away the competitive edge of
once industrial & agricultural areas & lower the quality
of life.
Probably not. Resources show that globalization actually
helps the natural environment through the national
development it fosters.
Global corporations committed to corporate social
responsibility to keep environment clean & safe
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 Globalization can cause job transitions in
home and host countries.
 Globalization causes wages to go up in
developing countries and can put downward
wage pressure among unskilled workers at
 Globalization also causes capital to enter and
exit economies easier and more frequently,
which causes economic uncertainty.

Globalization – The Social Impact
Copyright, John Wiley and Sons, Inc.
Globalization and Technology
Cultural globalization aided by Internet which allows
interaction & communication between different cultures
Globalization has led to faster diffusion of technology &
technological advancement critical for foreign firms
Globalization has led to devt of technology infrastructure
esp to developing countries to generate grwoth &
economic devt.
Copyright, John Wiley and Sons, Inc.
Globalization and Culture
Some suggest that globalization causes cultural
homogenization. This isn’t true.
Globalization causes people to be more aware of
their national culture and background, not less.
Understanding & acceptance of different cultures
Leads to growth in cross cultural contact & cultural
Promotes cultural diversity & create opportunities for
cross cultural marketing, trade & communication .
The challenge, is to lever resources to maintain
productivity in light of increasing nationalism and
cultural awareness.
Copyright, John Wiley and Sons, Inc.
Other Effects of Globalization
 Legal & Ethics – creation, understanding of
international laws & business practices
 Effects on poor countries – poorer & underdeveloped
economies could benefit from globalization with
more development & market opportunities.
 To developing countries they benefit from
globalization with increased employment, tax
revenues, and international relations.
 To developed countries benefit from globalization with
increased production, imports, exports, and corporate
 However argument against globalization that it
results in exploitation of labor & resources of
developing countries
 In their effect to be a part of globalization process,
some loss of sovereignty in govts in control &
decision making of domestic policies

Copyright, John Wiley and Sons, Inc.
Globalization – Gains or Losses?

Did Globalization Cause the Financial Crisis?

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Globalization – In summary
 Globalization is complex and expensive. It
forces business firms to adopt strategies and
operations to different cultures and climates.
When business can do this, and this is what this
class is all about, it can achieve a very good
return on investment and useful global