Lecture 2:

GLOBALISATION
At the core of IB is Globalisation?
• What is Globalization?
• This video explains

https://www.youtube.com/watch?v=3oTLyPPrZE4
Globalisation: the economic and business
version
‘
The growing interdependence of countries
worldwide through the increasing volume and
variety of cross-border transactions in
goods and services and of international
capital flows, and also through the more rapid
and widespread diffusion of technology.’
IMF, World Economic Outlook
 5 drivers of Globalization
• Driver 1: the triumph of economic neo-
liberalism
• Driver 2: spread of international governance
and regulation
• Driver 3: finance and capital spread
• Driver 4: Technology
• Driver 5: social and cultural convergence
Globalisation Trends
Top 20 Trade in Goods
and Services 2008-2018
Measures of globalisation
 Global Value Chains
• 60 % of trade in GVCs
• Global sourcing has extended networks
 World FDI inflows by region, 1995-2016 ($bn)

Source: UNCTAD: World Development Report

The globalisation continuum

• Nation state key

• They are sovereign
• Supremacy of national control
• Is globalisation changing this?

Primacy of Pure
nation state globalisation
Different views of globalisation
1 ) Pure globalisation view
(e.g. Ohmae’s ‘Borderless World
2) Transitional (states adapt)
3) Status Quo (globalisation deniers)
Key Trends in Globalisation
• States not constrained – (eg sustained welfare
spending)
• States adapt to globalisation
• Erosion of confidence in neo-liberal
globalisation
• Rise of geo-economics (states embedded in
global system but not determined by it.
Globalisation and Crisis

• Rapid transfer from financial to real economy

• Sharp fall in trade, investment, migration, etc:

- short vs long term

• Need for global governance – mixed
prospects
• Rise of protectionism – evidence?
• Accelerated shifting geopolitics and new
economic order?
Globalisation and business

Distinction between
• Globalisation of markets - where to sell the
product?
• Globalisation of production - where is production
most efficiently carried out?
– dispersion of operations because of locational
advantages - e.g. land, capital, labour,
resources
– global network of production and suppliers
– intensifies interdependence
Business implications of globalisation
• Lower trade and investment barriers intensify
competition (prices, costs, efficiency,
motivation)
• emergence of global perspective of products
and markets
• focus on core activities and rationalisation?
• search for networks and alliances
 Globalisation pressures and opportunities shaping
the firm’s environment

Governance: Lower cross-border barriers/intensified

Levels: competition – home and abroad
-multilateral – WTO, etc -cost pressures
-regional – e.g. EU, NAFTA -scale economies
-national – host and home country o Product development
Policies: o Production
-trade – tariff and non-tariff o Marketing
barriers o Cross-border value chains → logistics
-standards THE FIRM challenges
-environment -sourcing opportunities
-labour -newcomers – e.g. BRICs
-competition policy, etc -neo-liberal economic policies

Markets and marketing

Technology
-ICTs, especially the Internet
-global financial markets
-global media
-cultural convergence
-global advertising potential
-bigger markets resulting from reduced
barriers