Chapter 1

Globalization
 Chapter Preview

• Describe globalization
• Explain how globalization affects markets
and production
• Identify the drivers of globalization
• Discuss the globalization debate
• List types of firms in international business
• Define the global business environment
© Prentice Hall, 2008 International Business 4e Chapter 1 - 2
 Globalization Involves Us All

We experience international
transactions daily

Imports and exports reach

even remote areas

Technology and e-biz

promote trade

Consumers and companies

pull markets closer
© Prentice Hall, 2008 International Business 4e Chapter 1 - 3
 International Business

© Prentice Hall, 2008 International Business 4e Chapter 1 - 4

 Globalization

Trend toward greater economic, cultural, political,

and technological interdependence among national
institutions and economies

Globalization of Globalization of
markets production
Dispersal of production
Convergence in buyer activities worldwide to
preferences in markets minimize costs or
around the world maximize quality

© Prentice Hall, 2008 International Business 4e Chapter 1 - 5

 Benefits of Globalization

Globalization Globalization
of markets of production

•• Reduces
Reducesmarketing
marketingcosts
costs •• Access
Accesslow-cost
low-costlabor
labor
•• New
Newmarket
marketopportunities
opportunities •• Access
Accesstechnical
technicalexpertise
expertise
•• Levels
Levelsincome
incomestream
stream •• Access
Accessproduction
productioninputs
inputs

© Prentice Hall, 2008 International Business 4e Chapter 1 - 6

 Advice of Global Managers

 Know the customer

 Emphasize global awareness
 Develop world-class products
 Market effectively
 Improve logistics
 Analyze problems correctly

© Prentice Hall, 2008 International Business 4e Chapter 1 - 7

 Globalization Drivers I

Remove barriers to trade

and investment GATT

WTO

Regional trade
agreements
© Prentice Hall, 2008 International Business 4e Chapter 1 - 8
 Trade Exceeds Output

© Prentice Hall, 2008 International Business 4e Chapter 1 - 9

 Globalization Drivers II
Technological Innovation

E-mail and Internet, intranets, Transportation

videoconferencing and extranets advancements

Better Improved More efficient,

coordination communications dependable
and control and management shipping

© Prentice Hall, 2008 International Business 4e Chapter 1 - 10

 Top 20 Global Nations

© Prentice Hall, 2008 International Business 4e Chapter 1 - 11

 Globalization Then and Now

Highly mobile Fear of jobs

labor market moving abroad

Free-flowing Backlash among

capital and trade the disaffected

© Prentice Hall, 2008 International Business 4e Chapter 1 - 12

 Challenges to Business

Physical Digital Reputational

security security risk

Examine company Guard proprietary Require ethical and

vulnerability and information and lawful behavior from
create a disaster confidential all employees and
recovery plan communications business partners

© Prentice Hall, 2008 International Business 4e Chapter 1 - 13

 From Anarchy to Debate

Rage Reason

Violence Legitimacy

Carnage Civility

Exclusion Debate

© Prentice Hall, 2008 International Business 4e Chapter 1 - 14

 Jobs and Wages

Opponents Supporters

 Increases wealth and

 Eliminates jobs in efficiency
developed nations
 Generates labor market
 Forces wages lower flexibility
in developed nations  Creates jobs in
developed countries
 Exploits workers in  Advances economies
developing nations
of developing nations
© Prentice Hall, 2008 International Business 4e Chapter 1 - 15
 Labor and Environment

Opponents Supporters

– Globalization lowers + Investment raises

labor standards labor standards

– Weakens protection of + Open economies most

the environment environment friendly

– Exploits workers in + Companies concerned

poor nations for future markets

© Prentice Hall, 2008 International Business 4e Chapter 1 - 16

 Income
Income Inequality
Inequality debate

1 Inequality within nations

Poor people in developing
nations benefit most from
an open economy

2 Inequality between nations

Nations open to world trade
and investment grow faster 3 Global inequality
Inequality has fallen, but
than rich nations experts disagree on the
extent of the decline

© Prentice Hall, 2008 International Business 4e Chapter 1 - 17

 National Sovereignty

Opponents Supporters

Supranational
Globalization has
institutions reduce
benefited societies by
autonomy of national,
helping to spread
regional, and local
democracy worldwide
governments

© Prentice Hall, 2008 International Business 4e Chapter 1 - 18

 Impact on Culture

Opponents Supporters

• Destroys cultural • Specialize and trade

diversity to obtain other goods
• Homogenizes our • Import cultural goods
world from other nations
• Bankrupts local • Protects deeper moral
small businesses and cultural norms

© Prentice Hall, 2008 International Business 4e Chapter 1 - 19

 Culture
Culture Matters:
Matters:
Is
Is Resistance
Resistance Futile?
Futile?

The Same Everything?

…or Cultures Flourishing?

Values Gone for Good?

…or a Force for Good?

Finding Common Ground

© Prentice Hall, 2008 International Business 4e Chapter 1 - 20

 International Business Players

Multinational Small Businesses Born-Global

Corporation and Entrepreneurs Firm
Takes a global
Small companies and
Business that has perspective on its
individuals becoming
direct investments market and engages in
increasingly active in
abroad in multiple international business
international trade
countries from inception
and investment

© Prentice Hall, 2008 International Business 4e Chapter 1 - 21

 How They Stack Up

Comparing
revenue of
the world's
10 most
global firms
to the gross
domestic
product of
nations

© Prentice Hall, 2008 International Business 4e Chapter 1 - 22

 Global Business Environment

© Prentice Hall, 2008 International Business 4e Chapter 1 - 23

 Chapter Review

• Describe globalization
• Explain how globalization affects markets
and production
• Identify the drivers of globalization
• Discuss the globalization debate
• List types of firms in international business
• Define the global business environment
© Prentice Hall, 2008 International Business 4e Chapter 1 - 24