Chapter 1 - Global Business Management

(Introduction & Overview)

GLOBALIZATION
( D r. N i s f u l L a i l a , S E . , M . C o m . )
Globalization -An unstoppable force?

 This is the golden age for business, commerce and trade. Never before in the
history of the world has there been such an opportunity to sell as many goods
to as many people as there is right now
 With instant information and communication, virtually everything is available to
anyone, anywhere. Markets are now global and many corporations are often
richer and more powerful than many countries
 Globalization of markets refers to the merging of historically distinct and
separate national markets into one huge global marketplace. Falling barriers to
cross-border trade and investment have made it easier to sell internationally
Globalization

 More trade, more markets, more business, more information, more jobs,
more opportunities
 This whirlwind of economic activity has brought many benefits, and
wealth, to many people.This is the promise of a globalized world
 There has been faster economic growth, higher living standards,
accelerated innovation, and new opportunities for both individuals and
countries. Accompanied by a revolution in information and technology,
the world is very much a smaller and more integrated planet than ever
before
But if globalization can generate wealth, it can also take it
away:

 The billions of investment dollars that washed up on Asian shores

in the mid-1990's abruptly reversed direction in 1997, sending
millions of people back into poverty in what has become known
as the Asian financial crises, although its impact was so
widespread it affected countries on virtually every continent
 The benefits of globalization have largely bypassed over half of
the world's population, or close to 3 billion people who make do
on less than US$2 a day
Globalization

 There was a time when most regions were economically self-

sufficient. Locally produced foods, fuels and raw materials
were generally processed for local consumption. Trade
between different regions was quite limited
 Today, the economies of most countries are so
interconnected that they form part of a single,
interdependent global economy
Globalization Involving Us All

Your Everyday Life:

• Wake up to a GE alarm clock made in China
• Slip on Adidas sandals made in Indonesia
• Put your American Eagle clothes on from Mexico
• Unplug your Iphone made in the U.S.
• Hop into your Toyota made in Kentucky
• Listen to musical play from England
• Grap a Starbuck’s coffee harvested in Columbia
Globalization & Ethics

Global Inequality
• Widening gap of rich and poor
Environmental Regulations
• Unhealthy plants
• Emission of harmful toxins
Exploits Labor Standards
• Reduction of wages
• Long hours (12 or more)
• No benefits
Globalization & Marketing

Two Strategies for Businesses :

 Global Strategy
Reduce marketing costs by standardizing product and marketing
strategy
 Multi-National Strategy
Adapt products and marketing strategies in each national market to
suit local preferences
Globalization : Advantages

 Increases wealth and efficiency in developed and developing

nations
 Creates jobs in developed and developing nations
 Advances developing nations’ economies
 Decreases poverty in developing nations
Causes of Globalisation: Improved Communications

 The development of communication technologies such as

internet, email and mobile phones have been vital to the growth
of globalisation because they help MNCs to operate throughout
the world
 The development of satellite TV channels such as Sky and CNN
have also provided worldwide marketing avenues for the concept
and products of globalisation
Causes of Globalisation: Improved Transport

The development of refrigerated and container

transport, bulk shipping and improved air transport
has allowed the easy mass movement of goods
throughout the world.This assists globalisation
Causes of Globalisation: Free Trade Agreements

• MNCs and rich capitalist countries have always

promoted global free trade as a way of increasing
their own wealth and influence
• International organisations such as the World
Trade Organisation and the IMF also promote
free trade
Causes of Globalisation: Global Banking

• Modern communication technologies allow vast

amounts of capital to flow freely and instantly
throughout the world
• The equivalent of up to $US1.3 trillion is traded
each day through international stock exchanges in
cities such as New York, London and Tokyo
Causes of Globalisation: The Growth of MNCs

• The rapid growth of big MNCs such as Microsoft,

McDonalds and Nike is a cause as well as a consequence
of globalisation
• The investment of MNCs in farms, mines and factories
across the world is a major part of globalisation
• Globalisation allows MNCs to produce goods and
services and to sell products on a massive scale
throughout the world
The Effects of Globalisation

• Food supply is no longer tied to the seasons.We can buy food anywhere in the world at any
time of the year
• Because MNCs search for the cheapest locations to manufacture and assemble components,
production processes may be moved from developed to developing countries where costs are
lower
• In the global economy jobs are becoming more temporary and insecure
• Websites such as YouTube connect people across the planet. As the world becomes more
unified, diverse cultures are being ignored. MNCs can create a monoculture as they remove
local competition and thereby force local firms to close
• There is a growing awareness of the negative impacts of globalisation. People have begun to
realise that globalisation can be challenged by communities supporting each other in business
and society and through public protest and political lobbying
Nature & Forms of globalization (1)

 Economic globalization- It is inter linkage of the market in goods, services,

capital, trade and finance. It is contributed by liberalization, deregulation,
privatization and declining costs of transport.WTO and many regional blocs
have given impetus for this process
 Cultural globalization- Globalization has brought cultural diversities together to
form a global culture. Advances in communication, television network,
transportation technologies have been reducing the barriers of distance and
culture
Nature & Forms of globalization (2)

 Political globalization- Exchange of views and experiences between nations

regarding the establishment of good governance system, legal system, human
rights, free media etc. Regional grouping of nation creates pressure for
democracy and human rights. It is shifting away from command economy and
mixed economy to the free market model
 Environmental globalization- World is facing global warming, depletion of the
ozone layer, loss of bio- diversity, pollution etc.World community is trying to
encourage countries to adopt legal and other measures to protect the
environment
Cultural Business Challenges

Cultural business challenges include differences in…

• Languages
• Cultural interests
• Religions
• Customs
• Social attitudes
• Political philosophies
• Business practices
• Work ethic
• Currencies
Political Business Challenges

Political business challenges include:

• Numerous rules and regulations surrounding the business activity
• Tax implications
• Problems in importing and exporting
• Trade agreements
• Differences in laws such as privacy, security
Geoeconomic Business Challenges

Geoeconomic - refers to the effects of geography on the economic

realities of international business activities
• Distances
• Time zone differences
• Skilled labor supply & cost of labor
• Cost of living
• Infrastructure issues
International Business

 International business transactions—including consists of all commercial sales,

investments and transportation—that take place between two or more countries
 Managing an international business is different from managing a domestic business for at
least four reasons:
• Countries are different
• The range of problems confronted by a manager in an international business is wider
and the problems themselves more complex than those confronted by a manager in a
domestic business
• Managers in an international business must find ways to work within the limits
imposed by governments’ intervention in the international trade and investment
system, and
• International transactions involve converting money into different currencies.
QUESTION & ANSWER