GLOBALIZATION IN

BUSINESS

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 MERCANTILISM
A nation could only gain from trade 1500- 1750
surplus, that is, more exporting
than importing

Money consisted of
Trade Surplus Gold and Silver coins

Exports generates income

causing gold and silver Wealth
flow in the country

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 MERCANTILISM

Imports were determined

to be cost, as gold and
Wealth
silver must leave the
country to pay for imports

Foundation of Power
and global Influence

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 Exports Imports

More Exports in the

World Market

Surplus of Exports Decreased demand

Depressed Prices in Export Products

Decreased Earnings
Decreased Wealth
Decreased Wages

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 H-O Theory
Eli Heckscher and Bertil Ohlin
Refined David Ricardo’s Theory of
Comparative Advantage.
Land
Nations should primarily export
Labor
products that intensely use their
Capital
abundant factors of production.
Technology

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 H-O Theory
Factor Equalization Theory

When factors of Production can freely

move to other countries, efficiency will
further increase which leads to superior
allocation of goods and services.

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 Chinese workers increase in wages
Philippines can produce more goods to
consumers
Income for the Philippines
Increase wages in Chine

Philippines Workers

China Abundant
workers
GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 Need for International Business

• International business:
– causes the flow of ideas, services, and capital across the world
– offers consumers new choices.
– permits the acquisition of a wider variety of products
– facilitates the flexibility of labor, capital, and technology
– provides challenging employment opportunities.
– Higher Living Standards
– Lower Prices of Goods and Services.

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
Types of International Business
Export-import trade
Foreign direct
investment

Licensing

Franchising
Contract Manufacturing

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
Evolution of International Business

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
Phoenician and Greek merchants
China
British East India Company
Dutch East India Company
Portugal and France
Rome
United States of America
CLIENT WILLIAM M. MALINAO, MBA, LPT
Early traders
Well before the time of Christ
internationally integrated trading system
“all roads lead to China”
1840- world’s leading manufacturer
17th-Century mercantilism/colonialism
Common coinage
Pax Romana, or Roman Peace
Pax Americana,
GLOBALIZATION IN BUSINESS
Subject Instructor
 The Smoot-Hawley Act
Aims to raise import duties to reduce the volume of
goods coming into the U.S.

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
12
1980s efforts to convert GATT into WTO

1st Jan 1995 GATT was replaced by WTO (World

Trade Organization)
Trade Liberalization

The Term IB (International

Business) has emerged from the
1990 – 2000 term International Marketing
Rapid Internationalization ad
globalization

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
REGIONAL ECONOMIC
INTEGRATION

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
What Is Regional
Economic Integration?

• Regional economic integration - agreements

between countries in a geographic region to reduce
tariff and non-tariff barriers to the free flow of goods,
services, and factors of production between each
other

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 Objectives
Work together than separately to increase economic
growth and efficiency through economies of scale

Raise employment, skills, and

the quality of life for the citizens of the region

Promote peace and prosperity

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 What Limits Efforts
At Integration?
• Economic integration can be difficult because
– while a nation as a whole may benefit from a regional free
trade agreement, certain groups may lose
– it implies a loss of national sovereignty
• Regional economic integration is only beneficial if the
amount of trade it creates exceeds it diverts.
- Trade Creation and Trade Diversion

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 Levels of Regional Integration
Political Union
Coordinate aspects of members’ economic and political
systems
Remove barriers to trade, labor, and capital;
Economic Union set a common trade policy against nonmembers; and
common currency, a harmonized tax rate
has no trade barriers between members, a common external
Common Market trade policy, and the free movement of the factors of
production

Customs Union Remove all barriers to trade among members, and adopts a
common external trade policy.

Free-Trade Area Remove all barriers to trade among members, but each
GLOBALIZATION IN BUSINESS
country has own policies for non-members
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 What Are The Levels Of
Regional Economic Integration?
Levels of Economic Integration

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 Nafta

Expansion of trade in goods and services through

elimination of all trade barriers among parties

Protection of Intellectual Property Rights

Creation of institutions to address potential problems

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 European Union (EU)

Pop: 485 million

Members: 27
Economic Union
Began: 1951
GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
European Union: Early Years

 European Coal and Steel Community (1951): Removed

trade barriers in coal, iron, and steel
 European Union (1994): Final name change and reduced
barriers further
 Additional milestones:
– Maastricht Treaty (1991): Single currency targets

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor
 ASEAN
• Economic, social,
and cultural
development
• Safeguard
economic and
political stability
• Serve as a forum
to resolve
disputes

GLOBALIZATION IN BUSINESS
CLIENT WILLIAM M. MALINAO, MBA, LPT
Subject Instructor