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LEARNING OBJECTIVES

To understand the globalization concept To understand factors responsible for globalization To get an overview of global economy To find out characteristics of global companies and their role

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IMRAN KHAN Department of Management Sciences

GLOBALIZATION

What is Globalization? Definition:


Joseph Stiglitz, an economist and winner of the Nobel Prize defines Globalization as follows: Globalization "is the closer integration of the countries and peoples of the world ...brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders." (from Globalization and its Discontents)
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EXCHANGE OF SERVICES

International services are defined as transactions by private individuals and/or corporations that cross national boundaries.  Aviation  Banking  Communication  Insurance  Shipping
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GLOBAL INTEGRATION

FORMS OF INTEGRATION: NEGATIVE INTEGRATION Break down of trade barriers or protective barriers POSITIVE INTEGRATION It refers to the standardization of economic laws and policies
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DIRECTION OF GLOBALIZATION GLOBALIZATION OF MARKETS:

The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace.

NATIONAL MARKET

PAKISTAN SOUTH ASIA GLOBAL


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REGIONAL MARKET

GLOBALIZATION OF PRODUCTION:

GLOBAL MARKET

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IMRAN KHAN Department of Management Sciences

GLOBALIZATION OF MARKETS
CHARACHETRISTICS: MERGER OF MARKETS FALL OF TRADE BARRIERS HOMOGENITY IN CONSUMER TASTE AND NEEDS RIVALRY OF BIG COMPANIES
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GLOBALIZATION OF PRODUCTION
DEFINITION: It refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital).
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DRIVERS OF GLOBALIZATION
Declining trade and investment barriers Declining trend of protecting domestic market GATT and WTO role Flexibility in outsourcing Technological change Microprocessor and Telecommunication The Internet and World wide web Transportation technology
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Shrinking Globe
1500-1840

Best average speed of horse-drawn coaches and sailing ships, 10mph.

1850-1930

Steam ships, 35mph 1950s

Propeller aircraft 300-400 mph.

1960s

Jet passenger aircraft 500-700mph.


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Reasons for Globalization


Operational Necessities:  To secure raw material  To secure equipment  To secure technology  To dispose excess output Strategic Necessities:  To secure business against unforeseen external environmental changes  To assure continued growth
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GLOBALIZATION PROCESS
Direct Export Indirect Franchising Entry mode Licensing Turnkey Portfolio investment FDI

Investment

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The Changing Demographics of the Global Economy

The Changing World Output and World Trade picture The changing Foreign Direct Investment Picture

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Country

Share Share Share of world of world of world output output Exports 1963 2004 2004 % % %
10.4 5.7 9.5 4.8 4.7 3.4 5.9

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USA 40.3 20.9 JAPAN 5.5 6.9 Germany 9.7% 4.3 France 6.3% 3.1 UK 6.5% 3.1 Canada 3 3.5 China IMRAN KHAN Department of Management NASciences 13.2

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FDI Inflows, 1993-2003

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The Changing Nature of the Multi-National Enterprise


How many Asian and European Multi-National Companies you are familiar with? A multinational enterprise is any business that has productive activities in two or more countries. A number of multinational corporations (MNCs) from developing economies are becoming key players in the global economy. The world's second-largest forgings-maker comes from India; the biggest Nordic insurer was bought by a South African competitor; a Mexican company reinvented the global cement business; and Brazilian restaurant chains sponsor immigration visas for highly-skilled meat carvers to support their American expansions (Andrea E. Goldstein).
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The National Composition of the Largest Multinationals


Trends Toward Non-U.S Multi-Nationals
COUNTRY OF THE TOP 260 COMPANIES IN 1973 126 (38.5%) 9 49 19 21 OF THE TOP 500 TOP COMPANIES IN 1997 162 (32.4%) 126 34 42 41

USA JAPAN UK FRANCE GERMANY

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Top Investing Countries

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The Rise of Mini-Multinational

The number of mini-multinationals (small and medium-sized companies) is on the rise

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GLOBALIZATION DEBATE?
IS IT A GOOD OR BAD?
Power that controls the economy should be in the hands of elected representatives of the people instead of an industrial oligarchy ~ Justice William O. Douglas "I would define globalization as the freedom for my group of companies to invest where it wants when it wants, to produce what it wants, to buy and sell where it wants, and support the fewest restrictions possible coming from labour laws and social conventions. (Percy Barnevik, President of the ABB Industrial Group)

DO ONLY DEVELOPING COUNTRIES HAVE CONCERNS ABOUT GLOBALIZATION OR DEVELOPED COUNTRIES ALSO DO HAVE RESERVATIONS?

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GLOBALIZATION DEBATE  JOB LOSS AT HOME COUNTRY  PRESSURE FOR LOW WAGES RATES  CULTURAL IMPOVERISHED  ENVIORNMENTAL DEGRADATION SUPPORTERS VIEW:  HOST COUNTRY LIVING STANDARD IMPROVES  BETTER PURCHASING POWER OF HOST COUNTRY  SKILLED LABOR WAGES INCREASES
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