Chapter 1 Globalization. © Prentice Hall, 2008International Business 4e Chapter 1 - 2 Describe...

Chapter 1Chapter 1GlobalizationGlobalization

© Prentice Hall, 2008 International Business 4e Chapter 1 - 2

• 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

Chapter PreviewChapter Preview

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

Globalization Involves Us AllGlobalization Involves Us All

We experience internationaltransactions daily

Imports and exports reacheven remote areas

Technology and e-bizpromote trade

Consumers and companiespull markets closer

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

International BusinessInternational Business

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

GlobalizationGlobalization

Trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies

Globalization of markets

Convergence in buyer preferences in

markets around the world

Globalization of production

Dispersal of production activities

worldwide to minimize costs or maximize quality

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

Benefits of GlobalizationBenefits of Globalization

GlobalizationGlobalizationof marketsof markets

GlobalizationGlobalizationof productionof production

• Reduces marketing costs

• New market opportunities

• Levels income stream

• Reduces marketing costs

• New market opportunities

• Levels income stream

• Access low-cost labor

• Access technical expertise

• Access production inputs

• Access low-cost labor

• Access technical expertise

• Access production inputs

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

Advice of Global ManagersAdvice 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 - 8

Globalization Drivers IGlobalization Drivers I

Regional tradeRegional tradeagreementsagreements

GATTGATT

WTOWTO

Remove barriers to trade and investment

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

Trade Exceeds OutputTrade Exceeds Output

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

Globalization Drivers IIGlobalization Drivers IITechnological InnovationTechnological Innovation

E-mail and videoconferencing

Internet, intranets,and extranets

Transportationadvancements

Better coordination and control

Improved communications and management

More efficient, dependable

shipping

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

Top 20 Global NationsTop 20 Global Nations

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

Globalization Then Globalization Then andand Now Now

Highly mobileHighly mobilelabor marketlabor market

Highly mobileHighly mobilelabor marketlabor market

Fear of jobs Fear of jobs moving abroadmoving abroad

Fear of jobs Fear of jobs moving abroadmoving abroad

Backlash amongBacklash amongthe disaffectedthe disaffected

Backlash amongBacklash amongthe disaffectedthe disaffected

Free-flowing Free-flowing capital and tradecapital and trade

Free-flowing Free-flowing capital and tradecapital and trade

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

Challenges to BusinessChallenges to Business

Physicalsecurity

Digitalsecurity

Reputationalrisk

Examine companyvulnerability andcreate a disaster

recovery plan

Guard proprietaryinformation and

confidentialcommunications

Require ethical andlawful behavior from

all employees andbusiness partners

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

From Anarchy to DebateFrom Anarchy to Debate

ViolenceViolenceViolenceViolence

Rage Rage Rage Rage

CarnageCarnageCarnageCarnage

ExclusionExclusionExclusionExclusion

LegitimacyLegitimacyLegitimacyLegitimacy

ReasonReasonReasonReason

CivilityCivilityCivilityCivility

DebateDebateDebateDebate

© Prentice Hall, 2008 International Business 4e Chapter 1 - 15

Jobs and WagesJobs and Wages

Eliminates jobs in developed nations

Forces wages lower in developed nations

Exploits workers in developing nations

Increases wealth and efficiency

Generates labor market flexibility

Creates jobs in developed countries

Advances economies of developing nations

SupportersSupportersOpponentsOpponents

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

Labor and EnvironmentLabor and Environment

– Globalization lowers labor standards

– Weakens protection of the environment

– Exploits workers in poor nations

+ Investment raises labor standards

+ Open economies most environment friendly

+ Companies concerned for future markets

Opponents Supporters

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

Income Inequality Income Inequality debate debate

Inequality within nationsPoor people in developing nations benefit most from

an open economy

Inequality between nationsNations open to world trade and investment grow faster

than rich nations

Global inequalityInequality has fallen, but experts disagree on the

extent of the decline

Income InequalityIncome Inequality

32

1

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

National SovereigntyNational Sovereignty

SupportersSupporters

Globalization has Globalization has benefited societies by benefited societies by

helping to spread helping to spread democracy worldwidedemocracy worldwide

OpponentsOpponents

Supranational Supranational institutions reduce institutions reduce

autonomy of national, autonomy of national, regional, and local regional, and local

governmentsgovernments

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

Impact on CultureImpact on Culture

Opponents

• Destroys cultural diversity

• Homogenizes our world

• Bankrupts local small businesses

Supporters

• Specialize and trade to obtain other

goods

• Import cultural goods from other nations

• Protects deeper moral and cultural norms

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

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

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

The Same Everything?The Same Everything?The Same Everything?The Same Everything?

……or a Force for Good?or a Force for Good?……or a Force for Good?or a Force for Good?

……or Cultures Flourishing?or Cultures Flourishing?……or Cultures Flourishing?or Cultures Flourishing?

Finding Common GroundFinding Common GroundFinding Common GroundFinding Common Ground

Values Gone for Good?Values Gone for Good?Values Gone for Good?Values Gone for Good?

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

International Business PlayersInternational Business Players

Business that has direct investments abroad in multiple

countries

Small companies and individuals becoming increasingly active in

international trade and investment

Takes a global perspective on its

market and engages in international business

from inception

MultinationalCorporation

Small Businesses

and Entrepreneurs

Born-Global Firm

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

How They Stack UpHow 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 - 23

Global Business EnvironmentGlobal Business Environment

© Prentice Hall, 2008 International Business 4e Chapter 1 - 24

Chapter ReviewChapter 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