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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