Copyright © 2002 by Harcourt, Inc. All rights reserved. Topic 8 : Globalization and Business Lecturer: Zhu Wenzhong

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Topic 8 :Topic 8 :

Globalization and BusinessGlobalization and Business

Lecturer: Zhu Wenzhong Lecturer: Zhu Wenzhong


• Key learning goals: This topic will discuss the influence of globalization over

business today and the definition of multi-national corporations.

1. State the definition of globalization2. State the three important aspects of globalization3. Explain the main factors which have contributed to the

growth of globalization4. Explain how globalization might affect the location of a

business5. State the influences of multinational companies in the host

country

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


Definition: • Globalization is the growing integration of the world’s

economy. It is suggested that economic decision taken in one part of the world will affect other parts of the worlds so businesses need to base their business decision-making on what is happening in the world market rather than the national market.

• There are three important features or aspects of globalization, which can be seen as follows:

1. The increasing importance o f international trade2. More and more multinational companies 3. More and more businesses thinking globally about

their strategy.

Globalization and BusinessGlobalization and Business

-What Is Globalization?


Globalization and BusinessGlobalization and Business--Factors affecting globalization


There are many factors which have contributed to the growth of globalization, such as:

• technological change, • the reduction of transportation costs, • the deregulation of business, • the consumer taste changes, • and the growth of new market and competition…Detailed explanation is seen in the following table:


Table 8-1 Factors which have contributed to globalization

Factors contributing to globalization

Explain how

Technological change More powerful computers and internet have allowed the easy transfer of data, which plays an important role in speeding up the globalization.

The reduction of transportation costs

Air transportation and telephone costs have improved the developing environment for globalization.

Consumer taste change

More and more consumers today are willing to buy foreign or new products for fashion or new styles.

The growth of new markets

New markets have been opened up in countries like former Eastern European countries and China. The growth of new markets has increased the trend of globalization.

Competition More and more fierce competition has forced businesses to seek opportunities in the world markets. To compete successfully, businesses today must develop a global strategy.



Globalization and BusinessGlobalization and Business--The effects of globalization on businessesThe effects of globalization on businesses

Globalization and BusinessGlobalization and Business--The effects of globalization on businessesThe effects of globalization on businesses

• Globalization may have a great deal of influence on many businesses throughout the world. The impact may be stronger on some businesses, especially large businesses, but weaker on others.

• There are a number of effects of globalization on businesses. Some provide opportunities while others may provide threats to businesses.

• Some major effects of globalization on businesses are seen in the following table:


Table 8-2 Effects of globalization on businesses

Effects of globalization on businesses Please try to explain how

•Increasing competition More and more foreign businesses have entered local markets so the competition has been intensified.

•Meeting consumer needs in more effective ways

Consumers have choices for products and services. They can buy the best products for the best prices.

•Being able to enjoy economies of scale

Businesses can enjoy as large scale of production in the whole world. Their production costs can thus be reduced.

•Affecting the choice of location

Businesses can choose the most favorable place for production or business operation. The production of Motorola company in China can reduce the production costs of labor and eliminate the tariff restrictions of exports.

•Increasing mergers or joint-development opportunities in the world market

Businesses have more partners worldwide. They can join together to produce goods and services or to penetrate foreign markets.

Globalization and BusinessGlobalization and Business-The effects of globalization on businesses-The effects of globalization on businesses


Globalization and BusinessGlobalization and Business--Multinational companies and their influencesMultinational companies and their influences


What is a multinational company? • A multinational company is an organization which owns

or controls production or services facilities outside the country in which it is based. This means that they do not just export their products abroad, but actually produce their products in other countries.

• It is commonly understood that a company is called a multinational company provided it operates in more than four countries.

• Examples of multinational companies are many such as: HSBC, Toyota, Honda and so on. China’s HEIR is becoming a multinational one.




Some reasons why a company may become a multinational firm:

1. To avoid protectionist policies on trade, producing in another country can prevent the tariff or quota restrictions on foreign trade.

2. To realize globalization of the market and enjoy large scale economy.

3. To realize the diversification of markets and spread risks of operation

4. To take advantages of information technology and high speed travel …




• Influences of multinational companies on a host country:

There are some benefits and at the same time some problems for multinational businesses operating a particular country. Please see the following table:


Globalization and BusinessGlobalization and Business--Influences of multinational companies on a host country:Influences of multinational companies on a host country:

Globalization and BusinessGlobalization and Business--Influences of multinational companies on a host country:Influences of multinational companies on a host country: Benefits for a local country:• Creating new jobs

opportunities • Improving living standards

for people • Creating competition for

domestic businesses and causing them to improve efficiency

• Bringing new technology • Bringing new management

ideas and styles • Improving the balance of

international payments if exporting.

Problems for a local country:• Resulting in some local firms

to close plants or cut down employees

• Affecting the balance of payments if the multinational company imports huge amount of components from other countries

• Causing difficulties in government control because of the strong power of the business

• Causing environmental problems to the local country




• Question for debate: You are given 10 minutes to prepare a debate: Divide the class into two opponent parties and

make a short debate on whether and why you agree or disagree on globalization.

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Copyright © 2002 by Harcourt, Inc. All rights reserved. Topic 8 : Globalization and Business Lecturer: Zhu Wenzhong