INTERNATIONAL BUSINESS
INSTRUCTOR: HOANG THI QUE HUONG SESSION 2
CHAPTER 1: GLOBALIZATION
LEARNING OBJECTIVES
Understand what is meant by the term globalization.
Drivers of globalization
The main arguments in the debate over the impact
of globalization
INTRODUCTION
¦ In the world economy today, we see:
Ø Fewer self-contained national economies with high barriers to cross-
border trade and investment
Ø A more integrated global economic system with lower barriers to
trade and investment
Ø Over $4 trillion in foreign exchange transactions daily
Ø Over $18 trillion of goods and $4 trillion of services being sold across
national borders
Ø The establishment of international institutions
1. WHAT IS GLOBALIZATION?
¡ Globalization refers to the trend towards a more integrated
global economic system
Two key facets of globalization are:
¡ the globalization of markets: the merging of historically distinct
and separate national markets into one huge global marketplace
¡ the globalization of production: 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 (labor energy, land, and capital)
PUTTING IT INTO PRACTICE
¦ Globalization of Markets:
Starbucks around the world
PUTTING IT INTO PRACTICE
¦ It takes a
world to
build a
Dreamliner
THE EMERGENCE OF GLOBAL INSTITUTIONS
Global institutions
¡ manage, regulate, and police the global market place
¡ promote the establishment of multinational treaties to
govern the global business system
¡ World Trade Organization (WTO)
¡ International Monetary Fund (IMF)
¡ World Bank
¡ United Nations (UN)
II. DRIVERS OF GLOBALIZATION
What is driving the move toward
greater globalization?
- Declining Trade and Investment Barriers
- The Role of Technological Change
1. DECLINING TRADE AND INVESTMENT BARRIERS
Table 1: Average tariff rates on Manufactured products
Source: “International Business” – Charles W. Hill
1. DECLINING TRADE AND INVESTMENT
BARRIERS
¦ Lower trade barriers help companies:
Ø See the world as a single market
Ø Establish production activities in optimal locations around the
globe
¦ This has led to an acceleration in the volume of world
trade and investment since the early 1980s
1. DECLINING TRADE AND INVESTMENT BARRIERS
Average Annual Percentage Growth in the Volume of Exports and World GDP, 1950-2009
Source: Charles W.L Hill , International Business (8e), McGraw - Hill Education
2. THE ROLE OF TECHNOLOGICAL CHANGE
Question:What are the implications of technological change for the
globalization of markets?
Answer:
¡ Low cost communications networks help create electronic global
marketplaces
¡ Low cost transportation enable firms to create global markets,
and facilitate the movement of people from country to country
promoting a convergence of consumer tastes and preferences
2. THE ROLE OF TECHNOLOGICAL CHANGE
Question: What are the implications of technological change
for the globalization of production?
Answer: Lower transportation costs make a geographically
dispersed production system more economical and allow
firms to better respond to international customer demands
THE 4TH
INDUSTRIAL
REVOLUTION
PUTTING IT INTO PRACTICE
¦ Globalization:
Is there an app
for that?
III. CHANGING DEMOGRAPHICS OF THE
GLOBAL ECONOMY
¡ World Output and World Trade
¡ Foreign Direct Investment
¡ Multinational Enterprise
Changing World Output and World Trade Picture
Source: Charles W.L Hill , International Business (8e), McGraw - Hill Education
Growth in international trade
Source: WTO, World Trade Statistical Review 2016
FDI INFLOWS
THE CHANGING MULTINATIONAL ENTERPRISE
¡ A multinational enterprise is any business that has
productive activities in two or more countries
¡ Since the 1960s:
¡ there has been a rise in non-U.S. multinationals
¡ there has been a rise in mini-multinationals
¡ There has been a rise from developing countries
THE CHANGING MULTINATIONAL ENTERPRISE
National Origin of Largest Multinational Enterprises, 1973 and 2010
Source: Charles W.L Hill , International Business (8e), McGraw - Hill Education
THE GLOBALIZATION DEBATE
¡ Job and income
¡ Labor policies and environmental issues
¡ National sovereignty
¡ The gap between rich and poor countries
THE GLOBALIZATION DEBATE
GLOBALIZATION, JOBS, AND INCOME
¡ Critics claim jobs in advanced economies are being lost to
low-wage nations
¡ Supporters claim while some jobs may be lost, the economy
as a whole is better off
¡ free trade will result in countries specializing in the
production of those goods and services that they can
produce most efficiently, while importing goods and
services that they cannot produce as efficiently, and that
in doing so, all countries will gain
GLOBALIZATION, LABOR POLICIES, AND THE ENVIRONMENT
¡Critics argue free trade encourages firms from advanced
nations to move manufacturing facilities offshore to less
developed countries with lax environmental and labor
regulations
¡Supporters claim tougher environmental regulation and
stricter labor standards reflect economic progress
¡ as countries get richer as a result of globalization, they raise
their environmental and labor standards
¡ free trade does not lead to more pollution and labor
exploitation, it leads to less
GLOBALIZATION AND NATIONAL SOVEREIGNTY
¡ Critics worry economic power is shifting away from national
governments and toward supranational organizations such as
the WTO, the European Union (EU), and the UN
¡ Supporters argue that the power of these organizations is
limited to what nation-states collectively agree to grant
¡ the organizations must be able to persuade members
states to follow certain actions
¡ without the support of members, the organizations have
no power
GLOBALIZATION AND THE WORLD’S POOR
¡ Critics argue the gap between rich and poor has gotten
wider and the benefits of globalization have not been shared
equally
¡ Supporters suggest that the actions of governments have
made limited economic improvement in many countries
¡ many of the world’s poorest nations are under totalitarian
regimes, suffer from endemic corruption, have few
property rights, are involved in war, and are burdened by
high debt
