GLOBALIZATION AND LIBERALIZATION

Globalization
Globalization refers to the increasing interconnectedness and interdependence of the world’s economies,
cultures, and populations, facilitated by advances in technology, communication, and transportation. It involves the
integration of national markets into a single global economy through trade, investment, and the movement of goods,
services, and labor.

Key features of globalization include:

1.​ Trade Expansion - The reduction of trade barriers has increased international trade flows, allowing countries
to specialize based on comparative advantage.
2.​ Technological Integration - Innovations in technology have enabled seamless communication and
transactions across borders.
3.​ Cultural Exchange -Globalization promotes cultural interaction, exposing societies to new ideas, lifestyles,
and perspectives.
4.​ Global Supply Chains - Production processes are distributed across countries, with components sourced
globally to reduce costs and maximize efficiency.

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iPhone relies heavily on a bunch of different tech companies to make the parts for the iPhone, and some of them even come
from competing smartphone makers like Samsung. Apple has to make sure those parts play nicely with the other important
parts, as well as the iPhone's operating system, iOS.

Impacts of Globalization:
1. Economic Growth - Globalization boosts trade, investment, and technology transfer, helping economies grow by
creating new markets and job opportunities.
2. Inequality - While globalization increases wealth, it also widens the gap between rich and poor, as developed
countries and large corporations benefit more than low-income nations and workers.
3. Environmental Concerns - Increased industrial activities and transportation lead to pollution, deforestation, and
climate change, making sustainability a major issue.
4. Cultural Homogenization - As global influences spread, local traditions, languages, and cultures may fade,
leading to a more uniform global culture dominated by powerful nations.

Liberalization
Liberalization refers to the process of reducing government restrictions and regulations in an economy to
encourage private enterprise, competition, and foreign investment. It is often implemented alongside globalization to
open up domestic markets to the global economy.

Impacts of Liberalization:
Economic Efficiency- Liberalization often leads to a more competitive market, fostering innovation and efficiency.
Foreign Direct Investment (FDI)- Openness to foreign investors boosts capital inflows, technology transfer, and job
creation.
Market Volatility- Unchecked liberalization can lead to financial instability, especially in emerging markets.
Social Challenges- Rapid liberalization may harm vulnerable groups due to job losses in protected industries or
reduced government control over essential services.

Key aspects of liberalization include:

1. Trade Liberalization: Lowering tariffs, quotas, and other trade barriers to increase import and export activities.
2. Financial Liberalization: Allowing foreign investments in domestic markets and deregulating financial sectors to
attract global capital.
3. Deregulation: Reducing state control over industries to promote competition and efficiency.
4. Privatization: Transferring ownership of public enterprises to the private sector to improve performance and
profitability.

Globalization and liberalization significantly shape international business by:

❑ Expanding market opportunities for companies.
❑ Increasing competition and innovation.
❑ Facilitating access to global resources, talent, and technologies.
❑ Encouraging the free flow of goods, services, and capital.
❑ Creating challenges related to culture, risk, and environmental concern

INTERNATIONAL BUSINESS AND TRADE

What Is International Business?
-​ It refers to all commercial transactions (private and governmental) that involve two or more countries. These
include trade, investments, and collaborations.
-​ It refers to the exchange of goods and services across national boundaries. It also includes the production
and distribution of resources for profit and transactions that span borders. International business can also be
driven by non-financial goals, such as corporate social responsibility, that have an impact on a nation's future.

Drivers of International Business and Trade

1. Liberalization - The removal or reduction of trade barriers like tariffs, quotas, and restrictions makes it easier for
businesses to operate across borders. This encourages foreign investments, increases competition, and expands
market opportunities, driving international business and trade.
Comparison Between Licensing and Franchising in International Business

FACTOR LICENSING FRANCHISING

Control Limited control over use of intellectual High control over operations, branding,
property. and quality

Revenue Model Royalties based on sales of licensed Franchise fees + ongoing royalties based
products. on sales.

Investment and Risk Low initial investment from licensor; Higher investment for franchisee but lower
moderate risk. risk due to a proven system.

Support Minimal support, usually for the licensed Comprehensive support, including training
product only and operations.

Operational Guidelines Few operational guidelines provided. Strict operational guidelines and
standardized processes.

Flexibility More flexibility for licensee in terms of Less flexibility, as franchisee must adhere
operations. to the franchisor’s model.

Comparison Between Joint Ventures and Strategic Alliances

FACTOR JOINT VENTURES STRATEGIC ALLIANCES

Legal Structure Creates a new, separate legal entity. No new legal entity; companies remain
independent.

Control Shared control among the partners. Control remains with the individual companies.

Resource Sharing Extensive sharing of resources, risks, and Sharing of resources, but no sharing of risks or
profits. profits.

Commitment High commitment, often long-term. Lower commitment, often short-term or

project-based.
Flexibility Less flexible due to shared control and More flexible with fewer formalities.
governance.

Risk and Reward Shared risks and rewards, with joint Companies retain their individual risks and
ownership of the venture. rewards

Key Differences Between Multinational and Transnational Companies

FACTOR MULTINATIONAL COMPANIES TRANSNATIONAL COMPANIES (TNCS)

(MNCS)

Decision-Making Centralized; decisions are mainly made Decentralized; decisions are made both
at the headquarters. at headquarters and local subsidiaries.

Organizational Structure Parent company controls subsidiaries in More distributed management with
different countries. regional and global teams

Strategy Global strategy with local adaptation. Global integration with local
responsiveness.

Home Country Focus Has a clear home country; the head No dominant home country; operations
office is in one specific country are spread across many countries.

Product Offering Products and services are often adapted Products are adapted for local markets,
for local markets. but there's a focus on global
standardization.

Examples McDonald's, Coca-Cola, Toyota Nestlé, Unilever, Huawei