Globaliozation Ch1.docx

GLOBALIZATION What is Globalization? refers to changes in a more integrated and interdependent world economy. Globalization has several aspects, including market globalization and production 

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Globalization of Market : refers to combining historical differences and separate state markets into one large global market. Which means that in this market there will be a decrease in distance, national borders, and obstacles to political, economic and social policies Globalization of Production : refers to the return of sources of goods and services from locations around the world to take advantage of the different countries in terms of cost and quality of production factors

The Emergence of Global Institutions Several global institutions have emerged to:  

help manage, regulate, and police theglobal market place promote the establishment of multinational treaties to govern the globalbusiness system

Drivers of Globalization There are two macro factors underlyingthe trend toward greater globalization  

declining trade and investmentbarriers technological change

Declining Trade and Investment Barriers  

International trade : occurs when a firmexports goods or services to consumersin another country Foreign direct investment (FDI) : occurs when a firm invests resources inbusiness activities outside its homecountry

Lower trade barriers enable companiesto view the world as a single market andestablish production activities in optimallocations around the globe The Role of Technological Change The lowering of trade barriers madeglobalization of markets and production atheoretical possibility, technologicalchange made it a tangible reality. And Lower transportation costs make a geographically dispersed production system more economical and allow firms to better respond to international customer demands The Changing Demographics of the Global Economy Rapid economic growth is now beingexperienced by countries such as China,Thailand, and Malaysia, Further relative decline in the U.S. share of world output and world exports seems likely. So companies may find both new markets andnew competitors in the developing regions of theworld

The Changing Nature ofthe Multinational Enterprise A multinational enterpriseis anybusiness that has productive activities in two or more countries. While most international trade and investment is conducted by large MNEs, many small and medium-size firms are expanding internationally. The Internet has made it easier for many smaller companies to build international sales. Managing in the Global Marketplace    

Countries differences require companies to vary their practices country by country Managers face a greater and more complex range of problems International companies must work within the limits imposed by governmental intervention and the global trading system International transactions require converting funds and being susceptible to exchange rate changes