GLOBALIZATION

What is globalization?
Definition: globalization is the trend toward a more integrated global economic system.
The rate at which this shift is occurring has been accelerated recently.
Globalization has two faces:
1. Globalization of markets
2. Globalization of production
1. Globalization of markets:
Globalization of markets refers to the fact that in many industries historically distinct and
separate national markets are merging into one huge global marketplace.
2. Globalization of production:
The globalization of production refers to the tendency among many firms to source goods and
services from different locations around the globe in an attempt to take advantage of national
differences in the cost and quality of factors of production. (labor, energy, land and capital)
Drivers of globalization
Two key factors seem to underlie the trend towards the increasing globalization of markets and
production:

The decline of barriers to trade and investment and

Technological change.
The decline of barriers to trade and investment:
Decline in Trade barriers:
Definition: International trade occurs when a firm exports goods or services to consumers in
another country.

The changing nature of the Multinational Enterprise:

Definition: A multinational enterprise is any business that has productive activities in tow or more
countries.

The changing world order:

The globalization debate: prosperity or impoverishment?

Is the shift toward a more integrated and interdependent global economy a good thing?
There are three major criticism against globalizations. These are:

Reduced jobs and incomes

It encourages poor labor practices and environmental policies
National sovereignty of the countries are getting limited
Globalization; jobs and incomes:
Labor polices and globalization
National sovereignty and globalization:
.Under the new system, many decisions, which affect billions of people, are no longer made by
local or national Government, but instead, if challenged by any WTO member nation, would be
deferred to a group of unelected bureaucrats sitting behind closed doors in Geneva, (HQs of
WTO) at risk is the very basis of democracy and accountable decision making.
Ralph Nader, US environmentalist and consumer rights advocate.
Managing in the global marketplace:
Definition: An International business is any firm that engages in international trade or investment.
Question bank from Module 1:
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What is globalization?
Discuss the changing demographics of the global economy.(10 marks)
Define International business.
Discuss the forces driving companies towards International business.(10 marks)
What are the drivers of globalization? (June/July 2003)(3 marks)
Is globalization prosperity or impoverishment? (June/July 2003)(10 marks)