Globalization

What is Globalization?
The shift toward a more
integrated and
interdependent world
economy
Two components:
The globalization of markets
The globalization of production
Globalization of
Production
Vizio flat panel TV is
designed in a small office in California
assembled in Mexico
From
panels made in South Korea
electronic components made in China
microprocessors made in the U.S.

Not just manufacturing
Globalization of production has
historically been about manufacturing
Increasingly companies are using
modern communications to outsource
service activities to low-cost nations
Globalization of markets
In the past, each country had
its own companies in many industries
and its own products
I never saw Japanese media (and I saw
little non-US media) in college
Today everyone knows
Nintendo
Starbucks
Coca-Cola
Ikea
McDonalds
Samsung
But the most global markets
are for standard goods
Aluminum
Wheat
Microprocessors
Aircraft
For many consumer end-products,
huge differences still exist among
national markets
Entertainment, food, clothing
The Role of Technology
Lowering of trade barriers made
globalization possible;
Technology has made it a
transforming movement
Globalization is acceleration of
trends of the last 10,000 years
People lived for 250,000 years in
hunter-gatherer bands
Rise of agriculture 10,000 years ago led
to rise of empires and nation-states
Science and enlightenment after 1680
produced global trade and empires
Free trade and tech after 1980
produced globalization
The Emergence
of Global Institutions
Notable global institutions include
the World Trade Organization (WTO) which is
responsible for policing the world trading
system and ensuring that nations adhere to
the rules established in WTO treaties
In 2008, 151 nations accounting for 97% of world
trade were members of the WTO
the International Monetary Fund (IMF) which
maintains order in the international monetary
system

The Globalization Debate
Pro
Lower prices for goods
and services
Economic growth
Increase in consumer
income
Creates jobs (for many)
Countries specialize in
production of goods and
services that are
produced most
efficiently
Con
Destroys manufacturing
jobs in wealthy nations
Wage rates of unskilled
in advanced countries
decline
Companies move to
countries with fewer
labor and environment
regulations
Loss of sovereignty
Homogenized cultures

Managing in the Global
Marketplace
Much of this course is concerned
with managing an international
business
i.e., any business with international
sales,
sourcing, or
Investment
Managing an international
business is different
Countries are different
International transactions involve converting
money into different currencies
Range of problems in an international
business is wider and problems are
more complex
International business must cope with
different, conflicting government rules
and systems
Different strategic approaches required

The Emergence
of Global Institutions
the World Bank which promotes economic
development
the United Nations (UN) which maintains
international peace and security, develops
friendly relations among nations, cooperates
in solving international problems and
promotes respect for human rights, and is a
center for harmonizing the actions of nations