Lecture1
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Globalization refers to the increasing interdependence of countries resulting from the growing integration of trade, finance, people, and ideas. It involves the dispersion of production to locations that reduce costs and the standardization of marketing activities across countries. Technological innovation and falling barriers to trade and investment, such as regional trade agreements, have driven globalization by facilitating the flow of information, goods, services and capital across borders.
Lecture1
- 1. 5/2/2015 1 Introduction to Globalization DY Chhunsong Lecture 1 1 Fundamentals of Global Business Management 2 Objectives of the Lecture • Point out what Globalization is • Demonstrate the Globalization’s impacts on markets and production • Explore the forces of Globalization
- 2. 5/2/2015 2 Fundamentals of Global Business Management 3 What Is Globalization? Globalization is the trend toward greater economic, cultural, politi- cal, and technological interdependence among national institutions. It refers to an increasingly freer flow of goods, services, money, people, and ideas across national borders. The course will mainly focus on the business implications of Globalization. Fundamentals of Global Business Management 4 Globalization of Markets and Production
- 3. 5/2/2015 3 Fundamentals of Global Business Management 5 Globalization of Markets Globalization of markets refers to convergence in buyer preferences in markets around the world. It is important for international business because it offers companies several important benefits. International Business: Any commercial transaction that crosses the borders of two or more nations. Fundamentals of Global Business Management 6 Benefits of Globalization of Markets Local Needs Creates New Market Opportunities Levels Uneven Income Streams Reduces Marketing Costs Benefits
- 4. 5/2/2015 4 Fundamentals of Global Business Management 7 Benefits of Globalization of Markets (1) Reduces Marketing Costs: Can reduce costs by standardizing various aspects of marketing activities. Creates New Market Opportunities: As local markets might be small and saturated, Globalization can offer better market opportunities. Fundamentals of Global Business Management 8 Benefits of Globalization of Markets (2) Levels Uneven Income Streams: A company can use international sales to level its income streams (seasonal products). Local Needs: Any slightly different needs of local consumers can also be fulfilled although local suppliers cannot fulfill.
- 5. 5/2/2015 5 Fundamentals of Global Business Management 9 Globalization of Production The dispersal of production activities to locations that help a company achieve its cost-minimization or quality-maximization objectives for a good or service. Fundamentals of Global Business Management 10 Benefits of Globalization of Production 1. Provides Access to Low-Cost Workers: A company can reduce its cost by operating some of its business activities such as Customer Service in a low cost nation (China, India..). 2. Provides Access to Technical Expert: Companies can access to other experts in other countries. 3. Provides Access to Production Inputs: Allows any companies to access to resources that are not available or more expensive at home.
- 6. 5/2/2015 6 Fundamentals of Global Business Management 11 Forces Driving Globalization Forces Technological Innovation Falling Barriers to Trade and Investment Fundamentals of Global Business Management 12 Falling Barriers to Trade and Investment • General Agreement on Tariffs and Trade (GATT): Treaty designed to promote free trade by reducing both tariffs and nontariff barriers to international trade. • World Trade Organization (WTO): Was to replace GATT as GATT lacked of power to enforce world trade rules. It regulates trade between nations with 3 goals: 1) help the free flow of trade, 2) help negotiate the further opening of markets, and 3) settle disputes between its members.
- 7. 5/2/2015 7 Fundamentals of Global Business Management 13 Falling Barriers to Trade and Investment (1) • Regional Trade Agreements: Smaller groups of nations are integrating their nations such as North American Free Trade Agreement (NAFTA), European Union (EU), the Asia Pacific Economic Cooperation (APEC), and the Association of South- East Asian Nations (ASEAN). Fundamentals of Global Business Management 14 Technological Innovation • E-mail and Videoconferencing: Technology can speed up the flow of information and ease the tasks of coordination and control (even in another long distance location). • Internet and World Wide Web: Internet can be used to share and gather information and conduct business transactions.
- 8. 5/2/2015 8 Fundamentals of Global Business Management 15 Technological Innovation (1) • Company Intranets-Extranets: Intranets internally provide access to a company’s computer network from distant locations using personal computers. Extranets give distributors and suppliers access to a company’s database so that they can place orders or restock inventories electronically and automatically. • Advancements in Transportation Technologies: It can help enhance globalization by making shipping more efficient. Fundamentals of Global Business Management 16 Measuring Globalization • Political Engagement: Memberships in international organiza- tions, personnel and financial contributions to U.N. Security Council missions, and international treaties ratified. • Technological Connectivity: Internet users, Internet hosts, and secure servers.
- 9. 5/2/2015 9 Fundamentals of Global Business Management 17 Measuring Globalization (1) • Personal Contact: International travel and tourism, interna- tional telephone traffic, and personal transfers (including compensation to employees). • Economic Integration: Trade, foreign direct investment, and investment income. Fundamentals of Global Business Management 18 Is Globalization Good or Bad?