GlobalizationGlobalization

Chapter 1 - 2

• Describe globalization

• Explain how globalization affects markets and production

• Identify the drivers of globalization

• Discuss the globalization debate

• List types of firms in international business

• Define the global business environment

Chapter PreviewChapter Preview

Chapter 1 - 3

E-Biz SurpriseE-Biz Surprise

eBay expanded all typesof product markets

Eli Lilly hired a virtualR&D “workforce”

Expedia moved travelbooking online

Dell pioneered onlinebuying of custom PCs

Chapter 1 - 4

International BusinessInternational Business

Chapter 1 - 5

The nature of IB?The nature of IB?

• Foreign Business denote the domestic operation within a foreign company.

• Multi Domestic Company is an organization with multi country affiliate, each of which formulate its own business strategy based on perceived market differences.

• Global Company is an organization that attempts to standardize and integrated operations worldwide in all functional area.

• International Company refers to both global and Multi Domestic Company.

Chapter 1 - 6

Advice of Global ManagersAdvice of Global Managers

Know the customer

Emphasize global awareness

Develop world-class products

Market effectively

Improve logistics

Analyze problems correctly

Chapter 1 - 7

GlobalizationGlobalization

Trend toward greater economic, cultural, political and technological interdependence among national institutions and economies

Globalization of markets

Convergence in buyer preferences in

markets around the world

Globalization of production

Dispersal of production activities

worldwide to minimize costs or maximize quality

Chapter 1 - 8

Benefits of GlobalizationBenefits of Globalization

GlobalizationGlobalizationof marketsof markets

GlobalizationGlobalizationof productionof production

• Reduces marketing costs

• New market opportunities

• Levels income stream

• Reduces marketing costs

• New market opportunities

• Levels income stream

• Access low-cost labor

• Acquire technical expertise

• Obtain production inputs

• Access low-cost labor

• Acquire technical expertise

• Obtain production inputs

Chapter 1 - 9

Globalization Drivers IGlobalization Drivers I

Regional tradeRegional tradeagreementsagreements

GATTGATT

WTOWTO

Remove barriers to trade and investment

Chapter 1 - 10

Trade Exceeds OutputTrade Exceeds Output

Chapter 1 - 11

Globalization Drivers IIGlobalization Drivers IITechnological InnovationTechnological Innovation

Email and videoconferencing

Internet, intranetsand extranets

Transportationadvancements

Better coordination and control

Improved communications and management

More efficient, dependable

shipping

Chapter 1 - 12

Political Technological

Personal Economic

Top 20 Global NationsTop 20 Global Nations

Chapter 1 - 13

Globalization Drivers IIIGlobalization Drivers IIIMarketMarket

- As companies globalize, they also - As companies globalize, they also become global customer.become global customer.

-Avoid the competitor stealing their -Avoid the competitor stealing their customerscustomers

-Market Saturate-Market Saturate

Chapter 1 - 14

Globalization Drivers IVGlobalization Drivers IVCostCost

-Economic scale to reduce unit -Economic scale to reduce unit cost cost

-Reduce development, -Reduce development, production, inventory cost.production, inventory cost.

Chapter 1 - 15

Globalization Then Globalization Then andand Now Now

Highly mobileHighly mobilelabor marketlabor market

Highly mobileHighly mobilelabor marketlabor market

Fear of jobs Fear of jobs moving abroadmoving abroad

Fear of jobs Fear of jobs moving abroadmoving abroad

Backlash amongBacklash amongthe disaffectedthe disaffected

Backlash amongBacklash amongthe disaffectedthe disaffected

Free-flowing Free-flowing capital and tradecapital and trade

Free-flowing Free-flowing capital and tradecapital and trade

Chapter 1 - 16

Challenges to BusinessChallenges to Business

Physicalsecurity

Digitalsecurity

Reputationalrisk

Assess companyvulnerability andcreate a disaster

recovery plan

Guard proprietaryinformation and

confidentialcommunications

Require ethical andlawful behavior from

all employees andbusiness partners

Chapter 1 - 17

From Carnage to CivilityFrom Carnage to Civility

ViolenceViolenceViolenceViolence

Rage Rage Rage Rage

CarnageCarnageCarnageCarnage

ExclusionExclusionExclusionExclusion

LegitimacyLegitimacyLegitimacyLegitimacy

ReasonReasonReasonReason

CivilityCivilityCivilityCivility

DebateDebateDebateDebate

Chapter 1 - 18

Jobs and WagesJobs and Wages

Eliminates jobs in developed nations

Forces wages lower in developed nations

Exploits workers in developing nations

Increases wealth and efficiency

Generates labor market flexibility

Creates jobs in developed countries

Advances economies of developing nations

SupportersSupportersOpponentsOpponents

Chapter 1 - 19

Labor and EnvironmentLabor and Environment

– Globalization lowers labor standards

– Weakens protection of the environment

– Exploits workers in poor nations

+ Investment raises labor standards

+ Open economies most environment friendly

+ Companies concerned for future markets

Opponents Supporters

Chapter 1 - 20

Income Inequality Income Inequality debate debate

Inequality within nationsPoor people in developing nations benefit most from

open economy

Inequality between nationsNations open to world trade and investment grow faster

than rich nations

Global inequalityInequality has fallen, but experts disagree on the

extent of the decline

Income InequalityIncome Inequality

32

1

Chapter 1 - 21

National SovereigntyNational Sovereignty

SupportersSupporters

Globalization has Globalization has benefited societies by benefited societies by

helping to spread helping to spread democracy worldwidedemocracy worldwide

OpponentsOpponents

Supranational Supranational institutions reduce institutions reduce

autonomy of national, autonomy of national, regional and local regional and local

governmentsgovernments

Chapter 1 - 22

Impact on CultureImpact on Culture

Opponents

• Destroys cultural diversity

• Homogenizes our world

• Bankrupts local small businesses

Supporters

• Specialize and trade to obtain other

goods

• Import cultural goods from other nations

• Protects deeper moral and cultural norms

Chapter 1 - 23

International Business PlayersInternational Business Players

Business that has direct investments abroad in multiple

countries

Small companies and individuals becoming increasingly active in

international trade and investment

Takes a global perspective on its

market and engages in international business

from or near its inception

MultinationalCorporation

Small Businesses

and Entrepreneurs

Born-Global Firm

Chapter 1 - 24

How They Stack UpHow They Stack Up

Comparing revenue of the world's 10 most global firms to the gross domestic product of nations

Chapter 1 - 25

Global Business EnvironmentGlobal Business Environment

Chapter 1 - 26

Teaming upTeaming up• Imagine that you and a group of your fellow

classmates own a company that manufactures cheap sunglasses. To lower production costs, you want to move your factory from your developed country to a low-wage country. Choose a prospective country to which you will move. What elements of the national business environment will affect your move? Are there any obstacles to overcome in the international business environment? How will managing your company be different when you undertake international activities? What challenges will you face in managing your new employees?

Chapter 1 - 27

Teaming upTeaming up• This may be a good time to get students

working on their Market Entry Strategy Simulation project, if this has been assigned. This project gets students to begin pondering the types of elements that must be considered when selecting a country for investment. At a minimum, students’ responses should consider: (1) The presence of investment barriers in the country; (2) Resources needed to carry out production, as well as their availability and cost’ (3) Availability of modern telecommunications to facilitate communication with the home office; and (4) How the expansion might be financed.

Chapter 1 - 28

Chapter SummaryChapter Summary

• This chapter defines the scope of international business within the context of globalization. Globalization lets firms standardize marketing practices, enter new markets, access resources worldwide, and increase production efficiency. Fueling globalization are falling barriers to trade and investment, and rapid innovation in communication and transportation technologies. Globalization also affects a nation, whose level of globalization depends on political engagement, technological connectivity, personal contact, and economic integration. Yet because globalization’s impact is not always uniform, nor always positive, it has sparked debate. Disputes include globalization’s affect on jobs and wages; labor and environmental protection laws; income inequality; national sovereignty; and cultural diversity. Large multinationals, small firms, and entrepreneurs engage in international business. Each of these must navigate the global business environment—the dynamic, integrated global system that weaves together four distinct elements: (1) the forces of globalization, (2) national business environments, (3) the international business environment, and (4) international firm management.