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Transcript of Xmba Buad Slides 1
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InternationalBusiness8e
ByCharlesW.L.Hill
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Chapter1
Globalization
Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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WhatIsGlobalization?
vTheworldismovingawayfromself-containednationaleconomiestowardaninterdependent,integratedglobaleconomic
system
vGlobalizationreferstotheshifttowardamoreintegratedandinterdependentworld
economy
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WhatIsThe
GlobalizationofMarkets?
vHistoricallydistinctandseparatenationalmarketsaremerging
vItnolongermakessensetotalkabouttheGermanmarketortheAmericanmarket
vInstead,thereistheglobalmarketvfallingtradebarriersmakeiteasiertosellgloballyv
consumers
tastesandpreferencesareconvergingonsomeglobalnorm
vFirmspromotethetrendbyofferingthesamebasicproductsworldwide
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WhatIsThe
GlobalizationofProduction?
virmssourcegoodsandservicesfromlocationsaroundtheglobetocapitalizeonnationaldifferencesinthecostandquality
offactorsofproductionlikeland,labor,andcapital
vCompaniescanv
lowertheiroverallcoststructurevimprovethequalityorfunctionalityoftheirproductoffering
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Why Do We Need
Global Institutions?
vInstitutionsvhelpmanage,regulate,andpolicetheglobal
marketplace
vpromotetheestablishmentofmultinationaltreatiestogoverntheglobalbusinesssystem
vExamplesincludevtheGeneralAgreementonTariffsandTrade(GATT)vtheWorldTradeOrganization(WTO)vtheInternationalMonetaryFund(IMF)vtheWorldBankvtheUnitedNations(UN)
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What Do Global
Institutions Do?v TheWorldTradeOrganization(likeitspredecessorGATT)
v policestheworldtradingsystemv makessurethatnation-statesadheretotheruleslaiddownintrade
treatiesv promoteslowerbarrierstotradeandinvestment
vTheInternationalMonetaryFund(1944)maintainsorderintheinternationalmonetarysystem
v TheWorldBank(1944)promoteseconomicdevelopmentv TheUnitedNations(1945)
v maintainsinternationalpeaceandsecurityv developsfriendlyrelationsamongnationsv cooperatesinsolvinginternationalproblemsandinpromotingrespectforhumanrightsv isacenterforharmonizingtheactionsofnations
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What Is Driving
Globalization?
vThedeclineinbarrierstothefreeFlowofgoods,services,andcapitalthathasoccurredsincethe
endofWorldWarII
vsince1950,averagetariffshavefallensigniFicantlyandarenowat4percentvcountrieshaveopenedtheirmarketstoDI
vTechnologicalchangevmicroprocessorsandtelecommunicationsvtheInternetandWorldWideWebvtransportationtechnology
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Declining Trade And
Investment BarriersAverageTariffRatesonManufacturedProductsasPercentofValue
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What Does Globalization
Mean For Firms?
vLowerbarrierstotradeandinvestmentmeanFirmscanvviewtheworld,ratherthanasinglecountry,astheirmarketvbaseproductionintheoptimallocationforthatactivity
vTechnologicalchangemeansvlowertransportationcosts-Firmscandisperseproductiontoeconomical,geographicallyseparatelocationsvlowerinformationprocessingandcommunicationcosts-Firmscan
createandmanagegloballydispersedproductionsystems
vlowcostglobalcommunicationsnetworks-helpcreateanelectronicglobalmarketplace
vlow-costtransportation-helpcreateglobalmarketsvglobalcommunicationnetworksandglobalmedia-createa
worldwideculture,andaglobalmarketforconsumerproducts
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The Changing Demographics
Of The Global Economy
v Therehasbeenadrasticchangeinthedemographicsoftheworldeconomyinthelast30years
vourtrendsareimportant:1. theChangingWorldOutputandWorldTradePicture
2. theChangingoreignDirectInvestmentPicture3. theChangingNatureoftheMultinational
Enterprise
4. theChangingWorldOrder
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How Has World Output And
World Trade Changed?vIn1960,theUnitedStatesaccountedforover40%
ofworldeconomicactivity
vBy2008,theUnitedStatesaccountedforjustover20%ofworldeconomicactivity
vAsimilartrendoccurredinotherdevelopedcountries
vTheshareofworldoutputaccountedforbydevelopingnationsisrisingandisexpectedtoaccountformorethan60%ofworldeconomicactivityby2020
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How Has World Output And
World Trade Changed?
TheChangingDemographicsofWorldGDPandTrade
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How Has Foreign Direct
Investment Changed Over Time?
vInthe1960s,U.S.Firmsaccountedforabouttwo-thirdsofworldwideDIFlows
vToday,theUnitedStatesaccountsforlessthanone-FifthofworldwideDIFlows
vOtherdevelopedcountrieshavefollowedasimilarpattern
vIncontrast,theshareofDIaccountedforbydevelopingcountrieshasrisen
vDevelopingcountries,especiallyChina,havealsobecomepopulardestinationsforDI
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How Has Foreign Direct
Investment Changed Over Time?PercentageShareofTotalDIStock1980-2007
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How Has Foreign Direct
Investment Changed Over Time?DIInFlows1988-2008
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What Is A
Multinational Enterprise?
vAmultinationalenterprise(MNE)isanybusinessthathasproductiveactivitiesintwoormorecountries
vSincethe1960s,therehasbeenariseinnon-U.S.multinationals,andagrowthofmini-multinationals
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The Changing World Order
vManyformerCommunistnationsinEuropeandAsiaarenowcommittedtodemocraticpoliticsandfreemarketeconomiesvso,therearenewopportunitiesforinternational
businessesvbut,therearesignsofgrowingunrestandtotalitarian
tendenciesinsomecountrieslikeRussia
vChinaandLatinAmericaarealsomovingtowardgreaterfreemarketreformsvbetween1983and2008,DIinChinaincreasedfrom
lessthan$2billionto$90billionannuallyvbut,Chinaalsohasmanynewstrongcompaniesthat
couldthreatenWesternFirms
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How Will The Global Economy
Of The 21st Century Look?vTheworldismovingtowardamoreglobal
economicsystem
vButglobalizationisnotinevitablevtherearesignsofaretreatfromliberaleconomic
ideologyinRussia
vGlobalizationbringsrisksvtheFinancialcrisisthatsweptthroughSouthEastAsia
inthelate1990s
vtherecentFinancialcrisisthatstartedintheU.S.in2008,andmovedaroundtheworld
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Is An Interdependent Global
Economy A Good Thing?vSupportersbelievethatincreasedtradeandcross-
borderinvestmentmeanvlowerpricesforgoodsandservicesvgreatereconomicgrowthvhigherconsumerincome,andmorejobs
vCriticsworrythatglobalizationwillcausevjoblossesvenvironmentaldegradationvtheculturalimperialismofglobalmediaandMNEs
vAnti-globalizationprotestersnowregularlyshowupatmostmajormeetingsofglobalinstitutions
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How Does Globalization Affect
Jobs And Income?
vCriticsarguethatfallingbarrierstotradearedestroyingmanufacturingjobsinadvancedcountries
vSupporterscontendthatthebeneFitsofthistrendoutweighthecosts
vcountrieswillspecializeinwhattheydomostefFicientlyandtradeforothergoodsandallcountrieswillbeneFit
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How Does Globalization Affect Labor
Policies And The Environment?
vCriticsarguethatFirmsavoidcostlyeffortstoadheretolaborandenvironmentalregulationsby
movingproductiontocountrieswheresuch
regulationsdonotexist,orarenotenforcedvSupportersclaimthattougherenvironmentaland
laborstandardsareassociatedwitheconomic
progress
vascountriesgetricherfromfreetrade,theyimplementtougherenvironmentalandlaborregulations
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How Does Globalization
Affect National Sovereignty?vIstodaysinterdependentglobaleconomyshifting
economicpowerawayfromnationalgovernmentstowardsupranationalorganizationsliketheWTO,theEU,andtheUN?
vCriticsarguethatunelectedbureaucratshavethepowertoimposepoliciesonthedemocraticallyelectedgovernmentsofnation-states
vSupportersclaimthatthepoweroftheseorganizationsislimitedtowhatnation-statesagreetograntvthepoweroftheorganizationsliesintheirabilitytoget
countriestoagreetofollowcertainactions
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How Is Globalization
Affecting The Worlds Poor?vIsthegapbetweenrichnationsandpoornations
isgettingwider?vCriticsbelievethatifglobalizationwasbeneFicial
thereshouldnotbeadivergencebetweenrichand
poornationsvSupportersclaimthatthebestwayforthepoor
nationstoimprovetheirsituationistovreducebarrierstotradeandinvestmentvimplementeconomicpoliciesbasedonfreemarketeconomiesvreceivedebtforgivenessfordebtsincurredunder
totalitarianregimes
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How Does The Global
Marketplace Affect Managers?
vManaginganinternationalbusinessdiffersfrommanagingadomesticbusinessbecause
vcountriesaredifferentvtherangeofproblemsconfrontedinaninternationalbusinessiswiderandtheproblemsmorecomplexthan
thoseinadomesticbusiness
vFirmshavetoFindwaystoworkwithinthelimitsimposedbygovernmentinterventionintheinternationaltradeandinvestmentsystem
vinternationaltransactionsinvolveconvertingmoneyintodifferentcurrencies
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Review Question
Theshifttowardamoreintegratedand
interdependentworldeconomyisreferredto
as
a)economicintegration
b)economicinterdependency
c)globalization
d)internationalization
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Review Question
Themergingofhistoricallydistinctand
separatenationalmarketsintoonehuge
globalmarketplaceisknownas
a)globalmarketfacilitation
b)cross-bordertrade
c)supranationalmarketintegration
d)theglobalizationofmarkets
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Review Question
irmsthatareinvolvedininternational
businesstendtobe
a)large
b)small
c)medium-sizedd)large,small,andmedium-sized
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Review Question
Whichisnotafactorofproduction?
a)tradeb)land
c)capital
d)energy
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Review Question
Thesourcingofgoodandservicesfrom
aroundtheworldtotakeadvantageofnational
differencesinthecostandqualityoffactorsof
productioniscalled
a)economiesofscale
b)theglobalizationofproduction
c)globalintegration
d)globalsourcing
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Review Question
Whichorganizationisresponsibleforpolicing
theworldtradingsystem?
a)theInternationalMonetaryund
b)theUnitedNations
c)theWorldTradeOrganizationd)theWorldBank
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Review Question
Whatisthesinglemostimportantinnovation
totheglobalizationofmarketsand
production?
a)advancesintransportationtechnology
b)thedevelopmentofthemicroprocessor
c)advancesincommunication
d)theInternet
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Review Question
Whichofthefollowingtrendsistrue?
a)theUnitedStatesisaccountingforagreaterpercentageofworldtradethaneverbefore
b)theUnitedStatesisaccountingforagreaterpercentageofforeigndirectinvestmentthaneverbefore
c)theshareofworldtradeaccountedforby
developingcountriesisrisingd)theshareofforeigndirectinvestmentby
developingcountriesisdeclining
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Review Question
Whichoftheseisnotaconcernofanti-globalization
protesters?
a)globalizationraisesconsumerincomeb)globalizationcontributestoenvironmental
degradation
c)globalizationiscausingalossofmanufacturing
jobsindevelopingcountriesd)globalizationimpliesalossofnational
sovereignty