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INTERNATIONAL BUSINESS
Pham To Mai
University of Economics and Law
National University of HCMC
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Chapter I
GLOB LIZ TION
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Globalization
Trade and investment barriers aredisappearing.
Perceived distances are shrinking due toadvances in transportation andtelecommunications.
Material culture is beginning to looksimilar.
National economies merging into an
interdependent global economic system.
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What is Globalization?
The shift toward amore integrated andinterdependent world
economy.
Markets
Production
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Globalization & Businesses
OpportunitiesIncreased revenueopportunity throughglobal sales
Reduced costs byproducing in lowcost countries.
Facilitated globalexpansion byfavorable politicaland economic trends
Challengesincreased competitionand decreased prices indomestic markets
Foreign competition injobs
Different nations =different problems
Global planning may beeasy, but globalexecution is not
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Drivers of Globalization
Declining Trade andInvestment Barriers
The Role of Technological
Change
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Impact of GATT Tariff Rates
0
5
10
15
20
25
30
35
40
45
50
1913 1950 1990 2000
France
GermanyItaly
Japan
Holland
Sweden
BritainUnited States
Average Tariff Rates on Manufactured Products % of Value
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National FDI Regulatory Changes(2000-2010)
2000 2002 2004 2006 2008 2009 2010
Number of countries
that introduce change
70 72 103 91 54 50 74
Number of regulatorychanges, in which: 150 246 270 177 106 102 149
- More favourable 147 234 234 142 83 71 101
- Percentage of morefavourable changes intotal
98 95.1 86.7 80.2 78.3 69.6 67.8
Source: UNCTAD, World Investment Report 2011
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International Investment Agreements concluded,2010
Forms ofAgreements
BIT DTT Others
Signed in theyear
54 113 11
Cummulativenumber atthe end ofthe year
2,807 2,976 309
Source: UNCTAD, World Investment Report 2011
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Technological Change in Transportation
Commercial jet aircraft
Supper freighters
Containerizations
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The Shrinking Globe1500-1840
1850-1930
1950s
1960s
Best average speed ofhorse-drawn coaches and
sailing ships, 10mph.
Steam locomotives average 65mph.Steamships average 36mph.
Propeller aircraft300-400 mph.
Jet passenger aircraft500-700mph.
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Globalization - Pros
Lower prices for goods and services.
Economic growth stimulation.Increase in consumer income.
Creates jobs.Countries specialize in production of goodsand services that are produced mostefficiently.
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Globalization - ConsDestroys manufacturing jobs and lowers wagerates of unskilled workers in wealthy, advanced
countries.Companies move to countries with fewer laborand environment regulations.
Loss of national sovereignty.Increases gap between rich and poor nations
Deteriorates national culture
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Globalization and National Sovereignty
WTOEU
UN
WTO
Founded 1994
153 members
Police GATT trading system
Supranational organizations arelimited to powers granted by
member countries and serve thecollective interests of its members.Power is derived from theorganizations ability to sway
members to action.
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Globalization and the Worlds PoorCritics argue that globalization has not helpedpoor.
1870:per capitaincome of 17 richest nations was2.4x that of all other countries.1990: it was 4.5x larger.
Other factors may have influenced the gap.
Totalitarian governments.Economic policies that destroyed wealth creation.Little protection of property rights.Expanding populations.
War.
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Implicationfor International Businesses
IBs & MNCs are blamed for transferringnegative effects of globalization aroundthe world IBs & MNCs become targetsfor antiglobalization protesters
Be conscious of business ethics andCorporate Social Responsibility (CSR) indoing business abroad