Chapter 1 - Globalization. The objectives of this chapter: Understand what is meant by the term globalization, recognize the main drivers of globalization. describe the changing nature of the global economy, explain the main arguments in the debate over the impact of globalization, understand how the process of globalization is creating opportunities and challenges for business managers.
Global Business Today 8e by Charles W.L Hill © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Chapter 1 Globalization © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 12 What Is Globalization? Question: What is globalization? • Globalization the trend towards a more integrated global economic system • Globalization of markets the merging of historically distinct and separate national markets into one huge global marketplace Globalizationofproductionưthesourcingofgoodsand servicesfromlocationsaroundtheglobetotakeadvantage ofnationaldifferencesinthecostandqualityoffactorsof production(laborenergy,land,andcapital) â2014byMcGrawưHillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocument maynotbecopied,scanned,duplicated,forwarded,distributed,orpostedonawebsite,inwholeorpart. 1ư3 TheEmergenceofGlobal Institutions Global institutions: Manage, regulate, and police the global market place Promote the establishment of multinational treaties to govern the global business system Notable global institutions include the: World Trade Organization (WTO) International Monetary Fund (IMF) World Bank United Nations (UN) © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 14 Drivers of Globalization Question: What is driving the move toward greater globalization? • Two macro factors: Declining trade and investment barriers Technologicalchange Internationaltradeoccurswhenafirmexports goodsorservicestoconsumersinanothercountry Foreigndirectinvestment(FDI)occurswhenafirm investsresourcesinbusinessactivitiesoutsideits homecountry â2014byMcGrawưHillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocument may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 15 Drivers of Globalization Average Annual Percentage Growth in Volume of Exports and World GDP, 1950-2010 © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 16 Changing World Output and World Trade Question: How has world output and world trade changed over the last 50 years? • In the 1960s: • The U.S. dominated the world economy and the world trade picture • The U.S. dominated world FDI • U.S. multinationals dominated the international business scene • About half the world the centrally planned economies of the communist world was off limits to Western international business • Today, much of this has changed © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 17 Changing World Output and World Trade Picture The Changing Demographics of World GDP and Trade © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 18 Changing Foreign Direct Investment Question: How has the foreign direct investment picture changed over the last 50 years? • The share of world output generated by developing countries has been steadily increasing since the 1960s • The stock of foreign direct investment (total cumulative value of foreign investments) generated by rich industrial countries is declining • Crossborder flows of foreign direct investment are rising • The largest recipient of FDI is China © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 19 Changing FDI Picture Percentage Share of Total FDI Stock, 1980 - 2010 © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 110 Changing FDI Picture FDI Inflows, 1988 - 2010 â2014byMcGrawưHillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocument maynotbecopied,scanned,duplicated,forwarded,distributed,orpostedonawebsite,inwholeorpart. 1ư11 TheChangingMultinationalEnterprise Question:Whatisamultinationalenterprise? Amultinationalenterpriseisanybusinessthat hasproductiveactivitiesintwoormore countries Sincethe1960s: TherehasbeenariseinnonưU.S.multinationals Therehasbeenariseinminiưmultinationals â2014byMcGrawưHillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocument may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 112 The Changing World Order Question: Why is the changing world order important for firms? • The collapse of communism in Eastern Europe • New export and investment opportunities • Economic development in China • Huge opportunities despite continued Communist control • Free market reforms and democracy in Latin America • New markets and new sources of materials and production © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 113 The Global Economy in the 21st Century Question: What will the global economy look like in the 21st century A more integrated global economy: New opportunities for firms But, political and economic disruptions can throw plansintodisarray â2014byMcGrawưHillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocument maynotbecopied,scanned,duplicated,forwarded,distributed,orpostedonawebsite,inwholeorpart. 1ư14 TheGlobalizationDebate Question:Istheshifttowardamoreintegrated andinterdependentglobaleconomy agoodthing? Manybelievethatglobalizationispromoting greaterprosperityintheglobaleconomy, morejobs,andlowerpricesforgoodsand services Othersfeelthatglobalizationisnotbeneficial â2014byMcGrawưHillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocument maynotbecopied,scanned,duplicated,forwarded,distributed,orpostedonawebsite,inwholeorpart. 1ư15 ManagingintheGlobalMarketplace Question:Whatdoestheshifttowardaglobal economy mean for managers within an international business? Managing an international business (any firm that engages in international trade or investment) differs from managing a domestic business in four key ways © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 116 Managing in the Global Marketplace Country differences require companies to vary their practices country by country Managers face a greater and more complex range of problems International companies must work within the limits imposed by governmental intervention and the global trading system International transactions require converting funds and being susceptible to exchange rate changes © 2014 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 117 ... may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1 5 Drivers of Globalization Average Annual Percentage Growth in Volume of Exports and World GDP, 19 5 0-2 010 © 2 014 by McGraw Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document ... may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1 10 Changing FDI Picture FDI Inflows, 19 88 - 2 010 © 2 014 by McGraw Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document ... may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1 13 The Global Economy in the 21st Century Question: What will the global economy look like in the 21st century A more integrated global economy: