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.
1 Globalization Copyright © 2014 Pearson Education, Inc Chapter Objectives • Identify the types of companies that participate in international business • Describe the process of globalization and how it affects markets and production • Describe the two forces causing globalization to increase • Summarize the evidence for each main argument in the globalization debate • Describe the global business environment and identify its four main elements Copyright © 2014 Pearson Education, Inc 1-2 Apple • • • • Copyright © 2014 Pearson Education, Inc User-Centered Design Outsource Production Markets Globally Global Brand Strategy 1-3 International Business We experience international transactions daily Imports/exports reach us even in remote areas Technology and e-business promote trade Global talent contributes to efficiency/competitiveness Copyright © 2014 Pearson Education, Inc 1-4 Key Players Multinational Corporation Business that has direct investments abroad in multiple countries Copyright © 2014 Pearson Education, Inc Small Businesses and Entrepreneurs Small companies and individuals becoming increasingly active in international trade and investment Born Global Firm Adopts a global perspective and engages in international business from or near its inception 1-5 Global Firms vs. Nations Comparing revenue of the world's 10 most global firms to the gross domestic product of nations Source: Based on data obtained from “Fortune Global 500: The World’s Largest Corporations,” Fortune, July 23, 2012, pp. F1–F7; World Bank data set available at data.worldbank.org Copyright © 2014 Pearson Education, Inc 1-6 Globalization Trend toward greater economic, cultural, political and technological interdependence among national institutions and economies Globalization of markets Globalization of production Convergence in buyer preferences in markets around the world Dispersal of production activities worldwide to minimize costs or maximize quality Copyright © 2014 Pearson Education, Inc 1-7 Benefits of Global Markets Reduces marketing costs Creates new market opportunities Levels income stream Copyright © 2014 Pearson Education, Inc 1-8 Global Sustainability: Three Markets, Three Strategies Developed markets billion people Emerging markets billion people Traditional markets billion people Copyright © 2014 Pearson Education, Inc 1-9 Benefits of Global Production Lowercost labor Technical expertise Production inputs Copyright © 2014 Pearson Education, Inc - 10 Salaries of IT Workers Source: Based on data obtained from the International Average Salary Income Database (www.worldsalaries.org) Copyright © 2014 Pearson Education, Inc - 23 Labor, Environment, & Markets Opponents – Globalization lowers Supporters + Investment raises labor standards labor standards – Weakens protection of + Open economies most the environment environment friendly – Exploits workers in + Companies concerned poor nations for future markets Copyright © 2014 Pearson Education, Inc - 24 Manager’s Briefcase: The Keys to Global Success Copyright © 2014 Pearson Education, Inc Communicate effectively Know the customer Emphasize global awareness Market effectively Monitor global markets - 25 Inequality within Nations Income Inequality debate Rich get richer in wealthy nations? or Poor get richer in developing nations? Copyright © 2014 Pearson Education, Inc - 26 Inequality between Nations Gap widens between rich and poor nations? or Poor trading nations grow faster than rich ones? Copyright © 2014 Pearson Education, Inc - 27 Global Inequality Income Inequality debate Gap between rich and poor greater everywhere? or Inequality has fallen but extent unknown? Copyright © 2014 Pearson Education, Inc - 28 Discussion Question What does the evidence suggest for each branch of the debate on globalization and income inequality? Copyright © 2014 Pearson Education, Inc - 29 Answer to Discussion Question Inequality within nations: Studies suggest that developing nations boost incomes of their poor by integrating them into the global economy Inequality between nations: Nations open to trade and investment seem to grow faster than wealthy nations, while sheltered economies grow worse off Global inequality: Global poverty has fallen in recent decades but experts disagree on the extent of the drop Copyright © 2014 Pearson Education, Inc - 30 Impact on Culture Supporters Opponents • Destroys cultural diversity • Specialize and trade to obtain other goods • Homogenizes our world • Import cultural goods from other nations • Bankrupts local small businesses • Protect deeper moral and cultural norms Copyright © 2014 Pearson Education, Inc - 31 Culture Matters: Culture Matters: The Culture Debate The Culture Debate Material Desire Artistic Influence Western Values A Force for Good Deeper Values Copyright © 2014 Pearson Education, Inc - 32 National Sovereignty Opponents Supporters Supranational institutions reduce autonomy of national, regional, and local governments Globalization has benefited societies by helping to spread democracy worldwide Copyright © 2014 Pearson Education, Inc - 33 Global Business Environment Copyright © 2014 Pearson Education, Inc - 34 Discussion Question The textbook you are using in this course describes a model of international business as occurring within a dynamic and integrated system called the a Cultural Business Model b Globalization Environment c Global Business Environment Copyright © 2014 Pearson Education, Inc - 35 Answer to Discussion Question The textbook you are using in this course describes a model of international business as occurring within a dynamic and integrated system called the a Cultural Business Model b Globalization Environment c Global Business Environment Copyright © 2014 Pearson Education, Inc - 36 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher Printed in the United States of America Copyright © 2014 Pearson Education, Inc Copyright © 2014 Pearson Education, Inc - 37 ... Education, Inc 1-2 Apple • • • • Copyright © 2014 Pearson Education, Inc User-Centered Design Outsource Production Markets Globally Global Brand Strategy 1-3 International Business We experience international. .. dependable shipping - 16 Measuring Globalization Copyright © 2014 Pearson Education, Inc - 17 Globalization Then and Now Highly mobile labor market Fear of jobs moving abroad Free-flowing capital... Technology and e -business promote trade Global talent contributes to efficiency/competitiveness Copyright © 2014 Pearson Education, Inc 1-4 Key Players Multinational Corporation Business that