GLOBALIZATION

What is Globalization?
refers to changes in a more integrated and interdependent world economy. Globalization has
several aspects, including market globalization and production

 Globalization of Market : refers to combining historical differences and separate

state markets into one large global market. Which means that in this market there will
be a decrease in distance, national borders, and obstacles to political, economic and
social policies
 Globalization of Production : refers to the return of sources of goods and services
from locations around the world to take advantage of the different countries in terms
of cost and quality of production factors
The Emergence of Global Institutions
Several global institutions have emerged to:

 help manage, regulate, and police theglobal market place

 promote the establishment of multinational treaties to govern the globalbusiness
system
Drivers of Globalization
There are two macro factors underlyingthe trend toward greater globalization

 declining trade and investmentbarriers

 technological change
Declining Trade and Investment Barriers

 International trade : occurs when a firmexports goods or services to consumersin

another country
 Foreign direct investment (FDI) : occurs when a firm invests resources inbusiness
activities outside its homecountry
Lower trade barriers enable companiesto view the world as a single market andestablish
production activities in optimallocations around the globe
The Role of Technological Change
The lowering of trade barriers madeglobalization of markets and production atheoretical
possibility, technologicalchange made it a tangible reality. And Lower transportation costs
make a geographically dispersed production system more economical and allow firms to
better respond to international customer demands
The Changing Demographics of the Global Economy
Rapid economic growth is now beingexperienced by countries such as China,Thailand, and
Malaysia, Further relative decline in the U.S. share of world output and world exports seems
likely. So companies may find both new markets andnew competitors in the developing
regions of theworld
The Changing Nature ofthe Multinational Enterprise
A multinational enterpriseis anybusiness that has productive activities in two or more
countries. While most international trade and investment is conducted by large MNEs, many
small and medium-size firms are expanding internationally. The Internet has made it easier
for many smaller companies to build international sales.
Managing in the Global Marketplace

 Countries 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