Globalization

A fundamental shift is occurring in the world economy. We are moving away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to cross border trade and investment; by distance, time zones, and language; and by national differences in government regulation, culture, and business systems. And we are moving toward a world in which barriers to cross-border trade and investment are declining; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent, integrated global economic system. The process by which this is occurring is commonly referred to as globalization.

This is the world we live in. It is a world where the volume of goods, services, and investment crossing national borders has expanded faster than wor1d output consistently for more than half a century. It is a world where more than $1.2 billion in foreign exchange transactions are made every day, where $8.88 trillion of goods and $2.10 trillion of services were sold across national borders in 2004. I It is a world in which international institutions such as the World Trade Organization and gatherings of leaders from the world's most powerful economies have called for even lower barriers to cross-border trade and investment. It is a world where the symbols of material and popular culture are increasingly global: from Coca-Cola and Starbucks to Sony PlayStations, Nokia cell phones, MTV shows, and Disney films. It is a world in which products are made from inputs that come from all over the world. It is a world in which an economic crisis in Asia can cause a recession in the United States, and the threat of higher interest rates in the United States really did help drive Japan's Nikkei index down in the spring of 2004. It is also a world in which vigorous and vocal groups protest against globalization, which they blame for a list of ills, from unemployment in developed nations to environmental degradation and the Americanization of popular culture.

Globalization Defined
Globalization: the ongoing social, economic,
and political process that deepens and broadens the relationships and interdependencies amongst nationstheir people, their firms, their organizations, and their governments
International business facilitates the globalization process.
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International Business Defined

International business: all commercial
transactions between parties in two or more countries Private firms are profit-oriented. Government organizations may or may not be profit-oriented.
The international business environment is more complex and diverse than the domestic business environment.
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Opening Case: The Globalization of Health Care

There is a shortage of

radiologists in the United States and demand for their services is growing twice as fast as the rate of graduation Solution to the problem: Send images over the Internet to be interpreted by radiologists in India

Meaning- What is Globalization?

The shift toward a more integrated and

interdependent world economy Two components: The globalization of markets The globalization of production

Implications
As a manager in almost any industry, you'll need to consider both where to obtain the inputs you need of the quality you need and at the best possible price and where you can best sell the product or service Understanding the environmental and operations relationship

Implications
Most companies are either international or
compete with international companies Modes of operations may differ from those used domestically The best way of conducting business may differ by country An understanding helps you make better career decisions An understanding helps you decide what governmental policies to support

Globalization of Markets
The merging of distinctly

separate national markets into a global marketplace Falling barriers to crossborder trade have made it easier to sell internationally Tastes and preferences converge onto a global norm Firms offer standardized products worldwide creating a world market

Globalization of Markets
Difficulties that arise from the globalization of
markets Significant differences still exist among national markets Country-specific marketing strategies Varied product mix

Globalization of Production
Refers to sourcing of goods and services from
locations around the world to take advantage of
Differences in cost or quality of the factors of production

Labor Land Capital

Globalization of Production
Historically this has been primarily confined to

manufacturing enterprises Increasingly companies are taking advantage of modern communications technology, and particularly the Internet, to outsource service activities to low-cost producers in other nations

THE EMERGENCE OF GLOBAL ECONOMY

The Emergence of Global Institutions

Globalization has created the need for

GATT WTO IMF World bank United Nations

institutions to help manage, regulate and police the global marketplace

Reasons That Firms Engage in International Business

To expand sales
Volkswagen [Germany] Ericsson [Sweden] Michelin [France] Nestl [Switzerland] IBM [USA] Seagram [Canada] Sony [Japan]
[continued]

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Service exports and imports

a. Service performance Service of banking, Rental, engineering and management services Eg :Bechtel company has contract to rebuild the Afghanistan after Taliban attacks

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