Note 2
(2-2)
Phase of globalisation
The first phase of globalization began about 1830 and peaked around 1880.
International business became widespread due to the growth of railroads, efficient
ocean transport, and the rise of large manufacturing and trading firms. Invention of the
telegraph and telephone in the late 1800s facilitated information flows between and
within nations and greatly aided early efforts to manage companies’ supply chains.
The second phase of globalization began around 1900 and was associated with the rise
of electricity and steel production. This phase reached its height just before the Great
Depression, a worldwide economic downturn that began in 1929. In 1900, Western
Europe was the most industrialized world region. Europe’s colonization of countries in
Asia, Africa, and the Middle East led to establishment of some of the earliest
subsidiaries of multinational enterprises (MNEs). European companies such as BASF,
Nestlé, Shell, Siemens, and British Petroleum had established foreign manufacturing
plants by 1900.8 In the years before World War I (pre-1914), many firms were already
operating globally. The Italian manufacturer Fiat supplied vehicles to nations on both
sides of the war.
The third phase of globalization began after World War II. At war’s end in 1945,
substantial pent-up demand existed for consumer products, as well as for input goods to
rebuild Europe and Japan. The United States was least harmed by the war and became
the world’s dominant economy. Substantial government aid helped stimulate economic
activity in Europe. The pre-war years had been characterized by high tariffs and strict
controls on currency and capital movements. After the war, leading industrialized
countries, including Australia, Britain, and the United States, sought to reduce
international trade barriers. Transport, and the rise of large manufacturing and trading
firms. Invention of the telegraph and telephone in the late 1800s facilitated information
flows between and within nnations and greatly aided early efforts to manage companies’
supply chains.
The second phase of globalization began around 1900 and was associated with the rise
of electricity and steel production. This phase reached its height just before the Great
Depression, a worldwide economic downturn that began in 1929. In 1900, Western
Europe was the most industrialized world region. Europe’s colonization of countries in
Asia, Africa, and the Middle East led to establishment of some of the earliest
subsidiaries of multinational enterprises (MNEs). European companies such as BASF,
Nestlé, Shell, Siemens, and British Petroleum had established foreign manufacturing
plants by 1900.8 In the years before World War I (pre-1914), many firms were already
operating globally. The Italian manufacturer Fiat supplied vehicles to nations on both
sides of the war.
The third phase of globalization began after World War II. At war’s end in 1945,
substantial pent-up demand existed for consumer products, as well as for input goods to
rebuild Europe and Japan. The United States was least harmed by the war and became
the world’s dominant economy. Substantial government aid helped stimulate economic
activity in Europe. The pre-war years had been characterized by high tariffs and strict
controls on currency and capital movements. After the war, leading industrialized
countries, including Australia, Britain, and the United States, sought to reduce
international trade barriers. Transport, and the rise of large manufacturing and trading
firms. Invention of the telegraph and telephone in the late 1800s facilitated information
flows between and within nations and greatly aided early efforts to manage companies’
supply chains.
The fourth phase of globalization began in the early 1980s, which saw enormous growth
in cross-border trade and investment. The phase was triggered by the development of
personal computers, the Internet, and Web browsers; the collapse of the Soviet Union
and ensuing market liberalization in Central and Eastern Europe; and industrialization
and modernization in East Asian economies, including China.
Note 4
A day in the global economy
Julie Valentine is a college junior majoring in business. On a recent Saturday, she went
shopping at a local mall. First, she ordered a big breakfast, unaware that most of her
meal was imported from abroad: bacon from Spain, juice from Brazil, and Frenchbranded yogurt. Julie then headed to the department store to buy a gift for her father.
She perused neckties with Italian and French brand names, and others made in China
and Romania. She also considered electric shavers made by Braun (a German brand)
and Philips (a Dutch brand). She eventually bought a Panasonic (a Japanese brand).
Next, she headed to the perfume counter, where she tried various brands, including
Chanel (France), French Connection (United Kingdom), and Shiseido (Japan). Julie was
dreaming of buying a laptop computer. At the electronics store, she explored several
models made in China, Ireland, and Malaysia. As she passed a travel agency, she
remembered her spring vacation was just around the corner and decided to consult her
best friend, Melissa. Whipping out her Nokia cell phone (a Finnish brand, but made in
Hungary and South Korea), Julie reached Melissa, who answered on her Motorola
phone (from a U.S. firm, but made in Malaysia). The two chatted about their dream trip
to the beaches of southern Spain, considered Mexico, but decided they will probably
end up in Florida. Julie looked at a blouse made in Vietnam, but hesitated to buy it
because she had read that some products from Southeast Asia are made with child
labor. Julie left the mall and drove away in her Hyundai (a Korean brand, made from
Chinese, Korean, and U.S. parts). She liked Melissa’s car, a BMW (German, but made
in the United States from Asian and European components). Over the following weeks,
Julie and her exchange-student friend, Anders (her favorite Norwegian import), met
several times at restaurants featuring food from various countries, including France,
India, and Lebanon. On Friday night, they watched The Dark Knight (made in Britain,
Hong Kong, and the United States, and featuring Australian and British actors) on a
friend’s big-screen TV (a Dutch brand, but made in Indonesia). Over dinner, Julie and
Anders enjoyed pasta from Italy and shrimp from El Salvador and chatted about their
future.
Note 5
(2-5)
Company internationalization and the value chain
The globalization of markets has opened up countless new business opportunities for
internationalizing firms. At the same time, globalization means that firms must
accommodate new risks and intense rivalry from foreign competitors. Globalization
results in more demanding buyers who shop for the best deals worldwide. A purely
domestic focus is no longer viable for firms in most industries. Managers should replace
parochial attitudes with a more cosmopolitan orientation. Internationalization may take
the form of global sourcing, exporting, or investment in key markets abroad. Proactive
firms seek a simultaneous presence in major trading regions, especially Asia, Europe,
and North America. The most direct implication of market globalization is on the firm’s
value chain. Market globalization compels firms to organize their sourcing,
manufacturing, marketing, and other value-adding activities on a global scale. In a
typical value chain, the firm conducts research and product development (R&D),
purchases production inputs, and assembles or manufactures a product or service.
Next, the firm performs marketing activities such as pricing, promotion, and selling,
followed by distribution of the product in targeted markets and after-sales service. The
value-chain concept is useful in international business because it helps clarify what
activities are performed where in the world. For instance, exporting firms perform most
“upstream” value-chain activities (R&D and production) in the home market and most
“downstream” activities (marketing and after-sales service) abroad. Each value-adding
activity in the firm’s value chain is subject to internationalization; that is, it can be
performed abroad instead of at home.
Note 7
(2-7)
Service industries that are rapidly internationalizing
There are numerous industries in the services sector with strong potential for
internationalization. The giant Internet retailer eBay earned nearly $9 billion in 2009, of
which more than 50 percent came from international sales. The company expects most
future revenue growth will come from abroad. When developing its business in India,
eBay acquired the Mumbai-based e-retailer Baazee. This acquisition followed eBay’s
expansion into China, Korea, and Europe.
The exhibit illustrates the diversity of service sectors that are internationalizing,
extending their reach beyond the countries where they are based. If you are considering
a career in international business, keep these industries in mind.
Note 8
(2-8)
Who participate in international business
Multinational enterprises (also known as multinational corporations) historically have
been the most important type of focal firm. A multinational enterprise (MNE) is a large
company with substantial resources that performs various business activities through a
network of subsidiaries and affiliates located in multiple countries. MNEs carry out
research and development (R&D), procurement, manufacturing, and marketing activities
wherever in the world the firm can reap the most advantages.
For example, Alcon is a Swiss pharmaceutical firm that established major R&D facilities
in the United States to take advantage of the country’s superior know-how in the
chemicals sector. Verizon Wireless has located much of its technical support operations
in India, to take advantage of high-quality, low-cost customer support personnel located
there. Royal Dutch Shell owns several oil refineries and nearly 2,000 gasoline stations
in Canada. In addition to a home office or headquarters, the typical MNE owns a
worldwide network of subsidiaries. It collaborates with numerous suppliers and
independent business partners abroad (sometimes termed affiliates). Typical MNEs
include Barclays, Caterpillar, Disney, DHL, Four Seasons Hotels, Samsung, Unilever,
Vodafone, and Nippon Life Insurance. In recent years, the largest MNEs have been
firms in the oil industry (such as Exxon-Mobil and Royal Dutch Shell) and the
automotive industry (General Motors and Honda), as well as retailing (Walmart).
Many small and medium-sized enterprises (SMEs) participate in international business
as well. An SME is a company with less than 500 employees, as defined in Canada and
the United States. In the European Union, SMEs are defined as firms with less than 250
employees. In addition to accounting for smaller market shares of their respective
industries, SMEs tend to have limited managerial and other resources and primarily use
exporting to expand internationally. However, in most nations, SMEs constitute the great
majority of all firms. With the globalization of markets, advances in various technologies,
and other facilitating factors, many more SMEs are pursuing international opportunities.
SMEs account for about one-third of exports from Asia and about a quarter of exports
from the affluent countries in Europe and North America. In some countries—for
example, Italy, South Korea, and China—SMEs contribute roughly 50 percent of total
national exports.
One type of contemporary international SME is the born global firm, a young
entrepreneurial company that initiates international business activity very early in its
evolution, moving rapidly into foreign markets. Born globals are found in advanced
economies, such as Australia and Japan, and in emerging markets, such as China and
India. International business requires specialized knowledge, commitment of resources,
and considerable time to develop foreign business partnerships. How do SMEs succeed
in international business despite resource limitations? First, compared to large MNEs,
smaller firms are often more innovative and adaptable and have quicker response times
when it comes to implementing new ideas and technologies and meeting customer
needs. Second, SMEs are better able to serve niche markets around the world that hold
little interest for MNEs. Third, smaller firms are usually avid users of information and
communication technologies, including the Internet. Fourth, as they usually lack
substantial resources, smaller firms minimize overhead or fixed investments. They rely
on external facilitators such as FedEx and DHL, as well as independent distributors in
foreign markets. Fifth, smaller firms tend to thrive on private knowledge that they
possess or produce. They access and mobilize resources through their cross-border
knowledge networks or their international social capital.
Note 9
Geographical locations of the 500 largest multinational enterprise
The exhibit shows the geographic distribution of the world’s largest MNEs, drawn from
Fortune’s Global 500 list. As shown, these firms are concentrated in the advanced
economies. The United States is home to 140 of the top 500 MNEs, a number that has
declined over time as other countries’ firms increase in size. Japan has the second-most
MNEs (68 firms), followed by France (40 firms), Germany (39 firms), and Britain (26
firms). Collectively, the European Union countries have more top 500 firms than the
United States. In recent years, large MNEs have begun to appear in emerging market
countries, such as China, Mexico, and Russia. China currently hosts 37 of the top 500
MNEs, a fairly recent development.
The “new global challenger” firms from emerging markets are fast becoming key
contenders in world markets. For example, the Mexican firm Cemex is one of the
world’s largest cement producers. In Russia, Lukoil has big ambitions in the global
energy sector. China Mobile dominates the cell phone industry in Asia. The new global
challengers make best use of home-country natural resources and low-cost labor to
succeed in world markets. Thousands of firms from emerging markets have big global
dreams and pose competitive challenges to companies from the advanced economies.
Note 10
(1-28)
Geographic Locations of the
500 Largest Multinational Enterprises
Typical MNEs include Barclays, Caterpillar, Disney, DHL, Four Seasons Hotels,
Samsung, Unilever, Vodafone, and Nippon Life Insurance. In recent years, the largest
MNEs have been firms in the oil industry (such as Exxon-Mobil and Royal Dutch Shell)
and the automotive industry (General Motors and Honda), as well as retailing (Walmart).
The Exhibit shows the geographic distribution of the world’s largest MNEs, drawn from
Fortune’s Global 500 list. As shown, these firms are concentrated in the advanced
economies. The United States is home to a large but falling number of the top 500
MNEs. China now has the second-most MNEs, followed by Germany. Collectively, the
European Union countries have more top 500 firms than the United States.
In recent years, large MNEs have begun to appear in emerging market countries, such
as China, Mexico, and Russia. China hosts the second largest number of the top 500
MNEs, a number that has increased dramatically in the past decade. Most of China’s
top firms are state enterprises, that is, owned by the Chinese government, which
provides them substantial advantages.
The “new global challenger” firms from emerging markets are fast becoming key
contenders in world markets. For example, the Mexican firm Cemex is one of the
world’s largest cement producers. In Russia, Lukoil has big ambitions in the global
energy sector. China Mobile dominates the cell phone industry in Asia. The new global
challengers make best use of home-country natural resources and low-cost labor to
succeed in world markets. Thousands of firms from emerging markets have big global
dreams and pose competitive challenges to companies from the advanced economies.
Note 11
(1-11)
Who participate in the international business continued part
Many MNEs operate charitable foundations that support various initiatives.
GlaxoSmithKline (GSK), the giant pharmaceutical firm, operates a number of small
country-based foundations in Canada, France, Italy, Romania, Spain, and the United
States.
Notes 12
Non governmental organization
The British Wellcome Trust funds non-governmental organizations (NGOs) and
research initiatives to work in collaboration with private businesses to develop remedies
for diseases in Africa and other less developed areas around the world.
Notes 13
(2-13)
Drivers of market globalization
Worldwide reduction of barriers to trade and investment. The tendency of national
governments to reduce trade and investment barriers has accelerated global economic
integration. For example, tariffs on the import of automobiles, industrial machinery, and
countless other products have declined nearly to zero in many countries, encouraging
freer international exchange of goods and services. Falling trade barriers are facilitated
by the WTO. After joining the WTO in 2001, China made its market more accessible to
foreign firms. Reduction of trade barriers is also associated with the emergence of
regional economic integration blocs, a key dimension of market globalization.
Market liberalization and adoption of free markets. Built in 1961, the Berlin Wall
separated the communist East Berlin from the democratic West Berlin. The collapse of
the Soviet Union’s economy in 1989, demolition of the Berlin Wall that same year, and
China’s free-market reforms all signaled the end of the 50-year Cold War and smoothed
the integration of former command economies into the global economy. Numerous East
Asian economies, stretching from South Korea to Malaysia and Indonesia, had already
embarked on ambitious market-based reforms. India joined the trend in 1991. These
events opened roughly one-third of the world to freer international trade and investment.
China, India, and Eastern Europe have become some of the most cost-effective
locations for producing goods and services worldwide. Privatization of previously stateowned industries in these countries has encouraged economic efficiency and attracted
massive foreign capital into their national economies.
Note 14
(2-14)
Drivers of market globalization
Industrialization, economic development, and modernization. Industrialization implies
that emerging markets—rapidly developing economies in Asia, Latin America, and
Eastern Europe—are moving from being low value-adding commodity producers,
dependent on low-cost labor, to sophisticated competitive producers and exporters of
premium products such as electronics, computers, and aircraft. For example, Brazil is
now a leading producer of private aircraft, and the Czech Republic excels in the
manufacture of automobiles. As highlighted in the opening vignette, India has become a
leading supplier of computer software. Economic development is enhancing standards
of living and discretionary income in emerging markets.
Notes 15
(2-15)
Gross national income
Perhaps the most important measure of economic development is Gross National
Income (GNI) per head. The exhibit maps the levels of GNI worldwide. The exhibit
reveals that Africa is home to the lowest-income countries, along with India and a few
other countries in Asia and Nicaragua. These areas are also characterized by low levels
of market globalization. The adoption of modern technologies, improvement of living
standards, and adoption of modern legal and banking practices are increasing the
attractiveness of emerging markets as investment targets and facilitating the spread of
ideas, products, and services across the globe.
Note 17
(2-17)
Drivers of market globalization
Integration of world financial markets. Integration of world financial markets makes it
possible for internationally active firms to raise capital, borrow funds, and engage in
foreign currency transactions. Financial services firms follow their customers to foreign
markets. Cross-border transactions are made easier partly as a result of the ease with
which funds can be transferred between buyers and sellers, through a network of
international commercial banks. For example, as an individual you can transfer funds to
a friend in another country using the SWIFT network. The network facilitates global
financial transactions. The globalization of finance contributes to firms’ abilities to
develop and operate world-scale production and marketing operations. It enables
companies to pay suppliers and collect payments from customers worldwide.
Ongoing advances in information, manufacturing, and transportation technologies, as
well as the emergence of the Internet, have facilitated rapid and early
internationalization of countless firms, such as Neogen (www.neogen .com). The firm’s
founders developed diagnostic kits to test for food safety. Compared to test kits
available from other firms, Neogen’s products were more accurate, more efficient, and
easier to use. As word spread about the superiority of its products, Neogen was able to
internationalize quickly and acquired a worldwide clientele. Farmers use Neogen test
kits to test for pesticide residue; veterinarians use them for pharmaceuticals, vaccines,
and topicals; government agencies use them to test for E. Coli. Today, Neogen is a
highly successful international firm. Modern technology is promoting a higher level of
international business activity than ever before. For example, many companies in
software, gaming, and entertainment maintain a presence only on the Web.
Note 18
(2-18)
Societal conciqunces of market globalization
Contagion: Rapid Spread of Monetary or Financial Crises Beginning in late 2008, the
world economy experienced a severe financial crisis and global recession, the worst in
decades.1 The crisis was precipitated by pricing bubbles (excessively high prices) in
housing and commodities markets around the world. For example, by mid-2008, oil
prices climbed to an all-time high of nearly $150 a barrel, and gasoline prices reached
record levels in many countries. High commodity prices resulted partly from rising
demand, especially in emerging markets such as China and India. As bubbles in real
estate markets burst, home values crashed, leaving owners with mortgage debts
greater than the value of their homes. Many homeowners found themselves unable to
repay their debts, a situation that worsened as people lost jobs or experienced pay cuts.
Meanwhile, thousands of mortgages had been securitized—that is, sold as investment
vehicles on stock markets worldwide. As the value of these securities plunged or
became uncertain, the stock markets crashed.
A recession occurs when a national economy undergoes a prolonged period of negative
growth. GDP growth in advanced, developing, and emerging economies varies over
time. It declined substantially in recent years, due to the global recession and the
financial crisis. However, even following deep recessions, the global economy has
always returned to net GDP growth.
The exhibit show how GDP growth in advanced, developing, and emerging economies
varies over time. It declined substantially during the global recession and financial crisis.
One lesson of the exhibit is that, even following deep recessions, the global economy
has always returned to net GDP growth.
The crisis began in the United States and, like a contagious disease, spread around the
world. In international economics, contagion refers to the tendency for a financial or
monetary crisis in one country to spread rapidly to other countries, due to the ongoing
integration of national economies
Note 19
(2-19)
Societal conciqunces continued part
Sovereignty, the ability of a nation to govern its own affairs, is a fundamental principle
that underlies global relations. One country’s laws cannot be applied or enforced in
another country. Globalization can threaten national sovereignty in various ways. MNE
activities can interfere with the sovereign ability of governments to control their own
economies, social structures, and political systems.
Some corporations are bigger than the economies of many nations. Indeed, Walmart’s
internal economy—its total revenues—is larger than the GDPof most of the world’s
nations, including Israel, Greece, and Poland.
Large multinationals can exert considerable influence on governments through lobbying
or campaign contributions. They often lobby their government for, say, devaluation of
the home currency, which gives them greater price competitiveness in export markets.
MNEs influence the legislative process and extract special favors from government
agencies.
Note 20
(2-20)
Societal conciqunces continued part
But even the largest firms are constrained by market forces. In countries with many
competing firms, one company cannot force customers to buy its products or force
suppliers to supply it with raw materials and inputs. The resources that customers and
suppliers control are the result of free choices made in the marketplace. Company
performance depends on the firm’s skill at winning customers, working with suppliers,
and dealing with competitors. Corporate dominance of individual markets is rare. In
reality, market forces generally dominate companies. Gradual integration of the global
economy and increased global competition, combined with privatization of industries in
various nations, are making some companies less powerful within their national
markets. For example, Ford, Chrysler, and GM once dominated the U.S. auto market.
Today there are many more firms, including Toyota, Honda, Hyundai, Nissan, and BMW.
In annual sales, Toyota now leads the U.S. market, and home-country market shares of
domestic U.S. automakers have tumbled.
Today, globalization and the spread of financial crises compel governments to pursue
sound economic policies and managers to manage their firms more effectively. To
minimize globalization’s harm and reap its benefits, governments should strive for open
and liberalized economic regimes. Specifically, governments should ensure the freedom
to enter and compete in markets, protect private and intellectual property, enforce the
rule of law, and support voluntary exchange through markets rather than through
political processes. Banks and financial institutions should be regulated appropriately.
Transparency in the affairs of business and regulatory agencies is critical. One example
is the Sarbanes-Oxley Act, which the U.S. Congress passed in 2002. It addresses the
flaws in financial reporting practices that became apparent following corporate and
accounting scandals in such firms as Enron, Tyco International, and WorldCom. It
introduced new and enhanced standards for all U.S. public company boards,
management, and public accounting firms.
Note 21
(2-21)
Societal conciqunces continued
Globalization has created many new jobs and opportunities worldwide, but it has also
cost many people their jobs. Ford, GM, and Volkswagen have all transferred thousands
of jobs from their factories in Germany to countries in Eastern Europe. General Motors
and Ford have also laid off thousands of workers in the US, partly the result of
competitive pressures posed by carmakers from Europe, Japan, and South Korea.
Offshoring is the relocation of manufacturing and other value-chain activities to costeffective locations abroad. Ernst & Young relocated much of its accounting support work
to the Philippines. Massachusetts General Hospital has its CT scans and X-rays
interpreted by radiologists in India. Many IT support services for customers in Germany
are based in the Czech Republic and Romania. Offshoring has caused job losses in
many mature economies.
High-profile plant closures and relocation of manufacturing have received much media
attention in recent years. For example, Electrolux, the Swedish manufacturer of home
appliances, recently moved its Greenville, Michigan, refrigerator plant to Mexico.
Closure of the plant, which once provided 2,700 jobs, devastated the small Michigan
community. Management shifted production to Mexico despite repeated appeals by the
local community, the labor union, and the state of Michigan.
MNEs are often criticized for paying low wages, exploiting workers, and employing child
labor. Child labor is particularly troubling because it denies children educational
opportunities. In 2012, the International Labor Organization (www.ilo.org) reported
there are approximately 215 million children aged 5–14 at work around the world.
Note 22
(2-22)
Effect on the poor
Media attention and consumer concern are helping wages and sweatshop conditions to
slowly improve in developing economies.
Note 24
(2-24)
Societal conciqunces of globalisation continued
Globalization can harm the environment by promoting increased manufacturing and
economic activity that results in pollution, habitat destruction, and deterioration of the
ozone layer. For example, economic development in China is attracting much inward
FDI and stimulating the growth of numerous industries. However, the construction of
factories, infrastructure, and modern housing can spoil previously pristine environments.
In Eastern China, growing industrial demand for electricity led to construction of the
Three Gorges Dam, which flooded agricultural lands and permanently altered the
natural landscape.
Note 25
(2-25)
Societal conciqunces of globalisation continued
While it is generally true that globalization-induced industrialization produces
considerable environmental harm, this effect tends to decline over time. The evidence
suggests that environmental destruction diminishes as economies develop, at least in
the long run. As globalization stimulates rising living standards, people focus
increasingly on improving their environment. Over time, governments pass legislation
that promotes improved environmental conditions. For example, Japan endured polluted
rivers and smoggy cities in the early decades of its economic development following
World War II. But as their economy grew, the Japanese passed tough environmental
standards to restore natural environments.
Evolving company values and concern for corporate reputations also lead firms to
reduce or eliminate practices that harm the environment. For example, in Mexico, big
U.S. automakers like Ford and GM have gradually improved their environmental
standards. Benetton in Italy (clothing), Alcan in Canada (aluminum), and Kirin in Japan
(beverages) are examples of firms that embrace practices that protect the environment,
often at the expense of profits. The Conservation Coffee Alliance, a consortium of
companies, has committed substantial financial support to environmentally friendly
coffee cultivation in Central America, Peru, and Colombia.
Note 26
(2-26)
Societal conciqunces of globalisation continued
Globalization exerts strong pressures on national culture. Market liberalization leaves
the door open to foreign companies, global brands, unfamiliar products, and new
values. Consumers increasingly wear similar clothing, drive similar cars, watch the
same movies, and listen to the same recording stars. Advertising leads to the
emergence of societal values modeled on Western countries, especially the United
States. Hollywood dominates the global entertainment industry. In this way, globalization
can alter people’s norms, values, and behaviors, which may tend to homogenize over
time. Critics call these trends the “McDonaldization” or the “Coca-Colonization” of the
world.
To combat such trends, governments try to block cultural imperialism and prevent the
erosion of local traditions. In Canada, France, and Germany, the public sector attempts
to prevent U.S. ideals from diluting local traditions. Hollywood, McDonald’s, and
Disneyland are seen as Trojan horses that permanently alter food preferences,
lifestyles, and other aspects of traditional life. For better or worse, however, such trends
are probably inevitable in a globalizing world. Information and communications
technologies speed the homogenization of world cultures. People worldwide are
exposed to movies, television, the Internet, and other information sources that promote
lifestyles of people in the United States and other advanced economies. Appetites grow
for Western products and services, which are seen to signal higher living standards. For
example, despite low per-capita income, many Chinese buy consumer electronics such
as cell phones and TV sets. Global media have a pervasive effect on local culture,
gradually shifting it toward a universal norm.
At the same time, the flow of cultural influence often goes both ways. Advanced Fresh
Concepts is a Japanese food company that is transforming fast food by selling sushi
and other Japanese favorites in supermarkets throughout the United States. It sells
some $250 million worth of sushi to U.S. buyers every year. As the influence of the
Chinese economy grows over time, Western countries will likely adopt cultural norms
from China as well. Chinese restaurants and some Chinese traditions are already a way
of life in much of the world outside China.