Globalization
Chapter Preview
• Describe globalization
• Explain how globalization affects markets
and production
• Identify the drivers of globalization
• Discuss the globalization debate
• List types of firms in international business
• Define the global business environment
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E-Biz Surprise
eBay expanded all types
of product markets
Eli Lilly hired a virtual
R&D “workforce”
Expedia moved travel
booking online
Dell pioneered online
buying of custom PCs
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International Business
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The nature of IB?
• Foreign Business denote the domestic
operation within a foreign company.
• Multi Domestic Company is an organization
with multi country affiliate, each of which
formulate its own business strategy based on
perceived market differences.
• Global Company is an organization that
attempts to standardize and integrated
operations worldwide in all functional area.
• International Company refers to both global
and Multi Domestic Company.
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Advice of Global Managers

Know the customer

Emphasize global awareness

Develop world-class products

Market effectively

Improve logistics

Analyze problems correctly
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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
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Benefits of Globalization
Globalization
of markets
Globalization
of production
• Reduces marketing costs
• Access low-cost labor
• New market opportunities
• Acquire technical expertise
• Levels income stream
• Obtain production inputs
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Globalization Drivers I
Remove barriers to trade
and investment
GATT
WTO
Regional trade
agreements
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Trade Exceeds Output
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Globalization Drivers II
Technological Innovation
Email and
videoconferencing
Better
coordination
and control
Internet, intranets
and extranets
Transportation
advancements
Improved
communications
and management
More efficient,
dependable
shipping
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Top 20 Global Nations
Political
Technological
Personal
Economic
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Globalization Drivers III
Market
- As companies globalize, they also become
global customer.
-Avoid the competitor stealing their
customers
-Market Saturate
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Globalization Drivers IV
Cost
-Economic scale to reduce unit cost
-Reduce development, production,
inventory cost.
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Globalization Then and Now
Highly mobile
labor market
Fear of jobs
moving abroad
Free-flowing
capital and trade
Backlash among
the disaffected
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Challenges to Business
Physical
security
Digital
security
Reputational
risk
Assess company
vulnerability and
create a disaster
recovery plan
Guard proprietary
information and
confidential
communications
Require ethical and
lawful behavior from
all employees and
business partners
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From Carnage to Civility
Rage
Reason
Violence
Legitimacy
Carnage
Civility
Exclusion
Debate
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Jobs and Wages
Supporters
Opponents



Eliminates jobs in
developed nations
Forces wages lower
in developed nations
Exploits workers in
developing nations

Increases wealth and
efficiency

Generates labor market
flexibility

Creates jobs in
developed countries

Advances economies
of developing nations
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Labor and Environment
Opponents
– Globalization lowers
labor standards
– Weakens protection of
the environment
Supporters
+ Investment raises
labor standards
+ Open economies most
environment friendly
– Exploits workers in
+ Companies concerned
poor nations
for future markets
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Income
Inequality
Income
Inequality
debate
1
2
Inequality within nations
Poor people in developing
nations benefit most from
open economy
Inequality between nations
Nations open to world trade
and investment grow faster
than rich nations
3
Global inequality
Inequality has fallen, but
experts disagree on the
extent of the decline
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National Sovereignty
Opponents
Supporters
Supranational
institutions reduce
autonomy of national,
regional and local
governments
Globalization has
benefited societies by
helping to spread
democracy worldwide
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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
•
Protects deeper moral
and cultural norms
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International Business Players
Multinational
Corporation
Business that has
direct investments
abroad in multiple
countries
Small Businesses
and Entrepreneurs
Small companies and
individuals becoming
increasingly active in
international trade
and investment
Born-Global
Firm
Takes a global
perspective on its
market and engages in
international business
from or near its
inception
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How They Stack Up
Comparing
revenue of
the world's
10 most
global firms
to the gross
domestic
product of
nations
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Global Business Environment
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Teaming up
• Imagine that you and a group of your fellow
classmates own a company that manufactures
cheap sunglasses. To lower production costs, you
want to move your factory from your developed
country to a low-wage country. Choose a
prospective country to which you will move. What
elements of the national business environment will
affect your move? Are there any obstacles to
overcome in the international business
environment? How will managing your company be
different when you undertake international
activities? What challenges will you face in
managing your new employees?
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Teaming up
• This may be a good time to get students
working on their Market Entry Strategy
Simulation project, if this has been assigned.
This project gets students to begin pondering
the types of elements that must be considered
when selecting a country for investment. At a
minimum, students’ responses should
consider: (1) The presence of investment
barriers in the country; (2) Resources needed to
carry out production, as well as their
availability and cost’ (3) Availability of modern
telecommunications to facilitate
communication with the home office; and (4)
How the expansion might be financed.
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Chapter Summary
•
This chapter defines the scope of international business within the context of
globalization. Globalization lets firms standardize marketing practices, enter
new markets, access resources worldwide, and increase production
efficiency. Fueling globalization are falling barriers to trade and investment,
and rapid innovation in communication and transportation technologies.
Globalization also affects a nation, whose level of globalization depends on
political engagement, technological connectivity, personal contact, and
economic integration. Yet because globalization’s impact is not always
uniform, nor always positive, it has sparked debate. Disputes include
globalization’s affect on jobs and wages; labor and environmental protection
laws; income inequality; national sovereignty; and cultural diversity. Large
multinationals, small firms, and entrepreneurs engage in international
business. Each of these must navigate the global business environment—the
dynamic, integrated global system that weaves together four distinct
elements: (1) the forces of globalization, (2) national business environments,
(3) the international business environment, and (4) international firm
management.
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