Xmba Buad Slides 1

8/7/2019 Xmba Buad Slides 1

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InternationalBusiness8e

ByCharlesW.L.Hill


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Chapter1

Globalization

Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin


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WhatIsGlobalization?

vTheworldismovingawayfromself-containednationaleconomiestowardaninterdependent,integratedglobaleconomic

system

vGlobalizationreferstotheshifttowardamoreintegratedandinterdependentworld

economy


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WhatIsThe

GlobalizationofMarkets?

vHistoricallydistinctandseparatenationalmarketsaremerging

vItnolongermakessensetotalkabouttheGermanmarketortheAmericanmarket

vInstead,thereistheglobalmarketvfallingtradebarriersmakeiteasiertosellgloballyv

consumers

tastesandpreferencesareconvergingonsomeglobalnorm

vFirmspromotethetrendbyofferingthesamebasicproductsworldwide


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WhatIsThe

GlobalizationofProduction?

virmssourcegoodsandservicesfromlocationsaroundtheglobetocapitalizeonnationaldifferencesinthecostandquality

offactorsofproductionlikeland,labor,andcapital

vCompaniescanv

lowertheiroverallcoststructurevimprovethequalityorfunctionalityoftheirproductoffering


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Why Do We Need

Global Institutions?

vInstitutionsvhelpmanage,regulate,andpolicetheglobal

marketplace

vpromotetheestablishmentofmultinationaltreatiestogoverntheglobalbusinesssystem

vExamplesincludevtheGeneralAgreementonTariffsandTrade(GATT)vtheWorldTradeOrganization(WTO)vtheInternationalMonetaryFund(IMF)vtheWorldBankvtheUnitedNations(UN)


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What Do Global

Institutions Do?v TheWorldTradeOrganization(likeitspredecessorGATT)

v policestheworldtradingsystemv makessurethatnation-statesadheretotheruleslaiddownintrade

treatiesv promoteslowerbarrierstotradeandinvestment

vTheInternationalMonetaryFund(1944)maintainsorderintheinternationalmonetarysystem

v TheWorldBank(1944)promoteseconomicdevelopmentv TheUnitedNations(1945)

v maintainsinternationalpeaceandsecurityv developsfriendlyrelationsamongnationsv cooperatesinsolvinginternationalproblemsandinpromotingrespectforhumanrightsv isacenterforharmonizingtheactionsofnations


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What Is Driving

Globalization?

vThedeclineinbarrierstothefreeFlowofgoods,services,andcapitalthathasoccurredsincethe

endofWorldWarII

vsince1950,averagetariffshavefallensigniFicantlyandarenowat4percentvcountrieshaveopenedtheirmarketstoDI

vTechnologicalchangevmicroprocessorsandtelecommunicationsvtheInternetandWorldWideWebvtransportationtechnology


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Declining Trade And

Investment BarriersAverageTariffRatesonManufacturedProductsasPercentofValue


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What Does Globalization

Mean For Firms?

vLowerbarrierstotradeandinvestmentmeanFirmscanvviewtheworld,ratherthanasinglecountry,astheirmarketvbaseproductionintheoptimallocationforthatactivity

vTechnologicalchangemeansvlowertransportationcosts-Firmscandisperseproductiontoeconomical,geographicallyseparatelocationsvlowerinformationprocessingandcommunicationcosts-Firmscan

createandmanagegloballydispersedproductionsystems

vlowcostglobalcommunicationsnetworks-helpcreateanelectronicglobalmarketplace

vlow-costtransportation-helpcreateglobalmarketsvglobalcommunicationnetworksandglobalmedia-createa

worldwideculture,andaglobalmarketforconsumerproducts


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The Changing Demographics

Of The Global Economy

v Therehasbeenadrasticchangeinthedemographicsoftheworldeconomyinthelast30years

vourtrendsareimportant:1. theChangingWorldOutputandWorldTradePicture

2. theChangingoreignDirectInvestmentPicture3. theChangingNatureoftheMultinational

Enterprise

4. theChangingWorldOrder


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How Has World Output And

World Trade Changed?vIn1960,theUnitedStatesaccountedforover40%

ofworldeconomicactivity

vBy2008,theUnitedStatesaccountedforjustover20%ofworldeconomicactivity

vAsimilartrendoccurredinotherdevelopedcountries

vTheshareofworldoutputaccountedforbydevelopingnationsisrisingandisexpectedtoaccountformorethan60%ofworldeconomicactivityby2020


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How Has World Output And

World Trade Changed?

TheChangingDemographicsofWorldGDPandTrade


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How Has Foreign Direct

Investment Changed Over Time?

vInthe1960s,U.S.Firmsaccountedforabouttwo-thirdsofworldwideDIFlows

vToday,theUnitedStatesaccountsforlessthanone-FifthofworldwideDIFlows

vOtherdevelopedcountrieshavefollowedasimilarpattern

vIncontrast,theshareofDIaccountedforbydevelopingcountrieshasrisen

vDevelopingcountries,especiallyChina,havealsobecomepopulardestinationsforDI


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Investment Changed Over Time?PercentageShareofTotalDIStock1980-2007


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Investment Changed Over Time?DIInFlows1988-2008


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What Is A

Multinational Enterprise?

vAmultinationalenterprise(MNE)isanybusinessthathasproductiveactivitiesintwoormorecountries

vSincethe1960s,therehasbeenariseinnon-U.S.multinationals,andagrowthofmini-multinationals


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The Changing World Order

vManyformerCommunistnationsinEuropeandAsiaarenowcommittedtodemocraticpoliticsandfreemarketeconomiesvso,therearenewopportunitiesforinternational

businessesvbut,therearesignsofgrowingunrestandtotalitarian

tendenciesinsomecountrieslikeRussia

vChinaandLatinAmericaarealsomovingtowardgreaterfreemarketreformsvbetween1983and2008,DIinChinaincreasedfrom

lessthan$2billionto$90billionannuallyvbut,Chinaalsohasmanynewstrongcompaniesthat

couldthreatenWesternFirms


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How Will The Global Economy

Of The 21st Century Look?vTheworldismovingtowardamoreglobal

economicsystem

vButglobalizationisnotinevitablevtherearesignsofaretreatfromliberaleconomic

ideologyinRussia

vGlobalizationbringsrisksvtheFinancialcrisisthatsweptthroughSouthEastAsia

inthelate1990s

vtherecentFinancialcrisisthatstartedintheU.S.in2008,andmovedaroundtheworld


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Is An Interdependent Global

Economy A Good Thing?vSupportersbelievethatincreasedtradeandcross-

borderinvestmentmeanvlowerpricesforgoodsandservicesvgreatereconomicgrowthvhigherconsumerincome,andmorejobs

vCriticsworrythatglobalizationwillcausevjoblossesvenvironmentaldegradationvtheculturalimperialismofglobalmediaandMNEs

vAnti-globalizationprotestersnowregularlyshowupatmostmajormeetingsofglobalinstitutions


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How Does Globalization Affect

Jobs And Income?

vCriticsarguethatfallingbarrierstotradearedestroyingmanufacturingjobsinadvancedcountries

vSupporterscontendthatthebeneFitsofthistrendoutweighthecosts

vcountrieswillspecializeinwhattheydomostefFicientlyandtradeforothergoodsandallcountrieswillbeneFit


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How Does Globalization Affect Labor

Policies And The Environment?

vCriticsarguethatFirmsavoidcostlyeffortstoadheretolaborandenvironmentalregulationsby

movingproductiontocountrieswheresuch

regulationsdonotexist,orarenotenforcedvSupportersclaimthattougherenvironmentaland

laborstandardsareassociatedwitheconomic

progress

vascountriesgetricherfromfreetrade,theyimplementtougherenvironmentalandlaborregulations


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How Does Globalization

Affect National Sovereignty?vIstodaysinterdependentglobaleconomyshifting

economicpowerawayfromnationalgovernmentstowardsupranationalorganizationsliketheWTO,theEU,andtheUN?

vCriticsarguethatunelectedbureaucratshavethepowertoimposepoliciesonthedemocraticallyelectedgovernmentsofnation-states

vSupportersclaimthatthepoweroftheseorganizationsislimitedtowhatnation-statesagreetograntvthepoweroftheorganizationsliesintheirabilitytoget

countriestoagreetofollowcertainactions


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How Is Globalization

Affecting The Worlds Poor?vIsthegapbetweenrichnationsandpoornations

isgettingwider?vCriticsbelievethatifglobalizationwasbeneFicial

thereshouldnotbeadivergencebetweenrichand

poornationsvSupportersclaimthatthebestwayforthepoor

nationstoimprovetheirsituationistovreducebarrierstotradeandinvestmentvimplementeconomicpoliciesbasedonfreemarketeconomiesvreceivedebtforgivenessfordebtsincurredunder

totalitarianregimes


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How Does The Global

Marketplace Affect Managers?

vManaginganinternationalbusinessdiffersfrommanagingadomesticbusinessbecause

vcountriesaredifferentvtherangeofproblemsconfrontedinaninternationalbusinessiswiderandtheproblemsmorecomplexthan

thoseinadomesticbusiness

vFirmshavetoFindwaystoworkwithinthelimitsimposedbygovernmentinterventionintheinternationaltradeandinvestmentsystem

vinternationaltransactionsinvolveconvertingmoneyintodifferentcurrencies


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Review Question

Theshifttowardamoreintegratedand

interdependentworldeconomyisreferredto

as

a)economicintegration

b)economicinterdependency

c)globalization

d)internationalization


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Review Question

Themergingofhistoricallydistinctand

separatenationalmarketsintoonehuge

globalmarketplaceisknownas

a)globalmarketfacilitation

b)cross-bordertrade

c)supranationalmarketintegration

d)theglobalizationofmarkets


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Review Question

irmsthatareinvolvedininternational

businesstendtobe

a)large

b)small

c)medium-sizedd)large,small,andmedium-sized


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Review Question

Whichisnotafactorofproduction?

a)tradeb)land

c)capital

d)energy


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Review Question

Thesourcingofgoodandservicesfrom

aroundtheworldtotakeadvantageofnational

differencesinthecostandqualityoffactorsof

productioniscalled

a)economiesofscale

b)theglobalizationofproduction

c)globalintegration

d)globalsourcing


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Review Question

Whichorganizationisresponsibleforpolicing

theworldtradingsystem?

a)theInternationalMonetaryund

b)theUnitedNations

c)theWorldTradeOrganizationd)theWorldBank


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Review Question

Whatisthesinglemostimportantinnovation

totheglobalizationofmarketsand

production?

a)advancesintransportationtechnology

b)thedevelopmentofthemicroprocessor

c)advancesincommunication

d)theInternet


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Review Question

Whichofthefollowingtrendsistrue?

a)theUnitedStatesisaccountingforagreaterpercentageofworldtradethaneverbefore

b)theUnitedStatesisaccountingforagreaterpercentageofforeigndirectinvestmentthaneverbefore

c)theshareofworldtradeaccountedforby

developingcountriesisrisingd)theshareofforeigndirectinvestmentby

developingcountriesisdeclining


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Review Question

Whichoftheseisnotaconcernofanti-globalization

protesters?

a)globalizationraisesconsumerincomeb)globalizationcontributestoenvironmental

degradation

c)globalizationiscausingalossofmanufacturing

jobsindevelopingcountriesd)globalizationimpliesalossofnational

sovereignty

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