International Business Chapter 1 Globalization

Front 1

What is globalization?

Back 1

the shift toward a more integratedand interdependent world economypAp^

Front 2

WhatIs The Globalization of Markets?

Back 2

refers to the merging of historicallydistinct and separate national markets into one huge global marketplace.It is important to recognize thatsignificant differences still exist among national markets, requiring companiesto customize market strategies, product features, and operating practices tomeet the conditions in particular markets.

Front 3

WhatIs The GlobalizationofProduction?

Back 3

refers to the sourcing of goodsand services from locations around the globe to take advantageofnational differences in the cost and quality of factors of production (suchas labor, energy, land, and capital). By doing this, companies hope to lowertheir overall cost structure and/or improve the quality or functionality oftheir product offering, thereby allowing them to compete more effectively.

Front 4

WhyDo We Need GlobalInstitutions?

Back 4

help manage, regulate, and policethe global marketplace & promote the establishment ofmultinational treaties to govern the global business system

examples: GATT, WTO, IMF, World Bank, UN, G20

Front 5

WorldTrade Organization

Back 5

–polices the world trading system

–makes sure that nation-statesadhere to the rules laid down in trade treaties

–promotes lower barriers to tradeand investment

–161 memberson 26 April 2015

Front 6

InternationalMonetary Fund (IMF)

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–maintains order in theinternational monetary system

–lender of last resort for countriesin crisis •Argentina, Indonesia, Mexico,Russia, South Korea, Thailand, Turkey, Ireland, and Greece`q^

Front 7

World Bank

Back 7

promotes economic development via low interest loans for infrastructure projects

Front 8

United Nations (UN)

Back 8

-maintains international peace and security

- develops friendly relations among nations

- cooperates in solving international problems and in promoting respect for human rights

-is a center for harmonizing the actions of nations

Front 9

G20

Back 9

–forum through which major nationstried to launch a coordinated policy response to the 2008-2009 global financialcrisis

–continuedenhanced role during the sluggish recovery 2009 to present

Front 10

G7

Back 10

forum of major industrialized democracies

Front 11

International trade

Back 11

occurs when a firm invest resources in business activities outside its home country

Front 12

Foreign direct investment (FDI)

Back 12

occurswhena firm invests resources in business activities outside its home country

Front 13

WhatIs Driving Globalization?

Back 13

Declining barriers to the free flowof goods, services, and capital and technological change

Front 14

What does globalization mean for firms?

Back 14

lower barriers to trade and investment mean firms can view the world rather than a single country as their market and base production in the optimal location for that activity. but firms may also find their home markets under attack by foreign firms

Front 15

HowHas World Output And World TradeChanged?

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In1960, the U.S. accounted for over 40% of world economic activity, but by 2009,the U.S. accounted for just 24%

Front 16

WhatIs A MultinationalEnterprise?

Back 16

any business that has productiveactivities in two or more countries

Front 17

IsAn Interdependent GlobalEconomyA GoodThing? Supporters argue...

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Increased trade and cross-border investment mean:

–lower prices for goods and services

–greater economic growth

–higher consumer income, and morejobs

Front 18

Is An Interdependent Global Economy A Good Thing? Critics claim...

Back 18

Globalization will cause:

–job losses

–environmental degradation

–the cultural imperialism of globalmedia and MNEs

Front 19

HowDoes Globalization AffectJobs And Income?Critics argue...

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falling barriers to trade are destroying manufacturing jobs in advanced countries

Front 20

HowDoes Globalization AffectJobs And Income?Supporters claim...

Back 20

The benefits of this trend outweigh the costs

•countries will specialize in whatthey do most efficiently and trade for other goods—all countrieswill benefit

Front 21

HowDoes Globalization AffectLabor PoliciesAnd The Environment?

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Critics argue:Firms avoid the cost of adhering to laborand environmental regulations by moving production to countries where suchregulations do not exist, or are not enforced•

Supporters claim:Tougher environmental and labor standardsare associated with economic progress

-as countries get richer from freetrade, they implement tougher environmental and labor regulations

Front 22

HowDoes Globalization AffectNational Sovereignty?

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Criticsargue:Unelected bureaucrats have the power toimpose policies on the democratically elected governments of nation-states

Supportersclaim:The powerof these organizations is limited to what nation-states agree to grant

•the power of the organizations liesin their ability to get countries to agree to follow certain actions

Front 23

HowIs Globalization AffectingThe World’sPoor?

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Critics argue: If globalization was beneficial there should not bea divergence between rich and poor nations

Supporters claim:That thebest way for the poor nations to improve their situation is to•reduce barriers to trade andinvestment•implement economic policies basedon free market economies

•receive debt forgiveness for debtsincurred under totalitarian regimes•