INTERNATIONAL BUSINESS

Pham To Mai
University of Economics and Law
National University of HCMC
Chapter I
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PTM Globalization
07-Sep-14
Globalization
Trade and investment barriers are
disappearing.
Perceived distances are shrinking due to
advances in transportation and
telecommunications.
Material culture is beginning to look
similar.
National economies merging into an
interdependent global economic system.
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PTM Globalization
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What is Globalization?
The shift toward a
more integrated and
interdependent world
economy.
Markets
Production
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PTM Globalization
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Globalization of Market: The merging of
historically distinct separated national
markets into one huge global
marketplace.
Globalization of Production: The sourcing
of goods and services from location
around the globe to take advantage of
national differences in the cost and
quality of factors of production.
What is Globalization?
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PTM Globalization
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Globalization & Businesses
Opportunities
Increased revenue
opportunity through
global sales
Reduced costs by
producing in low
cost countries.
Facilitated global
expansion by
favorable political
and economic trends
Challenges
increased competition
and decreased prices in
domestic markets
Foreign competition in
jobs
Different nations =
different problems
Global planning may be
easy, but global
execution is not
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PTM Globalization
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Drivers of Globalization
Declining Trade and
Investment Barriers
The Role of Technological
Change
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PTM Globalization
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Impact of GATT Tariff Rates
0
5
10
15
20
25
30
35
40
45
50
1913 1950 1990 2000
France
Germany
Italy
Japan
Holland
Sweden
Britain
United States
Average Tariff Rates on Manufactured Products % of Value
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PTM Globalization
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National FDI Regulatory Changes
(2000-2010)
2000 2002 2004 2006 2008 2009 2010
Number of countries
that introduce change
70 72 103 91 54 50 74
Number of regulatory
changes, in which:
150 246 270 177 106 102 149
- More favourable 147 234 234 142 83 71 101
- Percentage of more
favourable changes in
total
98 95.1 86.7 80.2 78.3 69.6 67.8
Source: UNCTAD, World Investment Report 2011
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PTM Globalization
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International Investment Agreements concluded,
2010
Forms of
Agreements
BIT DTT Others
Signed in the
year
54 113 11
Cummulative
number at
the end of
the year
2,807 2,976 309
Source: UNCTAD, World Investment Report 2011
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PTM Globalization
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The Role of Technological Change
Microprocessors and
Telecommunications
The Internet and World
Wide Web
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PTM Globalization
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Technological Change in Transportation
Commercial jet aircraft
Supper freighters
Containerizations
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PTM Globalization
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The Shrinking Globe
1500-1840
1850-1930
1950s
1960s
Best average speed of
horse-drawn coaches and
sailing ships, 10mph.
Steam locomotives average 65mph.
Steamships average 36mph.
Propeller aircraft
300-400 mph.
Jet passenger aircraft
500-700mph.
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PTM Globalization
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Globalization - Pros
Lower prices for goods and services.
Economic growth stimulation.
Increase in consumer income.
Creates jobs.
Countries specialize in production of goods
and services that are produced most
efficiently.
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PTM Globalization
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Globalization - Cons
Destroys manufacturing jobs and lowers wage
rates of unskilled workers in wealthy, advanced
countries.
Companies move to countries with fewer labor
and environment regulations.
Loss of national sovereignty.
Increases gap between rich and poor nations
Deteriorates national culture
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PTM Globalization
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Globalization and National Sovereignty
WTO
EU
UN
WTO
Founded 1994
153 members
Police GATT trading system
Supranational organizations are
limited to powers granted by
member countries and serve the
collective interests of its members.
Power is derived from the
organizations ability to sway
members to action.
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PTM Globalization
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Globalization and the Worlds Poor
Critics argue that globalization has not helped
poor.
1870: per capita income of 17 richest nations was
2.4x that of all other countries.
1990: it was 4.5x larger.
Other factors may have influenced the gap.
Totalitarian governments.
Economic policies that destroyed wealth creation.
Little protection of property rights.
Expanding populations.
War.
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PTM Globalization
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Implication
for International Businesses
IBs & MNCs are blamed for transferring
negative effects of globalization around
the world IBs & MNCs become targets
for antiglobalization protesters
Be conscious of business ethics and
Corporate Social Responsibility (CSR) in
doing business abroad