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LEARNING OBJECTIVES
To understand the globalization concept To understand factors responsible for globalization To get an overview of global economy To find out characteristics of global companies and their role
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GLOBALIZATION
What is Globalization?
Definition:
Joseph Stiglitz, an economist and winner of the Nobel Prize defines Globalization as follows:
Globalization "is the closer integration of the countries and peoples of the world ...brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders." (from Globalization and its Discontents)
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EXCHANGE OF SERVICES
International services are defined as transactions by private individuals and/or corporations that cross national boundaries. Aviation Banking Communication Insurance Shipping
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GLOBAL INTEGRATION
FORMS OF INTEGRATION: NEGATIVE INTEGRATION Break down of trade barriers or protective barriers POSITIVE INTEGRATION It refers to the standardization of economic laws and policies
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The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace.
NATIONAL MARKET
REGIONAL MARKET
GLOBALIZATION OF PRODUCTION:
GLOBAL MARKET
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GLOBALIZATION OF MARKETS
CHARACHETRISTICS: MERGER OF MARKETS FALL OF TRADE BARRIERS HOMOGENITY IN CONSUMER TASTE AND NEEDS RIVALRY OF BIG COMPANIES
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GLOBALIZATION OF PRODUCTION
DEFINITION: It refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital).
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DRIVERS OF GLOBALIZATION
Declining trade and investment barriers Declining trend of protecting domestic market GATT and WTO role Flexibility in outsourcing Technological change Microprocessor and Telecommunication The Internet and World wide web Transportation technology
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Shrinking Globe
1500-1840
1850-1930
1960s
GLOBALIZATION PROCESS
Direct
Export
Indirect Franchising Licensing
Entry mode
Turnkey
Portfolio investment FDI
Investment
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The Changing World Output and World Trade picture The changing Foreign Direct Investment Picture
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Country
Share Share Share of world of world of world output output Exports 1963 2004 2004 % % %
10.4 5.7 9.5 4.8 4.7 3.4 5.9
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USA 40.3 20.9 JAPAN 5.5 6.9 Germany 9.7% 4.3 France 6.3% 3.1 UK 6.5% 3.1 Canada 3 3.5 China IMRAN KHAN Department of Management NASciences 13.2
14
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USA JAPAN UK
FRANCE
GERMANY
19
21
42
41
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01
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GLOBALIZATION DEBATE?
IS IT A GOOD OR BAD?
Power that controls the economy should be in the hands of elected representatives of the people instead of an industrial oligarchy ~ Justice William O. Douglas "I would define globalization as the freedom for my group of companies to invest where it wants when it wants, to produce what it wants, to buy and sell where it wants, and support the fewest restrictions possible coming from labour laws and social conventions. (Percy Barnevik, President of the ABB Industrial Group)
DO ONLY DEVELOPING COUNTRIES HAVE CONCERNS ABOUT GLOBALIZATION OR DEVELOPED COUNTRIES ALSO DO HAVE RESERVATIONS?
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GLOBALIZATION DEBATE JOB LOSS AT HOME COUNTRY PRESSURE FOR LOW WAGES RATES CULTURAL IMPOVERISHED ENVIORNMENTAL DEGRADATION SUPPORTERS VIEW: HOST COUNTRY LIVING STANDARD IMPROVES BETTER PURCHASING POWER OF HOST COUNTRY SKILLED LABOR WAGES INCREASES
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