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Globalization

Copyright 2014 Pearson Education, Inc.

Chapter Objectives
Identify the types of companies that participate in
international business
Describe the process of globalization and how it affects
markets and production
Describe the two forces causing globalization to increase
Summarize the evidence for each main argument in the
globalization debate
Describe the global business environment and identify its
four main elements

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Apple

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User-Centered Design
Outsource Production
Markets Globally
Global Brand Strategy
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International Business
We experience international
transactions daily
Imports/exports reach us
even in remote areas
Technology and e-business
promote trade
Global talent contributes to
efficiency/competitiveness
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Key Players

Multination
al
Corporation

Business that has

direct investments
abroad in multiple
countries

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Small
Businesses
and
Small companies and
Entrepreneurs
individuals
becoming
increasingly active in
international trade
and investment

Born Global
Firm
Adopts a global
perspective and
engages in international
business from or near
its inception

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Global Firms vs. Nations

Comparing
revenue of
the world's
10 most
global firms
to the gross
domestic
product of
nations
Source: Based on data obtained from Fortune Global 500: The Worlds Largest Corporations, Fortune, July 23, 2012, pp. F1F7;
World Bank data set available at data.worldbank.org.

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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 Global Markets

Reduces
marketing costs
Creates new market
opportunities
Levels income
stream
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Global Sustainability:

Three Markets, Three

Strategies
Developed markets
1 billion people

Emerging markets
2 billion people

Traditional markets
4 billion people
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Benefits of Global Production

Lower-cost labor
Technical expertise

Production inputs
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Labor and Resources

Companies can access workers and

resources in favorable business climates
almost anywhere in the world
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Discussion Question
What benefits might
companies obtain
from the globalization
of markets and the
globalization of
production?
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Answer to Discussion
Question
Global markets can reduce
marketing costs, create new
market opportunities abroad,
and level income streams.
Global production can allow
access to lower-cost
workers, technical expertise,
and production inputs.
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Globalization Drivers (1)

Falling Barriers

Remove barriers to trade

and investment

GATT
WTO
Regional trade
agreements

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Trade Exceeds Output

$ Value

Years
GDP
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Global Exports
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Globalization Drivers (2)

Technological Innovation

Email and
videoconferencing

Better
coordination
and control
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Internet, intranets,
and extranets

Transportation
advancements

Improved
communications
and management

More efficient,
dependable
shipping
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Measuring Globalization

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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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From Anarchy to Debate

Rage

Reason

Violence

Legitimacy

Carnage

Civility

Exclusion

Debate

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Discussion Question
__________ is the value of all
goods and services produced
by a countrys domestic and
international activities over a
one-year period.
a. Gross Domestic Product
b. Gross National Product
c. GNP Per Capita

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Answer to Discussion
Question
__________ is the value of all
goods and services produced
by a countrys domestic and
international activities over a
one-year period.
a. Gross Domestic Product
b. Gross National Product
c. GNP Per Capita

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Jobs and Wages

Supporters

Opponents

Eliminates jobs in
developed nations

Increases wealth and

efficiency everywhere

Lowers wages in
developed nations

Generates labor market

flexibility in developed
countries

Exploits workers in
developing nations

Advances economies
of developing nations

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Salaries of IT Workers

Source: Based on data obtained from the International Average Salary Income Database (www.worldsalaries.org).

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Labor, Environment, &

Markets
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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Managers Briefcase:

The Keys to Global Success

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Communicate effectively

Know the customer

Emphasize global awareness

Market effectively

Monitor global markets

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Income
Inequality
Inequality within Nations
debate
Rich get richer in wealthy nations?
or

Poor get richer in developing nations?

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Inequality between Nations

Gap widens between rich and poor nations?
or

Poor trading nations grow faster than rich ones?

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Income
Inequality
Global Inequality
debate

Gap between rich and poor greater everywhere?

or

Inequality has fallen but extent unknown?

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Discussion Question
What does the
evidence suggest
for each branch of
the debate on
globalization and
income inequality?
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Answer to Discussion Question

Inequality within nations: Studies
suggest that developing nations boost
incomes of their poor by integrating
them into the global economy.
Inequality between nations: Nations
open to trade and investment seem to
grow faster than wealthy nations, while
sheltered economies grow worse off.
Global inequality: Global poverty has
fallen in recent decades but experts
disagree on the extent of the drop.
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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

Protect deeper moral

and cultural norms

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Culture
Culture Matters:
Matters:

The
The Culture
Culture Debate
Debate
Material Desire
Artistic Influence
Western Values
A Force for Good
Deeper Values
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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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Global Business Environment

Copyright 2014 Pearson Education, Inc.

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Discussion Question
The textbook you are using in this
course describes a model of
international business as
occurring within a dynamic and
integrated system called the
__________.
a. Cultural Business Model
b. Globalization Environment
c. Global Business Environment
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Answer to Discussion
Question
The textbook you are using in this
course describes a model of
international business as
occurring within a dynamic and
integrated system called the
__________.
a. Cultural Business Model
b. Globalization Environment
c. Global Business Environment
Copyright 2014 Pearson Education, Inc.

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All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted, in any form or by any
means, electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of the publisher.
Printed in the United States of America.

Copyright 2014 Pearson Education, Inc.

Copyright 2014 Pearson Education, Inc.

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