GLOBALIZATION

GLOBALIZATION

It can be defined as a process of economic integration of the entire world through the removal of barriers to free trade and capital mobility as well as through

diffusion of knowledge and information

It would mainly consist of

Globalisation of Production Globalisation of Markets (Theodare Lewitt

DRIVING FORCES
Market Needs Technology Cost Quality Communications & Transportation Leverage- Experience Transfer, Systems Transfers, Resource Utilization, Global Strategy

RESTRAINING FORCES
Market Differences History Management Myopia Organisational Culture National Controls/ Barriers to Entry

UNDERLYING FORCES

Orientations of Management (EPRG) International Monetary Framework World Trading System

Regional Trade Agreement

Global Peace Domestic Economic Growth Communications & Transportation Technology Global/ Transnational Corporations

World Economies

Beginning of 1990s saw growth of US as a major Economy followed by Japan and Germany It could be attributed to ,willingness of US business to cut their workforce,reorganize their operations, invest heavily in R & D OECD; organization for economic and Cooperation Development (OECD); A group of 30 wealthy members countries that facilitates a forum for the discussion of economic, social and governance issues across the world.

International Trade regulations

International Business has seen the emergence of trade and investment liberalization GATT ; General agreement on Tariffs and Trade; was established to negotiate trade concession among member countries. It gave way to WTO WTO; World Trade Organisation; deals with the rules of trade among member countries. One of the most important function is to act as a dispute settlement mechanism

The TRIAD

The 3 major trading and investment blocs in the international arena: the US, EU and Japan US has the largest economy of the world with GDP of over 10$ trillion NAFTA ;North American Free trade agreement between the Canada, the US and Mexico EU; today there are 15 members and large number are applicants The collective GDP of EU is greater than US or Japan

Technology
Communication technology Technology for production of Goods and Services Quality standards and technology inputs

Reasons For Entering International Business

Growth Profitability Achieving Economics of Scale Risk Spread Access to Imported Inputs Uniqueness of Product or Service Business Opportunities due to life cycle Spreading R & D Costs

Evolutionary process of Global Business

Domestic Business Export Business International Business Multinational Business Global Business / Transnational Business Glocal Business

Domestic Business

Guided by titanic syndrome Extending to similar market Extends Business, manufacturing and other activities in other countries Ethnocentric approach It normally has an international division Focus is on home country market Business strategy is extension

Export Business

International Business

Multinational Business

Adaptation of Business mix Multidomestic strategy,each subsidy is an independent entity Polycentric approach Will either have a global Business strategy or a global sourcing strategy but not both Key assets are in home country

Global Business

Transnational Business

Works in integration, linking global resources with global markets at a profit Geocentric in approach Recognizes similarities and differences and adopts a world view to add value Key assets are dispersed interdependent and specialized Experience and knowledge are shared globally

Glocal Business

EPRG Framework
Ethnocentric orientation Polycentric orientation Regiocentric orientation Geocentric orientation

ETHNOCENTRIC; home country is superior,sees similarities in foreign countries POLYCENTRIC; Each host country is unique, sees differences in foreign countries REGIOCENTRIC; sees similarities and differences in world region; is ethnocentric or regiocentric in its view of the rest of the world GEOCENTRIC; world view,sees similarities and differences in home and host countries

GLOBALIZATION INDEX

It is a ranking of globalised countries carried out by A T Kearnery It has following key components

Economic Integration;trade, portfolio,FDI,investment income Personal Integration;telephone, travel, remittances, personal transfers Technology Integration;Internet users, Internet hosts, secure Internet services Political Integration;international organisations, UN peacekeeping, treaties and government transfers

International Economic Environment

An Overview

Capital rather than trade movement is driving world economy Production has become uncoupled from employment Primary products have become uncoupled from industrial products The contest between capitalism and socialism is over.This has led to collapse of communism as a model for organisation of economic activity and as an ideology.

Economic Systems
Market allocation; US Japan, W Europe Command allocation; former USSR,China,Cuba Mixed Systems;moving towards privatisation

Stages of Market Development

Low Income Countries; income less than 400$ per capita, third worlds

Limited industralisation and high percentage of population engaged in agriculture and subsistence farming High birth rate Low literacy rate Heavy reliance on foreign aid Political instability and unrest Concentration in Africa south of Sahara

Lower Middle Income countries; income between 400$- 2000$ per capita, countries in early stage of industralisation
Consumer markets are expanding Cheap and motivated labor force

Upper Middle Income countries; income between 2000$- 12000$ per capita,