Globalization Chapter 1

Global Telecommunications1-1

GlobalizationThe shift towards a more integrated and interdependent world economy.Two components:The globalization of markets.The globalization of production.1-2

Global DriversPositiveTechnologyOpen MarketsEconomic IntegrationPeaceCorporate StrategyGlobal FocusNegative Culture Market Barriers National Barriers WarCorporate StrategyLocal Focus1-3

Globalization of Markets1-4

Global ProductionSwan OpticalManufacturingDesign1-5

Growth of World Trade and World Output1950=100Figure 1.11-6

Impact of GATT Tariff RatesAverage Tariff Rates on Manufactured Products % of ValueTable 1.11-7Table 1-1 in text

The McGraw-Hill Companies, Inc., 20001-8Figure 1.2

The Shrinking Globe

1500 -1840

1850 - 1930

1950s

1960s

Best average speed of horse-drawn coaches and sailing ships, 10 mph.

Steam locomotives average 65 mph. Steamships average 36 mph.

Propeller aircraft300 - 400 mph.

Jet passenger aircraft, 500 - 700 mph.

The Changing Pattern of World Output and Trade1-9Table 1.2

Sheet1

CountryShare of World Output 1963Share of World Output 1996Share of World Exports 1997

United States40.3%20.8%12.6%

Japan5.5%8.3%7.76%

Germany9.7%4.8%9.9%

France6.3%3.5%5.46%

United Kingdom6.5%3.2%4.94%

Italy3.4%3.2%4.76%

Canada3%1.7%3.81%

ChinaNA11.3%2.85%

S. KoreaNA1.7%2.45%

Percentage Share of Total FDI Stock1980-19961-10Figure 1.3

FDI Inflows1980-1996$B1-11Figure 1.4

Of the Top 260 in 1973Of the Top 500 in 1997United States126 (48.4%)162 (32.4%)Japan9 (3.5%)126 (25.2%)Britain49 (18.8%)34 (6.8%)France19 (7.3%)42 (8.4%)Germany21 (8.1%)41 (8.3%)The National Composition of the Largest Multinationals1-12Table 1.3

Globalization - ProLower 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.1-13

Globalization - ConDestroys manufacturing jobs in wealthy, advanced countries.Wage rates of unskilled workers in advanced countries declines.Companies move to countries with fewer labor and environment regulations.Loss of sovereignty.1-14

International vs Domestic BusinessCountries are different.Range of problems are wider and more complex.Government intervention in trade and investment creates problems.International investment is impacted by different currencies.1-15

Sovereignty and the WTOUnder the new system, many decisions that affect billions of people are no longer made by local or national governments but instead, if challenged by any WTO member nation, would be deferred to a group of unelected bureaucrats sitting behind closed doors in Geneva. -Ralph Nader-1-16

Differences Between International and Domestic BusinessesCountries are different.The range of problems are wider and more complex.The intervention of governments that may limit international trade and investment.The need to convert into different currencies.1-17

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