globalization 1 copyright © 2014 pearson education, inc
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• 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
Chapter ObjectivesChapter Objectives
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AppleApple
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• User-Centered Design• Outsource Production• Markets Globally• Global Brand Strategy
• User-Centered Design• Outsource Production• Markets Globally• Global Brand Strategy
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International BusinessInternational Business
We experience internationaltransactions daily
Imports/exports reach useven in remote areas
Technology and e-businesspromote trade
Global talent contributes toefficiency/competitiveness
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Key PlayersKey Players
Business that has direct investments abroad in multiple
countries
Small companies and individuals becoming increasingly active in
international trade and investment
Adopts a global perspective and
engages in international business from or near
its inception
MultinationalCorporation
Small Businesses
and Entrepreneurs
Born Global Firm
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Global Firms vs. NationsGlobal 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 World’s Largest Corporations,” Fortune, July 23, 2012, pp. F1–F7; World Bank data set available at data.worldbank.org.
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GlobalizationGlobalization
Trend toward greater economic, cultural, political and technological interdependence among national institutions and economies
Globalization of markets
Convergence in buyer preferences in
markets around the world
Globalization of production
Dispersal of production activities
worldwide to minimize costs or maximize quality
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Benefits of Global MarketsBenefits of Global Markets
Levels incomestream
Reducesmarketing costs
Creates new marketopportunities
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Developed markets 1 billion people
Emerging markets 2 billion people
Traditional markets 4 billion people
Global Sustainability:Global Sustainability:
Three Markets, Three Three Markets, Three StrategiesStrategies
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Benefits of Global ProductionBenefits of Global Production
Production inputs
Lower-cost labor
Technical expertise
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Labor and ResourcesLabor and Resources
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Companies can access workers and resources in favorable business climates
almost anywhere in the world
Companies can access workers and resources in favorable business climates
almost anywhere in the world
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Discussion QuestionDiscussion Question
What benefits might companies obtain from the globalization of markets and the globalization of production?
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Answer to Discussion Answer to Discussion QuestionQuestion
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)Globalization Drivers (1)Falling BarriersFalling Barriers
Regional tradeagreements
GATT
WTO
Remove barriers to trade and investment
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Trade Exceeds OutputTrade Exceeds Output
Years
$ Value
GDP Global Exports
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Globalization Drivers (2)Globalization Drivers (2)Technological InnovationTechnological Innovation
Email and videoconferencing
Internet, intranets,and extranets
Transportationadvancements
Better coordination and control
Improved communications and management
More efficient, dependable
shipping
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Globalization Then Globalization Then andand Now Now
Highly mobileHighly mobilelabor marketlabor market
Highly mobileHighly mobilelabor marketlabor market
Fear of jobs Fear of jobs moving abroadmoving abroad
Fear of jobs Fear of jobs moving abroadmoving abroad
Backlash amongBacklash amongthe disaffectedthe disaffected
Backlash amongBacklash amongthe disaffectedthe disaffected
Free-flowing Free-flowing capital and tradecapital and trade
Free-flowing Free-flowing capital and tradecapital and trade
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From Anarchy to DebateFrom Anarchy to Debate
ViolenceViolenceViolenceViolence
Rage Rage Rage Rage
CarnageCarnageCarnageCarnage
ExclusionExclusionExclusionExclusion
LegitimacyLegitimacyLegitimacyLegitimacy
ReasonReasonReasonReason
CivilityCivilityCivilityCivility
DebateDebateDebateDebate
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Discussion QuestionDiscussion Question
__________ is the value of all goods and services produced by a country’s 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 Answer to Discussion QuestionQuestion
__________ is the value of all goods and services produced by a country’s 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 WagesJobs and Wages
Eliminates jobs in developed nations
Lowers wages in developed nations
Exploits workers in developing nations
Increases wealth and efficiency everywhere
Generates labor market flexibility in developed countries
Advances economies of developing nations
SupportersOpponents
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Salaries of IT WorkersSalaries of IT Workers
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Source: Based on data obtained from the International Average Salary Income Database (www.worldsalaries.org).Source: Based on data obtained from the International Average Salary Income Database (www.worldsalaries.org).
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Labor, Environment, & Labor, Environment, & MarketsMarkets
– Globalization lowers labor standards
– Weakens protection of the environment
– Exploits workers in poor nations
+ Investment raises labor standards
+ Open economies most environment friendly
+ Companies concerned for future markets
Opponents Supporters
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Manager’s Briefcase:Manager’s Briefcase:
The Keys to Global SuccessThe Keys to Global Success
Communicate effectively
Know the customer
Emphasize global awareness
Market effectively
Monitor global markets
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Income Inequality Income Inequality debate debate
Rich get richer in wealthy nations?or
Poor get richer in developing nations?
Inequality within NationsInequality within Nations
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Gap widens between rich and poor nations?or
Poor trading nations grow faster than rich ones?
Inequality between NationsInequality between Nations
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Income Inequality Income Inequality debate debate
Gap between rich and poor greater everywhere?or
Inequality has fallen but extent unknown?
Global InequalityGlobal Inequality
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Discussion QuestionDiscussion Question
What does the evidence suggest for each branch of the debate on globalization and income inequality?
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Answer to Discussion QuestionAnswer 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 CultureImpact on Culture
Opponents
• Destroys cultural diversity
• Homogenizes our world
• Bankrupts local small businesses
Supporters
• Specialize and trade to obtain other
goods
• Import cultural goods from other nations
• Protect deeper moral and cultural norms
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Culture Matters:Culture Matters:
The Culture DebateThe Culture DebateCulture Matters:Culture Matters:
The Culture DebateThe Culture Debate
Material DesireMaterial Desire
A Force for GoodA Force for Good
Artistic InfluenceArtistic Influence
Deeper ValuesDeeper Values
Western ValuesWestern Values
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National SovereigntyNational Sovereignty
Supporters
Globalization has benefited societies by
helping to spread democracy worldwide
Opponents
Supranational institutions reduce
autonomy of national, regional, and local
governments
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Global Business EnvironmentGlobal Business Environment
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Discussion QuestionDiscussion 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 Answer to Discussion QuestionQuestion
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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