Globalization
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Globalization. What is Globalization?. The shift toward a more integrated and interdependent world economy Two components: The globalization of markets The globalization of production. Globalization of Production. Vizio flat panel TV is designed in a small office in California

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What is globalization
What is Globalization?

  • The shift toward a more integrated and interdependent world economy

  • Two components:

    • The globalization of markets

    • The globalization of production


Globalization of production
Globalization of Production

  • Vizio flat panel TV is

    • designed in a small office in California

    • assembled in Mexico

    • From

      • panels made in South Korea

      • electronic components made in China

      • microprocessors made in the U.S.


Not just manufacturing
Not just manufacturing…

  • Globalization of production has historically been about manufacturing

  • Increasingly companies are using modern communications to outsource service activities to low-cost nations


Globalization of markets
Globalization of markets

  • In the past, each country had its own companiesin many industries and its own products

    • I never saw Japanese media (and I saw little non-US media) in college


Today everyone knows
Today everyone knows…

  • Nintendo

  • Starbucks

  • Coca-Cola

  • Ikea

  • McDonald’s

  • Samsung


But the most global markets are for standard goods
But the most global markets are for standard goods

  • Aluminum

  • Wheat

  • Microprocessors

  • Aircraft

  • For many consumer end-products, huge differences still exist among national markets

    • Entertainment, food, clothing


  • Drivers of globalization
    Drivers of Globalization

    • Two factors underlie globalization

      • “Decline in barriers to the free flow of goods, services, and capital” that has occurred since the end of World War II

      • Technological change


    Declining trade and investment barriers
    Declining Trade and Investment Barriers

    • During the 1920s and ‘30s, many of nations erected formidable barriers to international trade and foreign direct investment

    • Advanced industrial nations of the West committed themselves after World War II to removing barriersto the free flow of goods, services, and capital between nations.




    The role of technology
    The Role of Technology

    • Lowering of trade barriers made globalization possible;

    • Technology has made it a transforming movement



    Globalization is acceleration of trends of the last 10 000 years
    Globalization is acceleration of trends of the last 10,000 years

    • People lived for 250,000 years in hunter-gatherer bands

    • Rise of agriculture 10,000 years ago led to rise of empires and nation-states

    • Science and ‘enlightenment’ after 1680 produced global trade and empires

    • Free trade and tech after 1980 produced globalization


    The emergence of global institutions
    The Emergence yearsof Global Institutions

    Notable global institutions include

    • theWorld Trade Organization (WTO) which is responsible for policing the world trading system and ensuring that nations adhere to the rules established in WTO treaties

      • In 2008, 151 nations accounting for 97% of world trade were members of the WTO

    • the International Monetary Fund (IMF) which maintains order in the international monetary system


    The changing roles of countries in the global economy
    The Changing Roles of Countries yearsin the Global Economy

    In the 1960s:

    • The U.S. dominated the world economy and the world trade picture

    • U.S. multinationals dominated the international business scene

    • About half the world-- the centrally planned economies of the communist world-- was off limits to Western international business

      Today, much of this has changed.


    The changing world output and world trade picture
    The Changing World Output yearsand World Trade Picture

    • In the early 1960s, the U.S. was the world's dominant industrial power accounting for about 40.3% of world manufacturing output

    • By 2007, the U.S. accounted for only 20.7%

    • Other developed nations experienced a similar decline


    The changing nature of the multinational enterprise
    The Changing Nature of yearsthe Multinational Enterprise

    • Since the 1960s,

      • there has been a rise in non-U.S. multinationals

      • there has been a rise in mini-multinationals


    The globalization debate

    Pro years

    Lower prices for goods and services

    Economic growth

    Increase in consumer income

    Creates jobs (for many)

    Countries specialize in production of goods and services that are produced most efficiently

    Con

    Destroys manufacturing jobs in wealthy nations

    Wage rates of unskilled in advanced countries decline

    Companies move to countries with fewer labor and environment regulations

    Loss of sovereignty

    Homogenized cultures

    The Globalization Debate


    Managing in the global marketplace
    Managing in the Global Marketplace years

    • Much of this course is concerned with managing an international business

      • i.e., any business with international

        • sales,

        • sourcing, or

        • Investment


    Managing an international business is different
    Managing an international business is yearsdifferent

    • Countries are different

    • International transactions involve converting money into different currencies

    • Range of problems in an international business is wider and problems are more complex

    • International business must cope with different, conflicting government rules and systems

    • Different strategic approaches required


    Key terms
    Key terms years

    • An international business – any business with international sales, sourcing, or investment

    • A multinational business – any business with productive activities in 2 or more countries

    • A global business – a business that takes a global approachto production and sourcing (Coca-Cola, Intel)


    The emergence of global institutions1
    The Emergence yearsof Global Institutions

    • the World Bank which promotes economic development

    • the United Nations (UN) which maintains international peace and security, develops friendly relations among nations, cooperates in solving international problems and promotes respect for human rights, and is a center for harmonizing the actions of nations