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WEEK 1 - Intro To Business Chapter 1 - Globalization WEEK 1 - Introduction To Business

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10 views6 pages

WEEK 1 - Intro To Business Chapter 1 - Globalization WEEK 1 - Introduction To Business

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aakansha
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Chapter 1 - globalization

WEEK 1 / Introduction to business

What is globalization?

● Globalization of markets : refers to the merging of historically distinct


and separate national markets into one huge global marketplace.

→ not typically markets for consumer products, where national differences in tastes
and preferences can be important enough to act as a brake in globalization. → it’s
the markets for industrial goods and materials that serve universal needs the world
over. ( eg: aluminum, oil, microprocessors)

firm moves → no rivals → rivals follow to prevent their competitor from gaining an
advantage

● Globalization of production: refers to the sourcing of goods and services


from locations around the globe to take advantage of national
differences in the cost and quality of factors of production

eg: labor, land, energy and capital.


why do this? → lower overall cost structure or improve the quality or functionality of
product offering and therefore allowing them to compete more efficiently.
eg: boeing aircraft

from ppt : What is globalization?

- Impediments prevent optimal dispersion of activities.


- Formal and informal barriers to trade.
- Barriers to foreign direct investment.
- Transportation costs.
- Political and economic risk.
- Challenge of coordinating globally dispersed supply chains.

eg: govt may limit the ability to hospitals to outsource


Emergence of global institutions :

→ As markets globalize and an increasing proportion of business activity transcends


national borders, institutions are needed to help manage, regulate, and police the
global marketplace and to promote the establishment of multinational treaties to
govern the global busi- ness system

1) GATT ( general agreement on tariffs and trade ( GATT)

2) World trade organization

→ responsible for policing the world trading system and making sure nation states
adhere to the rules laid down in trade treaties signed by WTO member states.
→ 164 nations, 98% of world trade
→ lowering of barriers to cross border trade and investment

3) international monetary fund

4) the world bank

→ IMF : maintain order in the international monetary system meanwhile the world
bank: promote economic development.
→ world bank focused on making low-interest loans to cash strapped governments
in poor nations that wish to undertake significant infrastructure investments
→ IMF: last restory by nations whose economies are in turmoil and whose
currencies are losing value against those of other nations. - loans in exchange for
adoption of specific economic policies aimed at returning their troubled economies to
stability and growth. → can be seen as controversial in usurping the sovereignty of
nation state

5) united nations

→ preserving peace through international cooperation and collective security


→ members of UN agree to accept the obligations of the UN charter, international
treaty that establishes basic principles of int. relations.
→ purpose of UN: maintain international peace and security, develop friendly
relations among nations. cooperate in solving international problems and in
promoting respect for human rights, center for harmonizing the actions of nations.

6) Group of 20 ( G20)

→ finance ministers and central bank governors of the 19 largest economies in the
world + representatives from the european union and the european central bank
→ 90% of global trade and 80% of international global trade.

→ world GDP index and Merchandise trade index

Covid 19 - downward trend of globalisation

___________

Drivers of Globalization

→ two macro factors : decline in barriers to the free flow of g&s, technological
change

international trade: occurs when firm exports goods and services to consumers in
another country
FDI: occurs when a firm invests resources in business activities outside it’s home
country

tariffs on import of manufactured goods→ protect domestic industries from foreign


competition.

Role of technological change

- Communications

Microprocessors → growth of high power-low cost computing, vastly increasing the


amount of inro that can be processed by individuals and firms. internet, wireless
technologies, optical fiber, developments in satellite.
- Internet

→ information backbone of global economy,


→ e-commerce sales, expand global presence at a lower cost, enables enterprises
to coordinate and control a globally dispersed production system .

- Transportation technology

→ development of commercial jet aircraft and superfreighters and introduction of


containerization.
→ lowered the cost of shipping goods over long distances
→ international shipping industry - 90% of world trade

_______

The globalization debate

Antiglobalization protests

- began with 1999 protests at WTO meeting in seattle


- job losses in industries under attack from foreign competitors, downward
pressure due to wage rates, environmental degradation, cultural imperialism

- it’s common now


- globalization causes detrimental effects on living standards, wage rates and
the environment

__________

Managing in the Global Marketplace

Any firm that engages in international trade or investment is international.

Managing international business differs from managing purely domestic


business

- Countries are different


- Range of problems is wider and problems more complex
- Must find ways to work within limits imposed by government
- Transactions involve converting money into different currencies

National differences in Political, Economic, and Legal Systems

Poilitical economy

- Political, economic and legal systems of a country


- These systems are interdependent

Political Systems

- The system of government in a nation is called the political system

- Assessed according to two dimensions:


1. Emphasis on collectivism or individualism
2. Degree to which they are democratic or totalitarian

(Totalitarianism is a political system and a form of government that prohibits opposition


political parties, disregards and outlaws the political claims of individual and group opposition
to the state, and controls the public sphere and the private sphere of society. )

Collectivism :

- Emphasized collective goals over individual goals

Socialism:

- Public ownership of means of production for the common good


- Communist vs social democrats

(social democrats → no dictatorship and more peaceful way of achieving


collectivism)

Individualism :

- An individual should have freedom in economic and political pursuits


- The interests of the individual should take precedence over the interests of
the state
- Two cents :
1. Guarantee of individual freedom and self expression
2. Welfare of society best served
Democracy:

- Govt. us by the people, exercised either directly or through elected


representatives
- Representative democracy: citizens periodically elect individuals to represent
them
- Includes a multitude of safeguards that are typically based in constitutional
law, including :
1. Freedom of expression
2. Free media
3. Universal adult suffrage
4. Fair court system

Totalitarian:

- One person or political party exercises absolute control over all spheres of
human life and prohibits opposing political parties

imperfect or pseuco democracies

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