G1 CHAPTER 1

INTRODUCTION to
International Business and
Rise of Globalization
CADA, Jenien Joy IGNACIO, Ma. Luxia PENETRANTE, Crisolite
 To gain understanding of the concept of
international businesses

CHAPTER To contextualize how globalization took

place in the history of trade
OBJECTIVES
To explain the two sides of globalization
JC INTRODUCTION

No country can afford to remain

isolated from and not participate
in globalization.
JC

INTERNATIONAL BUSINESS
• Country to country business trade

• Purchasing and selling of goods, commodities, and services of a country

outside of its own borders
 THE EVOLUTION OF THE CONCEPT OF
INTERNATIONAL TRADE AND BUSINESS
• MERCANTILISM
• MARITIME
• BARTER SYSTEM
Exchanging of goods TRADE First systematic body of
and services between Merchants from the 19th thought focused on
two or more parties Century BE utilized the international trade.
without the use of seas and ports to trade

money. goods. - “Favorable Balance”

- Silk Road - Favors exportation heavily

and importation less.
LI - Spice Route
 LI

THE EVOLUTION OF THE CONCEPT OF

INTERNATIONAL TRADE AND BUSINESS
• THEORY OF COMPARATIVE
In 1776, the Father of economics— ADVANTAGE
• ADAM SMITH
published his book entitled An Inquiry into By David Ricardo, James Mill, and Robert
the Nature and Causes of the Wealth of Torrens. Introduced In the first quarter of
Nations. 19th century.

Specialization + Labor Division = Larger A country export goods in which its relative
Market & Increased Productivity cost advantage, and not their absolute cost
Worldwide. advantage, is greatest in comparison to other
countries.
Smith’s Attack on Mercantilism
• 1993 – FREE TRADE • CHICAGO SCHOOL OF ECONOMIC
All Currencies ———> GOLD THOUGHT
Propelled by the legendary economist, Milton
• THE FIRST WORLD WAR Friedman
Countries began to build walls around themselves. In Started in early 1970’s, in 1980’s it became a major
1920, the war brought along an economic recession, force to reckon, and became the norm in the 1990’s.
further changing the situation of global trade.
• INTERNATIONAL TRADE & BUSINESS
• May 1927 - WORLD ECONOMIC TODAY
CONFERENCE International business grew in scope and size to the
Opened the door to discussions on how to ease the point where at the moment; the global economy is
international trade issues leading to the establishment of dominated by multifunctional from all countries in
Multilateral Trade Agreement. the world.
LI
 CP

Types of International
Business Companies

• Multi-domestic
• Multinational
• International
• Domestic Market Extension by
Exporting
• Multi-domestic Company
JC

Benefits of International Business

BENEFITS TO NATION
• Encourages a nation to obtain foreign exchange

• Prompts specialization of a country in the production merchandise

• Helps a country in enhancing its development prospects

• Makes it comfortable for individuals to utilize commodities and services produced

in other nations
 JC

BENEFITS TO FIRMS

• Helps in improving profits of the organizations

• Helps organization in utilizing their surplus resources

• Enhancing the development prospects of firms

• Serve as one of the methods for accomplishing development in firms confronting extreme market conditions
in the local market
 RISE OF GLOBALIZATION
What is Globalization? • David Held’s “Global Transformation” -
“Although in a simplistic sense globalization
• Post Cold War - the world becoming more independent in its
refers to a rapid global interconnection, deep and
economical and informational dimension.
on large scale, such definition but requires now a
• Roland Robertson - “The understanding of the world and
more complex research.”
the increased perception of the world as a whole.”
• Thomas Larsson’s “The Race to the Top: The
• Martin Albrow and Elizabeth King - “all those processes
Real Story of Globalization” - “process of
by which the peoples of the world are incorporated into a
shrinking the world, the shortening of distances,
single world society.”
and the closeness of things; It allows the
• Anthony Giddens’ “The Consequences of Modernity” -
increased interaction of any person on one part
“The intensification of social relationship throughout the
of the world to someone found on the other side
world, linking distant localities in such a way that local
of the world, in order to benefit.”
 CP

The Two Facets of Globalization

The Globalization of Markets

- refers to the merging of historically distinct and separate national markets into one huge
global marketplace.
BENEFITS:

• Falling trade barriers make it easier to sell internationally, effective reducingmarketing

costs.
• The tastes and predilections of consumers are congregating on some global norm.
• Companies help generate the global market by offering the same basic products worlwide,
while still meeting the needs of local buyers.
CP

The Globalization of Production

- refers to sourcing of goods and services from
locations around the globe.

BENEFITS:

• More companies are taking advantage of modern

communications technology to outsource service
activities to low-cost producers in other nations.

• Because of these tech advancements, companies are able

to outsource even technical experts without losing full
control on their production.
 JC

The Drivers of Globalization

FALLING BARRIERS

01 Declining trade and investment barriers

International trade – occurs when a firm exports

02
goods and services to consumers in another country

Foreign direct investment (FDI) – occurs when a firm invests

03
resources in business activities outside its home country.
JC

Company
TECHNOLOGICAL CHANGES

Strategy 1
• Microprocessors and Telecommunications: developments in
communications and information processing lead to dropping of
cost of global communication.

• The Internet and the World Wide Web: this development will
be the information backbone of tomorrow’s global economy.

• Transportation Technology: this improvement enables firms to

better responds to international customer demands.
 Implications of technological change
for the globalization
of
1. Production
⚬ Lower transportation costs
⚬ Lower information processing and communication
costs
2. Market
⚬ Help create electronic global marketplace
⚬ Help generate global markets
⚬ A worldwide culture created by global comms
JC
BENEFITS OF
GLOBALIZATION
• Free Trade
• Free movement of labour
• Increased Economies of scale
• Greater Competition
• Increased Investment

LI
CP

Costs of Globalization

• Free trade can harm • Less cultural

developing • Labour drain diversity
economies

• Tax competition
and tax avoidance
• Environmental
Costs
Thank you!
 Group 1

CADA, JENIEN JOY IGNACIO, MA. LUXIA PENETRANTE, CRISOLITE