Globalization

International Business 3e Chapter Preview Describe globalization Explain how globalization affects markets and production Identify the drivers of globalization Discuss the globalization debate List types of firms in international business Define the global business environment © Prentice Hall, 2006 International Business 3e

International Business 3e E-Biz Surprise eBay expanded all types of product markets Eli Lilly hired a virtual R&D “workforce” Expedia moved travel booking online Dell pioneered online buying of custom PCs © Prentice Hall, 2006 International Business 3e

Advice of Global Managers Know the customer Emphasize global awareness Develop world-class products Market effectively Improve logistics Analyze problems correctly © Prentice Hall, 2006 International Business 3e

International Business 3e Globalization 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 © Prentice Hall, 2006 International Business 3e

Benefits of Globalization Globalization of markets Reduces marketing costs New market opportunities Levels income stream Globalization of production Access low-cost labor Acquire technical expertise Obtain production inputs © Prentice Hall, 2006 International Business 3e

Globalization Drivers I Remove barriers to trade / investment GATT WTO Regional trade agreements © Prentice Hall, 2006 International Business 3e

Globalization Drivers II Technological Innovation Email and videoconferencing Better coordination and control Internet, intranets and extranets Improved communications and management Transportation advancements More efficient, dependable shipping © Prentice Hall, 2006 International Business 3e

Globalization Then and Now Highly mobile labor market Fear of jobs moving abroad Free-flowing capital and trade Backlash among the disaffected © Prentice Hall, 2006 International Business 3e

Challenges to Business Physical security Assess company vulnerability and create a disaster recovery plan Digital security Guard proprietary information and confidential communications Reputational risk Require ethical and lawful behavior from all employees and business partners © Prentice Hall, 2006 International Business 3e

From Carnage to Civility Rage Violence Carnage Exclusion Vs. Reason Legitimacy Civility Debate © Prentice Hall, 2006 International Business 3e

International Business 3e Jobs and Wages Opponents Eliminates jobs in developed nations Forces wages lower in developed nations Exploits workers in developing nations Supporters Increases wealth and efficiency Generates labor market flexibility Creates jobs in developed countries Advances economies of developing nations © Prentice Hall, 2006 International Business 3e

International Business 3e Labor and Environment Opponents Globalization lowers labor standards Weakens protection of the environment Exploits workers in poor nations Supporters Investment raises labor standards Open economies most environment friendly Companies concerned for future markets © Prentice Hall, 2006 International Business 3e

International Business 3e Income Inequality Inequality within nations Poor people in developing nations benefit most from open economy Inequality between nations Nations open to world trade and investment grow faster than rich nations Global inequality Inequality has fallen, but experts disagree on the extent of the decline © Prentice Hall, 2006 International Business 3e

International Business 3e National Sovereignty Opponents Supranational institutions reduce autonomy of national, regional and local governments Supporters Globalization has benefited societies by helping to spread democracy worldwide © Prentice Hall, 2006 International Business 3e

International Business 3e Impact 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 Protects deeper moral and cultural norms © Prentice Hall, 2006 International Business 3e

International Business Players Multinational Corporation Business that has direct investments abroad in multiple countries Small Businesses and Entrepreneurs Small companies and individuals becoming increasingly active in international trade and investment Born-Global Firm Takes a global perspective on its market and engages in international business from or near its inception © Prentice Hall, 2006 International Business 3e

Global Business Environment Globalization International National Firm © Prentice Hall, 2006 International Business 3e