GLOBALIZATION Chapter 1 Md. Afnan Hossain Lecturer, School of Business & Economics

International Business International business is the performance of business activities across national boundaries. International business: Assists the flow of ideas, products and services across the world Offers consumers new choices Facilitates the mobility of labor, capital, and technology Provides challenging employment opportunities

What is Globalization? Globalization refers to the shift toward a more integrated and interdependent world economy. Two components: The Globalization of Markets The Globalization of Production

Globalization of Markets It is the merging of historically distinct and separate national markets into one huge global marketplace. E.g. Consumer products such as Citigroup credit cards, Coca Cola & PepsiCo soft drinks, Sony PlayStation video games, McDonald’s Hamburger, Starbucks coffee, General Motors & Toyota, etc. It no longer makes sense to talk about the “German market” or the “American market” Instead, there is the “global market” 4 4

Globalization of Production It refers to sourcing goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land and capital). This helps to Gain cost advantage by producing in locations where cost of production factors is low Improve the quality or functionality of the products, thus differentiating them E.g. Apple iPhone - Designed by Apple in California Assembled in China

Drivers of 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

THE SHRINKING GLOBE 1500-1840 1850-1930 1950s 1960s Best average speed of horse-drawn coaches and sailing ships, Steam locomotives average 65mph. Steamships average 36mph. Propeller aircraft 300-400 mph. Jet passenger aircraft 500-700mph. 9

The Emergence of Global Institutions Globalization has created the need for institutions to help manage, regulate and police the global marketplace World Trade Organization (WTO) GATT International Monetary Fund (IMF) World Bank United Nations (UN)

GATT & WTO GATT: The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade. GATT was signed by 23 nations in Geneva on October 30, 1947 and took effect on January 1, 1948. It lasted until the signature by 123 nations in Marrakesh on April 14, 1994 of the Uruguay Round Agreements, which established the World Trade Organization (WTO) on January 1, 1995. 11

IMF AND WORLD BANK Both the International Monetary Fund (IMF) and the World Bank (WB) were created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. The IMF was created to maintain order in the international monetary system. IMF lends money to countries that need short-term loans to conduct international trade. The World Bank was created to promote economic development through low-interest loans. World bank lend money to underdeveloped and developing countries for various projects. 12

United Nations (UN) Established in October 24, 1945 by 51 countries. Committed to preserve peace through international cooperation and collective security. Promotion of higher standard of living, full employment condition; economic and social progress and development. Four purposes: To maintain international peace and security, to develop friendly relations among nations, to cooperate in solving international problems and in promoting respect for human rights; center for harmonizing the actions of nations 193 member countries 13