1. INTRODUCTION & OVERVIEW
Chapter 1
INTRODUCTION
&
OVERVIEW

2. Case: Wal-mart’s global expansion
Largest retailer in the world –Over 4500 stores
International expansion in 1991begins with Mexico in response to market saturation in the US
Localization strategy adopted after trial and error
Global buying power has allowed it to reap economies of scale
Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets

3. What is globalization?
The shift towards a more integrated and interdependent world economy
Two components:
The globalization of markets
The globalization of production

4. Globalization of markets
The merging of distinctly separate national markets into a global marketplace
Tastes and preferences converge onto a global norm
Firms offer standardized products worldwide creating a world market

5. Globalization of markets
Significant differences still exist between national markets on many relevant dimensions
These differences require that marketing and operating strategies and product features be customized to best match conditions in a country.

6. Globalization of markets
Countries are different
Range of problems are wider and more complex
Government intervention in trade and investment creates problems
International investment is impacted by different currencies

7. Globalization of production
Refers to sourcing of goods and services from locations around the world to take advantage of
Differences in cost or quality of the factors of production
Labor
Land
Capital

8. Global Production
Swan Optical
Manufacturing
Example 1
Design
1-5

9. Volume of world trade and production, 1950-2002
Fig: 1.1

10. Emergence of global institutions
Globalization has created the need for institutions to help manage, regulate and police the global marketplace
GATT
WTO
IMF
World bank
United Nations

11. Global drivers
Macro factors that underlie trend towards greater globalization
Decline in trade barriers
Technological change

12. Pattern of declining tariffs

13. Declining barriers to trade
Globalization of markets and production has been facilitated by
Reduction in trade barriers
Removal of restrictions to foreign direct investment

14. The changing pattern of world output and trade

15. Percentage share of total FDI stock
Fig: 1.3

16. Volume of FDI inflows, 1994-2002 ($ billions)
Fig: 1.4

17. The role of technological change
Microprocessors and telecommunications
The internet and world wide web
Transportation technology

18. The shrinking globe
Fig: 1.2

19. Changing demographics of the world economy
World output and trade
Changing foreign direct investment
Changing nature of multinationals
Mini multinationals
Non US multinationals

20. National origin of largest multinational corporations
Fig: 1.5

21. Globalization debate-Pro
Lower prices for goods and services
Economic growth stimulation
Increase in consumer income
Creates jobs
Countries specialize in production of goods and services that are produced most efficiently

22. Environmental performance and income
Fig 1.6

23. Globalization debate-Con
Destroys manufacturing jobs in wealthy, advanced countries
Wage rates of unskilled workers in advanced countries declines
Companies move to countries with fewer labor and environment regulations
Loss of sovereignty