2. Globalization
“an unprecedented compression of time and space reflected in the tremendous intensification of social, political, economic, and cultural interconnections and interdependencies on a global scale” - Stegler
The movement towards the expansion of economic and social ties between countries through the spread of corporate institutions and the capitalist philosophy that leads to the shrinking of the world in economic terms.
-bized.uk

3. One way to approach this: think about the world before globalization
Distance mattered—space often measured in time
Territorial boundaries more or less kept things in and out
Society and culture had spatial referents
Everything had its “place” (literally)

4. Globalization
In a world of deterritorialization and supraterritoriality:
Distance becomes almost irrelevant (the end of distance)
Boundaries are increasingly permeable.
Groups and cultures increasingly don’t have a territorial basis (deterritorialization)
A new kind of non-physical “place” is emerging (supraterritoriality)

5. Globalization Could Involve...

6. Globalization
Reflects a business orientation based on the belief that the world is becoming more homogeneous and that distinctions between national markets are not only fading, but for some products, will eventually disappear. As a result, companies need to globalize their international strategy by formulating it across markets to take advantage of underlying market, cost, environmental, and competitive factors.

7. Globalization of Markets
Refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market.

8. Globalization of Markets

9. 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. By doing this, companies hope to lower their overall cost structure or improve quality of functionality of their product offering, thereby allowing them to compete more effectively.

10. Globalization of Production
The Lenovo ThinkPad
Lenovo is a Chinese company. It acquired IBM’s personal computer operations in The ThinkPad is designed in the US; the case, keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea; the built-in wireless card in Malaysia; and the microprocessor in the US.

11. Drivers of Globalization
Political Forces
There is a trend toward the unification and socialization of the global community. Preferential trading arrangements, such as the NAFTA and the EU, that group several countries into a single market have presented firms with significant marketing opportunities.

12. Technological Factors
Advances in computers and communications technology are permitting an increased flow of ideas and information across borders, enabling customers to learn about foreign goods. Cable and satellite TV systems in Europe and Asia, for instance, allow an advertiser to reach numerous countries simultaneously, thus creating regional and sometimes global demand. Global communications networks enable manufacturing personnel to coordinate production and design functions worldwide so that plants in many parts of the world may be working on the same product.

13. Market Forces
As companies globalize, they also become global customers.
Finding the home market saturated also sends companies into foreign markets.
Cost
Economies of scale to reduce unit costs are always a management goal. One means of achieving them is to globalize product lines to reduce development, production, and inventory costs.

14. Competitive Forces
Competition continues to increase in intensity. New firms, many from newly industrialized and developing countries, have entered world markets in automobiles, computers, and electronics, for example. Another competitive driving force for globalization is the fact that companies are defending their home markets from competitors by entering the competitors’ home markets to distract them.

15. Pros - Economic Aspect
Employees of a transnational corporation may be well paid compared to other workers in the country
Free trade between nations is established – countries can produce to its strengths and import the goods it needs without the threat of tariffs
Increased investment in developing countries stimulates their economies
A wide range of products are available at affordable prices due to free trade
Sharing of technological innovations is fast and fair

16. Cons - Economic Aspect
Jobs are being outsourced from developed countries to less developed countries resulting in higher unemployment
Transnational corporations may have fewer environmental regulations to follow and can pay lower wages – they can ‘shop around’ for best options
Corporate headquarters are usually located in the USA or western Europe resulting in resentment in the accumulation of economic power
Transnational corporations are becoming so large they are beyond the power of smaller governments
Economies are linked due to trade – economic hardship in one country will more greatly affect other nations
Cultural identity is lost due to mass use of western consumer products and entertainment
Profits usually do not stay in developing countries – they are returned to developed world

17. Pros – Cultural Aspect
Globalizations of communications sees great quantities of information shared around the world
The best of cultures can be shared and understood on a global scale
There is more influx of information between two countries, which do not have anything in common between them
There is cultural intermingling and each other is trying to know about the other’s cultural preferences and in the process of doing so, we are actually coming across things that we like and in the course of time adopt it

18. Cons – Cultural Aspect
A small number of private media companies decided what information is to be shared and shape public opinion through sensationalization (bias)
Media and entertainment impact is westernizing other cultures
There are some experts who think that globalization; along with the positive aspects is also leading to the incursion of negatives like communicable diseases and social degeneration

19. Pros – Political Aspect
Gradually there is a world power that is being created instead of compartmentalized power sectors. Politics is merging and decisions that are being taken, are actually beneficial for people allover the world
Since we share financial interests, corporate and governments are trying to sort out ecological problems for each other
International agreements are working towards trying to protect the environment from pollutants that cause global warming, destroying ecosystems, and increasing acidity levels in seas and oceans
Communications allow for the message of political freedom tyranny in the for of democracy to spread globally

20. Cons – Political Aspect
For nations that are at the receiver’s end are also giving up the reins in the ends of a foreign company which might again lead to a sophisticated form of colonization

21. Global Economic Systems
Market Economy
Command Economy
Mixed Economy

22. Market Economy
Exists when private enterprise reserves the right to own property and monitor the production and distribution of goods and services while the state simply supports competition and efficient practices.
Contains the least restriction as the allocation of resources is roughly determined by the law of demand.
Individuals within the community disclose wants, needs, and desires to which businesses may appropriately respond.

23. Market Economy
Competition is fervently encouraged to promote innovation, economic growth, high quality, and efficiency.
Government may prohibit such things as monopolies or restrictive business practices in order to maintain the integrity of the economy.

24. Command Economy
Comparable to monopoly in the sense that the organization, in this case, the government, has explicit control over the price and supply of a good or service.
Goods and services offered are not necessarily in response to stated needs but are determined by the theoretical advancement of society.
Businesses are owned by the state to ensure that investments and practices are done in the best interest of the nation despite the often opposing outcomes.

25. Command Economy
Devoid of private ownership, this economic system creates an environment where little motivation exists to improve customer service or introduce innovative ideas.

26. Mixed Economy
A combination of market and command economy. This means that while some aspects include private ownership and the freedom and flexibility of the law of demand, other sectors are subject to government planning.
The balance allows competition to strive while the government can extend assistance to individuals or companies.

27. Mixed Economy
Regulations concerning minimum wage standards, social security, environmental protection, and the advancement of civil rights may raise the standard of living and ensure that those who are elderly, sick, or have limited skills are taken care of.
Ownership of organizations seen as imperative to the nation may be transferred to the state to subsidize costs and allow the firm to flourish.

28. Economic Performance by Major World Region
Established Economies
North America
European Union
Japan
Emerging Economies
Central and Eastern Europe
China
Other Emerging Markets of Asia
India
Developing Economies on the Verge
South America
Middle East and Central Asia
Africa

29. Economic Performance Established Economies
North America
One of the four largest trading blocs in the world
Combined purchasing power of U.S., Canada and Mexico approaches $12 trillion
Free-market-based economy is attractive to private firms
United States
Foreign MNC’s find U.S. a lucrative expansion market
Foreign firms welcomed as investors in U.S. market
U.S. firms hold market dominance in many European markets; gaining market share in Asia

30. Economic Performance Established Economies
Canada
U.S.’s largest trading partner
Most of the largest foreign-owned Canadian companies are totally or heavily U.S.-owned
Legal and business environment in Canada is similar to that in U.S.

31. Economic Performance Established Economies
Mexico
Strongest Latin American economy
Very strong maquiladora industry
Trade with both Europe and Asia has increased
Now competitive with Asia for the U.S. market
Maquiladora is a factory, the majority of which are located in Mexican border towns, that imports materials and equipment on a duty and tariff-free basis for assembly or manufacturing and re-export.

32. Economic Performance Established Economies
European Union
Ultimate objective
Eliminate all trade barriers among member countries
Emergence of the EU as an operational economic union
A unified Europe could become the largest economic market in terms of purchasing power in the world
Foreign MNCs trying to gain foothold in EU
Acquisitions, alliances, cooperative R&D efforts
Economic linkages between the EU and newly emerging Central and Eastern European countries
Challenge is to absorb former communist bloc countries
Financial crises in Greece and Ireland putting pressure on the euro

33. Economic Performance Established Economies
Japan
Huge economic success in 1970s and 1980s
Ministry of International Trade and Industry (MITI)
Keiretsus
Vertically integrated industries
Holdings provide assistance needed in providing goods and services to end users
Decade long recession in 1990s
More competition from emerging economies
Poor management decisions
Remains a formidable competitor in the Pacific Rim, North America, and Europe

34. Economic Performance Emerging Economies
Central and Eastern Europe
Russia
Dismantling of price controls and privatization
Membership in International Monetary Fund (IMF) controlling inflation
Crime and political uncertainty
Czech Republic, Hungary, Poland
Privatization
Inflation
Political uncertainty

35. Economic Performance Emerging Economies
China
Real economic growth of 12 percent in 2007, 9 percent in 2008, and 11.5 percent in 2009
Savings glut in corporate sector
Vast developmental needs
Unemployment concerns
Attractive to investors despite political risk
Product pirating is a major problem
Currency value
Government policies favor domestic firms

36. Economic Performance Emerging Economies
South Korea
Chaebols
Very large family-held conglomerates
Solid economy, moderate growth and inflation, low unemployment
Hong Kong
Part of People’s Republic of China
Uncertainty about the role the Chinese government

37. Economic Performance Emerging Economies
Singapore
Success story
Leader and financial center for region
Taiwan
Progressed from labor-intensive economy to one dominated by technologically sophisticated industries
banking, electricity generation, petroleum refining and computers

38. Economic Performance Emerging Economies
Thailand, Malaysia, Indonesia
Large population base
Inexpensive labor
Considerable natural resources
Attractive to outside investors

39. Economic Performance Emerging Economies
India
Large population
Recent trend of locating software and high value-added services to this country boosting middle- and upper-class market for goods and services
Attractive to U.S. and British investors
well educated, English speaking, technologically sophisticated workers

40. Economic Performance Developing Economies on the Verge
South America
Hampered by foreign debt and severe inflation
But, intercountry trade is increasing
Countries looking to do business with U.S.
Brazil
Economy is now flourishing and attracting investment from MNCs
Privatization and stable government

41. Economic Performance Developing Economies on the Verge
Chile
Uncertain future, but helped by trade agreements
Argentina
Abundant natural resources
Economic problems persist

42. Economic Performance Developing Economies on the Verge
Middle East and Central Asia
Large oil reserves
Highly unstable geopolitical and religious forces
Plagued by continuing economic problems

43. Economic Performance Developing Economies on the Verge
Africa
Considerable natural resources
African nations remain very poor and undeveloped
International trade is not a major sources of income
Populace divided into 3,000 tribes that speak 1,000 languages and dialects
Major political instability
Poverty, starvation, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector

44. World’s Most Competitive Nations, 2010