Copyright 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of

1-1 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Globalization

Learning Objectives

• LO1-1: Understand what is meant by

the term globalization.

• LO1-2: Recognize the main drivers of

globalization.

• LO1-3: Describe the changing nature

of the global economy.

• LO1-4: Explain the major arguments

in the debate over the impact of globalization.

• LO1-5: Understand how the process of

globalization is creating opportunities and challenges for management practice.

This chapter introduces the emergence of the globally integrated business world.Globalization has reduced the traditional barriers to cross-border trade and investment (distance, time zones, language, differences in government regulations, culture, and business systems).

To begin the discussion of contemporary issues in international business, macroeconomic and political changes in the last 50 years are reviewed.

Information technology and other technological innovations have put global markets within the reach of even small firms in remote locations.Yet, in spite of all its benefits, globalization has a downside. Critics point out its adverse effects, including those on developing nations.

The opening case explores Apple’s decision to outsource production of its iPhone to China.While this decision has drawn criticism, Apple defends the strategy noting that suppliers and subcontractors in China have the ability to respond quickly to changing market conditions giving Apple an advantage in the highly competitive mobile phone market. The closing case explores GM’s strategy in China. GM has been serving the Chinese market via a 50/50 joint venture with state-owned SAIC Motors.The joint venture, in place since 1997, has seen sales rise from just half a million in 2006 to nearly 4 million in 2018. For GM, local production offers the opportunity to better understand the local market and avoid export shipping costs.1 (International Business Competing in the Global Marketplace, 13e Charles W. L. Hill) (Instructor Manual, For Complete File, Download link at the end of this File) 1 / 4

Chapter 01 – Globalization 1-2 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

OUTLINE OF CHAPTER 1: GLOBALIZATION

Opening Case: How the iPhone Is Made: Apple’s Global Production System

Introduction

What Is Globalization?The Globalization of Markets The Globalization of Production

Management Focus: Boeing’s Global Production System

The Emergence of Global Institutions

Drivers of Globalization Declining Trade and Investment Barriers Role of Technological Change

The Changing Demographics of the Global Economy The Changing World Output and World Trade Picture

Country Focus: India’s Software Sector

The Changing Foreign Direct Investment Picture The Changing Nature of the Multinational Enterprise

Management Focus: The Dalian Wanda Group

The Changing World Order Global Economy of the Twenty-First Century

The Globalization Debate Antiglobalization Protests

Country Focus: Protesting Globalization in France

Globalization, Jobs, and Income Globalization, Labor Policies, and the Environment Globalization and National Sovereignty Globalization and the World’s Poor

Managing in the Global Marketplace

Chapter Summary

Critical Thinking and Discussion Questions

Closing Case: General Motors in China 2 / 4

Chapter 01 – Globalization 1-3 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

CLASSROOM DISCUSSION POINT

Ask students to describe how international business has affected them in their day so far.Ask them about who made the clothes they are wearing, what type of food they ate for breakfast or lunch (muesli cereal, sushi, Italian-style coffee), what type of cell phone they have and where it was made, where their car was designed and manufactured, where the components for their computer were manufactured, and so on. Many students will be surprised at just how often international business affects their daily lives. Some will recognize that companies like Nissan have design facilities and manufacturing operations in the United States, but will be surprised to learn that Sodexho, a cafeteria operator for many universities, is a French company, or that many supermarket chains have been acquired by foreign operators (Stop and Shop by the Dutch Ahold, Trader Joe’s by the German Albrechts). The point to drive home is that our consumption patterns are already very dependent on international business.

Next, ask students the why aspect of this issue: Why, for example, are so many of our clothes made outside North America?

Finally, encourage students to think about the integrated world economy versus distinct national economies by asking about the type of car they own. Drive the discussion toward a consideration of whether talking about the nationality of a car makes sense. Is a Mercedes Benz assembled in Alabama with parts produced in Mexico a German car? Is a Chevrolet assembled in South Korea a Korean car? Volvo is now owned by Geely of China; Jaguar and Land Rover, which had been part of Ford, are now owned by India’s Tata Motors; and BMW owns Rolls-Royce. Are there any cars that are truly made in a single country?

OPENING CASE: How the iPhone Is Made: Apple’s Global Production System

Summary

The opening case explores Apple’s strategy to produce its popular iPhone. While Apple initially depended largely on U.S. producers, since the early 2000s, Apple has increased its reliance on subcontractors and suppliers in China. The company claims that the ability of these suppliers and subcontractors to quickly respond to changing market conditions gives Apple an important competitive advantage in the highly competitive global mobile phone market. Apple has been criticized for its decision with some suggesting that the company is shipping American jobs abroad. Apple has also been negatively affected by the poor working conditions at some of its suppliers. While the company says it has tried to address these concerns, it admits that its efforts have not always generated the outcomes it would like. Discussion of the case can begin with the following questions:

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Chapter 01 – Globalization 1-4 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.QUESTION 1: How has globalization created opportunities for companies like Apple to optimize their supply chains?

ANSWER 1: Apple, like other multinational companies, has capitalized on the

opportunities associated with globalization. Lower barriers to trade and investment associated with globalization have allowed the company to optimize the production of its iconic iPhone. Rather than producing the iPhone in the United States, Apple outsources production to suppliers and subcontractors around the world. The company capitalizes on the efficiency of suppliers and subcontractors regardless of their location in the world.Today, Apple’s product design team and marketing are based in the United States. While some parts such as the glass used for the screens are also produced domestically, much of the production takes place in China. In fact, Apple relies on some 1.5 million people outside the United States for the production of the iPhone.

QUESTION 2: What factors make China such an attractive production location for

Apple? How does production in China help Apple compete?

ANSWER 2: For Apple, the decision to produce the iPhone in China is simple. The

company claims that its suppliers and subcontractors in China can quickly respond to changing market conditions giving the iPhone maker a distinct advantage in the hotly competitive mobile phone market. Unlike its subcontractors and suppliers in other locations, Apple’s subcontractors and suppliers in China can quickly adapt their production to adjust to changes in market demand. Another attractive element of producing the iPhone in China is speed. The supplier that cuts the glass for iPhone screens for example, offers 24/7 output thanks to its factory design which includes dormitories for employees. Similarly, Apple was able to hire more than 8,000 industrial engineers in just 15 days in China, a task that would have taken nearly a year in the United States.

QUESTION 3: Why has Apple faced criticism for its decision to produce its iPhone in China? Is the criticism warranted? Explain.

ANSWER 3: Apple has come under significant scrutiny after it was revealed that one of its primary subcontractors treated its employees very poorly. According to critics, workers at Foxconn, the company that produces about 50 percent of the iPhones sold across the world, requires long hours and mandatory overtime from its employees and has a poor safety record. While Apple defends its decision to work with Foxconn saying that it is trying to get improvements in Foxconn worker conditions, many say that Apple has not gone far enough. Apple has also been accused of shipping American jobs abroad to places like China. While Apple points out that it also employs large number of Americans and that its strategy of using Chinese suppliers and subcontractors allows it to price its product more competitively, many remain unconvinced. The negative press associated with these claims is of course, detrimental to Apple’s reputation.

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