LEARNING OBJECTIVES:

Copyright © 2016 Pearson Education, Inc.

CHAPTER 1

GLOBALIZATION

LEARNING OBJECTIVES:

1.Identify the types of companies active in international business.

2.Explain globalization and how it affects markets and production.

3.Detail the forces that are driving globalization.

4.Outline the debate over globalization’s impact on jobs and wages.

5.Summarize the debate over income inequality.

6.Outline the debate over culture, sovereignty, and the environment.

7.Describe the global business environment and its main elements.

CHAPTER OUTLINE:

Introduction International Business Involves Us All Technology Makes It Possible Global Talent Makes It Happen Key Players in International Business Multinational Corporations Entrepreneurs and Small Businesses What Is Globalization?Globalization of Markets Reduces Marketing Costs Creates New Market Opportunities Levels Uneven Income Streams Local Buyers’ Needs Global Sustainability Three Markets, Three Strategies Globalization of Production Access Lower-Cost Workers Access Technical Expertise Access Production Inputs Forces Driving Globalization Falling Barriers to Trade and Investment World Trade Organization Other International Organizations Regional Trade Agreements Trade and National Output Technological Innovation E-Mail and Videoconferencing The Internet Company Intranets and Extranets Advancements in Transportation Technologies Measuring Globalization Debate Over Jobs and Wages Against Globalization Eliminates Jobs in Developed Nations International Business The Challenges of Globalization 8e John Wild Kenneth Wild (Instructor Manual All Chapters, 100% Original Verified, A+ Grade) 1 / 4

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Lowers Wages in Developed Nations Exploits Workers in Developing Nations For Globalization Increases Wealth and Efficiency in All Nations Generates Labor Market Flexibility in Developed Nations Advances the Economies of Developing Nations Summary of the Jobs and Wages Debate Debate Over Income Inequality Inequality within Nations Inequality between Nations Global Inequality Summary of the Income Inequality Debate Debate Over Culture, Sovereignty and the Environment Globalization and Culture Globalization and National Sovereignty

Globalization: Menace to Democracy?

Globalization: Guardian of Democracy?

Globalization and the Environment The Keys to Global Success The Global Business Environment The Road Ahead for International Business Bottom Line for Business A comprehensive set of specially designed PowerPoint slides is available for use with Chapter 1. These slides and the lecture outline below form a completely integrated package that simplifies the teaching of this chapter’s material.Lecture Outline

I. INTRODUCTION

Globalization is reshaping our cultures, our political, legal, and economic systems, and affecting our standards of living. It alters the global pattern of trade and investment by expanding markets and multiplying production possibilities.

• International Business Involves Us All
• Each of us encounters the result of international business transactions

every day whether we realize it or not.

• International business is any commercial transaction that crosses the

borders of two or more nations.

• Imports are goods and services purchased abroad and brought into a

country. Exports are goods and services sold abroad and sent out of a country.

• Technology Makes It Possible
• Technology is a remarkable facilitator of international business and

change.

• E-business (e-commerce) is the use of computer networks to purchase,

sell, or exchange products; service customers; and collaborate with partners. 2 / 4

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• Global Talent Makes It Happen
• Development and production now regularly occur on a global basis for

many goods and services.

• Performing these globally increases firm efficiency and competitiveness.

II. KEY PLAYERS IN INTERNATIONAL BUSINESS

Large firms from developed nations once dominated, but firms from Brazil, China, and India now play a bigger role. Technological advancements allow small and midsize companies to better compete.

• Multinational Corporations

A multinational corporation (MNC) has direct investments abroad in multiple countries. They generate significant jobs, investment, and tax revenue for the regions and nations they enter.

• Profiling the largest multinationals
• Some MNCs have more employees than small nations have

citizens (e.g., Walmart has 2.2 million employees globally).

• If Walmart were a country, it would rank third behind Norway in

terms of economic power (Figure 1.1).

• Entrepreneurs and Small Businesses
• They are increasingly active in international business by exporting earlier

and growing faster with help from technology.

• A born global firm is a company that adopts a global perspective and

engages in international business from or near its inception.

• Some small Internet companies reach customers solely through the Web

(e.g., Vellus Products, Weekend in Italy).

III.WHAT IS GLOBALIZATION?

Globalization is the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies. It is marked by “denationalization,” which is not “internationalization.”

• Globalization of Markets
• Convergence in buyer preferences in markets around the world
• Reduces marketing costs by standardizing activities
• Creates market opportunities abroad if home is small or saturated
• Levels uneven income streams for global seasonal products
• Yet companies must not overlook local buyers’ needs
• Need for global sustainability—development that meets the

needs of the present without compromising the ability of future generations to meet their own needs.

• Global Sustainability, Three Markets, Three Strategies. The world’s 7

billion people live in three types of markets, yet all require companies to

act in a sustainable manner:

• Developed markets are solidly middle class and people can

consume almost any product desired. A firm may use the latest technologies to develop sustainable products in a sustainable manner.

• Emerging markets are racing to catch up to rich nations and are

overloading infrastructures. Resource constraints can force companies to develop sustainable production methods.

• Traditional markets have mostly rural populations for whom

poverty and corruption prevail. Here, sustainability means 3 / 4

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teaching safe farming practices, environmental stewardship, and disease awareness.

• Globalization of Production
• Dispersal of production activities to locations that help a company to

minimize costs or maximize quality

• Access lower-cost workers to cut overall production costs
• Access technical expertise
• Access production inputs unavailable or more costly at home

IV.FORCES DRIVING GLOBALIZATION

Forces increase competition among nations by leveling the global business playing field.

• Falling Barriers to Trade and Investment

1947 General Agreement on Tariffs and Trade (GATT) was designed to promote free trade by reducing tariffs and nontariff barriers. 1994 GATT revision (1) reduced tariffs and lowered subsidies for agricultural products; (2) defined and protected intellectual property rights; and (3) created the WTO.

• World Trade Organization
• World Trade Organization (WTO) is the international

organization that enforces the rules of international trade.

b. WTO goals: (1) to help the free flow of trade, (2) help negotiate

the further opening of markets, and (3) settle trade disputes.

• WTO agreements are contracts committing members to fair and

open trade policies. WTO dispute settlement system is the spine of the global trading system.

• Regional Trade Agreements
• Smaller groups of nations also are integrating their economies

(e.g., NAFTA, European Union).

• Trade and National Output
• Effect of the WTO and regional trade pacts is greater global

trade and cross-border investing (Map 1.1).

• Trade growth has been faster than world output.
• Gross Domestic Product (GDP) is the value of all goods and

services produced by a domestic economy over a one-year period. Gross national product (GNP) adds income from international activities.

• Technological Innovation

Technology accelerates globalization by making it easier, faster, and less costly to move data, goods, and equipment around the world.

• E-mail and videoconferencing
• Speed information flows and ease the tasks of coordination and

control, which are complicated by operating across borders.

• Driving growth in videoconferencing are lower-cost bandwidth

and equipment, and decreased travel for cost or safety reasons.

• The Internet
• Helps firms sharpen forecasting, lower inventories, improve

communication with suppliers, and communicate quickly and cheaply with distant managers

• Reduces the cost of reaching an international customer base,

which is essential for the competitiveness of small firms

• Company intranets and extranets
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