Globalization

Globalization
It can be described as a process by which the people of the world are unified into a single society and function together Globalization refers to the shift toward a more integrated and independent world economy This process is a combination of economic, technological, socio cultural and political forces.

Globalization
Globalization is often used to refer to economic globalization, that is, integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.

Globalization
in an economic context, it refers to the reduction and removal of barriers between national borders in order to facilitate the flow of goods, capital, services and labour... although considerable barriers remain to the flow of labour Globalization is not a new phenomenon.

Globalization of Market
Tastes and preferences are converging Coca cola, McDonalds, Sony, Nike, Honda, Suzuki, Maruti, Nano Size does not matter 89% exporter in US employed less than 100 people 97%, less than 500 employees Significant differences still exists- Wall mart, Baskin Robins, products like automobiles, cell phones, electrical appliances Industrial Products -aluminum, wheat, oil, spare parts

Globalization of Market
Common Competition Coca cola/ Pepsi, Ford/ Toyota, Boeing/ Airbus Caterpillar/ Komatsu Wall mart, Carrefour, Tesco others follow Homogenized Global Market - German Market, American Market, Japanese Market

Globalization of Production
Sourcing goods and services from locations around the globe Boeing Jet Airliner 777, 8 Japanese Suppliers, Singapore, Italy Swan Opticals, China, Hong Kong Best Suppliers, Orders Japanese Product, American Product

Emergence of Global Institutions

Help, manage, regulate, police the global market Promote multinational treaties General Agreement on Tariffs and Trade (GATT) WTO, IMF, World Bank, UN

WTO
Successor of GATT 153 countries, 97% of the world trade Policing world trade system Facilitates establishments of additional agreements b/w WTO member states Promoting lowering of barriers for international trade

IMF and World Bank

Created in 1944 Maintain order in international monetary system to promote economic development IMF Argentina, Indonesia, Mexico, Russia, South Korea, Thailand and Turkey In return specific economic policies for stability and growth

United Nations
Established on October 24, 1945 By 51 countries Now 191 countries To preserve peace through international cooperation and collective security

Drivers of Globalization

Declining Trade and Investment Barriers 1920s and 30s High tariffs on imports Resulted in great depression 1930 GATT Since 1950 avg tariff has fallen to 3.9%

Average Tariffs Rates on Manufactured Products as Percentage Value

Volume of World Trade and Production

Drivers of Globalization
Role of technological change Microprocessors and Telecommunications
High power low cost computing Satellite, optical fiber, wireless technologies

The Internet and Worldwide web

Increase in user number 60% of US population, 2002

Drivers of Globalization
Role of technological change Jet aircrafts Containerization , 1970 80 Fall in freights charges

The Shrinking Globe

The Changing Demographics of the Global Economy

The Changing World Output Trade Picture

1960s, US Domination in industrial power 1963 40.3%, 2000 27% Japan, Germany, France, UK, Italy, China, S.Korea World Bank Projections for 2020

Changing FDI Picture

1960s, US 66.3%, British 10.5%, Japanese 2% Threat from US 2001, US 21%

The Changing Nature of MNE

1960s domination of US MNCs Rise of mini MNCs GM, Ford, Fuji, Kodak, Matushita, P&G, Sony, Unilever

Globalization Debate

Anti globalization Protests Dec 1999, 40,000 protesters in Seattle, WTO Job loss, downward pressure on wage rate Environmental degradation, cultural imperialism
Cultural imperialism is the practice of promoting, distinguishing, separating, or artificially injecting the culture or language of one culture into another.

Outsourcing - Adequate labor policies and environmental policies Pollution Move of economic power from national government to supranational organizations such as WTO Globalization and the World poor Afghanistan, Cambodia, Cuba, Haiti, Iraq, Libya, Nigeria, Sudan, Vietnam

Domestic and International Business

Differences between International Trade and Domestic Trade

Scope, Broader Market Benefits Market Fluctuations Modes of entry Business Complexity Technology Political Language and cultural barriers Mobility of factor of production Movement of goods Availability of resources

DEBATE
GLOBALISATION For and Against