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International Business

Sumati Varma

Chapter 1
Globalization and International Business

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Learning Objectives

•Understand the process of globalization

•Discuss the characteristics of globalization

•List the major motivations and drivers of globalization

•Examine the major differences between domestic and international


business

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Globalization Is:

• the process of increasing interconnectedness between societies.

• characterized by the convergence of tastes and preferences in different parts of


the global economy (e.g., McDonald’s burgers, Apple iPods).

• facilitated by networks of information, technology, trade and investment flows.

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Globalization Viewpoints

GLOBALIZATION VIEWPOINTS

Hyperglobalists Transformationalists

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Hyperglobalists

An extreme view that believes in:

• the emergence of a global cosmopolitan corporate culture

• the decline of nation states

• the increasing power of TNCs

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Transformationalists

• View globalization as a complex, uneven process

• A multidimensional view: includes economic processes alongside


regional and cultural issues

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Elements of Globalization

Economic globalization

Political globalization Cultural globalization

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Economic Globalization

• Globalization of the business corporation

• Globalization of supply

• Globalization of demand

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Cultural Globalization

A process of cultural homogeneity of the global economy. Cultural


globalization is characterized by:

• Cultural homogenization: uniformity and similarity in global products


and processes

• Cultural heterogeneity: local differences

• Cultural hybridization: adaptation of the global to local conditions,


meaning reattribution and re-contextualization

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Political Globalization

The emergence and domination of global and regional institutions and


trans-governmental networks such as:

• IMF

• The World Bank

• WTO

• UNCTAD

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Drivers of Globalization

Political
forces

Increasing Economic
competition forces

DRIVERS

Global Technological
governance developments

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International Orientations

INTERNATIONAL
ORIENTATIONS

Ethnocentrism Polycentrism Regiocentrism Geocentrism


(home-country (host-country (regional (world
orientation) orientation) orientation) orientation)

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International Versus Domestic Business

Characteristics of international businesses that set them apart from


domestic businesses:

• Diverse business environment

• Enhanced risk and uncertainty

• Operational complexity

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Motives for Firm Internationalization

MOTIVES

Increased profits

Capacity utilization

Market power

Strategic motives

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