What is Globalization?
Refers to the shift towards a more integrated and interdependent global economy.
Globalization in Markets
- Benefits small and large companies.
- Products that serve universal needs are global.
- Competitors may not change among nations.
Globalized Production Impediments
- Formal and informal barriers to trade. (tariffs, licenses, standarizations, subsidies, quotas…consumer behavior, transport costs, corruption, regulations)
- Transportation costs
- Political and economic risk
- Coordination
Global Institutions
- General Agreement on Tariffs and Trade (GATT)
- World Trade Organization
- International Monetary Fund
- The World Bank
- United Nations
General Agreement on Tariffs and Trade
Legal agreement between many countries whose overall ppurpose was to promote international trade by reducing or eliminating trade barriers such as tariffs, quotas or subsidies.
World Trade Organization
Intergovernmental organization that regulates and facilitates international trade. Governments with the help of the UN, use the organization to revise, establish and enforce the rules that govern international trade.
-164 nations 98% of world trade
International Monetary Fund
Major financial agency of the UN founded by 190 member countries. Works to achieve sustainable growth and for its members.
- Lender of last resort.
- Requires nations to adopt specific economic policies aimed at returning their economies to stability and growth.
The World Bank
Unique global partnership fighting poverty worldwide thrpugh sustainable options.
- Promotes economic development.
- Focused on making low-interest loans to cash.strapped governments in poor nations that wish to invest significally on infrastructure.
United Nations
Intergovernmental organization whose purpose is to maintain international peace and security, develop friendly relationships between nations, cooperate in solving international problems and in promoting respect for human rights, and serve as a centre for harmonization of the nations’ actions.
-193 Nations
Drivers of Globalization
- Declining trade and investment barriers. (Established WTO and GATT)
- Knowledge society (Informed costumers have drived demand)
- Technological Change (Transportation technology, worldwide communications, convergence of consumers tastes and preferences)
Changing Nature of the global economy
- China and BRIC countries (India, Brazil, Russia, and China) are growing rapidly.
- Latin America debt and inflation is going down.
- Non-US firms are increasingly investing across national borders.
- Non-US multinational enterprises are growing.
- Internet is lowering barriers-
- Rise of medium to small sized bussinesses and mini multinationals.
- Barriers to free flow of goods, services, and capital are decreasing.
- Adoption of liberal economic policies by nations who were previously opposed to them.
Globalization Cons
- Detrimental effects on living standards, wage rates, and
the environment. - Firms are able to move manufacturing activities to countries were wages are lower due to the falling barriers.
- Contributing to hugher unemployement and lower living standards.
Globalization Pros
- Free trade will result in countries specializing in the production of goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently.
Managing an International Bussiness
Globalization is creating opportunities and challenges for business managers.
- Need to vary practice from country to country.
- More complex decisions required.
- Need to understand international trading nad investment system, currecny exchange, regulations etc.
