Today 6e by Charles W. L. Hill Chapter 1 Globalization Introduction In the world economy today, we see • fewer self-contained national economies with high barriers to cross-border trade and investment • a more integrated global economic system with lower barriers to trade and investment • about $4 trillion in foreign exchange transactions taking place everyday • (in 2012) over $18. 2 trillion of goods and some $3. 5 trillion of services being sold across national borders • the establishment of international institutions ttp://www. ge. com/ http://www. ikea. com/ Chapter 1: Globalization Effects of globalization can be seen everywhere: • the cars people drive • the food people eat • the jobs where people work • the clothes people wear • Chapter 1: Globalization WHAT IS GLOBALIZATION? • Globalization refers to the shift towards a more integrated and interdependent world economy. Two key facets: • the globalization of markets • the globalization of production Chapter 1: Globalization The Globalization of Markets /14/2013 1 7 8 9 Globalization of markets: the fact that in many industries historically distinct and separate national markets are merging into one huge global marketplace in which the tastes and preferences of consumers in different nations are beginning to converge upon some global norm.
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Examples: – Smart Phones (iPhone, Android, etc. ) + Apps – Coca-Cola/ Starbucks- McDonald’s hamburgers – Apple iPad/ Samsung Tablet- IKEA furniture Chapter 1: Globalization The Globalization of Production
Globalization of production: the tendency among many firms to source goods and services from different locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as land, labor, capital, and energy), thereby allowing them to compete more effectively against their rivals. Examples:http://www. vizio. com/ BoeingLenovoVizio (B787: 65% outsourced) (design: US; case, keyboard, HD: Thailand; http://www. oeing. com/newairplane/display, memory: S. Korea; Wi-Fi: Malaysia; ass’y: Mex. ) http://www. lenovo. com/planetwide/select/selector. html Chapter 1: Globalization THE EMERGENCE OF GLOBAL INSTITUTIONS Global institutions: • help manage, regulate, and police the global market place • promote the establishment of multinational treaties to govern the global business system General Agreement on Tariffs and Trade (GATT) after WWII Chapter 1: Globalization 2/14/2013 2