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Chapter 1 - Globalization

Terms in this set (23)

Globalization *
The shift toward a more integrated and interdependent world economy
What is the world moving toward? *
The world is moving away from self-contained national economies toward an interdependent, integrated global economic system
Are markets merging? *
Historically distinct and and separate national markets are merging
Global Market*
-Falling trade barriers make it easier to sell globally.
-Consumers tastes and preferences are converging on some global norm
-Firms promote the trend by offering the same basic products worldwide
Firms of all sizes benefit and contribute to the globalization of markets*
-97% of all U.S. exporters have less than 500 employees
-98% of all small and mid-sized German companies participate in international markets
Global Institutions
Help manage, regulate, and police the global marketplace

Promote the establishment of multinational treaties to govern the global business system
Why Do Need Global Institutions *
to regulate world money
-The General Agreement on Tariff and Trade (GATT)
-The World Trade Organization (WTO)
-The International Monetary Fund (MF)
-The World Bank
- The United Nations (UN)
-The G20
The World Trade Organization (WTO) *
They police trade
The International Monetary Fund (IMF) *
they regulate currency
The World Bank*
They provide loans, huge amounts of money to mostly underdeveloped nations
The G20 *
20 Largest Economies
What is the globalization of production? *
Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like land, labor, energy, and capital
Companies Globalization of Production *
-Companies can lower their overall cost structure
-Improve the quality or functionality of their product offering
What is Driving Globalization? *
-Declining barriers to the free flow of goods, services, and capital
- Technological Change
Declining barriers to the free flow of goods*
-Average tariffs are now at just 4%
-More favorable environment for FDI
-Global stock of FDI was $15.5 trillion in 2009
-Facilitates global production
Technological Change*
-microprocessors and telecommunications
-the Internet and World Wide Web
-Transportation technology
How Has World Output and World Trade Changed?*
In 1960, the U.S. accounted for over 40% of world economic activity, but by 2009, the U.S. accounted for just 24%
-similar trend in other developed countries
How Has World Output and World Trade Changed?*
In contrast, the share the of world output accounted for developing nations rising
-expected to account for more than 60% of world economic activity by 2020
How Has Foreign Direct Investment Changed Overtime?*
In the 1960s, the U.S. accounted for about two-thirds of worldwide FDA flows
-Today, the United States accounts for less than one-fifth of worldwide FDA flows
-Other developed countries have followed a similar pattern
How Has Foreign Direct Investment Changed Overtime? *
In contrast, the share of FDI accounted for by developing countries has risen.
-Developing countries, especially China, have also become popular destinations for FDI
What Is A Multinational Enterprise (MNE)? *
Any business that has productive activities in two or more countries.

Since the 1960s
- the number of non-U.S. multinationals has risen
-the number of mine-multinationals has risen
Interdependent Global Economy Supporters*
Supporters believe that increased trade and cross-border investment mean
-lower prices for goods and services
-greater economic growth
-higher consumer income and more jobs
Interdependent Global Economy Critics*
-Job losses
-environmental degradation
-the cultural imperialism of global media and MNE's
Anti-globalization protestors now regularly show up at most major meetings of global institutions
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