International Business Chapter 1
Terms in this set (24)
The shift towards a more integrated world economy.
Two Key Facets of Globalization:
-Globalization of Production
-Globalization of Markets
Globalization of Production
(And its goal??)
The sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor energy, land and capital)
Goal: Lower overall cost of structure or improve the quality or functionality of their product and gain competitive advantage.
Globalization of Markets
-The merging of historically distinct and separate national markets into one huge global marketplace.
-In many markets today, tastes and preferences of consumers in different nations are converging upon some global norm.
Who benefits from/contributes to the globalization of markets?
Firms of all sizes.
-97% of all U.S. exporters have less than 500 employees
-98% of all small and mid-sized German companies participate in international markets
Major Concepts of Globalization of Markets
-Top trading partner for US?
-Top destination for US goods?
-Who exports the most to US?
Ongoing economic integration and growing interdependency of countries worldwide.
US Top Trading Partners
Canada ($450 billion)
China ($375 billion)
Mexico ($300 billion)
Japan ($150 billion)
Germany ($125 billion)
Top US Export Destinations
Canada ($250 billion)
China ($160 billion)
Mexico ($90 billion)
Japan ($60 billion)
UK ($50 billion)
Top Importers to US
China ($365 billion)
Canada ($276 billion)
Mexico ($230 billion)
Japan ($120 billion)
Germany ($80 billion)
Exports Sustain WI Businesses
8,737 companies exported from WI in 2013
-Small/Medium enterprise share of WI exporters: 87%
-SME share of WI's total merch. exports: 27%
Wisconsin's Top Sources of Foreign Investment
-85,600 WI workers employed by foreign controlled companies in 2012 (41,000 of them in manufacturing)
-3.6% of total 2012 private industry employment supported by foreign investment
Wisconsin's Top Export Markets
-Manage, regulate and police the global marketplace
-Promote the establishment of multinational treaties to govern the global business system
Global Institutions to Know:
-General Agreement on Tariffs and Trade (GATT)
-World Trade Organization (WTO)
-International Monetary Fund (IMF)
-United Nations (UN)
Drivers of Globalization
-Declining barriers to the free flow of goods, services and capital
-Liberalization of markets
-Technological development (informational and transportation)
Globalization Effects on Firms
-Lower barriers to trade and invest
-Firms may find their home market under attack by foreign firms
World Trade vs. GDP
-World trade is the exchange of capital, goods and services across international borders.
-Gross Domestic Product is the standard measure of the value of final goods and services produced by a country during a period minus the value of imports.
Trend of Globalization
Was moving much faster in past decades because it was new. But it will speed up again as Europe recovers from recession.
Foreign Direct Investments...
are increasing most in developing countries.
The Changing World Order
-Collapse of communism in Eastern Europe and Asian countries
-China and Latin America are also moving toward greater free market reforms
-A more integrated global economy
Changing Nature of MNEs
-An MNE is any business that has productive activities in two or more countries
-Since 1960s, rise in non-US MNEs and rise in mini-MNEs
Cons of Globalization
-Destroys manufacturing jobs in wealthy, advanced countries
-Wage rates of unskilled workers in advanced countries decline
-Companies move to countries with fewer labor and environment regulations
-Loss of sovereignty
Pros of Globalization
-Lower prices for goods and services
-Economic growth stimulation
-Increase in purchasing power
-Countries specialize in production of goods/services that are produced most efficiently
Globalization and Managerial Implications
International vs. Domestic business
-Countries are different
-Wide range of problems
-Local government intervention in international trade and investment system