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Global Business Today Chapter 1 - Globalization
Terms in this set (34)
Trend away from distinct economic units and toward one huge global market.
Facets (factors) of globalization
1. The globalization of markets
2. The globalization of production
Globalization of markets
Merging separate national markets into one huge global marketplace.
It has been proven that the tastes and preferences of consumers from all over the world are starting to unite into a social norm. For example, Starbucks coffee is enjoyed by people from all over the world.
Globalization of Production
refers to 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 (such as labor, energy, land, and capital)
factors of production
Components of production such as labor, energy, land, and capital
Which product markets tend to be the most global
1. Markets for commodities (oil, aluminium)
2. Industrial products
3. Computer software
4. Financial assets
Modes/ How to make an international business
4. turnkey projects
5. FDI (merger, acquisition, greenfield)
Low barriers help companies
1. See the world as a single market
2. Disperse production activities all over the world
Global institutions and their purpose
1. GATT 2. WTO 3. IMF 4. WORLD BANK 5.UN
1. Manage, regulate, and police global marketplace.
2. Promote establishment of multinational treaties to govern global business.
General Agreement on Tariffs and Trade (GATT)
International treaty that committed signatories to lowering barriers to the free flow of goods across national borders; led to WTO.
World Trade Organization
The organization that succeeded the General Agreement on Tariffs and Trade and now acts to police the world trading system.
International Monetary Fund
International institution set up to maintain order in the international monetary system. (Emergence of Global institutions)
International organization set up to promote economic development, primarily by offering low interest loans to cash-strapped governments of poorer nations. (Emergence of Global institutions)
An international organization made up of 191 countries charged with keeping international peace, developing cooperation between nations, and promoting human rights. (Emergence of Global institutions)
Purpose of UN
1. Maintain global peace
2. Develop friendly relations among nations
3. Respecting human rights
4. Harmonize the actions of nations
Group of Twenty (G20)
Established in 1999, the G20 comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank
Drivers of globalization
1. Declining trade and investment barriers
2. Technological change
When a firm exports goods or services to a different country
Foreign direct investment
When a firm invests resources in business activities outside home country
Lowered the cost of global communication and the cost of coordinating and controlling a global business.
The premise that the power of microprocessor technology doubles and its cost of production drops in half every 18 months.
Stock of Foreign Direct Investment
The total accumulated value of foreign-owned assets at a given time.
Multinational Enterprise (MNE)
Any business that has productive activities in two or more countries.
What are the implications of technological change for the globalization of production?
1. Lower transportation costs which makes it cheaper to perform globalization of production
2. Allows firm to respond better to costumer demand due to real time feedback.
What are the implications of technological change for the globalization of markets?
1. Lower transportation costs has made is easier to ship products around the world
2. Helps create electronic global marketplace
The changing demographics of the global economy
1. Changing world output and world trade picture
2. Changing of FDI
3. The changing nature of multinational enterprise
4. World order
The changing FDI
The share of world output generated by developing countries has been steadily rising since the 1960's. However, The FDI in developed countries is declining.
The changing nature of the multinational enterprises
Demographics of multinational enterprises
1. Rise of non-U.S. multinationals
2. Growth of mini-multinationals (bcuz of internet)
The changing world order
Economic development in China and collapse of communism in eastern Europe.
The globalization debate
Is the shift toward a more integrated and interdependent global economy a good thing
Compare in terms of
3. living conditions
4. national sovereignty
5. environment ----- how
1. More products
2. More costumers
3. lower costs
4. More job opportunities
1. losing jobs
2. environment degradation
3. less income
4. more competition
5. less control
Critics worry that economic power is shifting from the national government and towards organizations such as the WTO....
Supporters argue that the power of these organizations is limited to what everyone agrees upon.
How does managing an international business differ from managing a domestic business
1. Countries are different
2. Different currency's
3. Government intervention in the international trade and investment system
4. More problems for the manager and the problems themselves are more complex
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