Globalization

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Globalization - refers to the shift toward a more integrated and interdependent world economy. Globalization has several facets, including the global- ization of markets and the globalization of production. •Integration of global economic system

No more “German Market, or American Market”
Instead there is the Global Market
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. The globalization of markets - refers to the merging of historically distinct and separate national markets into one huge global marketplace. •Falling trade barriers make it easier to sell globally on global norm •Consumers’ tastes and preferences are converging on some global norm •Firms promote the trend by offering the same basic products worldwide The 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). •Companies are lowering overall cost and improving the quality and functionality of their products. Global Institutions - General Agreement on Tariffs and Trade (GATT), World Trade Organization, International Monetary Fund, World Bank, United Nations, and G20 •Help manage, regulate, and police the global marketplace & promote treaties. Drivers of Globalization

Declining barriers to the free flow of goods, services and capital •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… e.g., internet, microprocessors, worldwide web, transportation Lower Trade Barriers
Means firms can view the world, rather than a single country, as a their market •Base production in the optimal location for that...
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