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International Business
Lecturer : Eric Lam
M. Commerce (Marketing), M. Logistic Management, B Health Sciences

Lecture 1

Topic 1


What Is Globalization?
The world is moving away from selfcontained national economies toward an interdependent, integrated global economic
Globalization refers to the shift toward a
more integrated and interdependent world


What Is The
Globalization of Markets?
Historically distinct and separate national markets
are merging
It no longer makes sense to talk about the
“German market” or the “American market”
Instead, there is the “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

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,
and capital
Companies can
lower their overall cost structure
improve the quality or functionality of their
product offering

Why Do We Need
Global Institutions?
help manage, regulate, and police the global
promote the establishment of multinational treaties to
govern the global business system

Examples include
the General Agreement on Tariffs and Trade (GATT)
the World Trade Organization (WTO)
the International Monetary Fund (IMF)
the World Bank
the United Nations (UN)

What Do Global
Institutions Do?
 The World Trade Organization (like its predecessor GATT)  polices the world trading system
 makes sure that nation-states adhere to the rules laid down in trade treaties
 promotes lower barriers to trade and investment

 The International Monetary Fund (1944) maintains order in the international monetary system
 The World Bank (1944) promotes economic development
 The United Nations (1945)
 maintains international peace and security
 develops friendly relations among nations
 cooperates in solving international problems and in promoting respect for human rights
 is a center for harmonizing the actions of nations


What Is Driving
The decline in barriers to the free flow of goods,
services, and capital that has occurred since the
end of World War II
since 1950, average tariffs have fallen significantly and are now at 4 percent
countries have opened their markets to FDI

Technological change
microprocessors and telecommunications
the Internet and World Wide Web
transportation technology

Declining Trade And
Investment Barriers
Average Tariff Rates on Manufactured Products as Percent of Value


What Does Globalization
Mean For Firms?
 Lower barriers to trade and investment mean firms can
 view the world, rather than a single country, as their market  base production in the optimal location for that activity

 Technological change means
 lower transportation costs - firms can disperse production to economical, geographically separate locations
 lower information processing and communication costs - firms can create and manage globally dispersed production systems
 low cost global communications networks - help create an electronic global marketplace
 low-cost transportation - help create global markets
 global communication networks and global media - create a worldwide culture, and a global market for consumer products


The Changing Demographics
Of The Global Economy
 There has been a drastic change in the
demographics of the world economy in the last
30 years
 Four trends are important:
1. the Changing World Output and World Trade
2. the Changing Foreign Direct Investment Picture
3. the Changing Nature of the Multinational
4. the Changing...
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