Chapter Summary Globalization

Topics: International trade, World Trade Organization, Free trade Pages: 35 (10980 words) Published: July 31, 2012
Chapter 1
Globalization: the shift towards a more integrated and interdependent world economy. Globalization of markets: is the merging of historically distinct and separate national markets into one huge global marketplace. (markets that were isolated by trade barriers and barriers of distance, time and culture move towards a global one) -90% of small business firms in USA export

-In Germany, 98% of small and mid sized companies have exposure to international markets -The most global markets currently are not markets for consumer products, but markets for industrial goods and materials that serve universal need. Globalization of production: refers to the sourcing of good and serves from locations around the glove to take advantage of national differences in cost and quality of factors of production such as labor, management, land, capital and technological know how. By doing this companies hope to lower their overall cost struction of improve the quality Global institutions:

GATT: (General agreement on Tariffs and Trade) treaty that committed signatories to lowering barriers to the free flow of goods across national borders WTO (World Trade Organizatin): 154 nationas are WT members. It is responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties, a well as facilitating the establishment of additional multinational agreements between WTO states. IMF ( international Monetary Fund): institution set up to maintain order in the internatuional monetary system. World Bank: institution set up to promote general economic development in the worlds poorer nations. Drivers of Globalization

Macro factors:
-Decline in barriers to the free flow of goods, services, and capital that has occurred since the end of WW II. -Technological change specifically the developments in communication, information processing, and transportation technologies

1.Declining trade and investment barriers
During the 1930’s many nations erected several barriers (in the form of high tariffs) to international trade and foreign direct investment with the aim of protecting domestic industries from foreign competition. This ultimately depressed world demand and contributed to the Great Depression of the 1930’s. After WW II, the GATT was created to remove these barriers as well as the WTO, decreasing the tariff rates dramatically and removing restrictions to foreign direct investment. 2.The role of technological change:

Microprocessors and telecommunications:
-The development of the microprocessor has enabled the explosive growth of high power low cost computing and recent advances in the telecommunication technologies. It has revolutionized the optical fiber, wireless technolgoies and internet and WWW advancement. According to Moore’s law, the power of the microprocessor doubles and cost falls in half every 18 months. This causes the cost of global communication to plummet, lowering the cost of coordinating and controlling a global organization. •The internet and WWW

-The WWW has developed into the backbone of the global economy. E-commerce retail sales reached $133 billion in 2008. The internet rolls back some of the constraints of location, scale and time zones, and makes it easier for buyers and sellers to find each other. It also allows businesses small and large to expand their global presence at a lower cost than before. •Transportation technology

-The development of commercial jet aircrafts and super freighters and introduction of containerization, which simplifies shipping from one place ot the other, as well as reducing the timer required to get from one location to another. As well as reducing transportation costs. Implications of technological change for the globalization of Production -Dispersal of production to geographically separate locations became more economical. As well as allowing firms to manage globally dispersed production systems....
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