Chapter 1: Globalization and International Business
1. The meaning of globalization
* Broadly: the widening set of interdependent relationships among people from different parts of a world that happens to be divided into nations. * Narrowly: the integration of world economies through the elimination of barriers to movements of goods, services, capital, technology, and people.
A. How Does International Business Fit In?
* International business consists of all commercial transactions between two or more countries. The goal of private business is to make profits; Governments may undertake them either for profit or for other reasons. a. The Study of International Business
* Most managers need to approach their operating strategies from an international standpoint. * Managers in almost any industry need to consider (1) where to obtain the inputs they need of the required quality and at the best possible price and (2) where you can best sell the product or service you’ve put together from those inputs. * Studying IB is important because (1) most companies either are international or compete with international companies, (2) the best way of conducting business may differ by country, (3) an understanding helps you make better career decisions, and (4) an understanding helps you decide what governmental policies to support. b. Understanding the Environment/Operations Relationship
The Forces Driving Globalization
* Globalization (1) has been growing, (2) is less pervasive than generally thought, (3) has economic and non economic dimensions, and (4) is stimulated by several factors. * The A.T. Kearney / Foreign Policy Globalization Index: some countries are more globalized than others, and a given country may be highly globalized on one dimension and not another. This index ranks countries across four dimension; * Economic – international trade and investment
* Technological – Internet connectivity
* Personal contact- international travel and tourism, international telephone traffic, and personal transfers of funds abroad * Political – participation in international organizations and government monetary transfers A. Factors in Increased Globalization
a. Increase in and Application of Technology
* Population growth, Economic growth
* Innovations in transportation mean that more countries can compete for sales to a given market. b. Liberalization of Cross-Border Trade and Resource Movements c. Development of Services That Support International Business * Converting one currency to another, insurance
d. Growing Consumer Pressures
e. Greater Global Competition
* Born-global companies: start out with a global focus because of their founders’ international experience and because advances in communications give them a good idea of where global markets and supplies are. * Clustering or Agglomeration: the situation in which many new companies locate in areas with numerous competitors and suppliers; they quickly learn of foreign opportunities and gain easier access to the resources needed for international moves. f. Changing Political Situation
* A major reason for growth in IB is the end of the schism between Communist countries and the rest of the world. g. Expanded Cross-National Cooperation
* To gain reciprocal advantages
* To attack problems jointly that one country acting alone cannot solve * The resources needed to solve the problem may be too great for one country to manage; sometimes no single country is willing to pay for a project that will also benefit another country. * One country’s policies may affect those of others.
* To deal with areas of concern that lie outside the territory of any nation * Three global areas belong to no single country: the non-coastal areas of the oceans, outer space, and Antarctica.
The Costs of Globalization
* Critics of globalization claim (1)...
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