Globalization and International Business

Topics: Globalization, International trade, International economics Pages: 10 (2733 words) Published: October 31, 2014
CHAPTER ONE
Globalization and International Business

OBJECTIVES

To define globalization and international business and show how they affect each other •To understand why companies engage in international business and why international business growth has accelerated •To discuss globalization’s future and the major criticisms of globalization •To become familiar with different ways in which a company can accomplish its global objectives •To apply social science disciplines to understanding the differences between international and domestic business

CHAPTER OVERVIEW

Globalization has become a major socioeconomic force and topic of debate in the twenty-first century. Chapter One examines the forces that are driving this phenomenon, as well as the often passionate criticisms of the process. It reviews the objectives that firms pursue when they engage in international business activities and describes the various modes of entry that may be used. It also notes the terminology that has come into existence as new types of organizations have evolved. The chapter concludes with a discussion of the ways in which international business differs from domestic business.

CHAPTER OUTLINE

INTRODUCTION
As people, firms, and other organizations have expanded their access to resources, goods, services, and markets across wider geographical areas, they have also become more deeply affected (positively and negatively) by conditions outside their home countries. Globalization refers to the broadening set of interdependent relationships among people from different parts of a world that happens to be divided into nations. What is International Business?

International business involves all commercial transactions, including sales, investments, and transportation—private and governmental—between parties of two or more countries. Global events and competition affect almost all firms—large or small. However, the international environment is more complex and diverse than a firm’s domestic environment. [See Fig. 1.1.]

THE FORCES DRIVING GLOBALIZATION
Globalization is a difficult concept to measure. Currently, over 20 percent of world production is sold outside of its country of origin, restrictions on imports continue to decline, the foreign ownership of assets as a percent of world production continues to increase, and world trade continues to grow more rapidly than world production. Recessionary contraction in recent years has at least temporarily reversed this trend. That said, on a value basis, only a few countries (mainly very small nations) either sell more than half of their production abroad or source more than half of their consumption from foreign countries. Further, the principal source of capital in almost all nations is still domestic. Following are seven interrelated factors that have contributed to the spiraling growth in globalization. A.T. Kearney - Foreign Policy Globalization Index

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 money transfers Factors in Increased Globalization

There are seven factors that are often cited as having contributed to the increased growth in globalization. Increase in and Expansion of Technology
Vast improvements in transportation and communications technology—including the development of the Internet—have significantly increased the effectiveness and efficiency of international business operations. Today, a much larger portion of the population is involved in the development of new products, than just the production of products. Liberalization of Cross-Border Trade and Resource Movement

Over time most governments have lowered restrictions on trade and foreign investment in response to the expressed desires of their...
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