Perspectives on Globalization

Topics: Outsourcing, Investment, Developed country Pages: 83 (20934 words) Published: February 3, 2014
chapter 2
chapter outline
™ Introduction
™ What is globalization?
Globalization of markets
Globalization of production
™ Methods of internationalizing operations
Foreign direct investment (FDI)
™ Th eories of international business expansion
Early theories of FDI
Th eory of incremental internationalization
Dunning’s eclectic paradigm
™ Changing patterns of FDI
Destinations of FDI
Outward investors
™ Impact of globalization on societies
Economic impacts
Diff usion of technology
Global fi nancial markets
Culture change and globalization
Environmental impacts
™ MNEs and social impacts
™ Conclusions
learning objectives
™ To evaluate contrasting views on
globalization and its transformational
eff ects on businesses and societies
™ To gain an overview of the means by which
organizations expand internationally, in
both markets and production
™ To appreciate leading theories of
internationalization and foreign direct
investment (FDI)
™ To examine critically the impacts of
globalization on societies
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Impending closure of a car components factory in the province of Cádiz in Spain in 2007, by its American owner, Delphi, led to a wave of protests at the site, supported by political leaders, including the Spanish prime minister and the EU Commission president. Th e workers’ trade union organized a two-day general strike, which paralysed business and transport across the region, achieving global media attention. In the end, the factory closed, aff ecting not just the 1,600 employees, but an estimated 4,000 people in the region who depended on Delphi for business. By 2008, Delphi had relocated to Morocco, where wages are one-fi fth of Spanish levels. Scenarios like this have become commonplace, and are closely identifi ed with globalization, the topic of this chapter. Almost every aspect of modern life is shaped to some extent by processes of globalization. With relative ease, the consumer can enjoy worldwide travel, the internet and access to goods and services from around the world. For international businesses, three features stand out: the need to think about markets in numerous countries in a ‘joined-up’ way; the importance of global brands; and the imperative to seek the most advantageous location for production of their products. Th is chapter will examine all these aspects of globalization, but it aims also to look critically at the various processes taking place behind the scenes, as it were, including their impact on societies, highlighted in the opening vignette. Discourse on globalization sometimes takes the form of presenting arguments of those who support it, weighed against objections put forward by those who oppose it. Th at approach tends to rest on the assumption that we are confronted with a single global phenomenon. Th e approach adopted here, in contrast, looks at globalization as a number of strands which, when unbundled, exhibit diff erent eff ects in diff erent contexts.

Th e chapter begins by identifying the core features of globalization. It highlights the distinctions between the globalization of markets and of production, the latter having progressed to a greater extent than the former. Key theories of internationalization are examined from the perspective of the fi rm, focusing on trends in the expansion of markets and international production. As these processes encompass more and more countries, particularly developing countries, globalization’s impact on societies raises issues WE B C H EC K

Delphi’s website is
9781403_945631_03_cha02.indd 38 19/9/08 15:11:41
Perspectives on globalization chapter 2 39
for businesses and governments. Th ese issues
are explored in the remainder of the chapter.
It emerges that, while benefi ts such as new
jobs in manufacturing are bringing wealth to...
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