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Globalization
Globalization
Definition &
Components
Definition:
Moving away from selfcontained national economies
toward an interdependent,
integrated global economic
system
...
Two components:
•The globalization of markets
•The globalization of
production
...
g
...
Globalization
of Markets
International
Standard
Preferences
Globalization of Productions
The globalization of production refers to the
sourcing of goods and services from locations
around the globe to take advantage of national
differences in the cost and quality of factors of
production like land, labor, and capital
Raw
material
E
...
: foreign
direct investment
Business
strategy
-Cushion
Globalization
of
Productions
Market
Labor human
capital
Shrinking Globe
15001840
Best average
speed of
horse-drawn
coaches and
sailing ships,
10 mph
...
Steamships
average 36
mph
...
1960s
•Jet
passenger
aircraft, 500
-700 mph
...
Microprocessor &
telecommunication
Internet
Globalization Drivers
+ tive
Technology
(transportation &
communication)
Open market
Economic integrations
Peace
Corporate strategy
Global focus
- tive
Culture
Market barriers
National barriers
War
Corporate strategy
Local focus
Globalization Drivers: The Emergence
Of Global Institutions
Institutions are needed to:
help manage, regulate, and police the global marketplace
promote the establishment of multinational treaties to govern the global business system
Institutions created over the past half century include:
the General Agreement on Tariffs and Trade (GATT)
the World Trade Organization (WTO)
The World Trade Organization(like its predecessor GATT) is primarily responsible for policing the world
trading system and making sure that nation-states adhere to the rules laid down in trade treaties signed
by WTO members
In 2007, the 150 nations that accounted for 97% of world trade were WTO members
The WTO promotes lower barriers to trade and investment
the International Monetary Fund (IMF)
the World Bank
the United Nations (UN)
Change of Idea
•Free Market -since
Adam Smith
•Industrial Revolutions
•First Telegraphs Comm
...
• Economic growth
stimulation
...
• Creates jobs
...
• Destroys manufacturing
jobs in wealthy,
advanced countries
...
• Companies move to
countries with fewer
labor and environment
regulations
...
Sovereignty and the WTO
“Under the new system, many decisions that affect
billions of people are no longer made by local or
national governments but instead, if challenged by
any WTO member nation, would be deferred to a
group of unelected bureaucrats sitting behind closed
doors in Geneva