1. Global Business Today 7e
by Charles W.L. Hill

2. Chapter 1
Globalization

3. What Is Globalization?
Question: What is globalization?
Globalization - the trend towards a more integrated global economic system
Globalization of markets - the merging of historically distinct and separate national markets into one huge global marketplace
Globalization of production - 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 (labor energy, land, and capital)

4. The Emergence of Global Institutions
manage, regulate, and police the global market place
promote the establishment of multinational treaties to govern the global business system
Notable global institutions include
the World Trade Organization (WTO)
the International Monetary Fund (IMF)
the World Bank
the United Nations (UN)

5. Drivers of Globalization
Question: What is driving the move toward greater globalization?
Two macro factors:
declining trade and investment barriers
technological change
International trade occurs when a firm exports goods or services to consumers in another country
Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country

6. Drivers of Globalization
Figure1.1: Growth in World Merchandise Trade and Production,

7. Changing World Output and World Trade
Question: How has world output and world trade changed over the last 50 years?
In the 1960s:
the U.S. dominated the world economy and the world trade picture
the U.S. dominated world FDI
U.S. multinationals dominated the international business scene
about half the world-- the centrally planned economies of the communist world-- was off limits to Western international business
Today, much of this has changed

8. Changing World Output and World Trade
Table 1.2: The Changing Demographics of World GDP
and Trade

9. Changing Foreign Direct Investment
Question: How has the foreign direct investment picture changed over the last 50 years?
The share of world output generated by developing countries has been steadily increasing since the 1960s
The stock of foreign direct investment (total cumulative value of foreign investments) generated by rich industrial countries is declining
Cross-border flows of foreign direct investment are rising
The largest recipient of FDI is China

10. Changing Foreign Direct Investment
Figure 1.2: Percentage Share of Total FDI Stock,
1980 – 2008

11. Changing Foreign Direct Investment
Figure 1.3: FDI Inflows,

12. The Changing Multinational Enterprise
Question: What is a multinational enterprise?
A multinational enterprise is any business that has productive activities in two or more countries
Since the 1960s:
there has been a rise in non-U.S. multinationals
there has been a rise in mini-multinationals

13. The Changing World Order
Question: Why is the changing world order important for firms?
The collapse of communism in Eastern Europe
new export and investment opportunities
Economic development in China
huge opportunities despite continued Communist control
Free market reforms and democracy in Latin America
new markets and new sources of materials and production

14. The Global Economy in the 21st Century
Question: What will the global economy look like in the 21st century
A more integrated global economy
new opportunities for firms
but, political and economic disruptions can throw plans into disarray

15. The Globalization Debate
Question: Is the shift toward a more integrated and interdependent global economy a good thing?
Many experts believe that globalization is promoting greater prosperity in the global economy, more jobs, and lower prices for goods and services
Others feel that globalization is not beneficial

16. Managing in the Global Marketplace
Question: What does the shift toward a global economy mean for managers within an international business?
Managing an international business (any firm that engages in international trade or investment) differs from managing a domestic business in four key ways

17. Managing in the Global Marketplace
Countries differences require companies to vary their practices country by country
Managers face a greater and more complex range of problems
International companies must work within the limits imposed by governmental intervention and the global trading system
International transactions require converting funds and being susceptible to exchange rate changes