© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Global Business Today 8e by Charles W.L. Hill

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-2 Chapter 1 Globalization

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-3 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)

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-4 The Emergence of Global Institutions  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)  International Monetary Fund (IMF)  World Bank  United Nations (UN)

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-5 Drivers of Globalization Question: What is driving the move toward greater globalization? Two macro factors: 1.Declining trade and investment barriers 2.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

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-6 Drivers of Globalization Average Annual Percentage Growth in Volume of Exports and World GDP,

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-7 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

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-8 Changing World Output and World Trade Picture The Changing Demographics of World GDP and Trade

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-9 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

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Changing FDI Picture Percentage Share of Total FDI Stock,

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Changing FDI Picture FDI Inflows,

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part 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

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part 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

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part The Global Economy in the 21st Century Question: What will the global economy look like in the 21 st century  A more integrated global economy:  New opportunities for firms  But, political and economic disruptions can throw plans into disarray

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part The Globalization Debate Question: Is the shift toward a more integrated and interdependent global economy a good thing? Many 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

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part 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

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Managing in the Global Marketplace 1.Country differences require companies to vary their practices country by country 2.Managers face a greater and more complex range of problems 3.International companies must work within the limits imposed by governmental intervention and the global trading system 4.International transactions require converting funds and being susceptible to exchange rate changes