1. Globalization and International Business Lecture 1

2. Prologue
Era #1: 15th-18th Century. Exploration by European Nations- invasion in pursuit of raw materials/resources for industry development
Era#2: 18thy-20th Century. Industry Revolution and rapid growth of Manufacturing Industries. Migrations of labor, Steamships, Telegraph, Railways, Exporting, Dutch East India Company, Japan, Korea
Era #3: 20th Century- Old Economy and Business
Phase 1: s Oil Shock OPEC sets Oil price
Rise of Japan, Germany
Phase 2: 1980s-1990s. China’s World Manufacturing and India’s IT Business Processing
Era#4. Carry Over from 20th Century into 21st Century. New Economy
Phase 1: Giant Merger, Country Dependency, Outsourcing
Phase 2: World Trade Center and USA Unrest
Phase 3: 2008 Recession
Phase4:Emerging Markets. New Giants

3. Globalization Integration of Economic& Markets Across Cultures
“I do not want my house to be walled in on all sides and my windows to be closed. Instead, I want the cultures of all lands to be blown about my house as freely as possible. But I refuse to be blown off my feet by any”- Mahatma Gandhi
My Cousin sent me a beautiful Cardigan from London, UK. The label on the sweater says, “Made in Bangladesh. But it’s quite likely the the yarn came from Korea or Egypt or Pakistan and buttons from Japan, Zippers from Korean and China, and finished, inspected and packed in Sri Lanka by an Indian Inspecting company who has outsourced a Bangladeshi company to ship to ASDA, UK”
Globalization is leaving a lasting impression. While not perfect, globalization has been extremely successful. It has created millions of jobs, raised millions of jobs, raised millions out of poverty and improved the quality of life in countries that once were considered incapable of contributing to the world economy. Indeed, the benefits of globalization and global outsourcing are far reaching. With shared interests in building robust markets, generating greater profits for all and building stronger relationships, East and West are more interdependent upon one another than before. Globalization has made the world a borderless ‘one village’

4. Arguments for Globalization
Promotes intense competition among multinational corporations (MNCs) and also makes local companies to be more competitive internationally.
Makes governments more aware of the global impact of poor environmental policy.
Promotes ethical behavior by MNCs in the area of wages, working conditions and pollution abatement, since they are vulnerable to global media coverage of their operations, and fear loss of market share resulting from negative publicity.
Lifts all boats in the water – three billion people have been already raised out of poverty due to globalization.
Improves the condition of women and reduces the wage gap between developed and developing nations.
Creates more jobs for a nation overall, since it is more than offsets the loss of jobs in less competitive sectors by the creation of jobs in more competitive sectors.
Advances cross-cultural understanding by exposing people all over the world to foreign books and magazines, movies, television programs, and news.

5. Arguments Against Globalization
Triumph of giant companies who have the political and financial power to drive small rivals out of business.
Destroys the environment by promoting environmentally unsustainable technologies.
Often leads to a “race to the bottom” in labor and environmental standards as poor countries compete with each other in an attempt to attract
MNCs by relaxing laws and lowering standards in order to get jobs for their citizens.
Destroys jobs in wealthy and advanced economies as MNCs close plants in such countries and open them in developing countries where wages are lower.
Widens the gap between rich and poor both within and between nations.
May lead to political, economic, and cultural Americanization of the world.
Shifts power from national governments towards undemocratic supranational institutions (e.g., the World Trade Organization (WTO), the World Bank, the International Monetary Fund (IMF), the European Union (EU), etc.)

6. Drivers of Globalization
Globalization Potential
Competitive Drivers
Technology Drivers
Government Drivers
Market and Cost Drivers

7. Globalization Drivers
Global Market Drivers
Common customer needs, Expanding global customers, Global market channels, Marketing transfers and global branding
Cost Drivers
Economies of Scale, Sourcing, Production factor, Development cost
Government Drivers
Role of GATT/WB/WTO in trade liberalization
Trade barriers and investment policies, standard policy

8. Definitions..
International Business is business whose activities are carried out across national borders (not only international trade and foreign manufacturing but also the growing service industry in areas such as transportation, tourism, advertising, construction, retailing, wholesaling, and mass communication)
Foreign Business denotes the operations of a company outside its home or domestic market; many refer to this as business conducted within a foreign country. This term sometimes is used interchangeably with international business
A multidomestic company (MDC) is an organisation with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences
A global Company (GC) is an organisation that attempts to standardise and integrate operations worldwide in most or all functional areas
An international company (IC) is a global or multidomestic company
Foreign Direct Investment and Exporting Direct investments in equipment, structures, and organisation in a foreign country at a level that is sufficient to obtain significant management control; does not include mere foreign investment in stock markets
Exporting the transportation of any domestic good or service to destination outside a country or region; the opposite of importing, which is the transportation of any good or service into a country or region, from a foreign origination point
Home Country and Host Country The mother company that invests and operates in another country

9. How to Manage Global Organization
Ethnocentric : Home office people put in charge of key international positions.
Polycentric : Local nationals placed in key positions and allowed to appoint and develop their own people.
Regiocentric ; Depends on local managers from a particular geographic region to handle operations in and around that area.
Geocentric: Attempt to integrate diverse regions of the world through a global approach to decision making. Subsidiary and headquarters managers are treated on equal terms.

10. Forces of Globalisation
Political there is a trend toward the unification and socialisation of the global community. Preferential trading arrangements, such as the North American Free Trade Agreement and the European Union, that group several nations into a single market have presented firms with significant marketing opportunities. Many have moved swiftly to gain access to the combined markets of these trading partners, either through exporting or by producing in the area
The progressive reduction of barriers to trade and foreign investment by most government, which is hastening the opening of new markets by international firms that are both exporting to them and building production facilities in them;
The privatisation of much of the industry in formerly communist nations and the opening of their economies to global competition
Technological Advances in computers and communications technology are permitting an increased flow of ideas and information across borders, enabling customers to learn about foreign goods. Cable and satellite TV systems in Europe and Asia, for example, allow an advertiser to reach numerous countries simultaneously, thus creating regional and sometimes global demand. Global communications networks enable manufacturing personnel to coordinate production and design functions worldwide so that plants in many parts of the world may be working on the same product
The internet and network computing enable small companies to compete globally because they make possible the rapid flow of information regardless of the physical location of the buyer and seller

11. Forces [contd.]
Market As companies globalise, they also become global customers. For years, advertising agencies established offices in foreign markets when their major clients entered those markets to avoid having a competitor steal the accounts. Finding the home market saturated also sends companies into foreign into foreign markets
Cost Economies of scale to reduces unit costs are always a management goal. One means of achieving them is to globalise product lines to reduce development, production, and inventory costs. The company can also move production or other parts of the company’s value chain to countries where the costs are lower. Dramatic reductions in the cost of generating and transmitting information due to innovations in computing and telecommunications, as well as the decline in transportation costs, have facilitated this trend toward relocating activities worldwide
Competitive Competition continues to increase in intensity. New firms, many from newly industrialised and developing countries, have entered world markets in automobiles, computers, and electronics, for example. Companies are defending their home markets from competitors by entering the competitors’ home markets to distract them. Many firms that would not have entered a single country because it lacked sufficient market size have established plants in the comparatively larger trading groups (European Union, ASEAN)
THE RESULT OF THIS RUSH TO GLOBALISATION HAS BEEN AN EXPLOSIVE GROWTH IN INTERNATIONAL

12. Globalization affects all parts of the world –
not always positively…!

13. The Globalization Debate
Con
Destroys manufacturing jobs in wealthy nations
Wage rates of unskilled in advanced countries decline
Companies move to countries with fewer labor and environment regulations
Loss of sovereignty
Homogenized cultures
Pro
Lower prices for goods and services
Economic growth
Increase in consumer income
Creates jobs (for many)
Countries specialize in production of goods and services that are produced most efficiently
The past quarter century has seen rapid changes in the global economy. Barriers to the free flow of goods, services, and capital have been coming down. The volume of cross-border trade and investment has been growing more rapidly than global output, indicating that national economies are becoming more closely integrated into a single, interdependent, global economic system. As their economies advance, more nations are joining the ranks of the developed world. But it is always hazardous to use established trends to predict the future. The world may be moving toward a more global economic system, but globalization is not inevitable. Countries may pull back from the recent commitment to liberal economic ideology if their experiences do not match their expectations. Also, greater globalization brings with it risks of its own. This was starkly demonstrated in 1997 and 1998 when a financial crisis in Thailand spread first to other East Asian nations and then in 1998 to Russia and Brazil. Ultimately the crisis threatened to plunge the economies of the developed world, including the United States, into a recession. This slide outlines some of the arguments from the great globalization debate.

14. Unintended Consequences of Market Globalization
Loss of national sovereignty
Power shifts to MNEs and supranational organizations; concentration of power by MNEs leads to monopoly
Offshoring and the flight of jobs
Globalization causes dislocation of jobs; firms shift manufacturing abroad in order to avoid workplace safety and health regulations
Effect on the poor
Benefits of globalization are not evenly distributed
Effect on the natural environment
MNEs fail to protect the environment
Effect on national culture
Globalization results in loss of national cultural values and identity

15. Fun Reading- Ze Langadzh of ze Urop
The European Commission has just announced an agreement whereby English will be the official language of the European Union rather than German, which was the other possibility. As part of the negotiations Her Majesty's Government conceded that English spelling had some room for improvement and has accepted a 5 year phase-in plan that would be known as "Euro-English".
In the first year, 's' will replace the soft 'c'. Sertainly, this will make the sivil servants jump with joy. The hard 'c' will be dropped in favour of the 'k'. This should klear up konfusion and keyboards kan have one less letter.
There will be growing publik enthusiasm in the sekond year when the troublesome 'ph' will be replased with the 'f'. This will make words like 'fotograf' 20% shorter.
In the third year, publik akseptanse of the new spelling kan be expekted to reach the stage where more komplikated changes are possible. Governments will enkourage the removal of double leters which have always been a deterent to akurate speling. Also al wil agre that the horibl mes of the silent 'e' in the languag is disgrasful and it should go away.
By the 4th yer peopl will be reseptiv to steps such as replasing 'th'with 'z' and 'w' with 'v'. During ze fifz yer, ze unesesary 'o' be dropd from vords kontaining 'ou' and similar changes vud of kors be aplid to oza kombinations of letas.
After ziz fifz yer ve vil have a rali sensibl riten styl. Zer vil be no mor trubl or difikultis and evrivun vil find it ezi tu anderstand ech oza. Ze drem of an united Urop vil finali kum tru!