Bafin 102 - CH1 Globalization PDF

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INTERNATIONAL BUSINESS AND TRADE (BAFIN 102)CHAPTER 1: WHAT IS GLOBALIZATION?CASE #1: LEGAL OUTSOURCINGWHAT IS GLOBALIZATION? Globalization refers to the shift toward a more integrated and interdependent world economy. Globalization has several facets, including Globalization of Markets and Globaliz...

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INTERNATIONAL BUSINESS AND TRADE (BAFIN 102) CHAPTER 1: WHAT IS GLOBALIZATION?

CASE #1: LEGAL OUTSOURCING

WHAT IS GLOBALIZATION? •

Globalization refers to the shift toward a more integrated and interdependent world economy.

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Globalization has several facets, including Globalization of Markets and Globalization of Production

GLOBALIZATION OF MARKETS •

Globalization of Markets refers to the merging of historically distinct and separate national markets into one huge global marketplace.

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Citigroup, Coca-cola, Sony Playstation, Mcdonald’s, Starbucks and IKEA are examples of converging tastes and preferences of different customers world wide.

GLOBALIZATION OF PRODUCTION: •

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.

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Factors of production include labor, energy, land and capital.

WHAT IS THE PURPOSE OF GLOBALIZATION OF PRODUCTION? •

By doing this, companies hope to lower overall cost structure or improve quality of functionality of their product offering.

GLOBAL INSTITUTIONS •

As markets globalize, institutions are needed to help manage and regulate the global marketplace.

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Over the past half century, institutions like the World Trade Organization (WTO), the International Monetary Fund (IMF), the World Bank and United Nations (UN) were created to help perform these functions.

INTERNATIONAL BUSINESS AND TRADE (BAFIN 102) WORLD TRADE ORGANIZATION •

The WTO is primarily responsible for policing the world trading system.

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It makes sure that the nation-state adhere to the rules laid down in the trade treaties signed by the WTO member states.

THE IMF AND THE WORLD BANK •

The International Monetary Fund (IMF) was established to maintain order in the international monetary system.

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The World Bank, on the other hand, was set up to promote economic development

THE UNITED NATIONS •

Established in October 24, 1945 by 51 countries committed to preserving peach through international cooperation and collective security

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The UN has four purposes: 1. To maintain international peach and security 2. To develop friendly relations among nations 3. To cooperate in solving international problems and in promoting respect for human rights 4. To be a center for harmonizing the actions of nations

DRIVERS OF GLOBALIZATION •

Two (2) macro factors underlie the trend toward greater globalization: 1. Declining Trade and Investment Barriers 2. Technological Change

INTERNATIONAL BUSINESS AND TRADE (BAFIN 102) TRADE BARRIERS: •

The typical aim of trade barriers is to protect domestic industries from foreign competitions.

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Examples of trade barriers include natural barriers like distance and language, tariff barriers or taxes on imports, and non-tariff barriers like import quotas

THE ROLE OF TECHNOLOGICAL CHANGE •

The lowering of trade barriers made globalization theoretically possible.

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The world has seen major advances in communication, information, processing and transportation that made globalization a tangible reality

THE GLOBALIZATION DEBATE •

One of the great economic debates of all time revolves around the free-trade-versus-protection controversy.

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Is globalization beneficial or harmful to the economy? Why do most economists favor free trade?...