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.

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.

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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.

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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.

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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.

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Drivers of Globalization

Average Annual Percentage Growth in Volume of Exports and World GDP, 1950-2010
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.

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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.

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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.

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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.

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Changing FDI Picture

Percentage Share of Total FDI Stock, 1980 - 2010

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.

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Changing FDI Picture

FDI Inflows, 1988 - 2010

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may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

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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.

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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.

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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

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.

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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.

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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.

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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
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.

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