1.1 Intro to IS Flashcards
Globalization
Process with global interconnectedness, interdependent, a spatial extension of human activities across cultures/economies/political systems
3 waves of globalizaton
400-1000AC: transcontinental spread of religions “world religions”
1500 - 1700: European colonization of the Americas
19th century: British and French empires colonization of Asia/Africa, defined current (under)developed countries
Waves of globalization are revolutions that
Combine communication and transportation (ex. Telegraph, telephone, steamship, internet)
Different definitions of globalization
Business: trade, capital, technology (knowledge)
General: people, culture, environment
Transition of superpowers: ex. China catching up to U.S., 2nd longest economy, largest exporter
Globalization of markets
The merging of historically distinct and separate national markets into one large
Things to keep in mind with market globalization
Continuous falling barriers to cross border trade and investment (good)
Standardization/differing tastes
Competitors may not change across nations (Apple vs. Samsung)
Benefits small-medium enterprises (SME) (make up 33% of export vale in U.S.)
Global market ≠ national market
Global products serve a universal need (ex.oil)
Digital economy allows companies to be available worldwide
Why do we globalize production
Outsource to take advantage of difference in cost and quality of factors of production
Disadvantage of outsourcing
Can increase value chain complexity (ex. Boeing)
What was early outsourcing primarily used for
Manufacturing
Impediments that prevent optimal dispersion of activities
Formal and informal barriers to trade
Barriers to foreign direct investment
Transportation costs
Political and economic risk
Challenge of coordinating globally dispersed supply chain
Institutions that manage and regulate the global marketplace
GATT: General agreement on tariffs and trade
WTO: world trade organization
IMF: international monetary fund
World Bank
United Nations
G20: group of 20
ISO: international standardization organization
International trade
When a firm exports goods to customers in another country
Foreign direct investment
When a firm invests resources in business activities in another country
Multinational enterprise
A company producing in 2+ countries
Globalization trends as GATT and WTO lowered banners to trade
International trade
Foreign direct investment
Multinational enterprises
Change in world order: ex-communist countries are given opportunity to export and invest, leads to more risky business
Obstacles to trading freely are decreasing due to more liberal economic policies, globalization’s cannot be avoided, sore countries pull back due to fear of risk
Drivers of globalisation
Communication
Internet
Transportation technology
Globalization of production
Globalization of markets
Role of technological change in globalization
Lowering trade barriers made globalization of markets and production theoretically possible
Technological change has made possible
How was communication a driver of globalisation
The development of the microprocessor was one of the big communication innovations since WW2
Moore’s law predicts that the power of microprocessors doubles and costs of production fall every 18 months
How was the internet a driver of globalisation
It acts as an equaliser, more than half the world’s population uses it, global e-commerce sales over 2.5 trillion dollars
How was transportation technology a driver of globalisation
Commercial jets, super freighters and containerisation have shrunken the globe
How was the globalisation of production a driver of globalisation
It has become more economical to produce in separate geographical locations, outsourcing to LEDCs (low economically developed countries)
How was the globalisation of markets a driver of globalisation
Cultural distances have been reduced and has bought some convergence of consumer tastes and preferences
The globalization debate
Many protests against it in the 1990s for fear of detrimental effects on living standards, wage rates, and the environment (ex. Outsourcing to cheaper places)
Arguments against globalization/labour policies/environment
Labour and environmental regulations increase manufacturing costs
Lack of regulation can lead to abuse
Firms move production to nations that do not have regulations
Shift of power away form national governments toward supranational organizations
Arguments for globalization/labour policies/environment
Tougher environmental regulations and stricter labour standards go hand in hand with economic progress
Free trade leads to less labour exploitation and less pollution
The power of supranational organizations is limited to what nations collectively agree to grant
These organizations exist to serve the collective interests of the member states
The ISO 26000 is a guidance on being socially responsible with the following principles:
Accountability
Transparency
Ethical behavior
Respect for stakeholder interests
Repeat for rule of law
Respect for international norms and behavior
Respect for human rights
