Chapter 1 Flashcards
fewer self-contained ++++++ with high barriers to trade and investment
national economies
a more ++++++++ global economic system
integrated
refers to the trend towards a more
integrated global economic system (and some would say a more socio-political integration as well)
Globalization
Two key facets of globalization are:
the globalization of markets
the globalization of production
the merging of
historically distinct and separate national
markets into one huge global marketplace
Globalization of markets
In many markets today, the tastes and
preferences of consumers in different
nations are converging upon some
global norm
- 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
Globalization of production
(labor, energy, land, and capital)
factors of production
Goal of Globalization of Production
: lower overall cost structure or improve
the quality or functionality of their product and
gain competitive advantage
Global institutions are to:
manage, regulate, and police the global
market place
promote the establishment of multinational
treaties to govern the global business
system
- polices world
trading system and ensures nations adhere to the
rules established in treaties
World Trade Organization
maintains
order in the international monetary system
International Monetary Fund
promotes economic development
the World Bank
maintains international
peace and security, develops friendly relations
among nations, cooperates in solving international
problems and promotes respect for human rights,
and is a center for harmonizing the actions of
nations
The United Nations
What are the drivers of globalization?
Declining trade and investment
barriers; Technological change; The Changing World Order; Changing Demographics of the Global Economy; Changing Foreign Direct Investment Picture
; The Changing Multinational Enterprise (MNEs or MNCs); Changing World Output and World Trade Picture
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
Arguments against globalization
free trade encourages firms from advanced nations to move manufacturing facilities offshore to less developed countries with lax environmental and labor regulations
Jobs in advanced countries are lost
economic power is shifting away from national governments and toward supranational organizations such as the WTO, the European Union (EU), and the UN
gap between rich and poor has gotten wider and the benefits of globalization are not shared equally
Arguments for globalization
while some jobs may be lost, the economy as a whole is better off
tougher environmental regulation and stricter labor standards reflect economic progress
the power of these organizations is limited to whatnation-states collectively agree to grant
actions of governments have made limited economic improvement in many countries
Managing an international business differs
from a domestic business in four key ways:
- Differences require companies to vary practices
country by country - Managers face a greater and more complex range of
problems - Companies must work within the limits imposed by
governmental intervention and the global trading
system - International transactions require converting funds and
being susceptible to exchange rate risks
How much foreign exchange transactions occur daily?
4 Trillion
How much goods and services were sold accorss national boarders in 2011?
18.2 T goods 4.2 T services
What are two factors that have led to the globalization of markets?
Falling barriers to cross-border trade and and the convergence on a global norm (preferences)
How much of US Exports came from small businesses?
34%
The most global markets trade in what type of good?
Commodities and industrial goods
What are the factors of producton?
labor energy land capital
Early outsourcing activities were originally linked to _________ type, but now due to the internet even _________ activities can be outsourced
Manufacturing; Service
Robert Reich argues: “Increasing, the outsourcing of productive activities to different supppliers results in the creation of products that are global in nature. that is _____
Global Products
What are some impediments to global trade?
formal and informal barriers to trade between contries, barriers to foreign direct invenstment, transport costs, and issues associated with with economic and political risk
International treaty that committed signatories to lowering bariers in the free flow of goods accross national boarders and led to the WTO
General Agreement on Tariffs and Trade (GATT)
What is the legacy of the WTO
Helping globalization of markets and production become possible
What is the IMF
International Institution set up to maintain order in the international monetary system
What is the World Bank?
INternational institution set up to promote general economic developpement in the world’s poorest nations
What is G20
Finance ministers and central bank governors of the 19 largest economies in the world (and one from the EU and European Central Bank)
2 Macro factors that undrlie the trend toward greater globalization
Decline of barriers in the free flow of goods, services and capital, and technological change
Two main advances in technologo
Communication have become cheaper and easier (Telecomm and WWW) and transportation has become cheaper
What caused lower transportation costs?
Containerization and cargo ships and Commercial jet aircraft
Implications for the globalization of production (tech change):
Lower transportation costs make a geographically
dispersed production system more economical and
allow firms to better respond to international
customer demands
Low cost transportation enable firms to create
global markets, and facilitate the movement of
products from country to country promoting a
convergence of consumer tastes and preferences
Low cost communications networks help create
electronic global marketplaces
Changing Demographics of the Global Economy
Declining (developed) vs Rising (emerging mkt) populations
Changing Foreign Direct Investment Picture
Money shifting from developed economies to developing
The Changing Multinational Enterprise (MNEs or MNCs)
More non-U.S. multinationals and mini multinationals
What is an MNE
A firm that owns business operation in more than one country
The Changing World Order
Collapse of communism, rise of China, Latin America
Changing World Output and World Trade Picture
Shift to non-U.S. shares of global economy
In the 1960s:
the U.S. dominated the world economy and
world trade and 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
In the 1960s, the US produced ______ world manufacturing output; _______ in 2008
40.3%; 20.7%
What did countries start removing trade barriers
After WWII (GATT)
what lowered the cost of global
communication and the cost of coordinating and
controlling a global organization
microprocessor
The share of world output generated by
developing countries has been steadily _______ since the 1960s
increasing
(total
cumulative value of foreign investments)
Stock of foreign investments
The largest recipient of FDI
is China
