Chapter 2 - Globalization of Markets

Question 1

What is globalization?

Answer 1

the interconnectedness of national economies and the growing interdependence of buyers, producers, suppliers, and governments around the world

Question 2

Phase of Globalization

Answer 2

• First phase: introducing railroads and ocean transport
• second phase: rise of electricity and steel production
  third phase - bretton woods conference, agreement on Trade (GATT), WTO
• fourth phase - state enterprises, revolution in info, transport & technology

Question 3

What are some drivers of market globalization?

Answer 3

1) worldwide reduction of barriers to trade and invest
2) market liberalization and adoption of free markets
3) industrialization, modernization, economic development (living standards rose, low-value economies changed to high-value)
4) Integration of world financial markets (banks facilitating world transactions)
5) advances in technology (firms interacting with suppliers/customers worldwide and cheaply)

Question 4

What is ICT?

Answer 4

• Information and Communications Technology
• made to optimize performance for MNE’s and other firms to work globally

Question 5

What are the dimensions of market globalization?

Answer 5

1) Integration and independence of national economies (firms’ collective international activities)
2) rise of regional economic integration blocs (expansion of free trade areas)
3) growth of global investment and financial flows
4) Convergence of buyer lifestyle and preference
5) Globalization of production ( firms deciding on low-labor countries to produce)
6) Globalization of services (banking, hospitality, retailing are rapidly internationalizing)

Question 6

Societal Consequences of Market Globalization

Answer 6

1) Contagion - 2008 financial crisis and global recession with housing communities, people couldn’t repay debts
2) Loss of national sovereignty - a belief that MNE was interfering with gov. control of economy
3) Offshoring and the flight of jobs - as production takes place abroad, many lost jobs
4) effect on the poor - MNE pay low wages and exploit workers
5) Effect on the natural environment -generate pollution, habitat destruction, and other environmental harm
6) Effect on national culture -traditional norms, values, and behaviors may homogenize over time

Question 7

What is a value chain?

Answer 7

a sequence of value-adding activities within the firm processing, developing, producing, and marketing