Week 1: Globalization, Sept. 12

Question 1

globalization of markets

Answer 1

• “merging of historically distinct and separate national markets into one huge global marketplace”
• facilitated by offering standardized products
• do not have to be big company to participate
  
  • firms w less than 500 employed account for ~30% world trade by value
• opportunities to expand internationally and threats to your home market

Question 2

globalization of production

Answer 2

“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 (labour, energy, land, and capital)”

• companies hope to lower their overall cost structure and/or improve the quality or functionality of the product offering; increasing their competitiveness
• host governments hav e stake in the successful establishments of a MNE’s operations

Question 3

drivers of globalization

Answer 3

• tech advancement
• declining trade and investment barriers (politics and regulations)
• economic change

Question 4

drivers of globalization: tech change

Answer 4

• made the globalization of markets and production a reality
• advances have occurred in
  -microprocessors and telecom
  
  • internet
  • transportation tech
    
    • transportation costs are about 20% of the 1930 cost

Question 5

drivers of globalization: politics and regulations

Answer 5

• emergence of global institutions
  
  • General Agreement on Tariffs and Trade (GATT), World Trade Agreement (WTO), International Monetary Fund (IMF)

Question 6

Four important trends of the changing global economy

Answer 6

four things that are changing
- world output and world trade picture
- foreign direct investment picture
- nature of the multinational enterprise
- the changing world order
- new in 2020: issues from pandemic

Question 7

the changing nature of globalization: foreign direct investment

Answer 7

• another key aspect of the global economy is FDI
• FDI occurs when a firm invest directly in facilities to product and/or market a product in a foreign country
  
  • once a firm undertakes FDI, it becomes a MNE
• some first are more FDI focused, some are more trade focused, but most global firms are engaged in both
• FDI annual flows increased enormously in the last 40-50 years, but are also very volatile

Question 8

multinational enterprise

Answer 8

any business that has productive activities in two or more countries