Globalization and Business

By Professor Allan

Globalization and Business What is Globalization?• Globalization is the process of making something known

worldwide. For example, here in the United States, globalization is everywhere. You can't walk a couple of blocks without seeing restaurants that offer foods from Italy (pizza), Japan (sushi), or even Mexico (tacos!).  

• There are three important features or aspects of globalization, which can be seen as follows:

1. The increasing importance o f international trade2. More and more multinational companies 3. More and more businesses thinking globally about their

strategy.

Globalization of Production

Vizio flat panel TV is… designed in a small office in California assembled in Mexico

From…panels made in South Koreaelectronic components made in Chinamicroprocessors made in the U.S.

Globalization of Markets

• In the past, each country had its own companies in many industries and its own products.

Today everyone knows…• Nintendo• Starbucks• Coca-Cola• Ikea• McDonald’s • Samsung

Factors Affecting Globalization

There are many factors which have contributed to the growth of globalization, such as:

• technological change, • the reduction of transportation costs, • consumer taste changes, • and the growth of new market and competition…

Factors Contributing to Globalization

Technological change:More powerful computers and internet have allowed the easy transfer of data, which plays an important role in speeding up the globalization.

The reduction of transportation costs:Air and land transportation have improved the developing environment for globalization.

Consumer taste change: More and more consumers today are willing to buy foreign or new products for fashion or new styles.

The growth of new markets: New markets have been opened up in countries like former Eastern European countries and China. The growth of new markets has increased the trend of globalization.

Competition : More and more fierce competition has forced businesses to seek opportunities in the world markets. To compete successfully, businesses today must develop a global strategy.

The Effects of Globalization on Business

Increasing competition - More and more foreign businesses have entered local markets so the competition has been intensified.

Meeting consumer needs in more effective ways - Consumers have choices for products and services. They can buy the best products for the best prices.

Being able to enjoy economies of scale - Businesses can enjoy as large scale of production in the whole world. Their production costs can thus be reduced.

Increasing mergers or joint-development opportunities in the world market - Businesses have more partners worldwide. They can join together to produce goods and services or to penetrate foreign markets.

Multinational Companies and Their Influences

What is a multinational company? • A multinational company is an organization which owns or

controls production or services facilities outside the country in which it is based. This means that they do not just export their products abroad, but actually produce their products in other countries.

• It is commonly understood that a company is called a multinational company provided it operates in more than four countries.

• Examples of multinational companies are many such as: HSBC, Toyota, Honda and others.

The Globalization Debate

The Advantages of Globalization:• Supporters of globalization argue that it has the potential to make this

world a better place to live in and solve some deep-seated problems like unemployment and poverty. The marginal are getting a chance to exhibit in the world market.

• It promotes global economic growth, creates jobs, makes companies more competitive, and lowers prices for consumers. It also provides poor countries, through infusions of foreign capital and technology, with the chance to develop economically.

• There is cultural intermingling. Each country is learning more about other cultures.

The Globalization Debate

The Disadvantages of Globalization• Multinational corporations are accused of social injustice, unfair working

conditions (including slave labor wages and poor living and working conditions), as well as a lack of concern for the environment, mismanagement of natural resources, and ecological damage.

• Globalization makes it easier for rich companies to act with less accountability. They also claim that countries’ individual cultures are becoming overpowered by Americanization.

• Globalization has led to exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods.