Unit 1.9 Globalization
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Transcript of Unit 1.9 Globalization
+Unit Objectives:
Understand the meaning of globalization and the factors contributing to it
Analyze the role played by multinationals in the global business environment
Evaluate the impact of multinational companies on the host country
Explain what regional trading blocs are and their impact on a business of a country that is a member of a regional economic group/bloc
+Globalization
Is the integration of the world’s economies in terms of economics, sociology and politics.
For businesses, this means an attempt by firms to efficiently produce and sell the same products simultaneously in different countries.
With globalization, economic and political decisions taken in one region of the world will affect those in other parts of the world also.
The growing trend towards worldwide markets in products, capital and labor, unrestricted by barriers.
+Key features of globalization that have an impact on business strategy:Increased international trade as
barriers to trade are reduced
Growth of multinational businesses in all countries as there is greater freedom for capital to be invested from one country to another
Freer movement of workers between countries
+Opportunities and threats of globalization
Increases the level of competition
Meeting customer expectations and needs becomes increasingly more demanding
Businesses that are able to build a global presence can benefit from economies of scale
Multinationals have greater choice of location of their production facilities
Businesses have more choice in their expansion plans (mergers, acquisition and joint ventures)
Multinationals and e-commerce businesses benefit from increased customer base
+Globalization
http://www.youtube.com/watch?v=LtmvksvSvtc
+Multinational Corporations (MNCs) Is an organization that operates in two or more
countries
Examples: Coca-cola, Dell, Exxon, Microsoft, Nike, Nokia, Samsung, Toyota
Reasons why business strive to become MNCs: Increased customer base = increase sales Benefit from economies of scale as production levels
increase Avoid protectionist policies Cheaper production costs Spread risks Can trade efficiently with improvement in technology &
high speed travel
+Multinational Corporations (MNCs) Problems of expansion overseas:
Lack of knowledge and experience may create problems for firms operating in new markets
Storage, transportation and distribution costs may increase
External factors (beyond control of the business) such as legal restrictions, language barriers and cultural differences
Political and economic conditions may limit MNCs
Less developed infrastructures such as communication and road network, limiting efficiency
+MNC’s effect on host countries
Create jobs
Increase in GDP by creating consumption expenditure
Increase in national income thereby improving its standards of living
Introduction of new skills and technology in production processes (technology transfer) creates efficiency
MNCs competition lead to greater efficiency to the benefit of domestic customers
Capable of causing unemployment as they can pose a threat to domestic businesses
+Regional trading blocs (RTB) RTB refers to a group of countries that agree
to freer international trade with each other, through the removal of trade barriers on the movement of goods, services, labor and capital.
Trade barriers such as: tariffs and quotas Tariffs – tax on imports Quotas – quantity limits on the sale of
foreign imports
World Trade Organization (WTO) – deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.
+Trade Blocs
http://www.youtube.com/watch?v=YDUq0DINhYk
+Additional Resources:
http://www.ibbusinessandmanagement.com/19-globalisation.html