Introduction to Globalization

Chapter IPart I

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Objective of SessionTo define globalization and international

business and show how they affect each otherTo discuss the major advantages and

disadvantages of globalizationTo understand why companies engage in

international business

The GlobeContinents: Asia, Africa, N America, S

America, Europe, Oceania,Antartica..en_continents.gif

Continents are landmasses divided by oceans..

Oceans.. Pacific, Atlantic, Indian, Southern (Antarctic), and Arctic Oceans..world-oceans-map.jpg

GlobalizationDerived from the word globalize,

which refers to ‘emergence of an international network of social and economic systems’

One of the earliest known usages of the term as the noun was in 1930 in a publication entitled Towards New Education where it denoted a holistic view of human experience in education

Sociologists Martin Albrow and Elizabeth King define globalization as:…all those processes by which the people of the world are incorporated into a single world society

In ‘The Consequences of Modernity’, Anthony Giddens used following definition

‘The intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice

versa’

Globalization

Definition:‘emergence of interdependent relationships among people from different parts of a world’

Set of relationshipsBetween different nations

Globalization related relations…Aid to a poor countryFashion show paegentFootball matchLeisure tripYour SIP

How Globalized are youGlobalization_ You're living IT_(360p).flv

Global brands in

India

Indian brands

in global

business

Globalization:

Factors contributing to GlobalizationIncreased used of technologyLiberalization of cross-border trade and

resource movementsDevelopment of services that support

international businessGrowing consumer pressuresIncreased global competitionChanging political situationsExpanded cross-national cooperation

The Criticisms of Globalization

Threats to national sovereigntyGrowth and environmental stressGrowing income inequality

Pros and Cons of Globalization_(360p).flv

AdvantagesAccess to multiple marketsCollaborative decision makingCultural awarenessSwift spread of informationTolerance upgradation

Disadvantages of GlobalizationInequality of incomeAmericanizationSocially unequal distribution of world

resourcesCommodification of laborLess accountability for rich countries in name

of developmentSpread of deadly diseasesInhumane use of PoW and child laborHuman trafficking

Thus strong control and monitoring requiredWTOWBIMFUN

WTO: World Trade Organization

WTO replaced GATT as the organization overseeing the multilateral trading system.

Location: Geneva, SwitzerlandEstablished: 1 January 1995 as a new avatar of GATTCreated by: Uruguay Round negotiations (1986-94)   Membership:  157 countries on 24 August 2012Secretariat staff:  640Head:  Pascal Lamy (Director-General)

Functions:• Administering WTO trade agreements• Forum for trade negotiations• Handling trade disputes• Monitoring national trade policies• Technical assistance and training for developing countries• Cooperation with other international organizations 

The World Bank is an international financial institution that provides loans to developing countries for capital programs

The World Bank's official goal is the  ‘reduction of poverty’.

According to the World Bank's Articles of Agreement (as amended effective 16 February 1989), all of its decisions must be guided by a commitment to promote foreign investment, international trade, and facilitate capital investment

World Bank

IMF The organization's stated objectives are to promote international economic

cooperation, international trade, employment, and exchange rate stability,

by making financial resources available to member countries to meet balance of payments needs

UNThe United Nations is an international organization whose stated aims arefacilitating cooperation in international

law, international security, economic development, social progress, human rights, and achievement of world peace.

The UN was founded in 1945 after World War II to replace the League of Nations, to stop wars between countries,and to provide a platform for dialogue.

It contains multiple subsidiary organizations to carry out its missions.

Definition of International Business

All commercial transactions—including sales, investments, and transportation—that take place between two or more countries

Reasons That Firms Engage in International Business

Expanding salesAcquiring resourcesMinimizing risk

Modes of Operation in International Business

Merchandise exports and importsService exports and imports

Tourism and TransportationService Performance: banking, insurance,

engineering, management, interest and dividend

Asset UseInvestments: FDI(controlling interest) and

FII(non controlling interest)

Types of International Organizations

Collaborative arrangementsStrategic AllianceMultinational Enterprise (MNE)

Collaborative ArrangementsUsed to define:Companies that work as joint ventures,

licensing agreements, management contracts, minority ownership and long term contractual arrangements

New alliance

Strategic AllianceSame as collaborative agreement but often

reserved to refer either to an agreement important to one partner

Or an agreement that does not involve joint ownership

Joint work but identity apart

Multinational Enterprise (MNE)It takes a world wide view..And is willing to consider market and

production locations anywhere in the world.