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GOBAL BUSINESS MANAGEMENT

2/28/2013 IMRAN KHAN Department of ManagementSciences

1


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LEARNING OBJECTIVES

To understand the globalization

concept

To understand factors responsible forglobalization

To get an overview of global economy

To find out characteristics of global

companies and their role

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GLOBALIZATION

What is Globalization?Definition:Joseph Stiglitz, an economist and winner of theNobel Prize defines Globalization as follows:

Globalization "is the closer integration of thecountries and peoples of the world ...brought aboutby the enormous reduction of costs oftransportation and communication, and the

breaking down of artificial barriers to the flows ofgoods, services, capital, knowledge, and peopleacross borders." (from Globalization and itsDiscontents)



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EXCHANGE OF SERVICES

International services are defined as

transactions by private individuals and/or

corporations that cross national boundaries.

Aviation

Banking

Communication

Insurance

Shipping

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GLOBAL INTEGRATION

FORMS OF INTEGRATION:

NEGATIVE INTEGRATIONBreak down of trade barriers or

protective barriers

POSITIVE INTEGRATIONIt refers to the standardization of

economic laws and policies



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DIRECTION OFGLOBALIZATION

The globalization of markets

refers to the merging of

historically distinct and separate

national markets into one hugeglobal marketplace.

GLOBALIZATION

OF MARKETS:

GLOBALIZATIONOF PRODUCTION:

NATIONAL

MARKET

PAKISTAN

REGIONALMARKET

SOUTH ASIA

GLOBALMARKET

GLOBAL



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GLOBALIZATION OF MARKETS

CHARACHETRISTICS:

MERGER OF MARKETSFALL OF TRADE BARRIERSHOMOGENITY IN CONSUMER TASTE AND NEEDSRIVALRY OF BIG COMPANIES

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GLOBALIZATION OF PRODUCTION

DEFINITION:

It refers to the sourcing of goods andservices from locations around theglobe to take advantage of national

differences in the cost and quality offactors of production (such as labor,energy, land, and capital).



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DRIVERS OF GLOBALIZATION

Declining trade and investment barriers

Declining trend of protecting domestic

market

GATT and WTO role

Flexibility in outsourcing

Technological change

Microprocessor and Telecommunication

The Internet and World wide web

Transportation technology



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Shrinking Globe

1500-1840

1850-1930

1950s

1960s

Bestaveragespeedofhorse-drawncoachesandsailingships, 10mph.

Propelleraircraft300-400mph.

Jetpassengeraircraft500-700mph.

Steam ships, 35mph



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Reasons for Globalization

Operational Necessities: To secure raw material

To secure equipment

To secure technology

To dispose excess output

Strategic Necessities:

To secure business against unforeseen

external environmental changes

To assure continued growth2/28/2013 IMRAN KHAN Department of Management

Sciences11


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GLOBALIZATION PROCESS

2/28/2013 IMRAN KHAN Department of ManagementSciences

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Entrymode

ExportDirect

Indirect

LicensingFranchising

Turnkey

Investment

Portfolio

investment

FDI


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The Changing Demographics of the Global

Economy

The Changing World Output and World

Trade picture

The changing Foreign Direct InvestmentPicture



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Country Share

of world

output1963

%

Share

of world

output2004

%

Share

of world

Exports2004

%

USA 40.3 20.9 10.4

JAPAN 5.5 6.9 5.7

Germany 9.7% 4.3 9.5

France 6.3% 3.1 4.8UK 6.5% 3.1 4.7

Canada 3 3.5 3.4

China NA 13.2 5.92/28/2013 14IMRAN KHAN Department of ManagementSciences


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FDI Inflows, 1993-2003



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The Changing Nature of the

Multi-National Enterprise

How many Asian and European Multi-National Companies youare familiar with?

A multinational enterprise is any business that has productiveactivities in two or more countries.

A number of multinational corporations (MNCs) from developingeconomies are becoming key players in the global economy. Theworld's second-largest forgings-maker comes from India; the

biggest Nordic insurer was bought by a South Africancompetitor; a Mexican company reinvented the global cementbusiness; and Brazilian restaurant chains sponsor immigrationvisas for highly-skilled meat carvers to support their Americanexpansions (Andrea E. Goldstein).



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The National Composition of the Largest

Multinationals

Trends Toward Non-U.S Multi-Nationals

COUNTRY OF THE TOP 260

COMPANIES IN 1973

OF THE TOP 500

TOP COMPANIES IN

1997

USA 126 (38.5%) 162 (32.4%)

JAPAN 9 126

UK 49 34

FRANCE 19 42

GERMANY 21 41



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Top Investing Countries



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The Rise of Mini-Multinational

The number of mini-multinationals (small

and medium-sized companies) is on therise



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DO ONLY DEVELOPING

COUNTRIES HAVE CONCERNS

ABOUT GLOBALIZATION ORDEVELOPED COUNTRIES ALSO

DO HAVE RESERVATIONS?

IS IT A GOOD OR BAD?

Power that controls the economyshould be in the hands of electedrepresentatives of the peopleinstead of an industrial oligarchy~ Justice William O. Douglas

"I would define globalization as thefreedom for my group ofcompanies to invest where it wantswhen it wants, to produce what itwants, to buy and sell where itwants, and support the fewest

restrictions possible coming fromlabour laws and socialconventions.

(Percy Barnevik, President of theABB Industrial Group)

GLOBALIZATION

DEBATE?

http://www.betterworldheroes.com/douglas-william.htmhttp://www.betterworldheroes.com/douglas-william.htmhttp://www.betterworldheroes.com/douglas-william.htm


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GLOBALIZATION DEBATE

JOB LOSS AT HOME COUNTRY PRESSURE FOR LOW WAGES RATES

CULTURAL IMPOVERISHED

ENVIORNMENTAL DEGRADATION

SUPPORTERS VIEW:

HOST COUNTRY LIVING STANDARD

IMPROVES

BETTER PURCHASING POWER OF HOST

COUNTRY

SKILLED LABOR WAGES INCREASES

2/28/2013 IMRAN KHAN Department of Management Sciences 22

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