Global Business Management IMRAN PPT 2

LEARNING OBJECTIVES

• To understand the globalization concept• To understand factors responsible for globalization • 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 the Nobel Prize defines Globalization as follows:

Globalization "is the closer integration of the countries and peoples of the world ...brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders." (from Globalization and its Discontents)

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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 OF GLOBALIZATION

• The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace.

GLOBALIZATION OF MARKETS:

GLOBALIZATION OF PRODUCTION:

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GLOBALIZATION OF PRODUCTION

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DRIVERS OF GLOBALIZATION

Declining trade and investment barriers• Declining trend of protecting domestic market• GATT and WTO role• Flexibility in outsourcingTechnological change• Microprocessor and Telecommunication• The Internet and World wide web• Transportation technology

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Shrinking Globe1500-18401500-1840

1850-19301850-1930

1950s1950s

1960s1960s

Best average speed of horse-drawn coaches and sailing ships, 10mph.

Best average speed of horse-drawn coaches and sailing ships, 10mph.

Propeller aircraft 300-400 mph.

Propeller aircraft 300-400 mph.

Jet passenger aircraft 500-700mph.

Jet passenger aircraft 500-700mph.

Steam ships, 35mph

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Reasons for GlobalizationOperational Necessities: To secure raw material To secure equipment To secure technology To dispose excess outputStrategic Necessities: To secure business against unforeseen external environmental changes To assure continued growth

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Sciences 10

GLOBALIZATION PROCESS

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The Changing Demographics of the Global Economy

• The Changing World Output and World Trade picture• The changing Foreign Direct Investment Picture

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Country Share of world output 1963

%

Share of world output 2004

%

Share of world Exports

2004

%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 4.8

UK 6.5% 3.1 4.7

Canada 3 3.5 3.4

China NA 13.2 5.904/07/23 13IMRAN KHAN Department of Management Sciences

FDI Inflows, 1993-2003

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The Changing Nature of the Multi-National Enterprise

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

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

A number of multinational corporations (MNCs) from developing economies are becoming key players in the global economy. The world's second-largest forgings-maker comes from India; the biggest Nordic insurer was bought by a South African competitor; a Mexican company reinvented the global cement business; and Brazilian restaurant chains sponsor immigration visas for highly-skilled meat carvers to support their American expansions (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 the rise

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DO ONLY DEVELOPINGCOUNTRIES HAVE CONCERNSABOUT GLOBALIZATION ORDEVELOPED COUNTRIES ALSODO HAVE RESERVATIONS?

IS IT A GOOD OR BAD?

Power that controls the economy should be in the hands of elected representatives of the people instead of an industrial oligarchy~ Justice William O. Douglas

"I would define globalization as the freedom for my group of companies to invest where it wants when it wants, to produce what it wants, to buy and sell where it wants, and support the fewest restrictions possible coming from labour laws and social conventions.“ (Percy Barnevik, President of the ABB Industrial Group)

GLOBALIZATION DEBATE?

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GLOBALIZATION DEBATE JOB LOSS AT HOME COUNTRY PRESSURE FOR LOW WAGES RATES CULTURAL IMPOVERISHED ENVIORNMENTAL DEGRADATIONSUPPORTERS VIEW: HOST COUNTRY LIVING STANDARD IMPROVES BETTER PURCHASING POWER OF HOST COUNTRY SKILLED LABOR WAGES INCREASES

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