IBUS2101 Lecture Notes - International Business, Comparative Advantage, Economic Integration
4 May 2018
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IBUS2101 – WEEK 2
LECTURE TWO
An age of globalisation
The increasing integration and interaction of countries, politics, economies (national, regional,
world), companies (FDI, export, import) cultures and people the world is becoming smaller and
flatter
Why are we a part of globalisation?
- Value of world exports in 2000 tripled between 1980 and 2000.
- Foreign investment grows more than twenty-fold, even faster than international trade →
companies have many options of going to other countries to outsource.
- Firms without international goals may find their domestic markets under threat from
foreign competition, regardless of their size (79% of Australian Business are small/medium
business, and 95% of them believes that they have to face foreign competition due to
globalisation)
- 51 of top 100 economic entities (countries or companies) are MNCs → big multinationals
are the big players in the world economy.
GDP 2003-2020
Positive on the one hand (benefits of globalisation), and challenges (realistic) on the other
(Financial crisis).
- Therefore, we need strategy on globalisation to minimise those challenges and stresses
THE IMPLICATIONS OF GLOBALISATION
Four main:
1. More choices/options
- Apply to Consumers → can purchase G&S from any parts of the world
- Apply to Companies → can go to any country in the world to establish business
- Apply to individuals → international students, working in different firms or in another
country.
o Main question: in the context of globalisation, where can I find the global
opportunities to build up and hone my global comparative advantage?
- Globalisation = global opportunities (positive) + global competition (challenges) → Yes,
indeed you have more choices, but you’ll be facing global competition with global talents
2. Lower prices
- As globalisation provides companies with the choice to invest/manufacture product
everywhere in the world:
- Companies are likely to outsource cheaper labour resources, information from other
countries to maximise profit.
- Cheaper production cost then leads to benefits to consumers as they could spend less for
the same product.
3. Blurred national identity for products and services
-
Global disintegration
→ companies can disintegrate different activities from input and
output (e.g. R&D), you can put different activities in various parts of the world.
o Without globalisation, you’ll have to do all the activities in your home country
-
Global Re-integration
→ you still arrange different activities into various parts of the worlds,
you re-integrate everything
- Question: where do we place different activities and how to re-integrate?
4. Career choices and progression
- Two things important things included in a successful career strategy: Confidence and
Competence no matter where you work or study in the contest of globalisation.
- Then, where can I build up my global comparative advantage
find more resources at oneclass.com
find more resources at oneclass.com
IBUS2101 – WEEK 2
The global top 20 countries
Some countries are very global, some are very closed → how do we measure the degree do global
integrations?
There are 4 indicators:
1. Economic integration
o How is this country integrated with other parts of the worlds’ economy?
o Achieved through international trade, FDI etc.
2. Personal contact
o Freely travel across borders → international movement
3. Political engagement
o What are the government’s attitude towards globalisation?
4. Technology
o Interaction through internet → access of information
Globalisation index ranking
- Small European countries are very global → they need to actively pursue globalisation as
they have small landmass, small population etc.
- The emerging markets are not as global as the developed countries. This may mean that
they may move up in the future therefore, there are more opportunities created.
Drivers/indicators of Globalisation
- Economic drivers
o Globalisation and world economy (esp. in emerging economies) has been growing
although we have ups and downs
- Technological drivers
o Internet → transformed the world economy and global communication
o Transportation
- Political drivers
o Most governments are supportive of globalisation (except some very closed
countries) → they welcome world trade, international business
o However, there are anti-globalisation movements and certain conservative
countries’ disapproval for globalisation.
o International organisations support (WTO, World Bank, IMF etc.)
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
The increasing integration and interaction of countries, politics, economies (national, regional, world), companies (fdi, export, import) cultures and people the world is becoming smaller and flatter. Value of world exports in 2000 tripled between 1980 and 2000. Foreign investment grows more than twenty-fold, even faster than international trade companies have many options of going to other countries to outsource. 51 of top 100 economic entities (countries or companies) are mncs big multinationals are the big players in the world economy. Positive on the one hand (benefits of globalisation), and challenges (realistic) on the other (financial crisis). Therefore, we need strategy on globalisation to minimise those challenges and stresses. Apply to consumers can purchase g&s from any parts of the world. Apply to companies can go to any country in the world to establish business. Globalisation = global opportunities (positive) + global competition (challenges) yes, indeed you have more choices, but you"ll be facing global competition with global talents: lower prices.
