200591 Lecture Notes - Lecture 1: Internalization Theory, Factor Endowment, Comparative Advantage
Globalisation-
L.O-
1.1- explain the process and drivers of globalisation and the opportunities and challenges it
creates for businesses
1.2-illustrate how the global economy has changed over the last 50 years
1.3-justify the labelling of the 21st century as the emerging markets century
1.4-debate the impact of globalisation on issues such as job security, income inequality and the
environment
1.5-compare how the management of international business different from domestic businesses
countries differ in
1)cultural differences-multiculturalism- manage services differently
2) political and legal enviro
e.g)stage of dev in countries-e.g) democratic vs republic
-ethics & corp resp.
3)eco enviro
1.1-globalisation-the shift towards a more integrated and interdependent (mutually dependant
on eachother) global economy
3 faces of globalisation:
1)globalisation of markets-merging of historically distinct and separate markets into one
huge marketplace
-coverging consumer tastes and preferences on some global norm
-less barriers to cross border trade have made it easier to sell internationally
-most global of markets-markets for industrial goods and materials that serve a universal needs
Hong Kong,US,UK-sources of GDI
2)globalisation of production-sourcing of goods and services from locations around world
- take advantage of national differences in the cost and quality of various factors of
production
-e.g)boweing-dreamline made by parts from diff countries who specialise
Factors of production- components –labour, technology, land and capital
Global Institutions-rules on trade and investments
GATT- (General Agreement on Tariffs and trade) –signatories to lower barriers to free flow of
goods across national borders
WTO (world trade org)- police trading system and ensure nation adhere to rules sign by
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treaties
IMF (international monetary fund) and World Bank- created 1944- maintain order in monetary
system and promote economic development
Drivers of Globalisation-
1)Declining Trade and investment barriers- form of high tarrifs on imports of
manufactured goods.(1920s-30’s)
GATTO-WTO (1995) reduce barriers to trade
2014- average tarrif rate-4% -less restricted to export goods than 100 years ago
removed restrictions to fdi
declining trade-leads to inc. international trade
fdi –long term commitment
globalisation of market and resulting growth in trade and fdi-home and export markets in
threat by foreign markets
e.g)beggar thy neighbour practices
2001-WTO launched talks-liberalise global trade framework
2)technological innovations- transport operators, trade infrastructure-rail,port inc. -costs of
info processing have decreased-managing global networks easiers
a)Microprocessors and telecommunications-
single most innovation: low cost of global communication, low cost of
coordinating/controlling global organisation
b)Internet and worldwide web- expand without shopfronts, production offshoring,no constraints
on locations,scale,timezone
c)Transportation Technology : containerisation (uniform metal boxes),super freighters,
commercial jet aircraft
4)FDI-(foreign direct investment-investing resource outside home country)-inc. cross border
investments- pos. influence globalisation
implications for globalisation of production
as transport costs decline, dispersal of production is more economical
worldwide communications network essential
internet-major force in facilitating trade
jet aircraft-helps coordinate worldwide operations
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1.2-Global economy over 50 years-
4 changes in economy:
1960’s- US dominated world economy and trade
-Us dominated fdi
US- MNE’s dominated international business
-centrally planned economies off limits to western international business
1)The changing world output and world trade picture
1960’s-US: highest world output- 40.3%
2015:16.1%-sign. declined
Germany,France,italy ouput declined too.
(was a relative decline-reflecting faster economic growth of other countries)
2014-china :slightly higher share in world exports
us,uk,japan rel. decline due to industralation of world economy,fdi as group rising
sovereign wealth funds-
since 1991-fdi destination changing with developing economies
MNE’S-rise of non- us multinationals
changing world order-
collapse of communism in eastern europse
2007-2009 gfc led to reassessment of gov investment in western industrilised economies
china moves towards freer markets and private enterprise reforms
high rates of growth in sotuh asia
emerging economies on rise
Globalisation debate-
is globalisation good or bad
decline trade + investment-create jobs, raise income levels
b) antiglobalisation protesters- critics worry jobs lost to low wage nations
Labour and the enviro:
-critics: free trade encourages firms from advanced nations to move manufacturing facilities
offshore to less developed countries with enviro + labours reg
supporters: tougher enviro regulation and stricter labour standards go hand in hand with
eco progress and
that fdi helps country raise standards
IB:countries differ
-more intense competition,ib managers face wider and complex issues,ib has to contend with
limits by gov and bus system, ib involves currency conversion and fd exchange issues
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Document Summary
1. 1- explain the process and drivers of globalisation and the opportunities and challenges it creates for businesses. 1. 2-illustrate how the global economy has changed over the last 50 years. 1. 3-justify the labelling of the 21st century as the emerging markets century. 1. 4-debate the impact of globalisation on issues such as job security, income inequality and the environment. 1. 5-compare how the management of international business different from domestic businesses countries differ in. 1)cultural differences-multiculturalism- manage services differently: political and legal enviro e. g)stage of dev in countries-e. g) democratic vs republic. 1. 1-globalisation-the shift towards a more integrated and interdependent (mutually dependant on eachother) global economy. 1)globalisation of markets-merging of historically distinct and separate markets into one huge marketplace. Coverging consumer tastes and preferences on some global norm. Less barriers to cross border trade have made it easier to sell internationally. Most global of markets-markets for industrial goods and materials that serve a universal needs.
