Business paper
devil07
BUS_166_slides_week_5.pdf
1. What is globalization?
2. Costs and benefits of globalization
3. Comparative political and economic systems
4. Global problem solving
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What is globalization?
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What is globalization?
What are some of the ways in which globalization impacts our own daily lives?
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The process of globalization Globalization = “the increasing movement of goods, services, and capital across national borders” (p. 72)
Globalization is a process – an ongoing series of interrelated events.
• Advances in transportation and communication technology.
• International trade and financial flows integrate the world economy, leading to the spread of technology, culture, and politics.
• Globalization is not simply a trend or a fad but, rather, an international system.
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Entering and competing in the global marketplace
Develop global market channels.
• First build a successful business in the home country, then export products or services to buyers in other countries (e.g., Nestlé).
Establish global operations.
• Locate manufacturing plants or service operations in other countries as a way to cut costs (e.g., Ford, BMW).
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Entering and competing in the global marketplace
Develop global supply chains.
• Purchase raw materials, components, or other supplies from sellers in other countries; work may also be subcontracted (e.g., Nike, Gap).
Summarized in 3 words: sell, make, and source.
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Transnational corporations (TNCs)
Defined by the United Nations as firms that control assets abroad.
• 104,000 TNCs operate in the modern global economy.
• Many more affiliates—i.e., suppliers, subcontractors, retailers, and other business partners.
Most global commerce is carried out by a small number of powerful firms.
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Foreign direct investment (FDI)
Another important aspect of globalization is the worldwide flow of capital. Global flows of FDI in 2019 amounted to $1.39 trillion.
FDI occurs when a company, individual, or fund invests money in another country, exerting influence over the decision-making of a foreign business.
For example: • Opening up stores in a foreign country. • Acquiring a controlling interest in a foreign company that supplies materials required for manufacturing.
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Inversion
Companies avoid taxes in their home countries (i.e., inversion).
• By merging with companies located in other countries and shi ting their headquarters there (e.g., Burger King).
As a process, globalization is always changing, producing new opportunities and challenges for businesses, governments, and societies.
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International financial and trade institutions
Three institutions that set the rules by which international commerce is transacted:
• World Bank (WB) • International Monetary Fund (IMF) • World Trade Organization (WTO)
No business can operate across national boundaries without complying with rules set by the WTO.
Many businesses in developing countries are dependent on WB and IMF loans to survive.
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International financial and trade institutions
The World Bank (WB):
• Established in 1944.
• Provides economic development loans to its member nations.
• Funds used mainly for roads, dams, power plants, and other infrastructure projects, as well as for education, health and social services.
• Funding provided by member countries and international capital markets.
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International financial and trade institutions
The International Monetary Fund (IMF):
• “Sister” organization to the World Bank. • Purpose is to stabilize the system of currency exchange rates and international payments to enable member countries to participate in global trade.
• Provides loans to member countries, o ten with specific conditions.
• These loan conditions have been controversial (e.g., demands that governments cut spending, increase exports, and liberalize financial markets).
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International financial and trade institutions
The World Trade Organization (WTO):
• Founded in 1995, successor to General Agreement on Tariffs and Trade (GATT).
• International body that establishes the ground rules for trade among nations.
• Its major objective is to promote free trade; attempts to eliminate barriers to trade (e.g. quotas, duties and tariffs).
• “Most favored nation” rule means member countries cannot discriminate against foreign products for any reason.
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Costs and benefits of globalization
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Costs and benefits of globalization
Globalization is highly controversial.
Clearly, some benefit from globalization, while others do not.
• Furthermore, any changes to the rules are likely to advantage some while disadvantaging others.
What are some of the major arguments advanced by both sides in the debate over this important issue?
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Costs and benefits of globalization
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Comparative political and economic systems
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Comparative political and economic systems
Nations differ greatly in their political, social and economic systems.
First important dimension to consider is how power is exercised and degree of democratic rights.
Past century has been marked by spread of democratic rights to many nations for the first time.
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Comparative political systems Democracy — the presence of political freedom.
Four defining features of democracy (according to the U.N.):
• Fair elections
• Independent media
• Separation of powers • among the executive, legislative, and judicial branches of government
• An open society • where citizens have the right to form their own independent organization
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Comparative political systems Degree to which human rights are protected differs greatly among nations.
Several international codes of human rights exist (e.g., United Nation’s Universal Declaration of Human Rights of 1948).
Still, many violations of human rights still occur: • High rates of infant mortality • Poor treatment of minority groups and indigenous peoples
• Forced labor and human trafficking • Genocide
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Comparative political systems
In short, countries of the world differ greatly with respect to political institutions and outcomes.
• Changes within countries over time: https://www. v-dem.net/en/analysis/CountryGraph/
• Differences across countries: https: //www.v-dem.net/en/analysis/MapGraph/
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Comparative economic systems
Free enterprise systems: • Based on the principle of voluntary association and exchange.
• Members of society satisfy most of their economic needs through voluntary market transactions.
Central state control: • Economic power is concentrated in the hands of government officials and political authorities.
• The central government owns the property that is used to produce goods and services.
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Comparative economic systems
The Heritage Foundation has scored the nations of the world according to an Index of Economic Freedom: the fundamental rights of every human being to control his or her own labor and property.
• Among the freest nations: Hong Kong, Singapore, and New Zealand.
• Among the most repressed were Cuba, Venezuela, and—the least free in the world—North Korea.
• The United States ranked twel th out of 178 countries.
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Global problem solving
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Global inequality
Inequality may be measured in two ways: by wealth and income.
• Wealth refers to assets that a person accumulates and he or she owns at a point in time.
• Income refers to how much a person earns in a day or a year.
Focusing on the bottom of the pyramid can foster: • Social development • Provide employment in underserved communities • Reap profits
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Global inequality
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Global inequality
Business opportunities at the bottom of the pyramid?
Microfinance — This occurs when financial organizations provide loans to low-income clients or solidarity lending groups (a community of borrowers) who traditionally lack access to banking or related services.
• Grameen Bank in Bangladesh • BTPN in Indonesia
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Partnerships for global problem solving
Emerging trend for development of collaborative, multi-sector partnerships focused on particular social issues or problems in the global economy.
These partnerships (also called global action networks) involve three sectors:
• Business • Government • Civil society
• comprises nonprofit, educational, religious, community, family, and interest-group organizations
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Attributes of the three major sectors
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- What is globalization?
- Costs and benefits of globalization
- Comparative political and economic systems
- Global problem solving
