Essay on Week 1b Drivers of GB

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BSD119
Global Business
Week 1

1

Introduction
Outline
 1. Globalisation – of markets and production  2. Changing character of the global economy  3. The growth of GB
 4. Globalization:
Prosperity or Impoverishment?
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Focus Questions






What is International Business
What is globalisation?
Is domestic business immune to the forces of globalisation?
What are the factors causing the growth of global business (GB)?

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Focus questions (Cont’d.)








What are the indicators of the growth of
IB?
How internationally integrated have economies become?
What’s the difference between a global firm, transnational and a international firm? Who gains, who loses from globalisation? 4

1. Globalisation: Markets & Production
The nature of globalisation: national economies are increasingly integrated and interdependent – but diversity remains!!
 Is the local business immune?
Businesses respond to and are the engine of globalisation – the multinational enterprise
(MNE)
 Globalisation of production & markets

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The globalization of markets




many industries historically distinct and separate national markets are merging into one huge global marketplace in which the tastes and preferences of consumers in different nations are beginning to converge
Implications:
• today's firm operates in an environment that offers more opportunities, but is also more complex and competitive than that faced a generation ago.

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The globalization of production




There is a tendency among many firms to source goods and services from different locations around the world in an attempt to take advantage of national differences in the cost and quality of factors of production, thereby allowing them to compete more effectively against their rivals.
Implications:
• Improvements in transportation technology, including air transport, temperature controlled containerized shipping and coordinated ship-rail-truck systems have made firms better able to respond to international customer demands.



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2. Changing character of the global economy








Liberalisation - reduction in the barriers to trade and foreign investment (cooperation among nations: GATT, WTO and regional trade agreements)
Political environment –
.. changing ideologies, privatisation and the emerging market economies Rising disposable incomes –
.. economic development and demand for greater variety of products Technological change – transportation, communication, information processing and the Internet
• Moore’s Law –power of microprocessor technology doubles and its costs of production falls every 18 months
• Virtual organisation, virtual workforce (global outsourcing)

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3. The growth of GB - How global have economies become? a. Macro Economic (country level measures)
 Trade flows & intensity (Fig 1.1, & Table 1.2 Hill pp19 & 28.)
• Compare rates of growth of exports to world GDP
• Origins and destinations of products



Policy openness to trade and investment
Law of one price
• Define a global product? A global market?



Capital flows (Figs 1.3, 1.4 pp31 & 32)
• Foreign direct investment, portfolio investment
• Changing sources and destinations of FDI



Foreign exchange turnover
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How global have economies become?
b. Micro economic (firm level measures)
Compare MNEs, using the following:
 % of employees based overseas
 % of debt and equity funded from overseas
 number of countries in which the firm is represented
 highest level of management located overseas
 Changing national composition of MNEs (Figure 1.5 Hill p32) Source: World Investment Report, 2005 www.unctad.org 10

Managing in the global marketplace






A firm does not have to go international to be successful; they can simply export to or import from another country. But is this enough?
The world is shifting towards a more
integrated
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