Globalization
Integration of the world economy into one market.

Prof. Sergio Castello
Lecture notes: By Stephanie Gapud

Globalization 2.0
1970-1980

• Trade Barriers Fall down
Global Manufacturing/ Production •Lower cost through Product Standardization •Increase Ownership advantage •Lowered the cost /Unit •Economies of Scale •Lowered the cost to satisfy the demands of the Global Homogeneous Consumer •Location Advantage
– – – – – – – Collapse of Berlin wall Opening of China to the World India USSR Development of Transportation Communication Technology Advances Information processing

• Technological change

Marketing to Global Homogeneous market Advertising Global Economies of Scope

Global Homogeneous Consumer
Demands

Low Price High Quality Great Service

Create Cheap

Two Facets of Globalization
Globalization of Markets • Moving away from an economic system in which national markets are distinct entities isolated by trade barriers and barriers of distance, time & culture and toward a system in which national markets are merging into one global market Globalization of Production • Trend by individual firms to disperse production of their productive process to different locations around the world to take advantage of differences in cost and quality of factors of production (i.e. labor, energy, land, capital)

Globalization 3.0
Using Product Differentiation to Increase Sales

Global Branding

Niche Market

Innovation /Mergers •First Mover Advantage

CSR

Social Media

1990’s

Global Business Citizenship Framework
Boost Sales by creating an image of a Morally Responsible Member of a society through corporate governance, corporate philanthropy, corporate social responsibility (stakeholder theory), corporate social entrepreneurship, and global corporate governance. Suppliers are seen as collaborators Employees are seen as assets Owners – take responsibility and follow laws and achieve profit while maintaining morally upright Community = better ourselves in service Environment cared for – minimal footprint 2000’s- 2010’s Be Morally Responsible Share Holder Maximization Stake Holder maximization

corporate philanthropy (giving) corporate governance
(how CEO’s apply the concept of good citizenship in the vision and mission of the company as seen in the company policies)

corporate social responsibility (stakeholder theory),
(community service, )

global corporate governance
(How the company take on bigger challenges in helping better the world by contributing to the solutions to bigger problems in the world, like hunger, poverty, environmental degradation)

corporate social entrepreneurship
(How the company apply the concept of CSR and living it as company policies in the way they deal with other businesses, partners and the people they serve.)

Digital Information Technical Revolution Increase Sales and Lower Production Cost through Collaboration

Social Media •Face Book •Twitter

Globalization 4.0
Digital Outsourcing - suppliers Manufacturing •JIT – logistics- to streamline inventory •GPS •RFID •Suppliers

•Consumers •Market Research

Open source Cloud Computing

2013

Globalization Debate
Benefits of Globalization
• Consumer
– Lower Price – More Choices – High Quality

Cost of Globalization
• Jobs are gone
– Low or semi-skilled jobs are exported out of the US – Older un-trainable employees gets sacrificed-lost jobs all in the name of globalization Environmental Issues -Firms are accused of bringing their production to countries where there is lax environmental regulation in order to lower its cost of production -

• Workers
– Increase Capacity Utilization – Global Formation Specialization Increase Productivity (can do more with less) Increase Pay- Increase Standard of Living

Pillars of International Business
International Business F O R E X

Foreign Exchange is the Pricing Mechanism

high

Evolution of International Strategy
Cost