1. Chapter 1

2.  Globalization refers to the shift towards a
more integrated and interdependent world
economy.
 Globalization has several facets, including
the globalization of markets and the
globalization of production.

3.  Globalization of markets refers to the
merging of historically distinct and separate
markets into one huge global marketplace.
 Falling barriers to cross-border trade has
made it easier to sell internationally.
 It has been argued for sometime that the
tastes and preferences of consumers in
different nations are beginning to converge
on some global norms thereby creating a
global market.

4.  Consumer products such as Coca Cola, Sony
PlayStation, Starbucks coffee and McDonalds
Hamburgers are examples of this trend.

5.  Globalization doesn’t means that national
differences no longer exist.
 Differences still exist among national
markets along many relevant dimensions,
including consumer tastes and preferences,
distribution channels, culture, business
systems and legal regulations.

6.  These differences frequently require that
marketing strategies, product features and
operating practices be customized to best
match conditions in a country.
 For example automobile companies promote
different car models depending on a range of
factors such as fuel costs, income levels,
traffic congestion and cultural values.

7.  Most global markets currently are not
markets for consumer products---- where
national differences in tastes and
preferences are still important enough to act
as a brake on globalization----but markets for
industrial goods and materials that serve a
universal need the world over.

8.  In many global markets, the same firms
frequently confront each other as
competitors in nation after nation.
 Coca-Cola’s rivalry with PepsiCo is a global
one, as are the rivalries between Ford and
Toyota, Caterpillar and Komatsu in heavy
earthmoving equipment, Sony and Microsoft
in video games.

9.  Globalization of Production refers to sourcing
goods and services from locations around the
globe to take advantages of national
differences in the cost and quality of factors
of production (such as labor, energy, land and
capital).
 By doing this, companies hope to lower their
overall cost structure and/or to improve the
quality or functionality of their product
offering.

11.  IBM Thinkpad laptop computer is an example
of global web of activities.
 Designed in US by IBM engineers.
 The keyboard and hard drive were made in
Thailand; the display screen and memory
were made in South Korea.
 The built-in wireless card was made in
Malaysia.
 Assembled in Mexico.

12.  In each case these components were
manufactured in the optimal location that
reduced the production and transportation
costs.
 Dixon pencil manufacturer, takes wood from
china, uses lead of US, and assembles in
Mexico.
 Along with the outsourcing of products the
services are also being outsourced.
 Through internet U.S physicians outsource
radiology work in India.

13.  Two macro factors underlie the trend toward
greater globalization.
 The first is the decline in barriers to the free
flow of goods, services, and capital that has
occurred since the end of WW II.
 The second factor is technological change.

14.  Declining Trade and Investment Barriers
During the 1920s and 30s many of the world’s
nation-states erected formidable barriers to
internationals trade and FDI.
 International Trade occurs when a firm
exports goods or services to consumers in
another country.
 Foreign Direct Investment(FDI) occurs when a
firm invests in business activities outside its
home country.

15.  Many of the barriers to international trade
took the form of high tariffs on imports of
manufactured goods.
 These tariffs were to protect domestic
industries from foreign competition.
 Ultimately the depressed world demand
contributed to the Great Depression of the
1930’s.

16.  Having learned from this experience the
advanced industrial nations of the West
committed themselves after World War II
(1939-1945) to removing barriers to the free
flow of goods, services and capital between
nations.
 This goal was protected through GATT, the
General Agreement on Tariffs and Trade.
 Eight rounds of negotiations among member
states (now numbering to 148)have worked
to lower barriers to the free flow of goods
and services.

17.  The Uruguay (yoor-gwi) round further
reduced trade barriers; extended GATT to
cover services as well as manufactured
goods; provided enhanced protection for
patents, trademarks and copyrights and
established the World Trade Organization
(WTO) for international trading system.

18.  The lowering of trade barriers made
globalization of markets and production a
theoretical possibility, technological change
has made it a reality.
 The world has seen major advances in
communication, information processing and
transportation technology including the
emergence of internet and world wide web.

19.  Perhaps the single most important innovation
has been development of microprocessors
that enabled the explosive growth of high
power, low cost computing, vastly increasing
the amount of information that can be
processed by individuals and firms.
 Over the last 30 years global communications
have been modernized by the development
of satellite, optical fiber and wireless
technologies and now the internet (dot com
world).

20.  These technologies rely on the
microprocessors to encode, transmit, and
decode vast amount of information that
flows along theses electronic highways.
 The cost of microprocessors continues to fall
while their power increases (known as
Moore’s Law)

21.  The rapid growth of the internet and
associated world wide web which utilizes the
internet to communicate between world
wide websites is the latest expression of the
development.
 In 1990, fewer than 1 million users were
connected to the internet. By 1995 the figure
had risen to 50 million. In 2004 it grew to
about 945 million this number is increasing
day by day.

22.  The web makes it much easier for buyers and
sellers to find each other, where ever they
may be located and whatever their size.
 The web allows businesses both small and
large, to expand their global presence at
lower cost than ever before.