Globalization

Chapter 1

The McGraw-Hill

Global Telecommunications

The McGraw-Hill

1-1

Globalization
The shift towards a more integrated and
interdependent world economy.
Two components:
The globalization of markets.
The globalization of production.

The McGraw-Hill

1-2

Global Drivers
Positive
Technology

Negative
Culture

Open Markets

Market Barriers

Economic Integration

National Barriers

Peace

War

Corporate Strategy

Corporate
Strategy

Global Focus

Local Focus

The McGraw-Hill

1-3

Globalization of Markets

The McGraw-Hill

1-4

Global Production
Swan
Optical

Manufacturing

Design
The McGraw-Hill

1-5

Growth of World Trade and

World Output
2000
1800
1600
1400
1200
1000
800
600
400
200
0

1950=100

Trade
GDP Volume

1950

1960

1970

1980

The McGraw-Hill

1990

1997

Figure 1.1
1-6

Impact of GATT Tariff Rates

Average Tariff Rates on Manufactured Products % of Value
50
45
40
35
30
25
20
15
10
5
0

France
Germany
Italy
Japan
Holland
Sweden
Britain
United States
1913

1950

The McGraw-Hill

1990

2000

Table 1-1 in text

Table 1.1

1-7

The Shrinking Globe

Figure 1.2

1500 -1840

Best average speed of

horse-drawn coaches
and sailing ships, 10
mph.
The McGraw-Hill Companies, Inc., 2000

1850 - 1930

1950s

Propeller
Steam locomotives aircraft
average 65 mph.
300 - 400
Steamships average mph.
36 mph.

The McGraw-Hill

1960s

Jet
passenger
aircraft,
500 - 700
mph.
1-8

The Changing Pattern of World Output and

Trade
Country
United States
Japan
Germany
France
United Kingdom
Italy
Canada
China
S. Korea

Share of World Share of World Share of World

Output 1963 Output 1996
Exports 1997
40.3%
20.8%
12.6%
5.5%
8.3%
7.76%
9.7%
4.8%
9.9%
6.3%
3.5%
5.46%
6.5%
3.2%
4.94%
3.4%
3.2%
4.76%
3%
1.7%
3.81%
NA
11.3%
2.85%
NA
1.7%
2.45%

Table 1.2
The McGraw-Hill

1-9

Percentage Share of Total FDI Stock

1980-1996
50
45
40
35
30
25
20
15
10
5
0

1980
1985
1990
1994
1996

USA

UK

JPN

GER

Figure 1.3
The McGraw-Hill

FR

Neth

ODC

Dlvng
Econ

1-10

FDI Inflows
1980-1996
$B

400
350
300

World

250

Dev Ctry

200

Dlvg Ctry

150

USA

100

China

50
0

1985- 1991
90

1992

1993

The McGraw-Hill

1994

1995

1996

1997

Figure 1.4
1-11

The National Composition of the Largest

Multinationals
Of the Top 260 in 1973
1997
United States
Japan
Britain
France
Germany

126 (48.4%)
9 (3.5%)
49 (18.8%)
19 (7.3%)
21 (8.1%)

Of the Top 500 in

162 (32.4%)
126 (25.2%)
34 (6.8%)
42 (8.4%)
41 (8.3%)
Table 1.3

The McGraw-Hill

1-12

Globalization - Pro

Lower prices for goods and services.

Economic growth stimulation.
Increase in consumer income.
Creates jobs.
Countries specialize in production of goods and
services that are produced most efficiently.

The McGraw-Hill

1-13

Globalization - Con
Destroys manufacturing jobs in wealthy,
advanced countries.
Wage rates of unskilled workers in
advanced countries declines.
Companies move to countries with fewer
labor and environment regulations.
Loss of sovereignty.
The McGraw-Hill

1-14

International vs Domestic Business

Countries are different.
Range of problems are wider and more
complex.
Government intervention in trade and
investment creates problems.
International investment is impacted by
different currencies.
The McGraw-Hill

1-15

Sovereignty and the WTO

Under the new system, many decisions that affect billions of
people are no longer made by local or national governments
but instead, if challenged by any WTO member nation, would
be deferred to a group of unelected bureaucrats sitting behind
closed doors in Geneva. -Ralph Nader-

The McGraw-Hill

1-16

Differences Between
International and Domestic
Businesses
Countries are different.
The range of problems are wider and more
complex.
The intervention of governments that may
limit international trade and investment.
The need to convert into different
currencies.
The McGraw-Hill

1-17