International Business

Introduction
A fundamental shift is occurring in the world economy. We are moving away from a world in
which national economies were relatively self-contained entities, isolated from each other by
barriers to cross-border trade and investment; by distance, time zones, and language; and by
national differences in government regulation, culture, and business systems. And we are
moving toward a world in which barriers to cross-border trade and investment are declining;
perceived distance is shrinking due to advances in transportation and telecommunications
technology; material culture is starting to look similar the world over; and national economies
are merging into an interdependent, integrated global economic system. The process by
which
this is occurring is commonly referred to as globalization.
What is happening in the flat panel TV industry, which was profiled in the Opening Case, is
a classic illustration of the impact of globalization. Production of flat panel TVs is migrating
around the globe to low-cost locations. TVs that Vizio sells in the United States, for example,
are assembled in Mexico from flat panels manufactured in South Korea, electronic
components
made in China, and microprocessors made in the United States. By dispersing different
activities around the globe to where they can be performed most efficiently, and then
coordinating the entire production process, companies like Vizio can deliver flat panel TVs to
ar of interest r
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American consumers at much lower prices than would otherwise be possible. American
consumers benefit from the lower prices, as does Vizio and its strategic partners in South
Korea, China, the United States, and Mexico. The process of globalization also has losers,
however, and the losers in this case are workers in high cost locations who have lost their
jobs.
As we will see in this book though, most economists argue that the gains outweigh the
losses
by a wide margin, and that on balance globalization is a very beneficial process.
The flat panel TV industry is hardly alone in exemplifying the process of globalization. In
today's interdependent global economy, an American might drive to work in a car designed
in
Germany that was assembled in Mexico by the American automaker Ford from components
made in the United States and Japan that were fabricated from Korean steel and Malaysian
rubber. She may have filled the car with gasoline at a BP service station owned by a British
multinational company. The gasoline could have been made from oil pumped from a well
off the
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coast of Africa by a French oil company that transported it to the United States in a ship
owned by a Greek shipping line. While driving to work, the American might talk to her
stockbroker on a Nokia cell phone that was designed in Finland and assembled in Texas using
chip sets produced in Taiwan that were designed by Indian engineers working for Texas
Instruments. She could tell the stockbroker to purchase shares in Deutsche Telekom, a
German telecommunications firm that was transformed from a former state-owned monopoly
into a global company by an energetic Israeli CEO. She may turn on the car radio, which was
made in Malaysia by a Japanese firm, to hear a popular hip-hop song composed by a Swede
and sung by a group of Danes in English who signed a record contract with a French music
company to promote their record in America. The driver might pull into a drive-through coffee
shop run by a Korean immigrant and order a single, tall, nonfat latte and chocolate-covered
biscotti. The coffee beans came from Brazil and the chocolate from Peru, while the biscotti
was made locally using an old Italian recipe. After the song ends, a news announcer might
inform the American listener that antiglobalization protests at a meeting of the World
Economic Forum in Davos, Switzerland, have turned violent. One protester has been killed. The
announcer then turns to the next item, a story about how fe