Chapter

1. 1 Chapter INTRODUCTION & OVERVIEW

2. Largest retailer in the world –Over 4500 stores International expansion in 1991begins with Mexico in response to market saturation in the US Localization strategy adopted after trial and error Global buying power has allowed it to reap economies of scale Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets Case: Wal-mart’s global expansion

3. The shift towards a more integrated and interdependent world economy Two components: The globalization of markets The globalization of production What is globalization?

4. The merging of distinctly separate national markets into a global marketplace Tastes and preferences converge onto a global norm Firms offer standardized products worldwide creating a world market Globalization of markets

5. Significant differences still exist between national markets on many relevant dimensions These differences require that marketing and operating strategies and product features be customized to best match conditions in a country. Globalization of markets

6. 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 Globalization of markets

7. Refers to sourcing of goods and services from locations around the world to take advantage of Differences in cost or quality of the factors of production Labor Land Capital Globalization of production

8. Global Production Swan Optical Manufacturing Example 1 Design 1-5

9. Volume of world trade and production, 1950-2002 Fig: 1.1

10. Globalization has created the need for institutions to help manage, regulate and police the global marketplace GATT WTO IMF World bank United Nations Emergence of global institutions

11. Macro factors that underlie trend towards greater globalization Decline in trade barriers Technological change Global drivers

12. Pattern of declining tariffs

13. Globalization of markets and production has been facilitated by Reduction in trade barriers Removal of restrictions to foreign direct investment Declining barriers to trade

14. The changing pattern of world output and trade

15. Percentage share of total FDI stock Fig: 1.3

16. Volume of FDI inflows, 1994-2002($ billions) Fig: 1.4

17. The role of technological change • Microprocessors and telecommunications • The internet and world wide web • Transportation technology

18. The shrinking globe Fig: 1.2

19. World output and trade Changing foreign direct investment Changing nature of multinationals Mini multinationals Non US multinationals Changing demographics of the world economy

20. National origin of largest multinational corporations Fig: 1.5

21. 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 Globalization debate-Pro

22. Environmental performance and income Fig 1.6

23. 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 Globalization debate-Con