International Business Management: Chapter 2 - Globalization includes Globalization of markets & production; Benefit & cost of Globalization, Limits of globalization, The role of MNC. | INTERNATIONAL BUSINESS MANAGEMENT Chapter 2: Globalization 1 Globalization of markets & production • Globalisation of the market: refers the process of the worldwide market integration • Advantage: – Exploitation and creation of global market segment – Standardization of products, packaging, promotion – Converging tastes and trends world wide 2 1 Globalization of markets & production • Globalization of production: an emergence of an integrated international production system (IIP) • Form of globalization of production – Parts/components: outsourcing – Allocated assemble: worldwide – Sales: worldwide 3 Globalization of markets & production • Reasons for IIP – Assess low cost inputs – Product differentiation – Imitate & adapt new technology – Assess cooperative advantage – Breakdown of the value chain and reallocation to the effective location 4 2 Globalization of markets & production • How to get competition advantage: configuration versus coordination? • Configuration: concentrated portfolio of production site – Technology intensity – Access to scarce resources – Pressure for cost reduction • Coordination: expand the company’s subsidiaries in various national markets – Importance of border-crossing customer – Presence of global competitors – Investment is not intensity 5 Globalization of markets & production Implication of IIP – Economic activities formerly under national control now under MNE control – National economies linked through markets (trade) and through international production (FDI) – Cultural convergence 6 3 Benefit & cost of Globalization • Benefits of globalization – Business expansion leads to economy of scale – Assess to resources – Lowering price – Economic growth – Technology transfer – Job creation – And: so on . 7 Benefit & cost of Globalization • Cost of Globalization – – – – – – – – Job displacement Real wage erosion Job insecurity Regulation avoidance Loss of sovereignty Environment damage Inequality Global problem: .
