Globalization and Business
Globalization is the process by which the international exchange of goods, services, capital, technology and knowledge becomes increasingly interconnected.
Benefits of Globalization
Globalization increases economic growth and generates a wider range of products and services.
Complications of Globalization
Income inequality, environmental damage, unsafe food, sweatshops, and the rise of consumerism are common criticisms of globalization.
14.2 Historical Developments in the Global Economy
Major Historical Developments in the Global Economy
The development of a global economy includes important highlights to understand when considering its current framework.
14.3 International Trade Barriers
Standards-related trade measures, known in WTO parlance as technical barriers to trade play a critical role in shaping global trade.
It is typically more difficult to do business in a foreign country than in one’s home country due to cultural barriers.
The Argument Against Barriers
Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency.
The Argument for Barriers
Some argue that imports from countries with low wages has put downward pressure on the wages of Americans and therefore we should have trade barriers.
Trade barriers are government-induced restrictions on international trade, which generally decrease overall economic efficiency.
Despite international trading laws and declarations, countries continue to face challenges around ethical trading and business practices.
14.4 International Trade Agreements & Organizations
A common market is the first stage towards a single market and may be limited initially to a free trade area.
The Export-Import Bank of the United States
The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States federal government.
The International Monetary Fund (IMF)
The IMF seeks to promote international economic cooperation, international trade, employment, and exchange rate stability.
The North American Free Trade Agreement (NAFTA)
NAFTA is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America.
The World Bank
The World Bank is an international financial institution that provides loans to developing countries for various programs.
The European Union
The European Union (EU) is an economic and political union made up of 27 member states that are located primarily in Europe.
The Asia-Pacific Economic Cooperation
APEC is a forum for 21 Pacific Rim countries that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region.
The General Agreement of Tarrifs and Trade (GATT)
The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement regulating international trade.
14.5 Types of International Business
Countertrade is a system of exchange in which goods and services are used as payment rather than money.
FDI is practiced by companies in order to benefit from cheaper labor costs, tax exemptions, and other privileges in that foreign country.
Franchising is the practice of licensing another firm's business model as an operator.
With the advent of improved communication and technology, corporations have been able to expand into multiple countries.
Offshoring entails a company moving a business process from one country to another.
In a joint venture business model, two or more parties agree to invest time, equity, and effort for the development of a new shared project.
Outsourcing business functions to developing foreign countries has become a popular way for companies to reduce cost.
Imports are the inflow of goods and services into a country's market for consumption.
Licensing gives a licensee certain rights or resources to manufacture and/or market a certain product in a host country.
In contract manufacturing, a hiring firm makes an agreement with the contract manufacturer to produce and ship the hiring firm's goods.
Exporting is the practice of shipping goods from the domestic country to a foreign country.
14.6 The Global Corporation
Definition and Challenges of a Global Corporation
Global corporations operate in two or more countries and face many challenges in their quest to capture value in the global market.