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1 C h a p t e r O n e G l o b a l i z a t i o n & I n t e r n a t i o n a l B u s i n e s s Chapter ObjectivesTo define globalization and international business and show how they affect each other. To understand why companies engage in international business and why international business growth has accelerated. To discuss the major criticisms of globalization. To become familiar with different ways in which a company can accomplish its global objectives. What is Globalization?Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. Globalization is not new, though. For thousands of years, people—and, later, corporations—have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914. Good sides of Globalization oGlobalization lets countries do what they can do best. If, for example, you buy cheap steel from another country you don’t have to make your own steel. You can focus on computers or other things.oGlobalization gives you a larger market. You can sell more goods and make more money. You can create more jobs. oConsumers also profit from globalization. Products become cheaper and you can get new goods more quickly.
2 Bad sides of Globalization oGlobalization causes unemployment in industrialized countries because firms move their factories to places where they can get cheaper workers. oGlobalization may lead to more environmental problems. A company may want to build factories in other countries because environmental laws are not as strict as they are at home. Poor countries in the Third World may have to cut down more trees so that they can sell wood to richer countries. oGlobalization can lead to financial problems. In the 1970s and 80s countries like Mexico, Thailand, Indonesia or Brazil got a lot of money from investors who hoped they could build up new businesses there. These new companies often didn’t work, so they had to close down and investors pulled out their money. oSome of the poorest countries in the world, especially in Africa, may get even poorer. Their population is not as educated as in developed countries and they don’thave the new technology that US does.