What is Globalization? What forces are driving globalization?:
A shift towards a more integrated and interdependent world economy.
Globalization of Markets:
the merging of historically distinct and separate national markets into one huge
global market place.
Globalization of Production:
Sourcing goods and services from locations around the globe to take advantage
of national differences in the cost and quality of various factors of production.
Technology (Communications, computers, internet, transportation):
the internet have all contributed to the progression of global trade. The Microprocessor, enabled explosive growth of
high-power, low-cost computing, increasing the amount of information that can be processed by individuals and firms.
Microprocessor made way towards the development of global communication, satellite, optical fiber, wireless, the
internet, etc which all rely on the processor to encode, transmit, and decode the information. Moore's Law = the price
of microprocessor declines while the power inclines and power doubles and cost of production falls in half every 18
months. The internet and world wide web hit billions of users, backbone of global economy. Makes it easier for buyers
and sellers to intermingle. Transportation shrunk the globe in terms of travel time. Lowered cost of shipments by
revolutionizing containerization, and made it more economical to ship goods around the globe.
Political (Collapse of USSR, Democracy, Market economies):
Communist countries collapsing between
1989-1991. Soviet Union replaced by 15 independent republics. Czechoslovakia divided itself in two states. Risky for
western to do business with countries like Russia, where the state has more involvement than it should. a lot of
countries transitioning into a more free market trade even former communist countries. Collapse of communism in
Eastern Europe, which has created enormous long-run opportunities for international business. In addition, the move
toward free market economies in China and Latin America is creating opportunities and threats for Western
international businesses. Globalization arguments against are: job loss, pressure of lower pay, environmental
degradation, and cultural imperialism of global media, working conditions, and national sovereignty.
GATT (General Agreement on Tariffs and Trade)
: Created by voluntary agreement between individual
nation-states and their functions are enshrined in international treaties. GATT is primarily responsible for policing the
world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO
member states. International treaty that committed signatories to lowering barriers to the free flow of goods across
national borders; lead to WTO.
WTO (World Trade Organization):