Global Business Environment Ing. Lucie Reczková [USEMAP] Recap from last lecture csvukrs •Chapter 5 Globalization and society •Chapter 1 Globalization and International business •Daniels, J., Radebaugh, L., & Sullivan, D. (2021). International business, global edition. Pearson Education, Limited • • • • • Reading material csvukrs •Globalization •Drivers of Globalization •Globalization of Markets and Production •What is the future of globalization? • • • Lecture outline csvukrs Definitions • •Globalization is the widening and deepening of interdependent relationships among people from different nations. • •The elimination of barriers to international movements of goods, services, capital, technology, and people that influence the integration of world economies. • Globalization Globalization - definitions •Globalization is the closer integration of the countries and peoples of the world . . . •brought about by the enormous reduction of costs of transportation and communication, and •the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders. • •Globalization encompasses many things: the international flow of ideas and knowledge, the sharing of cultures, global civil society, and global environmental movement (Stiglitz, 2007). csvukrs Globalization - statement ‘Globalization enables us to get more variety, better quality, or lower prices. Our meals contain spices that aren’t grown domestically and fresh produce that may be out of season locally. Our cars cost less than they would if all the parts were made, and the labor performed in one place.’ csvukrs •has been growing, although sporadically, • •is less pervasive than generally thought, • •has economic and noneconomic dimensions, • •is stimulated by several factors. Globalization csvukrs 1. Role of technological change • Population growth and rise in productivity (more scientists who are still alive and also better productivity – producing more in less time gives more time to people to develop new products). Øcommunications (microprocessor, satellite, optical fibre, wireless technologies, internet), ØAI Øtransportation technology (development of commercial jet aircraft, introduction of containerization) Drivers of Globalization csvukrs Declining trade and investment barriers such as: •Restrictions to entry and exit of goods and services, and the resources—workers, capital, tools •The barriers to trade were in the form of tariffs on imports of manufactured goods to protect domestic industries from foreign competition. ØInternational trade – occurs when a firm exports goods or services to consumers in another country. ØForeign direct investment – when a firm invests resources in business activities outside its home country. Drivers of Globalization csvukrs •Growth of consumer pressures (know more, can afford more, want more variety, better quality, lower prices) • • Increase in global competition (pressures companies to buy or sell abroad) • • Changes in political situations and government policies (supporting or restraining) • • Expansion of cross-national cooperation (government addressing their own interests through international cooperation) Drivers of Globalization csvukrs 1.Globalization of Production 2. 2.Globalization of Markets • Major Components of Globalization csvukrs 1.Globalization of Production 2. •Companies aim to max. profit and efficiency from locations around the globe to take advantage of national differences in the cost and quality of production factors (labor, energy, land, capital). • •It is unlikely to find a single location that minimizes the costs of all of inputs, therefore different phases of production commonly occur in different countries. • Major Components of Globalization csvukrs 1.Globalization of Production 2. •a product is designed in one country, its raw materials and intermediary goods may be purchased from several countries, assembled elsewhere, and sold in yet other nations. •Boeing, General Motors (GM), General Electric (GE) • •it allows companies to compete more effectively • • Result => they lower their costs or improve the quality or functionality of their product offerings • Major Components of Globalization csvukrs 1.Globalization of Production - examples 2. •Boing 787 is made from 65% by outsourcing companies, because these suppliers are the best in the world at their particular activity. • •using modern communications technology to outsource service activities such as: ØRadiology work, Software companies test their software functions, customer call centres (Virgin media UK). Major Components of Globalization csvukrs 1.Globalization of Production - examples 2. • The quality assurance used to be recognized by the country where the products were produced e.g. ‘Made in USA’ ‘Made in Germany’ • • Now the quality assurance is the company itself => ‘Made by BMW’ ‘Made by Apple’ Major Components of Globalization csvukrs 2. Globalization of Markets •Many global companies have used economies of scale to produce standardized products for global customers. • •Tastes and preferences of consumers of different nations converge on some global norm creating a global market. • • •This strategy allows them to charge a lower price and delivering more reliable products. • Major Components of Globalization csvukrs •Global markets for standardized consumer products, such as steel, chemicals, computers, pharmaceuticals, and telecommunications. •Ikea • …significant differences still exist among national markets due to consumer tastes, preferences, culture, distribution systems, legal regulations. Globalization of markets - examples csvukrs Ørecent international developments (Brexit; US imposing tariffs on EU, Canada, China; Covid; environmental challenges; Middle East wars); Ø the benefits of globalization are in dispute more than ever; Pro-globalization => cross-cultural engagement and cross-border trade and investment benefited us and will continue to do so Return to nationalistic perspective => want their countries be more self-sufficient, greater control over economic activity within their borders and be able to set the rules for trade with others (Trump’s politics after became president). Globalization – what is the future? csvukrs What speaks against globalization: •Unemployment in developed countries - On one side outsourcing of services to low-wage countries reduce costs and prices of products as well. On the other side there is loss of jobs and incomes in the developed countries. •Loss of jobs due to: foreign competition, advances in technology, lower transportation costs, rise of skilled workers in developing countries and with it connected income inequality and personal stress. •Environmental degradation •Westernization or Americanization of local cultures Globalization – what is the future? csvukrs The effects of globalization on food system: •The world’s food system is more interconnected and complex than ever, built upon layers of transnational dependencies. •It is why a war in Europe can exacerbate a famine in Somalia — a country which imports most of its wheat and saw its supply of bread all but collapse overnight when exports of Ukrainian wheat ceased. •In moments when the world is under severe stress, globalization is not a strength but a weakness, not a foundation for the system’s stability but a reason for its fragility. •Any calamity anywhere in the world — whether a viral outbreak, drought or conflict — is a shock to the entire system, but one felt most acutely by the most vulnerable people and in the most vulnerable places. Globalization – what is the future? csvukrs The effects of globalization on food system: •About 80 percent of the world’s population depends at least partly on food imports to eat, and the money they spend on imported food has tripled in the past 25 years. •About half of the 50 countries with the highest pandemic-induced price increases are also among the countries most dependent on food imports, and about three-quarters of those crops originate in the Global South. •More than 95 percent of Botswana, Mexico, and Jamaica’s imports of rice, wheat, and corn are from countries most affected by the pandemic, making them disproportionately vulnerable to its disruptive effects. Globalization – what is the future? csvukrs The effects of globalization on food system: •Demand for efficiency has pushed farmers to grow single crops over large areas, or monocultures, depriving agricultural land of the biological diversity which makes food nutritious and agriculture resilient against climate change. •In a 2018 study, scholars from the University of British Columbia found that farm-level biodiversity has decreased as farms have grown bigger. •Today, just three crops — wheat, corn and rice — overwhelmingly produced in just five countries comprise nearly half of all calories consumed globally, and 86 percent of all cereal exports. Globalization – what is the future? csvukrs The effects of globalization on food system: •The focus on just a few crops has made our system extremely prone to price volatility. •It concentrates power in the hands of those farmers with the most land, capital and technology, along with the multinational grain traders who rake in massive profits during food crises. •With the entire system engineered to exclude small and medium farmers who still produce almost half of the world’s food calories, they are being set up to lose. •This approach also puts our entire food system at risk. • Globalization – what is the future? csvukrs The effects of globalization on food system: •In a recent paper, food security scholar Jennifer Clapp, a member of the UN High Level Panel of Experts on Food Security and Nutrition, described the world’s current food system as rigid, inflexible, and unable to adapt to shocks like war or a pandemic. •It is because the current hunger spike is the third such crisis in 50 years, and many more crises are highly likely in the future. Globalization – what is the future? csvukrs Globalization – what is the future? Obsah obrázku text, snímek obrazovky, diagram, Plán Obsah vygenerovaný umělou inteligencí může být nesprávný. Only 10 corporations control most of our food and drinks. References •Hill, C. W. L. (2022). International business: Competing in the global marketplace (International student;14e.; ed.). McGraw Hill. •Daniels, J., Radebaugh, L., & Sullivan, D. (2021). International business, global edition. Pearson Education, Limited. •https://www.aljazeera.com/opinions/2022/12/16/american-globalisation-is-aggravating-africas-hunger •https://www.aljazeera.com/economy/2023/1/20/is-globalisation-dead-at-davos-thats-the-big-question