The Global Economy

• is one in which goods, services, people, skills, and ideas move freely across geographic borders

  global economy
• is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders

  globalization
• Globalization is a product of a large number of firms competing against one another in an increasing number of global economies.
• In globalized markets and industries, financial capital might be obtained in one national market and used to buy raw materials in another. Manufacturing equipment bought from a third national market can then be used to produce products that are sold in yet a fourth market.
• Thus, globalization increases the range of opportunities for companies competing in the current competitive landscape.
• Firms engaging in globalization of their operations must make culturally sensitive decisions when using the strategic management process.
• Highly globalized firms must anticipate ever-increasing complexity in their operations as goods, services, people, and so forth move freely across geographic borders and throughout different economic markets
• Globalization has led to higher performance standards in many competitive dimensions, including those of quality, cost, productivity, product introduction time, and operational efficiency.
• In addition to firms competing in the global economy, higher performance standards affect firms competing on a domestic only basis.
• The reason that customers will purchase from a global competitor rather than a domestic firm is that the global company’s good or service is superior.
• Workers now flow rather freely among global economies, and employees are a key source of competitive advantage.
• Managers have to learn how to operate effectively in a “ multi polar ” world with many important countries having unique interests and environments.
• In 21st century, only companies capable of meeting, if not exceeding, global standards typically have the capability to earn above-average returns