INTBUS22

• Globalization is the process by which the world becomes increasingly interconnected through the growth of trade, communication, and cultural exchange
• It involves the integration of countries into a global economy, characterized by the free flow of goods, services, capital, and people across borders
• Globalization includes economic, political, cultural, and technological aspects
• Economic globalization involves the integration of national economies into the international economy through trade, investment, and financial transactions
• Political globalization includes the spread of democratic values, the establishment of international organizations like the United Nations, and the proliferation of global treaties and agreements
• Cultural globalization involves the exchange of cultural ideas, values, and practices across the world, facilitated by advances in technology such as the internet and social media
• Technological globalization refers to new technologies and innovations across the world, facilitated by advancements in communication, transportation, and information technology
• Main drivers of globalization include technological advancements, liberalization of trade policies, increased foreign direct investment (FDI), globalization of capital markets, economic interdependence, investment, migration, and cultural exchange
• Globalization has led to the emergence of new markets, ease of capital mobility, and diverse financial instruments, impacting companies' financial exchange choices
• Companies often choose financial exchanges that benefit from globalization, like investing in emerging markets or diversifying assets globally
• Types of financial exchange choices in a globalized economy include international debt and equity offerings, cross-border mergers and acquisitions (M&A), foreign direct investment (FDI), and foreign portfolio investment (FPI)
• Challenges in globalization and companies' financial exchange choices include currency risk, political risk, regulatory risk, and cultural differences
• Positive effects of globalization include economic growth, poverty reduction, increased consumer choice, and technological advancements
• Negative effects of globalization include job displacement, income inequality, environmental degradation, and cultural homogenization
• Globalization has significant implications for organizational decision-making, as companies must consider factors such as global competition
• Globalization implications for organizational decision-making include factors like global competition, localization, supply chain management, regulatory environment, and sustainability
• Globalization has led to the development of complex global supply chains, requiring companies to manage relationships with suppliers and partners across multiple countries
• Companies operating globally must navigate a complex web of national and international regulatory requirements
• Globalization has heightened awareness of environmental and social issues, impacting decision-making processes
• The changing nature of the global economy includes factors like the rise of emerging markets, technological advancements, and shifting demographics
• Executives view the shift in global economic activity from developed to developing economies as the most important trend for business and the most positive for their own companies’ profits over the next five years
• The increasing role of technology, like e-commerce and digital platforms, has enabled businesses to reach customers worldwide, breaking down traditional barriers to international trade
• The automotive industry has been impacted by globalization in areas like research and development, market expansion, environmental regulations, supply chain integration, manufacturing, and standardization
• International trade involves the exchange of goods and services between countries, crucial for the global economy and the prosperity of nations
• Types of international trade include import trade, export trade, entrepot trade, and bilateral/multilateral trade
• Countries engage in international trade to benefit from disparities in their production capabilities and costs, access to resources, market expansion, and economic efficiency
• Advantages of international trade include economic growth, specialization, consumer benefits, exchange of technology and ideas, economies of scale, competition, and more job creation
• Disadvantages of international trade include dependency, trade barriers, environmental impact, job displacement, unfair competition for new companies, threat to national security, and pressure on natural resources
• International trade is important for consumer access, price reduction, economic growth, cultural exchange, global interdependence
• International trade theories like mercantilism, absolute advantage, comparative advantage, and Heckscher-Ohlin focus on factors like national resources and productivity
• Classical trade theories suggest countries should specialize in producing and exporting goods they can produce more efficiently or at a lower cost than other countries
• Classical theories of international trade focus on country-level factors and efficiencies for trade
• Mercantilism:

  • Economic theory suggesting a country should export more than it imports to accumulate wealth in gold and silver
  • Emphasizes a positive balance of trade and accumulation of reserves
  • Example: England's Navigation Act of 1651 imposed high tariffs on imports while subsidizing exports to maintain a trade surplus
• Advantages of Mercantilism: Increased domestic production and trade, strengthening national economies and enhancing political power
• Disadvantages of Mercantilism: Inefficiency, corruption, empire building, and exploitation of colonies
• Absolute Advantage:

  • Proposed by Adam Smith, states a country should specialize in producing goods it is more efficient in than other countries
  • Countries should produce and export goods they can produce more efficiently than others
• Advantages of Absolute Advantage: Justification for trade advantages by focusing on assets
• Disadvantages of Absolute Advantage: Doesn't account for costs or trade barriers
• Comparative Advantage:

  • Introduced by David Ricardo, argues that countries can benefit from trade by specializing in goods with lower opportunity cost
  • Countries should specialize in producing goods where they have a comparative advantage
• Advantages of Comparative Advantage: Shows trade can be beneficial even if one country has an absolute advantage