Chapter 2

• globalization allows companies to outsource value chain activities to the most favorable locations worldwide
• value chain is the sequence of value adding activities the firm performs in the course of developing, producing, marketing, and servicing a product
• growing world trade and foreign direct investment provide buyers with a wider choice of products than ever before
• global competition and innovation frequently help to lower consumer prices
• phase one of globalization: 1830 to late 1800s, peaking in 1880
• phase two of globalization: 1900 to 1930
• phase three of globalization: 1948 to 1970s
• phase four of globalization: 1980s to 2006
• phase five of globalization: 2007 to present
• phase one of globalization is associated with use of water and steam power to mechanize production and power ships and trains
• phase one of globalization is when international business became widespread due to growth of railroads, ocean transport, and the rise of large manufacturing and trading firms
• during phase one of globalization was the invention of the telegraph and telephone
• phase one of globalization triggers: introduction of railroads and ocean transport
• phase one of globalization characteristics: rise of manufacturing, cross border trade between UK and US, more involvement with finance, expansion out west
• phase two of globalization is associated with the rise of electricity and steel production
• during phase two of globalization, electric power was widely used to drive mass production
• phase two of globalization reached its height just before the Great Depression
• in 1900, Western Europe was the most industrialized world region, with some of the earliest subsidiaries of MNEs
• phase two of globalization triggers: rise of electricity and steel production
• phase two of globalization characteristics: rise of electricity and the radio, modern advertising, MNEs growing, more investment, industry mainly manufacturing and agriculture
• phase three of globalization is associated with reconstruction efforts after World War II and the dismantling of trade barriers
• in 1947, the Bretton Woods Conference of 23 nations created the GATT (General Agreement on Tariffs and Trade), which reduced barriers to international trade and investment
• GATT led to the formation of the WTO (World Trade Organization), which aims to regulate and ensure fairness and efficiency in global trade and investment
• global cooperation post World War II gave birth to the International Monetary Fund and the World Bank
• in phase three of globalization, MNEs began to seek cost advantages by locating factories in developing countries with low labor costs
• international trade and investment expanded significantly in the 1960s
• after World War II, MNEs in Europe and Japan began to challenge the dominance of US multinationals
• in phase three of globalization, growing international trade coincided with increased cross national flows of capital, leading to integration of global financial markets
• phase three of globalization triggers: formation of GATT, conclusion of World War II, Marshall Plan to reconstruct Europe
• phase three of globalization characteristics: industrializing western countries to reduce trade barriers, rise of MNEs from Japan, development of global capital markets, rise of global trade names
• phase four of globalization featured the use of electronics and information technology to automate production
• phase four of globalization was characterized by enormous growth in cross border trade and investment
• phase four of globalization triggers: revolution in information, communication, and transportation technologies, remarkable growth of emerging markets, development of personal computers and the internet
• phase four of globalization is characterized by the collapse of the Soviet Union and the market liberalizatioon of Central and Eastern Europe
• impressive industrialization and modernization in East Asian economies followed phase four of globalization
• in phase four of globalization, international prosperity began to develop in the emerging markets including Brazil, India, and Mexico
• the 1980s witnessed huge increases in FDI, especially in capital and technology intensive sectors
• in phase four of globalization, technological advances supported rise of internationally active SMEs
• phase five of globalization triggers: rise of digital and other new technologies
• the value of world exports of services rose from 3 trillion in 2007 to more than 5 trillion in 2017