Overview
This lecture introduces the concept of globalization in international business, emphasizing its key trends, effects on markets and production, and the challenges posed by cultural and regulatory differences.
Introduction to Globalization
- Globalization is the increasing integration and interdependence of economies, businesses, and cultures across the world.
- It involves the global exchange of goods, services, labor, and investments.
- Examples include multinational retailers (e.g., Walmart, McDonald's) and technology brands spreading worldwide (e.g., Samsung).
Globalization of Markets
- Globalization merges previously separate national markets into a single global marketplace.
- Most goods and services are now available worldwide, with only a few closed markets remaining.
- Consumer preferences are becoming similar globally but still retain important cultural differences.
- Standardization trends exist, but localization (adjusting products for local markets) remains necessary due to cultural and regulatory factors.
Globalization of Production
- Companies produce goods in multiple countries to lower costs and increase efficiency.
- Production may be spread across countries (e.g., BMW manufacturing cars in Mexico for the U.S. market).
- Factors influencing location: labor, land, capital costs, and quality requirements.
- Companies source inputs or labor globally to minimize expenses and maximize output.
Cultural and Regulatory Challenges
- Significant cultural, political, legal, and regulatory differences persist between countries.
- Products often require adaptation (localization) to comply with local tastes, customs, and laws.
- Marketing, packaging, and product design must sometimes be customized for national markets.
- Governments may intervene to protect local markets, create jobs, or due to corruption.
Trends in Global Trade and Investment
- Global trade and investment have grown much faster than overall production since the 1980s.
- The growth accelerated in the 1990s due to the opening of Eastern Europe, Asia, and Latin America.
- International business faces increasing complexity as a result.
Key Terms & Definitions
- Globalization — integration of world economies, cultures, and markets.
- Localization — adapting products or strategies to fit local markets.
- Globalization of Markets — merging of separate national markets into one global market.
- Globalization of Production — sourcing inputs and producing goods in multiple countries for efficiency.
- Factors of Production — inputs used to produce goods (labor, land, capital).
Action Items / Next Steps
- Review the concept of global institutions for the next class.
- Be prepared to discuss examples of cultural adaptation by international businesses.