ni oh yeah all right so uh we begin our course in international uh business and today is actually chapter one introduction and overview and this is an introduction and overiew actually of globalization now here is the most ironic part of globalization we got here in the classroom a bunch of Western Europeans right who are getting lectured you know by a Eastern European in Southeast Asia right isn't that ironic but that's part of globalization part of globalization means again exchange of goods across the world exchange of services across the world exchange of Labor across the world and exchange of investments in this particular case we got an amazing exchange of a service which is an educational service okay across the world where you get to mix Eastern Europeans and Western European in Asia all right so let's get started with uh chapter one globalization and see what it is well they got here as a case study they got here about Walmart and Walmart is one of the many examples about globalization of course you know them all we're just talking that you love your Samsung Galaxy yes I also love my Samsung Galaxy right so Samsung seems to be Conquering the world now and it's eating the lunch of apple right and it's eating the lunch of Nokia right Nokia is falling behind and so on so Samsung is on the rise okay all so uh so back to globalization globalization number one what what's the problem what's the question like if you can't really see the screen oh we we we got too much of a light all right well let's let's try you can't see let's see hopefully it's a little better now is it a little better now all right so uh Walmart the biggest retailer in the world it's got 4,500 stores almost almost everywhere in the world okay it has extraordinary purchasing power if Walmart has a specific Demand on its suppliers suppliers usually comply otherwise they get in serious trouble if they don't comply Walmart has the power to to introduce standards and if it introduces it to hundreds more like thousands of its suppliers it could potentially introduce Global standards around the world another symbol of globalization is McDonald's you get to see McDonald's practically all around the world I mean they flooded my home country Bulgaria they flooded I'm sure here you me you got all of these International chains and this is all part of globalization globalization now back in the old days we didn't have exchange students like 20 25 years ago uh exchange students were extremely rare now you got exchange students all the time but practically going from country to Country to Country to Country again to get to get to experience the culture and everything else so globalization is steadily on the r the correct way to say that globalization has been on the rise since the 80s and has stalled and now we may be reversing globalization since the global financial crisis of 2008 all right let's get back to globalization all right so what is globalization well it is a shift to a more integrated and inter interdependent World it makes the world more interdependent it makes one business dependent on another it makes the economy of one country dependent on another for example it makes Apple the maker of iPhone very very very dependent on the chips produced by Samsung okay so you got a lot of inter dependence and you have a number of elements or components one of them is globalization of markets markets become Global you guys get to sell these BMWs everywhere in the world and we love them right Samsung gets to sell these galaxies all over the world and again we love them right so you have a tremendous globalization of markets many many uh goods and services are now practically available everywhere in the world very very few markets are still closed like North Korea and even now the last one of countries that is opening up is Cuba okay all the others are practically open you can find almost anything in any country around the world and that's the trend number one and the fundamental Trend number two is globalization of production globalization of production means that uh the German automaker BMW is producing BMW X5 in Mexico to sell it for the American Market all right you guys have a lot of X5 in Germany No not so many one of the reasons this X5 is a hell of a lot more expensive for a number of reasons first you got to have a tariff to bring your own German well it's actually mexican-made BMW in Europe you got to pay the Tariff and you got to pay the shipping it's an already expensive car so got to be pretty damn Rich German or Russian or Bulgarian or whatever to to buy but it's not as expensive in the US uh now EX three will be a lot cheaper than X5 right or not right well right in Europe but not right in the US in the US X3 gets to be a little bit more expensive because you got the shipping cost from Germany and the Tariff from Germany while the X5 has no tariff okay it's already made in NAFTA so in you can get a whole lot cheaper you can get a whole lot cheaper uh X5 then it can get uh in US then it can get an X3 okay so these are again Market distortions but the idea is that of globalization so if it makes more sense to produce it in Mexico you'd produce it in Mexico if it makes more sense to be produced in Canada it will be produced in Canada for Japanese automakers it makes more sense to produce their cars like Hondas and Toyotas right in the United States okay so that's what they do sometimes it makes more sense to move production to Eastern Europe or to Southeast Asia now the hottest production sites in the world are Vietnam Vietnam people are moving out of China and moving production into Vietnam okay they stopped moving production into Taiwan long time ago right now they're so production globalization means that sometimes you will have have a company produce in a foreign country to make it cheaper or it may produce the engine in one country it may produce the breaks in another country okay it may produce a third part in a third country okay so you may have to spread production what we call AI optimal Place let's see what's next globalization of markets well globalization of Market markets means that before historically distinctly separate and distinctly different markets are now getting merged or getting to flow to each other and they're becoming very similar example which I would was explaining is uh before Eastern Europe was so so totally different from Western Europe but now you come to my home country Bulgaria in going to see all the major American Mega corporations we love and we do Drive mostly German cars right BMWs and Mercedes of course we use the older models and used models which are a lot cheaper but you're going to see uh in Bulgaria more BMWs relative to Germany uh that just happens to be the reality uh the highest percentage of Mercedes in the world is in surprise Albania right over 90% of cars in Albania are Mercedes huh well it's a whole different story how they have them but why why don't they steal BMW why don't steal Mercedes sorry don't steal Audi why they don't steal Renault or right well again the idea here is again globalization is that yeah we get these cars we don't steal them we pay for them we buy them six seven 8 years old okay okay uh we drive it again it's part of globalization now uh again everyone's having a Samsung Galaxy part of globalization uh all over the world you you get these like that guy over there uh Apple MacBooks yeah that's a very very very good machine I have one I love it it's a great machine so this is part of completely different Market places so you're going to see a lot of uh Eastern Europeans that will have again the Western brand names of the bags whether it's the Gucci or the FAS okay for fashion we're going to be using cameras like Sony's and all the so the world is totally get globalized in terms of markets now when it come to bugaria you won't see too much of a difference in terms of Commodities in terms of what is sold pretty much anything which is sold on the German market and it's legal there is sold on the Bulgarian Market it's perfect go in Bulgaria with a small difference in price not too much of a a difference okay the other major Trend going on around the world is standardization of products what globalization has done in a sense is standardization of consumer preferences and tastes now consumers have not yet completely standardized example here everyone's riding a little scooter okay while in Africa they write motorcycle it's the same engine size the same thing but here it's the scooter type okay you keep your knees next to each other and in the motorcycle you have your knees spread out okay so for some cultural or other reasons Asians and especially in Taiwan and here and I was in maau teaching in maau they all love the schoolers and they will not buy motorcycle they buy only a scooter say there's still some preferences and you can't change those example will be Americans Americans love big cars they're you know they just cannot buy a small car for them it's it's like you know the size of their pride so Americans love the big cars well in Europe we'd rather have a small car yeah amazing you can go anywhere in Saudi Arabia I saw for the first time after two months living in teaching in Saudi Arabia a BMW three series that BMWs oh yeah but you can't find the Five series they got only one series seven right that's the only thing they know that's the only thing they drive same thing you can't find a cclass Mercedes impossible you can't buy you can't see it's not there you can't buy an e class either but everywhere they got only s class all right and they drive S Class well you're intelligent enough to guess what happens with audies no fours no six you got only eight 88 right and that's that's the way it goes okay same thing you're not going to see BMW X3 but you're going to see X5 okay these are important cultural differences it's got to be big size well what about jeans well the Middle East is an Arabic country and when Levis you know all Levis right they do the jeans when they sell the same American jeans in the Middle East they don't sell why wouldn't they sell well women in the Middle East aren't going to wear tight gen it's culturally unacceptable they got to be lose fit okay for whatever reasons so the point I'm trying to make is while we all get to love those Samsung Galaxies right and we like to get one and we do get one sometimes and we have very similar preferences in one sense sometimes you still have culturally different preferences whether it's for historic or for other reason could be for climate reason could be for cultural reasons sometimes people are totally different and they just wouldn't even look at a three series it doesn't mean anything okay all right but they got they're going to be buying only a seven series now you come to Bulgaria it's the opposite you really really really see a seven series but three series everywhere on the market so Bulgaria is the extreme opposite of Saudi Arabia when it comes com to the luxury level of cars and the entry level cars and again doesn't mean they're smarter and that we are dumber and it doesn't mean that we are smarter and that they are Dumber it just means that they are different people with different culture with different preferences so that's very important to understand and while globalization is driving consumer preferences to be closer and similar you still have significant cultural differences around the world all right oh man that's there it is significant differences still exist between National markets uh right on many levels of their menion so basically the differences are still there and these differences require here's the key different marketing Str strategies sometimes they'll require different packaging strategies okay sometime they'll require a different advertising strategies okay and sometimes it will just require a completely different product it will require a redesigned product okay when you redesign the product to fit the customer it is still considered part of marketing it's still considered a marketing strategy in this case it's called a differentiation or for nationalization in international business the key word is and going to see a lot is called localization localization means to change to adjust the product so as to fit local culture local preferences or maybe local requirements all right now here's an example where uh for Americans need to have a local uh difference because of government regulations examples Americans trying to bring in all of these huge V vehicles in Europe turns out to be a complete disaster and a complete failure well two reasons one is economic reason in Europe gasoline and Diesel is way more expensive than in Europe so you can't just sell gas ging cars because Europeans are a lot more cautious cautious about fuel efficiency and here's the other one big engine uh big engine cars will have a significantly higher tax in Europe but not in the United States and there's no tax in Saudi Arabia at all okay so uh Americans would think that they'll come with the American car and conquer the European world and Europeans say ah it's a big car too much gasoline too much tax they don't buy so when for comes what they have to do is they have to redesign for in Germany to fit European tastes for size okay and they got to throw in a European German made engine okay and then it would sell and it would sell well because it's half American half German now same thing about localization let me get a few more example is uh in America everywhere you see Toyota Camry well I can't see a Toyota Camry in Bulgaria and probably is very difficult to see Toyota Camry in Germany and the reason is the Japanese Toyota isn't even selling Camry in Europe for Europe they got a special model a little smaller a little narrower a little redesigned called Toyota avances you guys see avenus yes Toyota avenus is a fairly popular car it is a modified caming all right now in the Middle East you're not going to see evanes you're going to see only caming so the American cars will fit the Middle East Market but they cannot fit the European market again European market is different the preferences are different they can still put the small efficient engine but the Camry can't doesn't sell in Europe for whatever reasons we the Europeans don't want to buy the Camry but they buy the advances and so the Japanese sell the advances so again the advances versus the Camry is a strategy of localization changing the product to fit the market uh in Bulgaria we don't need to do that we just drive what Germans drive and we're happy with it right okay so different marketing different operating strategies and features to be customized to match the conditions of a country sometimes the conditions of a country could be you know the country is very hot so you need a different air conditioning system sometimes people in different cultures cook different ways so they need a different stove okay on the stove they put a flat pan oh but they don't cook with a flat pan they cook with a bow pan okay so mean these are simple cultural things that uh International businesses will have to learn let's see what we got next next okay so within globalization of Market you still have to understand that countries are different political systems are different legal systems are different regulatory systems are different culture is different oh yes and what a thing you will quickly notice when you see big tall people they got to be Western Europeans in here the locals are small in size try to sell clothes with big size you don't have big people over here can't sell the clothes okay so these are all the same okay so you have with different countries have a range of different problems and uh when you're dealing globally you have a lot bigger complexity everything's more complicated you got to deal with another legal system you got to deal with another culture you got to deal with so so many different things okay governments intervene governments intervene in trade for whatever reasons usually to protect their own business usually to create jobs usually they intervene just to make it difficult so that you can pay bribes okay we call this corruption governments love to create different obstacles and in order for you to go through the obstacle you pay a bribe and then the government is happy and business moves on that happens all the time around the world especially in the developing world uh that's not going to happen in Japan for example okay and not going to happen in Germany okay but it will happen in a lot of a lot of developing countries okay and International Investment is affected by different countries some countries are a lot more attractive for investment and some countries are simply not attractive for investment some countries government are very honest with extremely low level of corruption and some countries government are very dishonest and they try to rip you off in every possible way and then the locals try to rip you off and then you can't rely on the judicial system to help you so you're a little bit of helpless unless you're a multinational corporation and you maintain your own Army and you maintain your own justice system okay and you maintain your own enforcement and everything else but otherwise it is very complicated for international businesses we got 10 more minutes let's see what we have all right so globalization of production essentially remains globalizations of the factors of production and the factors of production are labor and capital back in the old days from about 200 300 years ago with the birth of economics in 1776 by Adam Smith in economics we like all this to separate land is a separate factor of production and we've done it for 200 reduced so we like to say labor land and capital but understanding that land is part of capital okay land is part of capital so what does it means it means that now multinational corporational businesses including universities like this one will be using foreign labor okay they'll be using a lot of foreign labor they'll be using a lot of foreign capital most of the things you see here foreign Capital uh the projector is foreign and important the computer is forign and important the uh screen is forign and important the textbook that we're using is again foreign and exported all right and when you get to look at your watch your watch is also foreign and exported but that's a different sort it's a consumer good so businesses will use most of their inputs like oil will be foreign and in this case imported all right so businesses will use all sorts of imported stuff as part of their input and they will be spreading there will be spreading production in different countries wherever production is cheaper wherever the resource maybe of Labor or the resource maybe of land or the resource of capital would be the cheapest in other words you will move production to that place where the combination of Labor land and capital will give you the lowest overall cost for the relatively highest overall quantity yeah we have about three five more minutes and then we going take a nap right right okay so differences in the cost of factors in other words German labor is expensive and labor in India and Bangladesh is very cheap so differences in the cost will determine where you're going to go or differences in quality okay sometimes you may go where the cost is lower we call it cheaper or you may go where the quality is higher depending on the type of product that you do let's see all right we got these here Global whatever uh design Swan Optical they have some say they cover everything manufacturing I don't know what this is let's move on oh different colors you see guys the color here is green and the screen is red yeah yeah they have some color okay so you make the design in one place looks to me like France right oh yeah and some other place that's got to be L Italy right I mean if you want to do design you're going to do it in Italy right Italians are we know the best designers I mean all of these top brand names are pretty much Italian brand names right when it comes to cars again Italians will have the best design right for especially for those specialty cars okay we call these exotic cars they all the exotic cars cars of Ferrari Lamborghini right all right see what else we got here let's see oh you also do some design here in Japan that that's interesting and all manufacturing will be somewhere in Southeast Asia could be Indonesia could be whatever the place is and again so you're going to have design spread around the world and you're going to have Manufacturing in one other place and it's still you can have marketing and sales Finance Accounting in still yet another country that's going to be the country of usually the headquarters let's see what else we got in here okay manufacturing also done in China all right so which is one of the most important Trends related to globalization and it's the stepid sorry steadily and rapidly Rising global trade and here you got a world trade and production and here's the key global trade is growing and Rising faster than Global Production so if production Grows by 4% trade goes by 10% and you can see over here how you have trade lagging behind production and later on trade accelerating so trade growing significantly faster than production the other very important trade to understand is that of Investments is rising even faster than trade so you got a Global Production global trade going a lot faster than production and Global invest investment going even faster than production I mean these are not the real numbers but you can think of it this way if economic growth is 5% trade is growing at 10% and Investments are growing at 15% all right so you have a very rapid growth of global trade and you can see the growth expanding steadily in the 70s and 80s but skyrocketing in the '90s the reason for the growth in the '90s is the collapse of Eastern Europe and the collapse of many other closed economies so opening up of Eastern Europe some countries in Latin America and also the opening up of Asia accounts for this rapid increase of globalization after the all right let's let's see what we have so we finish over here okay we finish up to Global institutions next time guys please remind me and we continue with global institutions finish