Chapter

INTRODUCTION&

OVERVIEW

1

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Case: Wal-mart’s global expansion

Largest retailer in the world –Over 4500 stores International expansion in 1991begins with Mexico

in response to market saturation in the US Localization strategy adopted after trial and error

Global buying power has allowed it to reap economies of scale

Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets

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International Management

International Management refers to the study of issues and problems that arise from the management of international, multinational and global organisations

However, organisation and management theorists are:

1. Virtually all western in their cultural assumptions

2. By and large Anglo-American in their values

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What is globalization?

The shift towards a more integrated and interdependent world economy

Two components: The globalization of markets The globalization of production

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Globalization of markets

The merging of distinctly separate national markets into a global marketplace Tastes and preferences converge onto a global

norm Firms offer standardized products worldwide

creating a world market

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Globalization of markets

Significant differences still exist between national markets on many relevant dimensions

These differences require that marketing and operating strategies and product features be customized to best match conditions in a country.

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Globalization of markets

Countries are different Range of problems are wider and more

complex Government intervention in trade and

investment creates problems International investment is impacted by

different currencies

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Globalization of production

Refers to sourcing of goods and services from locations around the world to take advantage of Differences in cost or quality of the factors of

productionLaborLandCapital

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Swan Optical Manufacturing

1-5

Design

Global Production

Example 1

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Volume of world trade and production, 1950-2002

Fig: 1.1

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Emergence of global institutions

Globalization has created the need for institutions to help manage, regulate and police the global marketplace GATT WTO IMF World bank United Nations

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Global drivers

Macro factors that underlie trend towards greater globalization

Decline in trade barriers Technological change

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Pattern of declining tariffs

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Declining barriers to trade

Globalization of markets and production has been facilitated by Reduction in trade barriers Removal of restrictions to foreign direct

investment

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The changing pattern of world output and trade

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Percentage share of total FDI stock

Fig: 1.3

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Volume of FDI inflows, 1994-2002 ($ billions)

Fig: 1.4

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The role of technological change

Microprocessors and telecommunications

The internet and world wide web

Transportation technology

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The shrinking globe

Fig: 1.2

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Changing demographics of the world economy

World output and trade Changing foreign direct investment Changing nature of multinationals

Mini multinationals Non US multinationals

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National origin of largest multinational corporations

Fig: 1.5

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Globalization debate-Pro

Lower prices for goods and services Economic growth stimulation Increase in consumer income Creates jobs Countries specialize in production of goods

and services that are produced most efficiently

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Environmental performance and income

Fig 1.6

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Globalization debate-Con

Destroys manufacturing jobs in wealthy, advanced countries

Wage rates of unskilled workers in advanced countries declines

Companies move to countries with fewer labor and environment regulations

Loss of sovereignty