INTERNATIONAL

BUSINESS AND
FINANCE

GLOBALIZATION
 PRESENTED TO:
SIR ABDUL KHALIQ
 PRESENTED BY:
 MC-0O7.
 MC-010.
 MC-015.
 MC-022.
 MC-028.

MC-16
SECTION-A
 POINTS TO PONDER
 WHAT DOES
GLOBALIZATION MEANS.
 RELATIONSHIP BETWEEN
GLOBALIZATION AND THE
CONSUMER.
 HOW DOES
GLOBALIZATION WORKS.
 PROS AND CONS.
 INTERNATIONAL
BUSINESS V/S DOMESTIC
BUSINESS.
 REASONS WHY
GLOBALIZATION IS
PREFFERED BY THE FIRMS.
 HISTORY OF GLOBALIZATION
 THE BRETTON WOODS CONFERENCE WAS HELD IN 1994 TO RESTORE
THE ECONOMIC ACTIVITY WHICH WAS SHATTERED BY THE WORLD
WAR 2. INTERNATIONAL ORGANIZATIONS SUCH AS THE WORLD
BANK, IMF AND GATT WERE SET UP TO REVIVE THE GLOBAL
ECONOMY.
THE BRETTOM WOODS CONFERENCE:
IT IS BASICALLY SOME KIND OF COMMISSION AND BOARD TO MAKE
TRADE POLICIES AND TRADE BALANCE.

 THE GATT, A TRADE PACT AND AN ORGANIZATION, WAS FOUNDED IN

GENEVA IN 1948 TO PURSUE THE OBJECTIVE OF FREE TRADE IN
ORDER TO ENCOURAGE THE GROWTH AND DEVELOPMENT OF ALL
MEMBERS COUNTRIES.
THE GATT:
IT IS A GENERAL AGREEMENT OF TERRIF AND TRADE
 HISTORY OF GLOBALIZATION
 IT SETS OUT THE WORLD TRADE RULES TO ENSURE COMPETITION
IN COMMODITY TRADE BY BRINGING DOWN TARRIF LEVELS.
THE FIRST 7TH ROUNDS
SOUGHT TO STIMULATE
THE INTERNATIONAL
TRADE BY LOWERING
THE NON-TARRIF
RESTRICTIONS ON
IMPORTS.

THE 8TH ROUND OF

GATT WAS LAUNCHED
IN OUNTA DEL ESTE,
URUGUAY, IN
SEPTEMBER 1986 AND IT
CONCLUDED IN 1994.
COKE
NOKIA
 GLOBALIZATION
DEFINITION:
“GLOBALIZATION IS A PROCESS THAT ENSURES
UNFETTERED CROSS NATIONAL FLOWS OF CAPITAL,
TECHNOLOGY AND COMMODITIES. IT HELPS IN THE
DEVELOPMENT OF A COUNTRY AS IT CONTRIBUTES
TO A FOREIGN EXCHANGE RESERVES, SUPPLEMENTS
DOMESTIC SAVINGS AND IS ASSOCIATED WITH
SUBSTANTIAL TECHNOLOGY DIFFUSION AND
STIMULATION OF COMPETITION.”

EXPALANATION:
 GLOBALIZATION STIMULATES ECONOMIC
GROWTH, RAISES THE INCOMES OF CONSUMERS
AND HELPS CREATE JOBS IN THE COUNTRY.
 IT IS ASSUMED THAT IT WOULD HELP THE
COUNTRY ACHIEVE HIGHER LEVELS OF
EFFICIENCY, INTERNATIONAL COMPETITIVENESS
AND INDUSTRIAL GROWTH.
 EXAMPLES:
THE EFFECTS OF INTERNATIONALIZATION AND GLOBALIZATION IS
ALL AROUND. THEY PREVADE OUR LIVES AS INDIVIDUALS AND
PROFESSIONALS & MATERIALIZE IN NUMEROUS INSTANCES.

 ATIF ASLAM IS A PAKISTANI SINGER BUT HAS SUNG MANY

SONGS FOR INDIA.
 COKE COLA.
 MCDONALDS.
 IKEA.
 CNN.
 SKYPE.
 EBAY.
 INTEL.
 MICROSOFT.
 NESTLE.
 GLOBALIZATION OF THE ECONOMY:
“GLOBALIZATION OF THE ECONOMY MEANS
INTEGRATING THE ECONOMY WITH THE
GLOBAL ECONOMY.”

IT INVOLVES:
 DISMANTLING OF HIGH TARRIF
WALLS
 REDUCTION OF IMPORT DUTIES
 TRANSITION OF ECONOMY FROM
PROTECTED TO OPEN
 REMOVAL OF NON-TARRIF
RESTRICTIONS ON TRADE
 FOREIGN DIRECT INVESTMENT (FDI)
 FOREIGN PORTFOLIO INVESTMENT
(FPI)
 RAISE CAPITAL AND GROWTH OF
COMPANIES
 AN AGE OF GLOBALIZATION
GLOBALIZATION HAS BECOME ONE OF THE KEY BUZZWORDS OF MODERN
TIMES. WHILE GLOBALIZATION MEANS DIFFERENT THINGS TO DIFFERENT
PEOPLE, ITS MANISFESTATIONS ARE FOUND ALL AROUND US.
YOU CAN BUY A COKE IN ALMOST EVERY COUNTRY OF THE WORLD.
COUNTRIES DIFFER IN THEIR GLOBALIZATION LEVELS.

GLOBALIZATION INDEX CONSISTS OF FOUR COMPONENTS THAT ARE:

ECONOMIC
PERSONAL
INTEGRATIO
N
CONTACT

POLITICAL
TECHNOLO
ENGAGEME
GY
NT
GLOBALIZATION INDEX
 GLOBALIZATION FOR THE CONSUEMR
FOR THE CONSUMER GLOBALIZATION MEANS:
“MORE CHOICES, LOWER PRICES AND AN INCREASINGLY BLURRED
NATIONAL IDENTITY FOR PRODUCTS AND SERVICES”
FOR EXAMPLE:
 PURCHASE A GENERAL MOTORS OR A FORD CAR OR TRUCK
AND YOU WILL FIND OUT THAT THE CAR IS EITHER MADE IN
CANADA OR MEXICO OR CONTAINS NUMEROUS FOREIGN
COMPONENTS.
 BUY A CAR CARRYING THE LOGO OF A FOREIGN
MANUFACTURER, AND YOU MAY FIND OUT THAT IT IS
MADEIN U.S,
 HONDA CIVICS IN OHIO
 MERCEDES M CLASS IN ALABAMA
 NISSAN PICKUP TRUCKS IN TENNESSEE.
 DIMENSIONS OF GLOBALIZATION
 ECONOMIC DEVELOPMENT IN
ANY COUNTRY IN THE ERA OF
GLOBALIZATION IS THE RESULT
OF THE HEALTHY NATURAL
RELATIONSHIP BETWEEN THE RESOURCES
DIMENSIONS OF THE
GLOBALIZATION.
 IT NATURALLY DEPENDS UPON
ADEQUATE, ADEQUATE
EFFICIENT MANAGEMENT OF FINANCIAL
TRAINED,
ECONOMIC FACTORS. SKILLED & & REAL
DIMENSIONS SAVINGS,
 THE DEVELOPED COUNTRIES MOTIVATE
CAPITAL &
ARE INDUSTRIAL ECONOMIES. D HUMAN
INVESTMEN
RESOURCES
 THE DEVELOPING COUNTRIES T

ARE DEPENDENT ON
AGRICULTURE. ENTREPRE
 INDUSTRIALIZATION NEURIAL
COMPRISES OF DYNAMIC DRIVE &
INNOVATI
INTERACTION BETWEEN ONS
DEMAND AND SUPPLY.
 DIMENSIONS
 GLOBALIZATION IS USED TO CUT ACROSS
CONVENTIONAL TRANSNATIONAL BORDERS TOWARDS
EVOLVING A GLOBAL BUSINESS CULTURE.
 THE TRANSFORMATION PROCESS CALLS FOR CERTAIN
MERGERS AND ACQUISITIONS, ALIGNMENTS, ALLIANCES
AND AMALGAMATIONS OF OPERATIONS AND IDEAS.
 FOR LONG LASTING RESULTS, BUSINESS
TRANSFORMATION HAS TO BE SUPPORTED BY
APPROPRIATE QUALITY STRATEGY & SUPPLEMENTED BY
SUITABLE DEVELOPMENT STRATEGY.
 THE TRADE AND TECHNOLOGY IS INCREASING BEING
FELT BY ALL NATIONS AS A BASIC NECESSITY FOR
SOCIAL INFRASTRUCTURE & FOR THE DEGREE OF
BALANCE IN THE TRADE & TECHNOLOGY.
 GLOBALIZATION RESULTING FROM THESE CHANGES HAS
ALMOST BECOME THE ORDER OF THE DAY FOR ALL
BUSINESS HOUSES WITH ENTREPRENEURIAL DRIVE.
 WHAT GLOBALIZATION GIVES TO NATIONS
 GLOBALIZATION IS HIGHER AMONG G-7
NATIONS AS COMPARE TO THE
DEVELOPING AND EMERGING
ECONOMIES.
 GLOBALIZATION IS LOW FOR
DEVELOPED COUNTRIES LIKE JAPAN
BUT HIGH IN EMERGING AND
DEVELOPING COUNTRIES LIKE
MALAYSIA & NIGERIA AND BOTSWANA.
 GLOBALIZATION IS THE GAME OF
WINNERS AND LOSERS.
 IN 2000, THE SHARE OF DEVELOPING
COUNTRIES IN WORLD MERCHANDISE
TRADE ROSE TO ITS HIGHER LEVEL IN
50 YEARS.
 THE TRADE GROWTH OF THE 49 LEAST
DEVELOPED COUNTRIES (LCDs)
EXCEEDED GLOBAL AVERAGE.
 IN 2000, FOR THE 1ST TIME EVER,
MULTINATIONAL FIRMS FROM
DEVELOPING COUNTRIES MADE IT
INTO THE RANKS OF THE TOP 100
GLOBAL MULTINATIONALS.
 THREATS OF GLOBALIZATION
 GLOBALIZATION ENHANCES THE
MONOPOLY POWER OF LARGE
MULTINATIONAL CORPORATIONS.
 IT WILL DEPRIVE NATIONS OF THEIR
SOVEREIGNTY.
 TO SOME ECONOMIES GLOBALIZATION
SIMPLY MEANS AMERICANIZATION
THAT WILL BECOME A THREAT TO
THEIR VALUES AND IDENTITY.
 THE WTO MAY HAVE ASSUMED A
CONFLICT RESOLUTION ROLE.
 AS MULTINATIONAL FIRMS FLOURISH
AND SMALL FIRMS REMAIN VIABLE
PLAYERS THAT HAVE AN IMPACT IN
THE GLOBAL ECONOMY.
 GLOBALIZATION V/S ENVIRONMENT
 GLOBALIZATION LACKS TO PERFORMS
SOCIAL CORPORATE RESPONSIBILITY.
 ALTHOUGH SOME FIRMS MAY SEEK TO
LOWER COST REGARDLESS OF
ENVIRONMENTAL RESPONSIBILITIES.
 LIKE DOW CHEMICALS, WORKS A LOT
FOR THE CLEAN UP IN EASTERN EUROPE
& FORMER EAST GERMANY.

SOCIAL BALANCE
 GLOBALIZATION CARRIES BOTH
PROMISES AND THREATS & HAS WINNERS
AND LOSERS AT THE NATIONAL,
REGIONAL, ORGANIZATIONAL &
INDIVIDUAL LEVELS.
 SOCIAL BALANCE: A KEY QUESTION
 THE GLOBALIZATION CHALLENGE
IS ONE OFMAINTAINING A
BALANCE BETWEEN THE PUBLIC
INTEREST AND THAT OF THOSE
WHO SUFFER ITS CONSEQUENCES
IN THE SHORT RANGE.
 IT IS BEST TO UNDERSTAND
GLOBALIZATION IN ABALANCED
LIGHT, RECOGNIZING ITS POSITIVE
AND NEGATIVE ASPECTS.
 TO FOCUS ATTENTION ON
CONSTRUCTIVE SOLUTIONS TO
THE FOREIGN TRADE AND
INVESTMENT DEBATE.
 INTERNATIONAL ECONOMIC
ORGANIZATIONS I.E
INTERNATIONAL MONETARY FUND,
THE WORLD BANK, AND THE
WORLD TRADE ORGANIZATION
PROVIDE ADDED
INFRASTRUCTURE TO SUPPORT
GLOBALIZATION.
 GLOBALIZATION CHALLENGES
GLOBALIZATION MAINLY HAVE TO FACE THE TWO
CHALLENGES THAT ARE:
 WORLD TRADE ORGANIZATION (W.T.O)
ARGUMENTS
 THE SYSTEM HELPS PROMOTE
PEACE.
 DISPUTES ARE HANDLED
CONSTRUCTIVELY.
 RULES MAKE LIFE EASIER
FOR ALL.
 FREE TRADE CUT THE COSTS
OF LIVING.
 MORECHOICES OF PRODUCT
& QUALITIES.
 TRADE RAISES INCOMES.
 TRADE STIMULATES
ECONOMIC GROWTRH.
 BASIC PRINCIPLES MAKE LIFE
MORE EFFICIENT.
CRITICISM
 THE WTO DICTATES POLICY.
 THE WTO IS FOR FREE TRADE AT
ANY COST.
 COMMERCIAL INTERESTS TAKE
PRIORITY OVER DEVELOPMENT.
 THEY TAKE PRIORITY OVER
ENVIRONMENT.
 THEY TAKE PRIORITY OVER
HEALTH & SAFETY.
 THE WTO DESTROYS JOBS,
WORSENS POVERTY.
 SMALL COUNTRIES ARE
POWERLESS.
 THE TOOL OF POWERFUL
LOBBIES.
 INTERNATIONAL BUSINESS
DEFINITION:

“International business is defined as all business activities, including the creation and
transfer of resources, goods, services, know how, skills and information which go
beyond national boundaries”

The resources that makeup this flow are raw material, capital and people . goods
may be semi finished and finished assemblies and products. Services include
accounting, legal counsel, banking, insurance, management consulting, trade
services, education, healthcare, and tourism, among others.
The parties involved may be individual, companies, company cluster , govt. bodies,
and international institutions. Of these, companies are the dominant players .These
activities crossing national boundaries are often called international
Transactions.

The total values of goods and services involved in the activities of IKEA business
transactions worldwide are upwards from $16 trillion, well over the sales volume of
some of the largest corporation and larger than some countries gross national
product.
 MNEs
“A multi-domestic firm is an enterprise with multiple
international subsidiaries that are relatively independent
from headquarters. The global firm consists of closely
integrated international subsidiaries controlled and
coordinated from central headquarters. The MNE is defined
by the organization for Economic Cooperation and
Development (OECD) as an enterprise that engages in foreign
direct investment (FDI) and owns or controls value-adding
activities in more than one country.”
 WHAT MNEs HAVE TO OFFER
•Links to local companies
•Increased productivity
•Improved efficiency
•Capital formation
INVESTMENT& HUMAN •Training
RESOURCES •Employment
•Management skills

•R&D
•Industrial upgrading
•New capital equipment
•Export expansion
TECHNONLGY&TRADE •lower-cost imports

•Access to clean technologies

•Pollution abatement skills
•Companywide standards
ENVIRONMENT
 INTERNATIONAL V/S DOMESTIC BUSINESS
INTERNATIONAL DOMESTIC
 Many nations many  One nation same language
languages and cultures. and culture.
 Transport cost influences  Transport is one of the
to some extent. major expenses.
 Different currencies in  One currency.
different countries.  Market is relatively
 Markets are diverse and hetrogeneous.
highly hetrogeneous.
MOTIVATION FOR INTERNATIONALIZATION
Market
motives

Economic
motives

Strategic
motives
INTERNATIONAL TRADE THEORIES

THESE ARE THE THREE INTERNATIONAL TRADE THEORIES

 ABSOLUTE ADVANTAGE THEORY
AN INQUIRY INTO THE NATURE AND CAUSE OF WEALTH AND NATION
ADAM SMITH FROM U.K INTRODUCE THE DOCTRINE LAISSEZ-FAIRE
TO INTERNATIONAL TRADE. LAISSEZ-FAIRE MEANS LITERALLY “LET
MAKE FREELY”OR MORE GENERALLY “FREEDOM OF ENTERPRISE AND
COMMERCE”

THIS THEORY ARGUES THAT BOTH COUNTRIES WOULD GAIN

FROM THE EFFICIENT ALLOCATION OF NATURAL RESOURCES
GLOBALLY.
 COMPARATIVE ADVANTAGE THEORY
 DAVID RICARDO IN 1817 IN HIS BOOK ON THE
“PRINCIPLES OF POLITICAL ECONOMY AND
TAXATION” STATED THAT:

“BOTH COUNTRIES WOULD GAIN FROM TRADE EVEN IF ONE WERE

MORE EFFICIENT IN ALL GOODS, THUS IT WAS A COMPARATIVE
ADVANTAGE OF A NATION IN PRODUCING A GOOD RELATIVE TO
OTHER NATION THAT DETERMINES INTERNATIONAL TRADE FLOW”