International business chapters 1-4
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refers to the trend towards a more integrated global economic system
What are the two key facets of globalization?
- the globalization of markets
- the globalization of production
globalization of markets
the merging of historically distinct and separate national markets into one huge global marketplace
globalization of production
he sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor energy, land, and capital)
goal of globalization of production(2)
- Lower overall cost structure
- Improve the quality or functionality of the product to gain competitive advantage
What is driving the move toward greater globalization?(2)
- declining trade and investment barriers
- technological change
occurs when a firm exports goods or services to consumers in another country
foreign direct investment
occurs when a firm invests resources in business activities outside its home country
What are the implications of technological change for the globalization of production and the globalization of markets?
- Lower transportation costs (Advances in Shipping and Logistics):
- Make a geographically dispersed production system more economical
- Over 40% of US trade within multinational firms
- Allow firms to better respond to customer demands
- Lower communication costs (Advances in Information and Communication Technologies (ICT)):
- Help create electronic global marketplaces
- Allow firms to connect with global operations in real time
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