Unit 1 Global Business Environment Structure 1. Introduction 2. Meaning of Globalisation 1. 3Driving Forces of Globalisation 1. 4Dimensions of Globalisation 1. 5Stages of Globalisation 1. 6Introduction to Theories of International Trade 1. 6. 1 Absolute Advantage Theory 1. 6. 2 Comparative Cost Advantage Theory by David Ricardo 1. 6. 3 Factor Endowment Theory (Heckscher-Ohlin Thesis) 1. 7 Trading Environment of International Trade 1. 7. 1 Tariff and Non-tariff Barriers 1. 7. 2 Trade Blocs – Regional Economic Integration 1. 7. 3 Raising of New Economies 1. 8Self Assessment Questions 1. 9Answers . 10Case Studies 1. 1 Introduction Globalization describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of exchange. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. However, globalization is usually recognized as being driven by a combination of economic, technological, socio-cultural, political, and biological factors. The term can also refer to the transnational dissemination of ideas, languages, or popular culture. Looking specifically at economic globalization, demonstrates that it can be measured in different ways. This center around the four main economic flows that characterize globalization: • Goods and services, e. g. , exports plus imports as a proportion of national income or per capita of population • Labor/people, e. g. , net migration rates; inward or outward migration flows, weighted by population • Capital, e. g. , inward or outward direct investment as a proportion of national income or per head of population Technology, e. g. , international research & development flows; proportion of populations (and rates of change thereof) using particular inventions (especially ‘factor-neutral’ technological advances such as the telephone, motorcar, broadband). 1. 2 Meaning of Globalisation Globalization refers to shift towards a more integrated and interdependent world economy. Globalization has two main components: 1. Globalization of Markets: It refers to the process of integrating and merging of the distinct and separate national markets in to one global market place. E. g. Global acceptance of consumer products such as Coca-Cola, Levi’s jeans, McDonalds, etc 1. Globalization of Production: It refers to the tendency among many firms to source goods and services from different locations around the globe in order to take advantage of national differences in the cost and quality of factors of production (labor, energy, land and capital). E. g. The Boeing Company’s airliners source various components from various parts of globe. 1. 3 Driving Forces of Globalisation 1. Declining trade and investment barriers After the World War II the lowering of trade barriers led to the free flow of goods, services, and capital between nations. In additions to lowering of trade barriers, many countries have also removed restrictions on barriers to FDI. These two changes made the laws less restrictive there by encouraging both inward and outward investment by foreign firms. 2. The role of technological change Advances in microprocessors and telecommunication Emergence of the internet and World Wide Web Innovations and development in the transportation technology 3.
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