CHAPTER 1

The Rapid Change of International Business

Section 1 – Term matching

1. Multidomestic company A. consists of the interactions between the domestic environmental

forces and the foreign environmental forces, as well as interactions

between the foreign environmental forces of two countries, such as

when an affiliate in one country does business with customers in

another.

2. Global company B. unconscious reference to one’s own cultural values when

judging behaviors of others in a new and different environment.

3. International company C. internal forces over which management does have some control

and that management administers to adapt to changes in the

uncontrollable forces.

4. Economic globalization D. an organization with multi-country affiliates, each of which

formulates its own business strategy based on perceived market

differences.

5. Economies of scale E. is business that is carried out across national borders. 

6. Unit costs F. a trade pact between countries that reduces tariffs for certain

products to the countries who sign the agreement. While the tariffs

are not necessarily eliminated, they are lower than countries not

party to the agreement.

7. Foreign direct investment G. an organization that attempts to standardize and integrate

 operations worldwide in most or all functional areas.

8. Exporting H. all the uncontrollable forces originating in the home country

that surround and influence the life and development of the firm. 

9. Environment I. has facilities and other assets in at least one country other than

its home country. Such companies have offices and/or factories in

different countries and usually have a centralized head office

where they coordinate global management.

10. Uncontrollable forces J. external forces that management has no direct control over,

although it can exert influence.

11. Controllable forces K. denotes the operations of a company outside its home or

domestic market; many refer to this as business conducted within a

foreign country.

12. Domestic environment L. the relative ability of parties in a situation to exert influence

over each other. 

13. Foreign environment M. the tendency toward an international integration and

interdependency of goods, technology, information, labor and

capital, or the process of making this integration happen.

14. International environment N. either a global or a multidomestic company

15. International business O. the transportation of any domestic good or service to a

destination outside a country or region.

16. Foreign business P. Transactions in which the ownership of companies, other business

organizations, or their operating units are transferred or consolidated

with other entities.

 17. Multinational corporation Q. the process by which a property or business goes from being

owned by the government to being privately owned.

18. Preferential trading R. all the forces influencing the life and development of the firm. 

arrangements

19. Privatization S. direct investments in equipment, structures, and organizations in

a foreign country at a level sufficient to obtain significant

management control; does not include mere foreign investment in

stock markets.

20. Subsidiary T. the total expenditure incurred by a company to produce, store and sell

one unit of a particular product or service. They include all fixed costs,

or overhead costs, all variable costs, or direct material and labor costs.

21. Bargaining power U. reduced costs per unit that arise from increased total output of a

product.

22. Mergers and acquisitions V. all the uncontrollable forces originating outside the home

country that surround and influence the firm.

23. Self-reference criterion W. a company with stock that is more than 50% controlled by another

company, which is usually referred to as the parent company or

the holding company.

Section 2 – Gap filling

A (1) ________________  is an organization that attempts to standardize operations worldwide

in all functional areas. A (2) ________________, by contrast, is an organization with multi-

country affiliates, each of which formulates its own business strategy based on perceived market
differences. The term (3) ________________ is often used to refer to both global and

multidomestic firms.

Following are the five change-based drivers that are leading international firms to globalize their

operations, with an example for each kind: (4) ________________ —preferential trading

agreements, technological— (5) ________________ in communications technology, market—

global firms become global customers, cost—globalization of product lines and production helps

reduce costs by achieving (6) ________________, and competitive—firms are defending their

home markets from (7) ________________ by entering the foreign competitors' markets.

International business differs from its domestic counterpart in that it involves three environments

—domestic, foreign, and international—instead of one. Although the kinds of forces are the

same in the domestic and foreign environments, their values often differ, and changes in the

values of foreign forces are at times more difficult to assess. The international environment is

defined as the (8) ________________ between the domestic environmental forces and the

foreign environmental forces and between the foreign environmental forces of two countries

when an (9) ________________ in one country does business with customers in another. An

international business model helps explain this relationship.

The (10) ________________ is composed of all the uncontrollable forces originating in the

home country that influence the firm's life and development. The (11) ________________ is

composed of all the forces originating outside the home country that influence the firm. The (12)

________________ is the interaction between the domestic and foreign environment forces or

between sets of foreign environmental forces.

Section 3 – Mutiple choice questions

1. The increased internationalization of business requires __________ to have a basic knowledge

of international business. 

A. all managers

B. managers of multinationals

C. managers of transnationals

D. managers of purely domestic operations

2. There is an emphatic need for all business people to have a basic knowledge of

____________.

A. foreign travel

B. international business

C. the Pacific Rim

D. foreign exchange

3. Foreign business denotes ____________.

A. a business whose activities involve crossing national borders.

B. the domestic operations within a foreign country.

C. an organization with multi-country affiliates.

D. an organization that attempts to standardize operations worldwide.

4. A global company is defined as an organization that attempts to have a worldwide presence in

its market, to standardize operations worldwide in one or more of the firm's functional areas, and
to integrate its operations worldwide. According to this definition, a global firm's management

____________.

A. Looks for differences among markets.

B. Avoids maintaining a presence in key markets.

C. Uses domestic products, raw materials and financing whenever possible.

D. Searches the world for market opportunities.

5. A multidomestic company is ____________.

A. an organization that attempts to standardize and integrate operations worldwide in all

functional areas.

B. the same as a global company

C. an organization with multi-country affiliates, each of which formulates its own business

strategy based on perceived market differences

D. an organization that standardizes and integrates operations on a domestic basis

6. Which of the following is not a major kind of driver leading international firms to the

globalization of their operations?

A. Political.

B. Market.

C. Environmental.

D. Technology.

7. The most common definition of globalization is that of ____________.

A. political globalization - the international integration of political laws and customs

B. geographical globalization - the international integration of countries in geographical

proximity to one another

C. cultural globalization - the international integration of people with similar cultural

characteristics

D. economic globalization - the international integration of goods, technology, labor, and capital

8. Advances in computers and communications technology are permitting an increased flow of

ideas and information across borders. This enables ____________.

A. manufacturing personnel to concentrate more on domestic production

B. customers to learn about foreign goods

C. sellers of products to travel to more locations worldwide in search of buyers

D. advertisers to focus more on specific countries where demand is the greatest

9. One of management's goals is utilizing economies of scale to reduce unit costs. Which of the

following would not necessarily result in economics of scale being realized?

A. Globalizing product lines to reduce development costs.

B. Locating production in countries where the costs of the factors of production are lower.

C. Locating production in countries where the labor force is the most highly educated.

D. Globalizing product lines to reduce production and inventory costs.

10. International business differs from domestic business in that a firm operating across borders

must deal with the forces of three kinds of environments. Which of the following is not one of

the three kinds of environments?

A. Domestic

B. Foreign

C. International

D. Local

11. Uncontrollable forces that management has no direct control over include ____________.

A. Political

B. Capital

C. Raw materials

D. Production

12. Controllable forces that management administers to adapt to changes in uncontrollable forces

include ____________.

A. Financial

B. Legal

C. Technological

D. Personnel

13. The forces in the foreign environment are the same as those in the domestic environment

except that they occur in foreign nations. However, they operate differently for several reasons.

Which of the following is not one of the reasons?

A. Different force values.

B. Changes are difficult to access.

C. Physical and sociocultural forces are not important.

D. The forces are interrelated.

14. The trend toward unification and socialization of the global community is illustrated by

which of the following ____________.

A. preferential trading arrangements that group several nations into a single market

B. progressive increases in barriers to foreign investment by most governments

C. increased public ownership of much of the industry in formerly communist nations

D. all of the above are aspects of the trend toward unification and socialization of the global

community

15. Due to the expanding importance of foreign-owned firms in local economies, host

governments have made their policies toward these companies _______________. 

A. more strict

B. more liberal

C. harsher

D. more confronting

16. One variable commonly used to measure where and how fast internationalization takes place

is: _______________. 

A. the increase in a nation's population

B. the increase in the number of new companies formed

C. the increase in foreign direct investment

D. the increase in international trade

17. According to supporters of the globalization of trade and investment, free

trade ____________.

A. creates more and better jobs

B. benefits all nations and workers

C. does not cause the loss of high-paying jobs

D. All of the above

18. According to opponents of the globalization of trade and investment, ____________.

A. globalization has produced uneven results across nations and people

B. globalization has had harmful effects on labor and labor standards

C. globalization has contributed to a decline in environmental and health conditions

D. All of the above

19. The domestic environment is composed of all the uncontrollable forces originating in the

__________ that surround and influence the life and development of the firm. 

A. international arena

B. host nation

C. home country

D. foreign country
20. The kinds of forces in the foreign environment are ____________ those in the domestic

environment except that they occur in foreign nations. 

A. different from

B. the same as

C. less than

D. more stringent than

21. Decision making in the international environment is ____________ it is in a purely domestic

environment. 

A. less complex than

B. less demanding than

C. more complex than

D. about the same as

Section 4 – T/F + explanation

1. A global company is an organization with multi-country affiliates, each of which formulates

its own business strategy based on perceived market differences.

2. The difference between firms of the early 1900s and present companies are their explosive

growth and the increasing globalization of their products and markets.

3. One variable commonly used to measure where and how fast internationalization takes place

is the increase in total foreign direct investment.

4. The kinds of forces in the foreign environment are the same as those in the domestic

environment except they occur in foreign nations.

5. An international manager has two choices on what to do overseas with a concept or technique

employed in domestic operations: (1) transfer it intact or (2) adapt it to local conditions.

6. Global company maintains a presence in key markets around the world.

7. As a business practice, international business is relatively new.

8. Five major drivers of globalization are political, technological, market, cost, and culture.

9. Advances in computers and communication technology are permitting an increased flow of

ideas and information across borders, enabling customers to learn about foreign goods.

10. In order to achieve economies of scale, the company can move production or other parts of

the company’s value chain to countries where the costs are higher.

11. One variable commonly used to measure where and how fast internationalization is taking

place is the increase in total foreign direct investment.

12. Importing is the transportation of any domestic good or service to a destination outside a

country or region.

13. Distributive forces are kinds and numbers of competitors, their locations, and their activities.

14. The elements over which management does have some control are the external forces, such

as the factors of production and the activities of organization.

15. American companies want their managers to have a basic knowledge of international

business.

16. Only those companies that have foreign operations need to be aware of what is occurring

globally in its markets and their industry.

17. Foreign business is business whose activities are carried out across national borders.

18. The United Nations uses the term transnational to describe an enterprise doing business in

more than one country.

19. There are five major kinds of drivers, all based on changes that are leading international

firms to the globalization of their operations.

20. Supporters of globalization generally argue that it is the best strategy for advancing

the world economic development.

Section 5 – Short-answered questions

1. What are the differences among international, global, and multidomestic companies?

2. Take examples of Preferential Trading Arrangements and explain their meanings.

3. What is the difference between international business and international trade?

4. Are companies such as Exxon Mobil, BP and Royal Dutch/Shell MNEs? What criteria do they

meet that makes them MNEs?

5. The study of international business is fine if you are going to work in a large multinational

enterprise, but it has no relevance for individuals who are going to work in small firms. Do you

agree or disagree with this statement? Explain.

Section 6 – Case study

Vizio and the Market for Flat Panel TVs

Operating sophisticated tooling in environments that must be kept absolutely clean, fabrication

centers in South Korea, Taiwan, and Japan produce to exacting specifications sheets of glass

twice as large as king size beds. From there, the glass panels travel to Mexican plants located

alongside the U.S. border. There they are cut to size, combined with electronic components

shipped in from Asia and the United States, assembled into finished flat panel TVs, and loaded

onto trucks bound for retail stores in the United States, where consumers spend over $35

billion a year on flat panel TVs.

The underlying technology for flat panel displays was invented in the United States in the late

1960s by RCA. But after RCA and rivals Westinghouse and Xerox opted not to pursue the

technology, the Japanese company Sharp made aggressive investments in flat panel dis plays.

By the early 1990s Sharp was selling the first flat panel screens, but as the Japanese economy

plunged into a decade-long recession, investment leadership shifted to South Korean

companies such as Samsung. Then the 1997 Asian crisis hit Korea hard, and Taiwanese

companies seized leadership. Today, Chinese companies are starting to elbow their way into

the flat panel display manufacturing business.

As production for flat panel displays migrates its way around the globe to low-cost locations,

there are clear winners and losers. U.S. consumers have benefited from the falling prices of

flat panel TVs and are snapping them up. Efficient manufacturers have taken advantage of

globally dispersed supply chains to make and sell low-cost, high-quality flat panel TVs.

Foremost among these has been the California-based company Vizio, founded by a Taiwanese

immigrant. In just six years, sales of Vizio flat panel TVs ballooned from nothing to over $2

billion in 2008. In early 2009, the company was the largest provider to the U.S. market with a

21.7 percent share. Vizio, however, has fewer than 100 employees. These focus on final

product design, sales, and customer service. Vizio outsources most of its engineering work, all

of its manufacturing, and much of its logistics. For each of its models, Vizio assembles a team

of supplier partners strung across the globe. Its 42-inch flat panel TV, for example, contains a

panel from South Korea, electronic components from China, and processors from the United

States, and it is assembled in Mexico. Vizio's managers scour the globe continually for the

cheapest manufacturers of flat panel displays and electronic components. They sell most of
their TVs to large discount retailers such as Costco and Sam's Club. Good order visibility from

retailers, coupled with tight management of global logistics, allows Vizio to turn over its

inventory every three weeks, twice as fast as many of its competitors, which allows major cost

savings in a business where prices are falling continually.

On the other hand, the shift to flat panel TVs has caused pain in certain sectors of the

economy, such as those firms that make traditional cathode ray TVs in high-cost locations. In

2006, for example, Japanese electronics manufacturer Sanyo laid off 300 employees at its U.S.

factory, and Hitachi closed its TV manufacturing plant in South Carolina, laying off 200

employees. Sony and Hitachi both still make TVs, but they are flat panel TVs assembled in

Mexico from components manufactured in Asia.

Questions:

1. Why is the manufacturing of flat panel TVs migrating to different locations around the

world?

2. Who benefits from the globalization of the flat panel display industry? Who are the losers?

Section 7 – Further readings

Reading 1 – Impact of Globalization on Economic Growth in Vietnam: An

Empirical Analysis

1. Introduction

Globalization reflects an ongoing process of greater interdependence among countries and

their citizens (Fischer, 2003). There are four main driving forces behind increased
interdependence: trade and investment liberalization, technological innovation and the

reduction of communication costs, entrepreneurship, and global social networks. Globalization

is described as the growing economic interdependencies of countries worldwide through the

increasing volume and variety of cross-border transactions in goods and services and of

international capital flows, as well as through the rapid and widespread diffusion of

technology and information. As a multidimensional concept, globalization expresses the

extension process of economic, political and social activities across national borders.

Today, there are two main views on globalization, one given by anti-globalists and the other

by supporters of globalization. The anti-globalists view globalization as a controlling and

influencing force used by overseas corporations to dominate international trade (Konyeaso,

2016). Western organizations have throughout the years increased their commitments in

developing countries due to this being more profitable for them. One reason is due to the large

quantity of resources found in these parts of the world. Many highly globalized developing

countries have not been able to profit from globalization and are still facing the same problems

they have been facing for many decades. According to the globalists, globalization is viewed

as a beneficial process. It is presumed the only true way to beat poverty (Konyeaso, 2016).

They argue that one of the main characteristics of globalization is greater trade in goods and

services both between nations and within regions. Many of the industrializing countries are

winning a rising share of world trade and their economies are growing faster than in richer

developed nations, especially after the global financial crisis. Another important characteristic

of globalization is the increasing transfers of capital, including the expansion of foreign direct

investment, by trans-national companies and the rising influence of sovereign wealth funds.

Foreign direct investment will help developing nations to industrialize, create jobs, bring
business opportunities, and acquire manufacturing skills (Konyeaso, 2016).

Globalization could be either a success or a failure depending on its management (Stiglitz,

2002). There is success when it is well managed, for instance in the case of East Asian

countries. Their success is based on exports, closing technological, capital and knowledge

gaps. However, there is failure when globalization is managed by international economic

institutions. Stiglitz argued that the problem is not with globalization but with how it is

managed by international institutions who set the rules of the game.

Following the globalization trend, Vietnam has made considerable efforts for economic

integration with the world since the late 1980s. Vietnam joined ASEAN, APEC, and ASEM in

1995, 1998, and 2001. The country continues to move toward greater international economic

integration, through more opening up of trade with China, expanding bilateral links with the

US, accessing the WTO in 2007, and signing the TPP in 2015. In addition to a more open

trade policy, Vietnam has improved the investment environment to attract foreign direct

investment. In Vietnam, trade and foreign investment are the two strongest linkages to the

global economy. In more than 20 years, Vietnam has made a number of convincing economic

achievements. The average annual economic growth rate was 6.5 percent over the period 1995

– 2016. In 1995, Vietnam’s GDP per capita of US$ 288 placed it among the poorest countries

in the world. In 2008, a GDP per capita of US$ 1164 led to Vietnam’s attainment of lower

middle-income status by the World Bank classification. In the year 2016, GDP per capita

reached US$ 2185. Economic growth in Vietnam has been accompanied by trade liberalization

reforms that have led to an explosion in international trade. Exports as a share of GDP grew

from 32.81 percent in 1995 to 93.62 percent in 2016, while imports grew from 41.91 percent

to 91.06 percent over that same period. The key to the remarkable gains of the Vietnamese
economy is the liberalization of domestic markets, foreign investment attraction, a trade

openness policy and other macroeconomic policies.

Vietnam has experienced an increasing level of the overall globalization index (KOF), from

29.29 in 1995 to 56.69 in 2014. Due to the increasing trend of globalization, finding the effect

of globalization on economic growth is most important. However, the relationship between

globalization and economic growth in Vietnam has not been deeply evaluated by previous

researchers (for example John Thoburn (2004), Jenkins (2006), and Pham Lan Huong (2013)

etc.) and there is apparently a need to fill this research gap. Therefore, the aim of this study is

to investigate the impact of globalization on economic growth in Vietnam for the period from

1995 to 2014. This paper is organized as follows: after a short literature review of relevant

studies on the impact of globalization on economic growth, the methodology of the study is

presented. The next section exposes the main findings, and the final section concludes the

paper with several policy recommendations.

2. Literature review

The relationship between globalization and growth is a heated and highly debated topic in the

growth and development literature. Economists have long been interested in determining how

globalization affects economic growth. Theoretical growth studies report a contradictory

discussion on the relationship between globalization and growth. Some of the studies found a

positive effect of globalization on growth, others argued that globalization has a harmful effect

on growth. Despite the conflicting theoretical views, many studies have empirically examined

the impact of globalization on economic growth in developed countries as well as in

developing ones. Many of them appeared after 2006 when Dreher introduced a new

comprehensive index of globalization - KOF (an acronym for the German word
“Konjunkturforschungsstelle”). The overall globalization index (KOF) covers the economic,

social and political dimensions of globalization. Economic globalization is characterized as

long-distance flows of goods, capital and services, information and perceptions that

accompany market exchanges. Political globalization is characterized by a diffusion of

government policies. Social globalization is expressed as the spread of ideas, information,

images and people (Fidelis, 2012).

There have been numerous studies on the effects of globalization on economic growth. Dreher

(2006) examined the impact of globalization on the growth of 123 countries between 1970 and

2000. Ordinary Least Squares (OLS) regression and Generalized Method of Moment (GMM)

techniques have been used for the analysis. The overall result showed that globalization

promotes economic growth. The economic and social dimensions have a positive impact on

growth whereas the political dimension has no effect on growth.

Zhuang and Koo (2007) used a panel dataset covering 56 countries in the period from 1991 to

2004 to investigate the effects of globalization on economic growth. The variables include

GDP growth rate, labor, capital, foreign direct investment, portfolio capital flow, trade,

consumer price indices, per capita GDP, human capital, indicators of technology, and real

exchange rates. By using the generalized least squares estimation, results strongly suggest that

economic globalization has a significantly positive effect on economic growth for all

countries.

Rao and Vadlamannati (2009) examined the impact of globalization on the growth rate of 21

poor African countries during 1970 - 2005. The variables used in the study include log(output

per worker), log(capital per worker), index of globalization, index of institutional reforms, the

rate of inflation and the ratio of current government expenditure to GDP. They employed a
systems GMM method of estimation and found a small but significant positive association

between globalization and economic growth in 21 low-income African countries.

Kakar (2011) determined the long run effect of globalization on economic growth in Pakistan

from the year 1980 to 2009 by employing the time series data, co-integration and error

correction technique. The variables include GDP growth rate, foreign direct investment inflow,

population growth rate, real effective exchange rate, government expenditure on education and

health as a percentage of GDP and trade as a percentage of GDP. The results show that

globalization can be a useful tool for economic growth for a developing country like Pakistan.

Plegrinova et al. (2012) studied the relationship between globalization and important

macroeconomic indicators in twelve developed countries on the European and North

American continents from 1995 to 2009. They considered the effect of rising FDI, balance of

payments and GDP per capita on the KOF globalization index. By using nonparametric

regression model (panel data regression), the results indicate that there is a statistically

significant relationship between the KOF index of globalization and foreign direct investments

as well as GDP per capita. They could not accept the hypothesis of a statistically significant

relationship between the KOF index of globalization and the balance of payments of selected

countries.

Umaru (2013) analyzed the effects of globalization on Nigeria’s economic performance

between the years 1962 and 2009 by using the Annual Average Growth Rate technique. He

found that globalization affects the petrol, manufacturing industry and solid mineral sectors in

negative ways, but it effects the agriculture, transportation and communication sectors in

positive ways. Konyeaso (2016) also studied the impact of globalization on the Nigerian

economy between 1986 and 2013. By using the multiple regression technique, the results show
that there is a positive relation between globalization and economic growth. The Nigerian

economy is gaining from globalization mainly due to foreign direct investment and trade

openness.

Chelly and Deluna (2014) examined the relationship among economic growth, financial and

trade globalization in the Philippines from 1980 to 2011. The variables considered in the study

include real GDP growth rate, financial openness (the sum of FDI inflow and external debts

divided by GDP) and trade openness (the trade to GDP ratio). The study used the Vector

Autoregressive VAR(1) model and the Granger Causality test. It was found that the current

value of GDP is positively affected by the previous value of itself and trade openness. The

estimation results suggested that growth in trade volumes accelerates economic growth.

However, financial openness has no significant effect on the current value of GDP.

Ying (2014) analyzed the connection between globalization and economic growth in ASEAN

countries between the years 1970 and 2008 by using the Fully Modified Ordinary Least

Squares technique. He found that economic globalization effects economic growth in a

positive way but social and political globalization affects it in negative ways.

Suci (2015) also explored the development of the globalization level and economic growth in

ASEAN countries. Based on the panel data of six developing ASEAN countries from 2006 to

2012, the study found that the overall index of globalization (KOF) had a positive and

significant impact on economic growth in the region. Economic and political globalization

positively impacted the economic growth but social globalization did not affect growth.

Inflation, infrastructure, quality of education, technological preparedness, and government

spending also had positive impacts on economic growth.

Olimpia Neagu (2017) studied the impact of globalization on economic growth in Romania for

a time span of 24 years between 1990 and 2013. In order to highlight the impact of

globalization, expressed by the KOF globalization index and its components, on the economic

growth rate, the author estimated an econometrical model and found a statistically strong and

positive link between the GDP per capita dynamics and the overall globalization index as well

as between the GDP growth rate and economic and political globalization. However, the social

dimension of globalization was found to have a negative impact on economic growth in

Romania.

In Vietnam, there also exists a number of studies on the effect of globalization on poverty,

employment and some aspects of human development such as education, health care, etc. For

example, John Thoburn (2004) studied globalization and poverty in Vietnam and found that

Vietnam has seen a striking reduction in poverty since its opening to the outside world in the

early 1990s, and evidence for this poverty reduction is not sensitive to where the poverty line

is drawn. However, inequality has risen. Jenkins (2006) explored the ways in which

globalization affected the labour market in Vietnam by analyzing the impact of FDI on

employment. He concluded that the expansion of foreign firms to labor-intensive

manufacturing has not had a substantial impact on employment because of the high

productivity and low value-added nature of much of this investment. Not only have the direct

employment effects of FDI in Vietnam not been very substantial, but the indirect effects have

also been minimal and possibly even negative. Nguyen Thi Hong Tu et al. (2004) studied

globalization’s effects on health care and occupational health in Vietnam. They concluded that

the process of globalization has given rise to serious problems for the health of workers.

Pollution of the working environment in workplaces is at a high level and the situation of
diseases related to occupations and occupational diseases of workers have been detected and

have increased yearly. Besides that, Hien and Simon Fraser (2007) analyzed the impact of

globalization on higher education in Vietnam and showed that the merging of higher education

institutions, abandonment of state monopolies in education, increasing diversity in education

provision, re-orienting curricula to meet market needs, and introducing competition into the

educational sector in order to enhance the efficiency and effectiveness of the educational

services are all impacts of globalization on the education system in Vietnam. In addition,

Pham Lan Huong (2013) analyzed the effects of globalization and the necessity of Vietnamese

educational management for integration into the world, etc. Despite the numerous studies,

knowledge of the effect of globalization on economic growth in Vietnam is still scarce. This

study tries to fill this gap by examining the effect of globalization on economic growth in

Vietnam.

3. Conclusions and recommendations

This study empirically examined the impact of globalization on economic growth in Vietnam.

The ordinary least square and cointegration techniques were used to examine the long-term

relationship existing among variables while error correction models were also applied in order

to determine the short run dynamics around the equilibrium relationship.

The study showed that the Vietnamese economy is gaining from globalization. The empirical

results concluded that globalization has a positive effect on economic growth in the short run

as well as in the long run. The overall globalization index has a positive and significant impact

on the economic growth. Moreover, economic globalization was found to be positively

influential toward economic growth. The findings of the results revealed that the presence of

globalization could enhance economic growth in Vietnam. These results are consistent with
the finding of Suci (2015) and Ying (2014) to some extent on the beneficial aspects of

globalization in ASEAN countries. Thus, the findings of this paper support previous literature

on the contribution of globalization to economic growth. The study further showed that the

ratio of foreign direct investment to GDP and foreign exchange rate affect economic growth

positively whereas balance of trade affects economic growth negatively.

Although Vietnam has integrated into the world economically, politically and socially, the

increase in the globalization level, especially in the aspect of economic globalization can be

suggested through the increase in trade volume, in FDI and portfolio investment as well as the

decrease in barriers and taxes in international trade.

According to the results of the analysis, the following recommendations are made. First and

foremost, there is a need for the Vietnamese government to support the development of the

globalization level of the country to catch a higher level of growth rate. Secondly, there is a

need for the Vietnamese government to continue proactive and sound policies aimed at

encouraging foreign direct investment, ensuring foreign exchange rate stability and facilitating

international trade to maximize the benefits of globalization and reduce its harmful effects on

economic development at large.

Reading 2 – Where is Vietnam in the globalization process?

VN Economic Times – Mr. Pascal Lamy, formerly the Director General of the WTO, tells VET that

Vietnam is the greatest beneficiary of globalization and needs to take advantage of human resources in

the years to come to stay abreast of the fourth industrial revolution.

How would you evaluate Vietnam’s international economic integration process since it
joined the WTO?

Vietnam is the greatest beneficiary of globalization and has been a successful example of

integration during its ten years in the WTO. It is already taking advantage of its human

resources and benefiting from its comparative advantages in areas where human resources play

an important role. Vietnam’s accession into the WTO has been a success and has helped it

grow very well compared to countries with high growth rates. In the global economy, we see

economic growth in developed countries not being as high as in emerging countries. For

example, the US and Japan have growth rates of only 2-3 per cent, and Europe is even lower. I

hope that Vietnam will try to maintain this growth.

What about the shortcomings? What are the limitations of Vietnam in international

economic integration and how can they be overcome?

In the context of accession to the WTO, Vietnam has initial advantages in achieving average

global growth but many challenges still lie ahead, especially in market competition. Moreover,

some of the constraints from the equitization of State-owned enterprises have also slowed

down the pace of economic integration. Private enterprises are more likely to be more

adaptable. There is also the problem of corruption. But what I want to say here is that Vietnam

has reached out to the world through reform and opening up, which require a special political

process. I am not pessimistic because I see that Vietnam has the capacity to cope with

challenges. It faces difficulties in the process of innovation and reform and will therefore

contribute to a successful ASEAN region, making it more dynamic and unified with

mechanisms that are likely to enhance competition compared with countries in Latin America.

You said that Vietnam is integrating well, but in fact Vietnamese enterprises are having
to overcome trade challenges as some developed countries are imposing protectionist

measures in order to limit imports from developing countries like Vietnam. How should

Vietnam respond?

This is normal in trade. When opening the door to integration, there will be people who are

afraid of disturbance or fear change. Integration is not a smooth process. This is a principle

when we open the door to integrate in global trade and is the premise for this process. There

are always positive and negative things that make it difficult for some people. The main issue

here is how this process is carried out in fair trade conditions. Free trade is good but fair trade

is better. In order for the trade process to achieve efficiency, it is important that countries have

an equal mentality. Will Vietnam be competitive and will it compete equally? 

I believe that there is fair competition, because if not, Vietnam would not have joined the

WTO, a model for negotiating fair trade issues with multilateralism. For countries like

Vietnam, it is necessary to prepare for increasingly strict criteria. With economic development,

the lives of people in Vietnam will be better but its population will become older, so

Vietnamese need high requirements regarding sanitary regulations. This is necessary to

improve the quality of products in the country.

What should Vietnam do to integrate more deeply, especially in the context of the fourth

industrial revolution?

Vietnam now exceeds the world’s average growth. Advantages for Vietnam lie in its human

resources, who possess a hard-working and determined character. This partially explains the

effectiveness of the country in global competition. In the future, Vietnam needs to invest in

training and fostering talent. In the era of the fourth industrial revolution, Vietnam still has
 advantages. Economic exchange activities are fully-automated but I think that the best strategy

in order to succeed against all risks is to invest in wisdom. Migration and cybersecurity issues

will have an important impact on the international integration process and Vietnam will be no

exception. In the fourth industrial revolution, Vietnam should further develop its intellectual

advantages and not rely on cheap labor.

References
Ball, D. A., Geringer, J. M., McNett, J. M., Minor, M. S., 2013. International business: The
challenge of global competition (13th ed.) New York, NY: McGraw-Hill Irwin.
Hill, Charles W. L., 2013. International business: competing in the global marketplace. McGraw-
Hill/Irwin - 9th ed.
Tran Tho Dat, Nguyen Thi Cam Van (2018), Impact of Globalization on Economic Growth in
Vietnam: An Empirical Analysis. Journal of Economics and Development, Vol.20, No.1, pp. 32-
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