International Business and Trade
Lecture 3
GLOBALIZATION OF MARKET AND THE
INTERNATIONALIZATION OF THE FIRM
GLOBALIZATION MARKET
● Refers to the gradual integration and growing
interdependence of national economies.
PHASES OF GLOBALIZATION
● THE FIRST PHASE - International business
became widespread due to the growth of
railroads, efficient ocean transport and the rise
of large manufacturing and trading firm. It
begun in 1830 and peaked around 1880.
● THE SECOND PHASE - It begun in 1900 and wsas
associated with the rise of electricity and steel
production. This phase reached its height just
before the great depression, a world wide
economic downturn that begun in 1929.
● THE THIRD PHASE - Begun after the world wide
II. A substantial pent up demand was created
for consumer as well as industrial product to
rebuild Europe and Japan.
● THE FOURTH PHASE - It begun in 1980 and
featured enormous growth in cross boarder
trade and investment.
MARKET GLOBALIZATION: ORGANIZING FRAMEWORK
DRIVERS OF GLOBALIZATION
TECHNOLOGICAL ADVANCES AND GLOBALIZATION
● WORLDWIDE REDUCTION IN BARRIERS TO
TRADE AND INVESTMENTS
The tendency of national government to reduce
trade and investments barriers has accelerated
global economic integration.
Example: tariffs on import of industrial and
medical equipment and other countless
products have declined nearly to zero in many
countries.
● MARKET LIBERALIZATION AND ADOPTION OF
FREE MARKET
In the past 3 decades, free market reforms in
China and the former Soviet Union, smoothed
the integration of former command economies
into global economy.
● INDUSTRIALIZATION ECONOMIC
DEVELOPMENT AND MODERNIZATION
Many emerging markets rapidly developing
economies in Asia, Latin America and eastern
Europe now moved from being low value
adding commodity producers to sophisticated
competitive produces and exporter of premium
products such as electronics, computers, and
aircraft.
● INTEGRATION OF WORLD FINANCIAL MARKETS
Financial markets integration makes it possible
for internationally active firm to raise capital,
barrow funds, and engage in foreign currency
transaction.
● ADVANCE TECHNOLOGY
Technological advances are remarkable
facilitator of cross boarder trade and
investments. This is an important mega trend
that requires greater elaboration.
 ● LOSS OF NATIONAL SOVEREIGNTY
Sovereignty define as the ability of nation to
govern its own affairs.

● OFFSHORING
The relocation of manufacturing and other
value chain activities to cost effective location
abroad.

● RESHORING
The return of manufacturing and services back
to the home countries.

● EFFECT ON THE POOR

DIMENSION OF MARKET GLOBALIZATION
The globalization of market can be characterized by
several major dimension or manifestations.
● Integration and interdependence of national
economies. (VALUE CHAIN)
● Rise of regional economic integration blocs.
(NAFTA, APEC)
● Growth of global investment and financial
flows. (BUY & SELL FOREX)
● Convergence of consumer lifestyles
preferences.
● Globalization of production
● Globalization of services
Child labor is particularly troubling because it
denies children educational opportunities.
Estimated there are 200 million children aged
five to fourteen work around the world.
● EFFECT ON SUSTAINABILITY AND NATURAL
REOURSCES
Globalization promotes manufacturing and
economic activity that the results in increased
pollution, habitant distraction, and
deterioration of the ozone layer.
● EFFECT ON NATIONAL CULTURE
globalization exerts strong pressures on
national culture because market liberalization
exposes local consumers to global brands,
unfamiliar product and different values.

Value chain> the sequence of value adding activities the

firm performs in the course of developing, producing,
marketing,and servicing a product.

STAGES IN THE FIRM’S VALUE CHAIN

● RESEARCH
● PROCUREMENT (SOURCING)
● MANUFACTURING
● MARKETING
● DISTRIBUTION
● SALE SERVICE

SOCIETAL CONSEQUENCE OF GLOBALIZATION

● CONTAGION: RAPID SPREAD OF MONETARY

OT FINANCIAL CRISIS
The crisis begun in the united state of America
and like contagious disease, spread around the
world. It is a tendency of a financial or
monetary crisis in one country to spread
rapidly to another countries due to the ongoing
integration of national economies.