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Lecture 2global
Lecture 2global
GLOBALISATION
At the core of IB is Globalisation?
• What is Globalization?
• This video explains
https://www.youtube.com/watch?v=3oTLyPPrZE4
Globalisation: the economic and business
version
‘
The growing interdependence of countries
worldwide through the increasing volume and
variety of cross-border transactions in
goods and services and of international
capital flows, and also through the more rapid
and widespread diffusion of technology.’
IMF, World Economic Outlook
5 drivers of Globalization
• Driver 1: the triumph of economic neo-
liberalism
• Driver 2: spread of international governance
and regulation
• Driver 3: finance and capital spread
• Driver 4: Technology
• Driver 5: social and cultural convergence
Globalisation Trends
Top 20 Trade in Goods
and Services 2008-2018
Measures of globalisation
Global Value Chains
• 60 % of trade in GVCs
• Global sourcing has extended networks
World FDI inflows by region, 1995-2016 ($bn)
Primacy of Pure
nation state globalisation
Different views of globalisation
1 ) Pure globalisation view
(e.g. Ohmae’s ‘Borderless World
2) Transitional (states adapt)
3) Status Quo (globalisation deniers)
Key Trends in Globalisation
• States not constrained – (eg sustained welfare
spending)
• States adapt to globalisation
• Erosion of confidence in neo-liberal
globalisation
• Rise of geo-economics (states embedded in
global system but not determined by it.
Globalisation and Crisis
Distinction between
• Globalisation of markets - where to sell the
product?
• Globalisation of production - where is production
most efficiently carried out?
– dispersion of operations because of locational
advantages - e.g. land, capital, labour,
resources
– global network of production and suppliers
– intensifies interdependence
Business implications of globalisation
• Lower trade and investment barriers intensify
competition (prices, costs, efficiency,
motivation)
• emergence of global perspective of products
and markets
• focus on core activities and rationalisation?
• search for networks and alliances
Globalisation pressures and opportunities shaping
the firm’s environment