THE

GLOBAL
CONTEXT OF
BUSINESS
 At the end of this discussion, you should be able
to:

● Understand the difference between globalisation

and internationalisation

Objective: ● Outline the main elements of globalisation

● Illustrate the role of the multinational enterprise

● Introduce the implications of globalisation for

business
What is Globalization?
oThe process of integration on a worldwide scale of markets
and production.
oThe growing interdependence of the world’s economies,
cultures, and populations, brought about by cross-border
trade in goods and services, technology, and flows of
investment, people, and information.
What is Internationalization?
o Refers to the increased links between nation states with respect to trade and the
movement of resources. The relevant thing here is that the nation state is still
important; it is participating and cooperating with other nation states to a common
end.
o (sometimes shortened to "I18N , meaning "I - eighteen letters -N") is the process
of planning and implementing products and services so that they can easily be
adapted to specific local languages and cultures, a process called localization .
The internationalization process is sometimes called translation or
localization enablement .
 Globalization VS Internationalization
GLOBALIZATION
- A result of the desire of
the global economies
- The structure that
people want to set up
- is more related to
economies of the nation
INTERNATIONALIZATIO
N The easiest way to
- The process that has separate the terms is to
allowed for globalization to
think of
be achieved.
- Part of that structure, Internalization as of
hence, can termed as a the steps in the
subset of Globalization Globalization
- is more related with the process.
individual, firm or business
for their goods and services.
Elements of Economic Globalization
International trade
Foreign Direct Investment (FDI)
Capital market flows
Diffusion of technology
International trade:
An increasing share of spending on goods
and services is devoted to imports and an
increasing share of what countries produce
is sold as exports.
Foreign Direct Investment (FDI):
-FDI is defined as “investment made to acquire lasting
interest in enterprises operating outside of the economy of
the investor”.
-Direct investment in constructing production facilities, is
distinguished from portfolio investment, which can take the
form of short-term capital flows (e.g. loans), or long-term
capital flows 
Capital market flows: 
This refers to the flows of money from private savers
wishing to includes foreign assets in their portfolios. Capital
market flows also include remittances from migration, which
typically flow from industrialized to less industrialized
countries. In essence, the entrepreneur has several sources
for funding a business.
Migration:
One of the most visible and significant aspects of
globalization: growing numbers of people move
within countries and across borders, looking for better
employment, opportunities and better lifestyle.
Diffusion of technology:
Innovations in telecommunications, information technology,
and computing have lowered communication costs and
facilitated the cross-border flow of ideas, including technical
knowledge as well as more fundamental concepts such as
democracy and free markets 
The Role of Multinational Enterprises
Substantial amounts of foreign trade and hence movements of
currency result from the activities of very large multinational
companies or enterprises. Multinational enterprises/companies
(MNEs/MNCs), strictly defined, are enterprises operating in
several countries and having production or service facilities
outside the country of their origin. These multinationals usually
have their headquarters in a developed country, but this is beginning
to change. At one time globalization meant that businesses were
expanding from developed to developing economies.

How Globalization
affects business?
MARKETS - Globalization means that
firms are faced with bigger markets for
their products. Many of these markets
are covered by regional trade
agreements (RTAs) , which are
groupings of countries set up to
facilitate world trade. All such
agreements must be notified to the
World Trade Organization, and they can
take a variety of forms.
Financial markets-Businesses need to raise
capital to be able to produce, trade and
invest. Although much of this takes place
domestically, banks operate internationally
and so businesses are exposed to global
forces.
Globalization has enabled firms to
specialize- and to increase the intensity
of R&D, Innovation and Capital in their
output. Globalization increases the flow
of goods, services, capital, people and
ideas across international boundaries.
Labor markets - It has been estimated
that the global integration of emerging Other resources- As well as
markets has doubled the supply of labor labor, businesses have to source
for the global production of goods. For and purchase other resources such
businesses wishing to recruit as raw materials and energy.
internationally, there are practical Natural resources are
problems including locating the differentially distributed around
necessary people and dealing with the the world and therefore they
rules and regulations involved in require international trade to take
employing migrants, such as work place if firms are to acquire these
permits and visas. These requirements
inputs.
will vary from one country to another.
 Globalization and the small and
medium- sized firm
A strategic alliance is a collaborative
agreement between firms to achieve a common
aim, in this context a presence in other markets.
These agreements can take many forms.
Licensing is where a company (the
licensor) authorises a company in another
country (the licensee) to use its intellectual
property in return for certain
considerations, usually royalties. Licensors
are usually multinationals located in
developed countries.
Franchising is an arrangement where one party (the
franchiser) sells the rights to another party (the franchisee)
to market its product or service. There are different types of
franchise relationship, and this is a possibility for
international expansion. It is an attractive option for
companies seeking international expansion without having
to undertake substantial direct investments.
Joint venture is usually a jointly owned and independently
incorporated business venture involving two or more
organisations. This is a popular method of expanding abroad as
each party can diversify, with the benefit of the experience of
the others involved in the venture and a reduction in the level of
risk. Where a large number of members are involved in such an
arrangement, this is called a consortium .