Chapter 1:
Globalization
INTERNATIONAL BUSINESS MODULE
NGUYEN HONG HANH (PHD.)
In Today’s Lecture
1. “Globalization”: Definition
and evidence
2. Globalization outcomes
3. Drivers of globalization
4. Different perspectives on
globalization
5. Current event
1. Globalization:
Definition and Evidence
| “The rise of the ‘G’ word"
Defining Globalization
One definition (among many):
Globalization refers to growing economic interdependence among
countries
...as reflected in increasing cross-border flows of three types of entities:
goods and services, capital and know-how
Source: Gupta, A. K. and Govindarajan, V. (2004) Global Strategy and Organisation.
John Wiley & Sons, Inc.
Integration
Globalization:
3Is Interconnection
Interdependence
Globalization
Globalization: establising new
connections across the world resulting in
expansion of international social,
cultural, policital and economic
activities
1. Social globalization
2. Cultural globalization
3. Political globalization
4. Economic globalization
1. Social Globalization
• Sharing and adopting ideas and information between
different countries and regions
Examples
• Telephones and internet
access
• International tourism
• Education exchanges
• Freedom to travel
• Freedom of the press
2. Cultural Globalization
• Exchange and adoption of trends, values, and artistic
expression among and between national and regional cultures
Examples
• Music
• Cinema
• Literature
• Art
• Cultural exchanges
• Global retail stores
• Restaurants
3. Political Globalization
• Participation in global political institutions which serve to
mânge and supervise inter-country and inter-regional affairs
Examples
• Embassies
• International treaties
• International organizations
• International NGOs
• Humanitarian aid
agencies
4. Economic Globalization
• The spread and adoption diverse economic processes,
opportunities and challenges between countries and
regionns of the world
Examples
• Trade in goods & services
• Trade agreements
• Tariffs and duties
• Foreign direct investment
Geographies of Globalization
• Globalization: ‘the qualitative
transformation of economic relationships
across geographical space’
• Complex and changing geographies,
rather than a single global geography
• To ascribe a single cause/origin for
globalization is meaningless
• The Four Tendencies
– localizing processes
– internationalizing processes
– globalizing processes
– regionalizing processes
Localizing process: geographically
concentrated economic activities with
varying degrees of functional
integration
Internationalizing process: simple
geographical spread of economic
activities across national boundaries
with low levels of functional
integration
Globalizing process: both extensive
geographical spread and high degree
of functional integration
Regionalizing process: The operation
of “globalizing” process at a more
geographically limited (but supra-
national) scale, ranging from highly
integrated and expanding EU to much
smaller regional economic
agreement.
Stages of Globalization
Globalization 1.0 (from 1492 to 1800)
Globalization 2.0 (from 1800 to 2000)
Globalization 3.0 (from 2000 until present)
Case study 1: A Brief History of Global Trade
Deep Pacific, the race between Cutty Sark and Thermopylae,
Montage Dawson (1872)
Ancient Silk Road
Asia, Europe, North Africa
Medieval Trade Routes
Historical Growth of Global Trade
Importance of Trade to World Economy
Trade and National Economic Growth
Recent Global Trade Trends
Global Trade Flows Today
Global
Imports and
Exports
Growing Importance of Global Services
Trade
Shifting Global Economic Center of
Gravity
Summary – A Brief History of Global Trade
• Long distance trade is as old as human
history
• Global trade across and between continents
has occurred throughout recorded history
• Global trade has been growing exponentially
• Global services trade is also rapidly
increasing
• Trade patterns are rapidly evolving as less
developed countries continue to grow
Measuring Globalization
Globalization index
• KOF Swiss Economics Institute
• Data starts in 1970
• Measures globalization using varios data metrics
• Social interation statistics => Social globalization index
§ Cultural statistics => Cultural globalization index
§ Political statistics => Political globalization index
§ Trade & financial statistics => Economic globalization index
§ Composite of the above => OVERALL globalization index
Globalization – Category Trends
2. Globalization outcomes
Globalization of Markets
…refers to the merging of historically
distint and separate national markets
into one huge global marketplace
- Falling trade barriers
- The tastes and preferences of
consumers are converging on some
global norms
- Same basic products worldwide
- Only one global market
Globalization of
Production
…refers to the sourcing of goods
and services from locations around
the globe to take advantage of
national differences in the cost and
quality of factors of production like
land, labor and capital
- Companies compete more effectively
by lowering their overall cost structure
or improving the quality or functionality
of their product offering
Globalization outcomes
• Social outcomes
• Cultural outcomes
• Political outcomes
• Economic outcomes
• Some trends
Globalization: Social outcomes
Globalization: Cultural outcomes
Differential Broadband Penetration
Globalization: Political outcomes
Globalization: Economic outcomes
3. Drivers of
Globalization
Drivers of
Globalization
1. Population growth
2. Advanced information
and transportation
technologies
3. Liberalization of world
trade policy
4. Multi-national trade blocks
5. Global supply chain
200+ Years of Population Growth
Changes in Info & Transport Technology
19th Century 21st Century
80-125 900km/h
km/h
2+ weeks to 2+ weeks to
cross Atlantic cross Pacific
(~5000 tons) (~250,000 tons)
1886: 8 100+
words per TB/sec
min (Morse
Code)
1500-1840
Horse-ride and sailing ship 1850-1930
~16km/h
Steam locomotive, average ~110km/h.
Steam ship, average ~58km/h.
1950s
It has become faster, easier
and cheaper to transport Propeller, ~483-644
goods and people around the km/h 1960s
world!
Passenger jet aircraft,
~805-1127km/h.
Falling International Tariff
World Trading Blocks
Global Supply Chains
Case study 2: Chinese New Silk Road
China’s New Silk Road (Belt & Road
Initiative)
China’s BRI
Motivation
• Sustain China’s economic
growth
• Develop China’s inland
Western provinces
• Promote trade in Central Asia
• Secure overland access to
energy and resources
• Expand China’s ”circle of
friends” regionally & globally
• Expand international use of
Chinese currency
Selected BRI Projects To-Date
BRI Participating Countries
Polar Ice Road
Criticism of BRI
• BRI is a form of neocolonialism
• Debt trap diplomacy
• Low participation rate of local
companies in projects
• Lack of transparency and
clarity
• Environmental concerns
• Geopolitical concerns
4. DIFFERENT PERSPECTIVES ON
GLOBALISATION
Hyper-globalists versus sceptics
Regionalisation not globalisation?
The End of
Globalization?
● Causes of the 2008 financial crisis
● Responses to the crisis
● Has the free market ideology been
irrevocably damaged by the crisis?
● Arguments pro and con
● Does it mean the end of
globalization if it has?
Positions on Globalization
Hyper-globalists Sceptical internationalists
Argue that we live in a borderless Argue that there is nothing new
world where the national is irrelevant about globalization; the world was
Neo-liberal faction more open and transnational in the
past than in the present
Anti-globalization faction
Globalization: FOR of AGAINST
Income Inequality within Countries
Income Inequality between Countries
Greenhouse Gas Emissions
Cultural Imperialism
Trade Wars
Growing Nationalism
Armed Conflict Continue
Is Globalization
a Force for
Good?
Hyper-globalist perspectives:
‘Globality’ – the end state of globalisation?
A fundamental shift in the global competitive
landscape
‘Competing with everyone, from everywhere, for
everything’. Business flows in every direction
Power is shifting from the US, Europe and Japan to
China, India and other rapidly developing
economies
Hyper-globalist perspectives:
Kenichi Ohmae & Thomas Friedman
Thomas Friedman (2005) The World is Flat: A Brief History of
the World in the 21st Century
• The beginning of 21st Century will be remembered for a whole new age of
globalisation – a ‘flattening’ of the world
• The explosion of advanced technologies now means that suddenly
knowledge-pools and resources have connected all over the planet,
levelling the playing field as never before
• Each of us is potentially an equal – and competitor – of the other
• The world is wired so Indian accountants or software engineers can share
an idea, team their skills or compete head-on for work with their US and
European counterparts
• Professionals everywhere, from China to Australia to Costa Rica, can work
from home as if they were in offices next door
• Globalisation v.1.0, 2.0 and 3.0
Friedman’s 10 Forces That Flattened the World
1. October 1989: when the walls came down, windows went up
2. September 1995: when Netscape went public
3. Work flow software: let’s do lunch, have your application talk to my
application
4. Open-sourcing: self-organising collaborative communities
5. Outsourcing: Y2K (India)
6. Offshoring: Running with gazelles, eating with lions (China)
7. Supply-chaining: eating sushi in Arkansas (Walmart)
8. Insourcing: what the guys in brown shorts are really doing (UPS)
9. In-forming: Google, Yahoo, MSN Web Search
10. The steroids: digital, mobile, personal and virtual
i.e. Key changes in global political landscape, technology, business models
…but is the world really 'flat' or 'borderless'?
Some critics say the global economy is highly uneven and
‘spiky’ (e.g. Richard Florida)
Some argue that regions are the real competitive units
(e.g. Rugman)
And is any of this really 'new'? (e.g. Hirst & Thompson)
The World is ‘Spiky’ (Richard Florida)
Exampleofinnovationclusters:thenumberofpatents,resultingfromacriticalmassofentrepreneurs,scientist,financiers
Regionalisation not Globalisation?
Alan M. Rugman has emphasised the importance of regions
and of regional trends in global business and has repeatedly
challenged some common assumptions about ‘globalisation’:
Rugman's evidence on 'regionalisation'
Largest 500 MNEs are not spread world-wide but clustered around the major
regions (the 'triad')
• 85% of cars produced in North America are sold there; over 90% of
cars produced in the EU are sold there; over 93% of cars sold in
Japan are made there
World’s 500 largest companies:
• 72% of all sales are within their home region (e.g. Wal-Mart 94%;
General Motors 81%; Kingfisher 98%; Vodafone 93%; Mitsubishi 93%)
Region or global multinationals?
• Many of the world's largest firms are not global but regionally based, in terms of
breadth and depth of market coverage…
Source:
Rugman &
Verbeke (2004)
Region or global multinationals?
• Only 9 ‘truly global’ multinationals…
Source: Rugman & Verbeke (2004)
Region or global multinationals?
• Top 10 ‘Home-region’ based multinationals…
Source: Rugman & Verbeke (2004)
5. Current Events
• The 4th Industrial Revolution
• De-globalization?
• Re-globalization?
• Friend-shoring? Near shoring? Re-shoring?