Chapter One
Globalization and
International Linkages
McGraw-Hill/Irwin
Chapter1. Globalization and
International Linkages
The specific objectives of this chapter are to
1. ASSESS the implications of globalization for
countries, industries, firms, and communities.
2. REVIEW the major trends in global and
regional integration.
3. EXAMINE the changing balance of global
economic power among countries.
4. ANALYZE the major economic systems
1-2
Chapter1. Globalization and
International Linkages
1. International Management
2. Globalization and Internationalization
3. Global Economic Systems
4. Economic Performance by Major
World Region
1-3
1. International Management
International management involves
Applying management concepts and techniques
in a multinational environment and
Adapting management practices to different
economic, political, and cultural environments
Multinational corporation (MNC)
Operations in more than one country
International sales
Mix of nationalities
1-4
2. Globalization and Internationalization
Globalization
Process of social, political,
economic, cultural, and
technological integration among
countries around the world.
1-5
2. Globalization and Internationalization
Hastened by
Offshoring
Process by which companies undertake
some activities at offshore locations
instead of their countries of origin.
Outsourcing
Subcontracting or contracting out of
activities to external organizations that
had previously been performed by the
firm.
1-6
2. Globalization and Internationalization
Globalization: Pros and Cons
Benefits of Globalization
Wealth
Jobs
Technology
Lower prices
Criticisms of Globalization
off-shoring of business service jobs to lower-wage
countries
growing trade deficits
slow wage growth
environmental and social impacts
1-7
Global and Regional Integration
Global Agreements
General Agreement on Tariffs and Trade (GATT)
World Trade Organization (WTO)
How do they differ?
1-8
1-9
Global and Regional Integration
Regional Agreements
NAFTA: North American Free Trade Agreement
CAFTA-DR: Central America-Dominican
Republic-United States Free Trade Agreement
EU: European Union
ASEAN: Association of Southeast Asian Nations
T-TIP: Trans-Atlantic Trade and Invesment
Partnership
CPTPP: Comprehensive and Progressive
Agreement for Trans-Pacific Partnership
1-10
1-11
CAFTA-DR: Central America-Dominican
Republic-United States Free Trade
Agreement 1-12
Atlantic Ocean 1-13
1-14
1-15
CPTPP (Comprehensive and Progressive
Agreement for Trans-Pacific Partnership) 1-16
Global and Regional Integration
1-17
Global and Regional Integration
1-18
ASEAN: Association of Southeast Asian Nations1-19
FTA of Vietnam 1993 ASEAN
1 AFTA
2 ACFTA 2003 ASEAN, China
3 AKFTA 2007 ASEAN, Korea
4 AJCEP 2008 ASEAN, Japan
5 VJEPA 2009 Vietnam, Japan
6 AIFTA 2010 ASEAN, India
7 AANZFTA 2010 ASEAN, Australia, New Zealand
8 VCFTA 2014 Vietnam, Chile
9 VKFTA 2015 Vietnam, Korea
VN – EAEU
10 2016 Vietnam, Rusia, Belarus, Amenia, Kazakhstan, Kyrgyzstan
FTA
CPTPP Vietnam, Canada, Mexico, Peru, Chile, New Zealand,
11 2019
(TPP) Australia, Japan, Singapore, Brunei, Malaysia, UK
12 AHKFTA 2019 ASEAN, Hong Kong (China)
13 EVFTA 2020 Vietnam, EU (27 countries)
14 UKVFTA 2021 Vietnam, UK
15 RCEP 2022 ASEAN, China, Korea, Japan, Australia, New Zealand
16 VIFTA 2023 Vietnam, Israel 1-20
The Shifting Balance of Economic Power
in the Global Economy
Shifting landscape due to
Economic integration
Economic potential of emerging markets
BRICS countries (Brazil, Russia, India,
China, South Africa) could be among the four
most dominant economies by 2050)
E7
N11
1-21
1-22
1-23
1-24
Trends in Trade and
International Investments
Foreign direct investment (FDI)
Investment in property, plant, or
equipment in another country
Growing at healthy rate
Outpacing domestic growth in most
countries
Some emerging countries received
more FDI than developed ones.
1-25
3. Global Economic Systems
Market Economy?
Command Economy?
Mixed Economy?
1-26
3. Global Economic Systems
Market Economy: private enterprise monitors
the production and distribution of goods and
services while the state simply supports
competition
Command Economy: government has explicit
control over the price and supply of a good or
service.
Mixed Economy
1-27
4. Economic Performance
by Major World Region
Established Economies
North America
European Union
Japan
Emerging Economies
Central and Eastern Europe
China
Other Emerging Markets of Asia
India
Developing Economies on the Verge
South America
Middle East and Central Asia
Africa
1-28
Case: Greece
1-29
Established Economies
North America
One of the four largest trading blocs in the world
Combined purchasing power of U.S., Canada and
Mexico approaches $12 trillion
Free-market-based economy is attractive to private
firms
United States
Foreign MNC’s find U.S. a lucrative expansion market
Foreign firms welcomed as investors in U.S. market
U.S. firms hold market dominance in many European
markets; gaining market share in Asia
1-30
Established Economies
Canada
U.S.’s largest trading partner
Most of the largest foreign-owned Canadian
companies are totally or heavily U.S.-owned
Legal and business environment in Canada is similar
to that in U.S.
Mexico
Strongest Latin American economy
Very strong maquiladora industry
Trade with both Europe and Asia has increased
Now competitive with Asia for the U.S. market
1-31
Established Economies
European Union
Ultimate objective
Eliminate all trade barriers among member countries
Emergence of the EU as an operational economic union
A unified Europe could become the largest economic market in
terms of purchasing power in the world
Foreign MNCs trying to gain foothold in EU
Acquisitions, alliances, cooperative R&D efforts
Economic linkages between the EU and newly
emerging Central and Eastern European countries
Challenge is to absorb former communist bloc countries
Financial crises in Greece and Ireland putting
pressure on the euro
Brexit!
1-32
Established Economies
Japan
Huge economic success in 1970s and 1980s. Culture?
Ministry of International Trade and Industry (MITI)
Keiretsus
Vertically integrated industries
Holdings provide assistance needed in providing goods and
services to end users
Decade long recession in 1990s
More competition from emerging economies
Poor management decisions
Remains a formidable competitor in the Pacific Rim,
North America, and Europe
1-33
Emerging Economies
Central and Eastern Europe
Russia
Dismantling of price controls and privatization
Membership in International Monetary Fund
(IMF) controlling inflation
Crime and political uncertainty
Czech Republic, Hungary, Poland
Privatization
Inflation
Political uncertainty
1-34
Emerging Economies
China
Real economic growth of 12 percent in 2007, 9
percent in 2008, and 11.5 percent in 2009
Savings glut in corporate sector
Vast developmental needs
Unemployment concerns
Attractive to investors despite political risk
Product pirating is a major problem
Currency value
Government policies favor domestic firms
1-35
Emerging Economies
South Korea
Chaebols
Very large family-held conglomerates
Solid economy, moderate growth and inflation, low
unemployment
Hong Kong
Part of People’s Republic of China
Uncertainty about the role the Chinese government
1-36
Emerging Economies
Singapore
Success story
Leader and financial center for region
Taiwan
Progressed from labor-intensive economy to one
dominated by technologically sophisticated
industries
banking, electricity generation, petroleum refining and
computers
1-37
Emerging Economies
Thailand, Malaysia, Indonesia
Large population base
Inexpensive labor
Considerable natural resources
Attractive to outside investors
1-38
Emerging Economies
India
Large population
Recent trend of locating software and high value-
added services to this country boosting middle- and
upper-class market for goods and services
Attractive to U.S. and British investors
well educated, English speaking, technologically
sophisticated workers
1-39
Developing Economies on the Verge
South America
Hampered by foreign debt and severe inflation
But, intercountry trade is increasing
Countries looking to do business with U.S.
Brazil
Economy is now flourishing and attracting
investment from MNCs
Privatization and stable government
1-40
Developing Economies on the Verge
Chile
Uncertain future, but helped by trade agreements
Argentina
Abundant natural resources
Economic problems persist
1-41
Developing Economies on the Verge
Middle East and Central Asia
Large oil reserves
Highly unstable geopolitical and religious forces
Plagued by continuing economic problems
1-42
Developing Economies on the Verge
Africa
Considerable natural resources
African nations remain very poor and undeveloped
International trade is not a major sources of income
Populace divided into 3,000 tribes that speak 1,000
languages.
Major political instability
Poverty, starvation, illiteracy, corruption,
overcrowding among many social problems
negatively affecting economic sector
1-43
Review
Globliization?
NAFTA?
1-44
Chapter1. Globalization and
International Linkages
1. International Management
2. Globalization and Internationalization
3. Global Economic Systems
4. Economic Performance by Major
World Region
1-45
