Globalization and economic policy

Forces driving globalization

cost factors, market factors, technology factors, global business cycle

cost factors

looking for cheaper labour and manufacturing costs, outsource to other countries, which get an inward investment, jobs and technology

market factors

domestic markets become saturated, switch to emerging markets, establish a global presence due to global clients, it is dangerous to stand aside

technology factors

the Internet makes comparison of supply chain costs and of final price, software tools on company intrantes allow managers to access information anywhere, anytime

global business cycle

it is now international, in every turn of the cycle, the pace of globalization is likely to increase

recovery

upswing

growth

expansion, boom

recession

contraction, downturn

depression

slump

Company strategy in the face of globalization

Import/Export, Outsourcing, Foreign direct investment

Import/Export

lowest risk, lowest profit, franchising, foreign licensing

Outsourcing

deeper level of involvement with a long-term contractual agreement

Foreign direct investment

highest risk, most control and shows the most commitment to the global market, buy property and businesses in the foreign nation, it includes: acquisition, joint ventures, strategic alliances

Political strategy in the face of globalization

being in favour of market forces and deregulation, being in favour of subsidies and protectionism

being in favour of market forces and deregulation

labour market more flexible, lower taxes, cut red tape, encourage free trade

being in favour of subsidies and protectionism

protect job security, social benefits, high taxes in order to pay for social programmes, protect national business and jobs, tariffs and quotas on imports

Measuring and analysing global trade

balance of trade, balance of payments, exchange rates

balance of trade

imports minus exports, when import is higher then export we have trade surplus, opposite trade deficit

balance of payments

balance of trade plus services and investments

exchange rates

currencies fluctuate against each other

looser regulations

cancel out quotas and tariffs

human right abuses

child labour

requirements

for

back-office services

accounts

front-line services

customer helplines

control

over

world trade organization

works towards reducing tariffs and quotas, mediates in trade disputes

international monetary found

makes short-term loans

World Bank

lends money to developing countries

competitive adventage

competitive edge