Globalization, International Business, and Economic Systems Overview

Globalization

The shift toward a more integrated and interdependent world economy

Service-learning

An educational experience where students participate in organized activities that meet community needs

Globalization of markets

The merging of historically distinct national markets into one global marketplace

Globalization of production

Sourcing goods and services globally to take advantage of cost and quality differences

Most global markets

Industrial goods

Factors of production

Land, labor, capital, and entrepreneurship

World Trade Organization (WTO)

Organization that polices the world trading system

International Monetary Fund (IMF)

Lender of last resort to countries in financial trouble

World Bank

Provides development and infrastructure financing

United Nations

Organization with 193 members committed to peace and security

Group of 20 (G20)

Finance ministers and central bank governors of major economies representing most global GDP and trade

Foreign direct investment (FDI)

Investment in activities outside a firm's home country

GATT

Agreement created to lower trade barriers and establish the WTO

COVID-19 trade slump

16 percent decline in world trade

Drivers of globalization

Technological change and liberalization of trade and investment

BRIC countries

Brazil, Russia, India, China

Multinational enterprise (MNE)

Firm with productive activities in two or more countries

Pro-globalization argument

Economic growth and lower prices

Anti-globalization argument

Job losses, inequality, and environmental harm

International business complexity

International business is more complex than domestic business

National context

Political, economic, and legal systems of a country

Systems interdependence

Political, economic, and legal systems affect one another

Autocracy

Political system run by one person

Kleptocracy

Government resources directed to those with close political ties

Individualism

Focus on individual goals

Collectivism

Focus on group goals

Karl Marx

Founder of modern socialist thought

Socialism split

Communism and social democracy

Privatization

Transfer of state-owned enterprises to private owners

Individualism philosopher

Aristotle

Individualism tenets

Individual freedom and self-interest

Economic diversification

Reduces risk and increases stability

Totalitarianism (communist)

State owns means of production

Totalitarianism (theocratic)

Religion controls government

Totalitarianism (tribal)

Loyalty to tribe or clan

Totalitarianism (right-wing)

Private ownership with authoritarian political control

Pseudo-democracy

Elections without real political freedom

Economic systems

Market, command, mixed

Market economy

Private ownership of productive activities

Legal system purpose

Enforce laws, regulate behavior, resolve disputes

Legal systems

Common law, civil law, theocratic law

Civil law contracts

Detailed and written

Common law contracts

Flexible and precedent-based

CISG

Uniform rules for international sales contracts

Property rights

Legal rights over use of resources and income

Private actions

Theft, piracy, blackmail, organized crime

Public actions

Corruption by government official