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The primary drivers of globalization include advances in communication technology, such as the Internet, which allows for 24/7 information processing; cheaper transportation methods; falling barriers to cross-border trade influenced by organizations like the WTO; and converging consumer tastes and preferences.
Containerization has significantly reduced shipping costs and increased the efficiency of transporting goods across borders, facilitating international trade and making it easier for firms to engage in global markets.
Outsourcing involves contracting work to firms in other countries, allowing companies to reduce costs and focus on core competencies while benefiting from lower labor costs and specialized skills available abroad.
Foreign Direct Investment (FDI) occurs when a firm invests resources in business activities outside its home country, aiming to generate profit. FDI is significant as it contributes to economic development, particularly in developing countries.
Developing countries often have more room for growth and development, as they can adopt new technologies and practices that have already been established in developed countries, leading to faster economic progress.
The globalization of production considers factors such as land, labor, energy, and capital, which influence where firms choose to locate their production facilities to optimize costs and efficiency.
A Multinational Enterprise (MNE) is a business that operates production facilities in multiple countries, playing a crucial role in globalization by facilitating the flow of goods, services, and capital across borders.
Lower barriers to trade and investment encourage international business by making it easier for firms to export goods and services, attract foreign investment, and expand their market reach.
Globalization introduces complexities such as transportation logistics, language barriers, varying tariffs, differing political and legal systems, cultural differences, and currency exchange rates, which businesses must navigate.
The BRIC countries—Brazil, Russia, India, and China—are significant in the global economy due to their rapid economic growth, large populations, and increasing influence in international trade and investment.
In 1960, the U.S. held a dominant position in the world economy and trade, significantly influencing global economic policies and practices.
Since 1990, the global labor pool has increased by 500%, expanding the workforce available to businesses and enhancing competition in the labor market.
The World Trade Organization (WTO) serves to police the world trading system, ensuring that trade flows as smoothly, predictably, and freely as possible among member countries.
The International Monetary Fund (IMF) maintains order in the international monetary system and acts as a lender of last resort to countries facing financial crises.
The United Nations contributes to globalization by promoting international cooperation, preserving peace, and ensuring collective security among nations.
Critics argue that globalization can lead to divergence, where the benefits of economic growth are not equitably distributed, potentially exacerbating poverty and inequality among the world's poor.
Standardized products cater to converging consumer tastes and preferences, allowing firms to market and sell the same products worldwide, which can simplify production and marketing strategies.
Tariffs are taxes imposed on imported goods, which can increase the cost of foreign products, protect domestic industries, and influence trade patterns by making imports less competitive.
Globalization can drive economic development by providing access to larger markets, attracting foreign investment, and facilitating the transfer of technology and knowledge across borders.
Cultural differences can affect communication, negotiation styles, management practices, and consumer preferences, requiring businesses to adapt their strategies to succeed in diverse markets.