Materials, Ch.

1-6
Pursuing globalization and living it differ from mere involvement in international
business activities.
More important, the rise of global thinking and practice has made business interests and
orientations more necessary then ever.

lobal trade e!pended rapidly from 16"" to 1#"". $orbes magazine indicates that
bet%een 1#&" and 1'1" the free flo% of labor %as impressive and capital moved freely
among ma(or countries.
)n the second half of the nineteenth century, 1* million people crossed the +tlantic to
settle in ,orth +merica.
)t is not $ree -rade bet%een any t%o countries that is the true aim. but to remove
obstacles in the %ay of the stream of the freely e!changing commodities, that ought to
like the /ceanus of primitive geography, to encircle the %hole habitable %orld.
lobalization is defined as a set of beliefs that foster a sense of connectivity,
interdependence, and integration in the %orld community.
+t the firm level, the globalization should mean the ability of corporation to conduct
business across borders in an open market, ma!imizing organizational benefits, %ithout
inflicting social damage or violating the rights of people from other cultures.
lobal Corporation should treat globalization as a vie% and outlook that broadens and
energizes human minds and perspectives.
Practically and spiritually, globalization must be inclusive rather than e!clusive,
endeavor.
-he pillars of globalization are open trade and vital civil and legal institutions that uphold
individual and group rights %hile facilitating social and economic integration.
)ndustrial 0evolution helped to connect 1uropean and overseas economies in
complementary development patterns that transmitted changes in the rhythm of economic
gro%th in the industrial %orld overseas.
2orld economy is broader in terms of the number of national markets that are engaged. it
is deeper in terms of the density and velocity of interaction and flo%s of trade and
finance. and the dominant mode of organization of %orld economic transactions has
changed significantly from the market 3trade and portfolio4 investment to
internationalization of production through M,Cs.
Capital no% moves %ith startling speed around the %orld. 1ach day over 51 trillion is
traded in a global foreign e!change market that never closes.
1ven small- and medium- sized companies recognize that the competition for market
share is global, and that participating in the global economy is no longer a choice but a
necessity.
$6) flo%s set a record as )nternational Corporation responded to economic liberalization
in various countries. )nflo%s increased by 7' percent, to 5688 billion. 2hile outflo%s
rose 7& percent, to 568' billion.
)ncreases in $6) inflo%s in 1''# e!ceeds the gro%th in the nominal value of %orld gross
domestic product 36P4 and international trade, %hich gre% by 9.* percent and 7.6
percent respectively.
-he liberalization and restructuring of %orld economies have induced international
corporations to pursue a %ide range of investment activities.
:iberalization of much of the %orld economy and active engagement of international
corporations facilitate not only kno%ledge transfer but also labor movement and
integration among countries.
2orkers; %ages in M,Cs are generally higher, more e<ual, and converge faster across
economies than those of the total manufacturing sector.
-he liberalization of services and of trade in services fosters the application of ne%
management techni<ues, facilitates relations bet%een various stages of design production,
and marketing of products and services, and generates greater economies of scale.
)nternet revolution has made universal connectivity a reality.
2hile cultural homogenization is far from being a reality, cultural integration and cross-
cultural familiarity are advancing <uickly.
,ations have become more accepting of convergence around the effective techni<ues that
ensure their vitality and competitiveness.
)n the last fe% decades, there has been a phenomenal dominance of transnational capital
in the %orld economy, %hich in tern induces the transnationalization of social classes.
-he formation and acceptance of transnational elites %eaken the nation-state system and
all its relative frames of reference.
-he %orld gradually has become increasingly united, and this has manifested itself in a
holistic consciousness.
=everal types of e!change predominate in social relationships> material e!change 3e.g.
trade, capital accumulations4. political support of security, coercion, surveillance, and
authority. legitimacy and obedience. and symbolic e!change by means of all types of
communication, publication, and information transfer mechanisms.
-he %idespread appeal of the free market system induces a firm to act as a citizen of the
market in %hich it operates.
-he issue of a home country is still important in the firm;s conduct, but it %ill gradually
fade.
Corporate alliances and net%orking circle the globe and eventually render corporate
boundaries obsolete.
Managers eventually recognize that every person, even in the remote corner of the %orld,
is a potential customer.
Corporate involvement in a societal and environmental issues is a good business practice
and a source of business advantage.
)nstant transmission of information to most of the %orld;s regions sensitizes people to
issues that are global in nature and induces them to demand no less then the best <uality,
price, and services.
,/s; involvement in solving social, economic, and political problems compels
governments and business organizations to cooperate and tackle issues that seem to be
local but often have conse<uences beyond national borders.
-he national-state as an entity is not in danger of collapsing in the near future. rather, it is
assuming ne% functions that are in line %ith globalization trends and the principal of the
civil society.
)ntellectual, political, and cultural entities, especially in industrial countries, have a stake
in advancing their conceptual designs for the %orld.
-here are no inherent contradictions bet%een global integration and increasing a%areness
of social, ethnic, and religious identity, among many segments of the %orld;s
populations.
:iberalization %as reinforced by the conclusion, in 1''8, of the ?ruguay 0ound of
multilateral trade negotiation and the establishment of the 2orld -rade /rganization and
as nations and investors alike have ac<uired confidence in and are motivated by its
mission, ob(ectives and procedures.
:iberalization policies have significantly %idened the effective economic space available
for producers and investors.
:iberalization is endangered by the rise of national protectionism and the use of
economic sanctions by the leading economic po%ers.
=ince the 1'*"s, trade has been e!panding faster than %orld output. )n fact, %orld 6P
and trade gre% at ostentatious rates in 1''& despite the +sian financial crisis.
-he share of advanced industrial countries in %orld $6) inflo%s and outflo%s %as about
&9 and '9 percent respectively.
)nternational corporations are the most important instruments for global trade and
investment.
-he dominance of advanced industrial countries in %orld economic activities reflects
historical patterns initiated since the industrial revolution and that these countries offer
competitive conditions for firms to e!pand and gro%.
/ne of the most volatile forces in the past t%o decades has been capital flo%s.
@y the end of the 1'#"s, many governments abandoned capital controls, and fi!ed
currency rates %ere determined more by markets than by states.
overnments appear un%illing if not unable, to a large e!tent, to regulate capital
movements.
=ubstantial capital flo%s, in recent years have reached more countries and come in more
diverse forms and instruments than ever before.
=ome e!perts argue that the 1''&-1''# financial crisis does not differ from the earlier
crisis, such as one that the ?nited =tates e!perienced in 1#89.
-he Marshal plan %as introduced and the @retton 2oods agreement created the 2orld
@ank and the )M$ to enhance development and stabilize the crisis.
@ankers and )nvestors sho%ed, in the last decade, a sudden interest in the developing
countries.
+vailability of $inancial )nformation enables people to trade huge amounts of short-term
flo%s.
Most of the loans %ere short term in nature 3up to one year4. -here has been a gradual
decline in the share of the public sector in total loans.
Commercial banking in the ma(or industrial countries %as under pressure, due to
deregulation, to find alternative sources of business to increase return.
-he globalist economic philosophy;s attribution of a divine design to the unregulated
play of the market is not a rationally defensible position.
2hile %e talk of financial crisis across the %orld, 1.7 billion people live on less than 51 a
day. 7 billion live on under 59 a day. 1-7 billion have no access to clean %ater. 7 billion
have no access to sanitation. 9 billion have no access to po%er.
-he starting point for the establishing appropriate programs to cope %ith the financial,
economic, and social crisis is to enlist the contributions of ,/s and other grassroots
associations that have allegiances to global causes.
-he issues of sovereignty and aspiration for supremacy of others competitors render
many of the ?= %orld pro(ections and designs far from realistic.
-he %orld seems to move from economic and possible technological competition
bet%een countries to%ard a competition bet%een ideas and values.
-he state %as evolved to perform various functions 3e.g. security, economics,
international relations, and politics social relations.
-he rise of nationalism and liberation movements among C6=s and increasing
%orld%ide a%areness of the e!tend of the damage that had been inflicted upon C6s
forced many colonial countries to change their courses of action.
=assan 31''74 and =auer--hompson and =mith 31''64 maintain that globalization
%eakens national boundaries and the po%er of national and subnational communities.
overnment policies and priorities are likely to remain differentiated from each other. +s
such, states may assume ne% roles in conducting their affairs.
1merging global organizations have been gradually displacing and assuming some
functions of the sovereign state.

+ corner stone of globalization thinking is the commonality among people across cultures
and borders.
-he most noticeable structured integration and change, ho%ever, is taking place in the
%orld economy and in %orld culture.
)n conducting their affairs, organizations assume various roles and pursue diverse
activities. lobalization intensifies and %idens such involvement.
-he challenges that firms face come from business and non-business rivals alike.
=everal dimensions related to organizational conduct and involvement can be identified>
trade 3business4, international relations, organizational, intellectual and moral.
-he @ody =hop claims that defending human rights around the globe Aembodies our
conviction that business should be about social responsibility as %ell as profit.B
)n terms of structuring organizational functions and activities, globalization induces a
profound realignment.
-he intellectual component is a product of contradictory trends. integration and
differentiation at the global AsocietalB level and intense competition and cooperation at
the firm level.
Practitioners have al%ays sought to enhance public image and involvement in social
activities as necessary conditions for strategically positioning a firm in the market place.
/ne of the most pressing arguments is that the global free-market economy, caring,
loyalty, and moderation are not priorities as gains are privatized to the benefits of the
po%er holders, and costs are socialized by charging them to those %ho have no political
or economic po%er.
-he most important challenge for t%enty-first century is to engineer a ne% balance
bet%een the market and society-one that %ill continue to foster the creative energies of
private enterprises %ithout eroding the social foundation of cooperation.
)t seems that business leaders, rather than scholars, are taking the lead in highlighting
some crucial dimensions 3e.g. intellectual, international relations4 in their discourse and
conduct.
6evelop marketing andCor production strategies that span nation-state borders to
ma!imize the use of its resources and skills.
)t is generally accepted that as a pact evolves to%ard protectionism 3discriminating
against nonmembers4 and moves to take advantage of its market size and comparative
advantage, regionalism constitutes a setback to %orld%ide market liberalization efforts.
0-Ps are assumed to either create trade 3specialization and competition induce higher
productivity and stimulate demand for good and services from %ithin or outside the pact4
or divert trade 3increasing intrapact trade at the e!pense of international trade4.
1!isting 0-Ps have t%o things in common> a tendency to structure their economies
behind pro(ectionist barriers and to have free trade %ithin the pacts but protectionism
to%ard nonmember countries.
Currently there are more then thirty-three 0-Ps involving more than 19" countries on all
continents.
)n today;s %orld of instant communications and rapid kno%ledge transfer, along %ith lo%
transportation costs, geographic pro!imity is not an overriding factor for ensuring the
success of the 0-Ps.
Cultural differences tend to be more limited and prospects for interconnectedness and
assimilation tend to be enhanced.
=imilar outlooks and e!pectations regarding trade and economic systems stimulate
cooperation and produce effective negotiations to deal %ith issues significant for 0-Ps.
Countries that lack demographic institutions and the political %ill to make 0-Ps
operational have failed to make reasonable progress in the <uest for building sound
regional trade.
0egional integration is seen as a popular pursuit and offers these regimes an opportunity
to improve the public image.
0-Ps are not a unified concept and cannot by themselves be the organizing principal for
a ne% economic global order.
/ne of the most significant fears among trade observers is that though the discrimination
%ithin the 0-Ps is not permitted, it is tolerated against outsiders
.
0egional trade pacts are often vie%ed as necessary mechanisms for trade liberalization,
as driving forced that motivate members of the trade pacts to engage in global bargaining
and focus on the most urgent and serious trade problems.
0-Ps also enhance global vision by strengthening the common elements %hile
ma!imizing the negative impact of ongoing trade disputes.
+ common perception e!ists among ordinary and intellectual individuals, especially in
the C6=s, that globalization has drifted from its natural path and many have been left out.
-he gap bet%een rich and poor is increasing both %ithin and bet%een the countries
around the globe.
lobalization has reduced the po%er of individuals and communities to shape their
destinies.
/perating in an open, competitive market is a prime vehicle for ensuring that the best
producers of goods and services have access to markets and that consumers have plenty
of choices, thereby ma!imizing their %elfare.
/ne of the most intriguing phenomena in the globalization of the economy is the rise and
evolution of global corporations.
Modern firms 3e.g. transnational corporations, or global corporations4 operating across
borders are different from traditional %orld companies, be they colonial trading or
resource e!traction companies.
-oday;s companies are not necessary e!tensions of colonial po%ers and domination.
like%ise, they are not blindly motivated to control natural resources of other nations.
+t least *7,6"& firm operate across borders, %hich have about 88,'1& %orld%ide
affiliates.
1!port of foreign affiliates more than doubled bet%een 1'#9 35&79 billion4 and 1''8
351,#*"billion4.
-he ratio of $6) stocks in 1''& to %orld 6P %as 91 percent.
$irms have increasingly used cross border agreements 3e.g. (oint ventures, licensing,
franchising, etc.4
$irms operating across borders directly employ more than &7 million people in
nonagricultural activities %orld%ide.
Cross-border mergers and ac<uisitions 3MD+4 have become a ma(or mode of investment
by ma(or corporations.
=ervice firms have become increasingly involved in the globalization of the %orld
economy.
)n practice, there are considerable variations in the %ay that firms perceive themselves.
?nilever, ho%ever, differentiates bet%een an international and a global firm in terms of
strategy.
=ome e!perts have a tendency to refer to M,Cs as global corporations.
enerally, scholarly literature on the organizational forms of corporations operating on a
global scale can be classified in terms of orientation, strategy, structure, and net%orking
and alliances.
lobal organization operates in a Aborderless %orldB that does not focus primarily on its
home country.
lobal organizations play a crucial role in internalizing the challenge of globalization.
lobal corporations have three ma(or characteristics-inner security, inner direction, and
inner coherence.
6omestic firm is a firm that operates only in a local market.
M,C- the Company vie%s itself as a collection of relatively autonomous subsidiaries
operating in t%o or more countries.
)nternational firm, because of its senior managers; orientations, type of business, or the
e!tent of operations, does not sho% any sensitivity to variations in international markets.
2orld%ide company is a company that has, for the most part, largely standardized its
products and operations all over the %orld.
lobal corporations are those that internalize globalization;s challenges. -hese
corporations have a culture that reconciles, in their mission and operations, contradictions
that are common among -,Cs and M,Cs.
lobal corporations think of everything they do in term of the entire %orld and capitalize
on ideas every%here. produce stronger %orld-class technology. and access the most
<ualified people.
=ome of the benefits that global corporations appear to gain by globalization are>
net%orking, revitalization and gro%th, and %orld citizen image.