(New) what is globalization? 4 drivers of globalization | International Business

Business School 101

15 May 202112:50

Summary

TLDRThis video script from 'Business School 101' explores globalization's impact on business, society, and the economy. It discusses how interconnectedness has grown due to advancements in technology and trade policies, leading to a global marketplace and production. The script highlights the benefits and challenges of globalization, including the convergence of consumer tastes and the sourcing of goods and services worldwide. It also touches on the four major drivers of globalization: technological, market, cost, and political factors.

Takeaways

🌐 Globalization is the increased interconnectedness and interdependence of people and countries, affecting various aspects of life including trade, communication, and the spread of ideas.
🛒 The globalization of markets merges national markets into a global marketplace, with companies like Apple and Coca-Cola aiming to create a global consumer market.
🏭 Globalization of production involves sourcing goods and services from around the world to leverage national differences in production costs and quality.
📱 Technology, such as the internet and smartphones, has been a key driver of modern globalization, enabling fast global communication and commerce.
🌍 Historically, globalization has gone through waves, with significant growth in the 19th century and a second wave post-World War II, despite periods of downturn and scrutiny.
🔍 Despite a trend towards global consumer norms, significant differences in consumer tastes, business systems, and legal regulations still exist among national markets.
🌟 Companies like Apple facilitate globalization by designing products in one country but sourcing components from manufacturers worldwide.
💡 Globalization allows companies to lower costs and improve product quality by taking advantage of different national cost structures and production efficiencies.
⚖️ Political decisions, such as trade barriers and capital controls, significantly influence the extent and nature of globalization.
🌟 The COVID-19 pandemic and US-China trade war have highlighted the risks of over-reliance on global production, prompting some countries to consider reshoring essential industries.

Q & A

What does the term 'globalization' refer to according to the World Health Organization?
-Globalization refers to the increased interconnectedness and interdependence of peoples and countries.
How has globalization impacted our daily lives?
-Globalization has impacted our daily lives by influencing the products we buy, the food we eat, and the ways we communicate with one another.
What are the two interrelated perspectives through which globalization can be understood?
-Globalization can be understood from the opening of international borders to increase fast flows of goods, services, finance, people, and ideas, and the changes in institutions and policies at national and international levels that facilitate or promote such flows.
What was the first wave of globalization propelled by?
-The first wave of globalization was propelled by steamships, railroads, the telegraph, and other breakthroughs, as well as increasing economic cooperation among countries.
What are the two major facets of globalization discussed in the script?
-The two major facets of globalization are the globalization of markets and the globalization of production.
How does the globalization of markets affect consumer products?
-The globalization of markets refers to the merging of national markets into one global marketplace, making it easier to sell internationally and leading to a convergence of consumer tastes and preferences.
What is an example of a product that is designed in one country but manufactured in another?
-The iPhone is designed in California but its components are manufactured by suppliers around the world.
What are some of the key suppliers for the iPhone mentioned in the script?
-Key suppliers for the iPhone include Qualcomm for chips, Samsung for the battery, Sony for the camera, and Bosch Sensor Technology for the accelerometer.
Why do companies source goods and services from locations around the globe?
-Companies source goods and services globally to take advantage of national differences in the cost and quality of factors of production, such as labor, energy, land, and capital.
What are the four major factors driving globalization?
-The four major factors driving globalization are technological drivers, market drivers, cost drivers, and political drivers.
How has technology shaped the foundation of modern globalization?
-Technology, particularly in transportation and communication, has accelerated the pace of globalization, with the internet enabling global communication and containerization lowering shipping costs.
What are some challenges that companies face in the globalization of production?
-Challenges in the globalization of production include formal and informal barriers to trade, barriers to foreign direct investment, transportation costs, and issues associated with economic and political risk.

Outlines

00:00

🌐 Understanding Globalization

The first paragraph introduces the concept of globalization, emphasizing its impact on modern life and its connection to significant global issues like climate change and terrorism. It discusses both the benefits and downsides of globalization and the importance of understanding it in the business world. The paragraph outlines the definition of globalization from the World Health Organization, highlighting increased interconnectedness and interdependence. It traces the history of globalization back to the 19th century, mentioning the first wave driven by technological advancements like steamships and the telegraph. The paragraph also introduces two major facets of globalization: the globalization of markets, which refers to the merging of national markets into a global marketplace, and the globalization of production, which involves sourcing goods and services globally to take advantage of national differences in production costs and quality.

05:02

📱 Globalization in Practice: The iPhone Example

The second paragraph delves into the practical application of globalization, using the iPhone as a case study. It discusses how various components of the iPhone are sourced from manufacturers around the world, illustrating the trend of global products. The paragraph mentions key suppliers like Qualcomm, Samsung, Sony, and Bosch Sensor Technology, emphasizing the global nature of product creation. It also touches on the outsourcing of service activities facilitated by modern communication technologies. The paragraph highlights the challenges of globalization, such as trade barriers, foreign direct investment restrictions, transportation costs, and political risks, which can impede the optimal dispersion of productive activities. The paragraph concludes by noting the trend of countries considering moving essential industries back home due to national security concerns, as seen during the US-China trade war and the COVID-19 pandemic.

10:04

🚀 Drivers of Globalization

The third paragraph outlines the four major factors driving globalization: technological, market, cost, and political drivers. It explains how advancements in transportation and communication technologies have accelerated globalization, with the internet and social media breaking down national boundaries. The paragraph also discusses how saturated domestic markets push companies to expand globally and how cost advantages in different countries can be exploited. Lastly, it addresses the role of political decisions in facilitating or restricting cross-border activities, such as trade tariffs, capital controls, and immigration regulations. The paragraph concludes with a summary of the day's topic, emphasizing the interconnectedness of the world and the influence of globalization on various aspects of daily life.

Mindmap

Keywords

💡Globalization

Globalization refers to the increasing interconnectedness and interdependence of peoples and countries. It is a central theme of the video, which discusses how globalization affects various aspects of modern life, including trade, communication, and the spread of ideas. The script mentions that globalization has both proponents and detractors, but it is an undeniable reality of contemporary existence.

💡Interconnectedness

Interconnectedness is a key aspect of globalization, indicating how different parts of the world are linked through economic, social, and cultural ties. The video script uses this term to describe how globalization has led to the opening of international borders, facilitating the flow of goods, services, finance, people, and ideas.

💡International Borders

International borders are the geographical boundaries that separate countries. The script discusses how globalization has led to the opening of these borders, allowing for increased trade and movement of people. This is exemplified by the historical context provided, where advances in transportation and communication technologies have made international interactions more frequent and easier.

💡Global Marketplace

The global marketplace is a concept that describes how national markets are merging into one large, unified market due to globalization. The video uses this term to illustrate how companies can now sell products and services across borders more easily, creating a larger customer base and opportunities for growth.

💡Consumer Convergence

Consumer convergence refers to the idea that consumer tastes and preferences are becoming more similar across different nations. The video mentions this concept to explain how global brands like Apple, Coca-Cola, and McDonald's can offer similar products worldwide and still find success.

💡Customization

Customization is the process of adapting products or services to meet the specific needs or preferences of a particular group of customers. The script discusses how, despite consumer convergence, significant differences still exist among national markets, requiring companies to customize their offerings to match local conditions.

💡Globalization of Production

The globalization of production is the practice of sourcing goods and services from around the world to take advantage of differences in production costs and quality. The video uses the iPhone as an example to show how different components are manufactured in various countries, highlighting the complexity of global supply chains.

💡Outsourcing

Outsourcing is the act of contracting out a business process to an external provider rather than performing it internally. The video discusses how companies outsource manufacturing and service activities to different countries to reduce costs or improve efficiency, mentioning examples such as hospitals outsourcing radiology work to India.

💡Technological Drivers

Technological drivers are the advancements in technology that facilitate globalization by making communication and trade easier. The script highlights the role of the internet, containerization, and smartphones in accelerating globalization, enabling companies to reach global markets and manage international operations more effectively.

💡Market Drivers

Market drivers are the economic forces that motivate companies to expand beyond their domestic markets. The video explains how saturated domestic markets push companies to look for growth opportunities abroad, citing examples of Fortune 500 companies that generate more revenue from foreign markets.

💡Cost Drivers

Cost drivers are the factors that influence a company's decision to source goods or services from different countries based on cost advantages. The script discusses how labor costs can vary significantly between countries, providing companies with opportunities to reduce their production costs by outsourcing to lower-cost locations.

💡Political Drivers

Political drivers are the policy decisions and regulations that affect the ease or difficulty of cross-border activities. The video explains how decisions such as import tariffs, capital controls, and immigration regulations can either facilitate or hinder globalization, impacting the extent to which companies can operate internationally.

Highlights

Globalization is a reality of modern life, affecting everything from products we buy to how we communicate.

Globalization is tied to major issues like climate change, trade, terrorism, and disease spread.

Globalization has both proponents and detractors, but it's crucial to understand its nature and impact.

Globalization defined by WHO as increased interconnectedness and interdependence of peoples and countries.

Globalization involves opening international borders for the flow of goods, services, finance, people, and ideas.

The first wave of globalization was driven by steamships, railroads, and the telegraph in the 19th century.

Globalization waned after World War I and was revived post-World War II by the US-led efforts.

Globalization of markets refers to the merging of national markets into a global marketplace.

Consumer tastes are converging, creating a global market for consumer products like iPhones and Coca-Cola.

Companies must customize marketing and products to match conditions in different countries.

The globalization of production involves sourcing goods and services globally for cost and quality advantages.

The iPhone exemplifies global production with components sourced from various countries.

Outsourcing of services is also a facet of globalization, with tasks like radiology and customer service being offshored.

Globalization faces impediments like trade barriers, transportation costs, and political risk.

Technological advancements like the internet and smartphones have accelerated globalization.

Market saturation drives companies to expand globally for growth opportunities.

Cost advantages in labor and services are a significant driver for globalization.

Political decisions on trade, investment, and immigration regulations impact the extent of globalization.

Globalization's impact on the US economy will be discussed in a subsequent video.