Globaliza
tion
Chapter Outline
OPENING CASE: The Globalization of Production at Boeing
INTRODUCTION
WHAT IS GLOBALIZATION?
The Globalization of Markets
The Globalization of Production
Management Focus: Vizio and the Market for Flat Panel TVs
THE EMERGENCE OF GLOBAL INSTITUTIONS
DRIVERS OF GLOBALIZATION
Declining Trade and Investment Barriers
The Role of Technological Change
THE CHANGING DEMOGRAPHICS OF THE GLOBAL ECONOMY
, The Changing World Output and World Trade Picture
Country Focus: India’s Software Sector
The Changing Foreign Direct Investment Picture
The Changing Nature of the Multinational Enterprise
Management Focus: China’s Hisense – An Emerging Multinational
The Changing World Order
The Global Economy of the Twenty-First Century
THE GLOBALIZATION DEBATE
Antiglobalization Protests
Country Focus: Protesting Globalization in France
Globalization, Jobs, and Incomes
Globalization, Labor Policies, and the Environment
Globalization and National Sovereignty
Globalization and the World’s Poor
MANAGING IN THE GLOBAL MARKETPLACE
CRITICAL THINKING AND DISCUSSION QUESTIONS
CLOSING CASE: Who Makes the Apple iPhone?
,Learning Objectives
1. Understand what is meant by the term globalization.
2. Recognize the main causes of globalization.
3. Describe the changing nature of the global economy.
4. Explain the main arguments in the debate over the impact of globalization.
5. Understand how the process of globalization is creating opportunities and challenges
for business managers.
Chapter Summary
This opening chapter introduces the reader to the concepts of globalization and
international trade, and provides an introduction to the major issues that underlie these
topics. The components of globalization are discussed, along with the drivers of
globalization and the role of the General Agreement on Tariffs and Trade (GATT) and its
successor the World Trade Organization (WTO) in lowering trade barriers. The
influence of technological change in facilitating globalization is also discussed, along
with the role of multinational firms in international business.
The chapter also describes the changing demographics of the global economy, with a
special emphasis on the increasingly important role of developing countries in world
trade. This discussion is complemented by a description of the changing world order,
which was brought on by the collapse of communism in Eastern Europe and republics of
the former Soviet Union. The chapter ends with a candid overview of the pros and cons
of the trend towards globalization.
Opening Case: The Globalization of Production at Boeing
, Summary
The opening case explores U.S. aircraft manufacturer Boeing’s approach to the
production of its Dreamliner 787 airplane. Boeing’s strategy was unlike any of its
previous strategies. Instead of producing much of the aircraft itself, Boeing, noting
that 80 percent of its customers were foreign airlines, decided to outsource some 65
percent of the value of the Dreamliner to suppliers located around the world. This
strategy introduced a number of challenges for Boeing, and production of the 787
was often delayed. A discussion of the case can revolve around the following
questions:
QUESTION 1: Reflect on Boeing’s decision to outsource much of the production of the
Dreamliner 787. What benefits does this strategy offer? Are there any drawbacks?
ANSWER 1: Boeing has traditionally outsourced some of the production of its
aircraft, but it took outsourcing to a new level with the Dreamliner 787, outsourcing
65 percent of its value to suppliers located around the world. This strategy allowed
each company including Boeing to focus on what it does best, allowing for greater
efficiency and lower costs. Some students may also suggest that by using suppliers
located in customer countries, Boeing was able to introduce a “local” element to the
Dreamliner and gain goodwill with its customers. However, with its new strategy,
Boeing also encountered many problems including challenges in coordinating its
globally dispersed production chain. Production was frequently delayed and the
aircraft was ready for sale much later than Boeing had anticipated. Some students
may note that while Boeing was able to benefit from the expertise of its suppliers, by
outsourcing, the company also lost the ability to increase its own knowledge and
skills.
QUESTION 2: How has globalization made Boeing’s approach to the production of
the Dreamliner possible?
ANSWER 2: Students should recognize the importance of technology that facilitated
tion
Chapter Outline
OPENING CASE: The Globalization of Production at Boeing
INTRODUCTION
WHAT IS GLOBALIZATION?
The Globalization of Markets
The Globalization of Production
Management Focus: Vizio and the Market for Flat Panel TVs
THE EMERGENCE OF GLOBAL INSTITUTIONS
DRIVERS OF GLOBALIZATION
Declining Trade and Investment Barriers
The Role of Technological Change
THE CHANGING DEMOGRAPHICS OF THE GLOBAL ECONOMY
, The Changing World Output and World Trade Picture
Country Focus: India’s Software Sector
The Changing Foreign Direct Investment Picture
The Changing Nature of the Multinational Enterprise
Management Focus: China’s Hisense – An Emerging Multinational
The Changing World Order
The Global Economy of the Twenty-First Century
THE GLOBALIZATION DEBATE
Antiglobalization Protests
Country Focus: Protesting Globalization in France
Globalization, Jobs, and Incomes
Globalization, Labor Policies, and the Environment
Globalization and National Sovereignty
Globalization and the World’s Poor
MANAGING IN THE GLOBAL MARKETPLACE
CRITICAL THINKING AND DISCUSSION QUESTIONS
CLOSING CASE: Who Makes the Apple iPhone?
,Learning Objectives
1. Understand what is meant by the term globalization.
2. Recognize the main causes of globalization.
3. Describe the changing nature of the global economy.
4. Explain the main arguments in the debate over the impact of globalization.
5. Understand how the process of globalization is creating opportunities and challenges
for business managers.
Chapter Summary
This opening chapter introduces the reader to the concepts of globalization and
international trade, and provides an introduction to the major issues that underlie these
topics. The components of globalization are discussed, along with the drivers of
globalization and the role of the General Agreement on Tariffs and Trade (GATT) and its
successor the World Trade Organization (WTO) in lowering trade barriers. The
influence of technological change in facilitating globalization is also discussed, along
with the role of multinational firms in international business.
The chapter also describes the changing demographics of the global economy, with a
special emphasis on the increasingly important role of developing countries in world
trade. This discussion is complemented by a description of the changing world order,
which was brought on by the collapse of communism in Eastern Europe and republics of
the former Soviet Union. The chapter ends with a candid overview of the pros and cons
of the trend towards globalization.
Opening Case: The Globalization of Production at Boeing
, Summary
The opening case explores U.S. aircraft manufacturer Boeing’s approach to the
production of its Dreamliner 787 airplane. Boeing’s strategy was unlike any of its
previous strategies. Instead of producing much of the aircraft itself, Boeing, noting
that 80 percent of its customers were foreign airlines, decided to outsource some 65
percent of the value of the Dreamliner to suppliers located around the world. This
strategy introduced a number of challenges for Boeing, and production of the 787
was often delayed. A discussion of the case can revolve around the following
questions:
QUESTION 1: Reflect on Boeing’s decision to outsource much of the production of the
Dreamliner 787. What benefits does this strategy offer? Are there any drawbacks?
ANSWER 1: Boeing has traditionally outsourced some of the production of its
aircraft, but it took outsourcing to a new level with the Dreamliner 787, outsourcing
65 percent of its value to suppliers located around the world. This strategy allowed
each company including Boeing to focus on what it does best, allowing for greater
efficiency and lower costs. Some students may also suggest that by using suppliers
located in customer countries, Boeing was able to introduce a “local” element to the
Dreamliner and gain goodwill with its customers. However, with its new strategy,
Boeing also encountered many problems including challenges in coordinating its
globally dispersed production chain. Production was frequently delayed and the
aircraft was ready for sale much later than Boeing had anticipated. Some students
may note that while Boeing was able to benefit from the expertise of its suppliers, by
outsourcing, the company also lost the ability to increase its own knowledge and
skills.
QUESTION 2: How has globalization made Boeing’s approach to the production of
the Dreamliner possible?
ANSWER 2: Students should recognize the importance of technology that facilitated
