Fiance

Chapter1

Globalization refers to the shift toward a more integrated and interdependent world economy.

Globalization of markets- national markets are merging into one huge marketplace.

Globalization of production- firms are basing individual productive activities at the optimal world locations for the particular activities.

Factors of production: labor, energy, land, capital

*Factors leading to the trend of globalization:

declining trade barriers and

changes in communication information and transportation technology

free flow of goods services and capital have lowered since WW2

Consequence of globalization of P and M- world trade has grown faster than world output, FMI has surged, competitive pressure

World trade organization is primarily responsible for policing the world trading system and making sure nation states adhere to the rules

International monetary fund maintain order in international monetary system

World Bank set up to promote economic development

United nations- committed to preserving peace through international cooperation and collective security, harmonize.

*Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country. Barriers of high tariffs led to the great depression

Moores law- the power of the microprocessor technology doubles and it’s getting cheaper to produce. Helped firm’s link worldwide operations into sophisticated info networks. Results in the cost of global communications plummets

-since 1960 the US has dropped for 38% share of the world’s output to 8% in 2011

1990’s faced new competition from Japanese and European multinationals.

Fall of communism in eastern Europe- created opportunities for international business.

Multination enterprises are companies with two productive activities in two or more countries.

They are also international businesses-any company that does business with another country.

*Debate if global economy is best? Focus on the impact...