Basics of Globalization

• Definition: Globalization refers to the increasing interconnectedness of economies, cultures, and societies through trade, investment, technology, and communication.
• Key Drivers:
  1. Technological Advancements (e.g., internet, transportation)
  2. Trade Liberalization (e.g., reduced tariffs, free trade agreements)
  3. Market Expansion (access to larger customer bases)
  4. Global Institutions (e.g., WTO, IMF, World Bank)

Why Firms Go International

1. Market Expansion: Access to new customers and geographic regions.
2. Cost Efficiency:
   • Lower production costs (e.g., outsourcing, economies of scale).
   • Access to cheaper labor, materials, or infrastructure.
3. Diversification:
   • Reduce dependency on domestic markets.
   • Spread risk across multiple markets.
4. Competitive Advantage:
   • Capitalize on technological or resource advantages.
   • Gain a foothold in emerging markets before competitors.
5. Access to Resources:
   • Raw materials or talent unavailable domestically.
   • Entry to innovative hubs or industrial clusters.

Barriers to International Business

1. Cultural Differences:
   • Language barriers.
   • Differences in business practices and consumer behavior.
2. Legal and Regulatory Issues:
   • Trade restrictions (e.g., tariffs, quotas).
   • Intellectual property rights.
   • Compliance with local laws.
3. Economic Factors:
   • Exchange rate volatility.
   • Inflation and economic instability in foreign markets.
4. Political Risks:
   • Political instability or corruption.
   • Restrictions on foreign ownership.
5. Logistics and Infrastructure:
   • High transportation costs.
   • Lack of reliable supply chains in some regions.
6. Protectionism:
   • Policies favoring domestic industries (e.g., subsidies, import bans).