Chapter 4: Business in a Globalized World

Globalization: the increasing movement of goods, services and capital across borders, a process-

an ongoing series of interrelated events, supply exchange between economies.

- Develop global market channels

- Establish global operations

Arbitrage: makes more money for less cost, cheaper to make it somewhere else.

- Develop global supply chains

- Sell, make, source.

MAJOR TRANSNATIONAL CORPORATIONS (TNCs):

- Defined by the United Nations as firms that control assets abroad.

- Most global commerce is carried out by a small number of powerful firms.

- Provides jobs, services, goods, boosts economy.

- Direct affect economy and elections.

- FDI (Foreign Direct Investment): when someone invests money in another country,

buying shares of stock in or loaning money to a foreign firm. However, laws of the land

apply. Often happens because of risks in economy. Ex: Apple stocks go down, gold and

other metals go up.

- Inversion: companies avoiding taxes in their home countries. Strategy: Merging with

companies located in other countries, and shifting their HQ there.

- Three institution that set the rules by which international commerce is transacted:

- World Bank, International Monetary Fund, World Tarde Organization

World Bank (1944)

Major issue: corruption from project managers.

International Monetary Fund:

Currency exchange: that money doesn’t get devalued. Stabilize system of currency exchange

Word Trade Organization (1995)

Establishes ground rules for trade among nations.

Benefits and Costs:

- Increases economic productivity, reduces costs

- Comparative advantage

- More variety for a daily basis

- Harder to regulate conditions

- Environmental damage

- Causes job insecurity

- Gives developing countries access to foreign investment funds to support economic

development.

POLITICAL SYSTEMS:

Democracy, Monarchy, Communist.

They all want different lifestyles.

Democracy: fair election, independent media, separation of power, an open society.

Military dictatorship: total power through control of armed forces.

The Bottom of the Pyramid: Global Wealth Pyramid

- Relocation of resources

Microfinance: loans under 50 bucks for low income people.

A bank can’t do microfinance because they have to show return.

Associations with your fellow villagers for enterprise building. Specially women.
99% of these loans get repaid.

One critic: Interest rate: 70%

COLLABORATIVE PARTNERSHIPS:

Work for people with basic education.

Social impact bond to fix a social issue

3 sectors: Business, Civil Society, Government.