BMGC Chapter One

University of London
Business and Management

in a Global Context
Chapter 1:
Perspective on
globalisation and
international business-
Reading Material
Lecturer: M.Nageb
CHAPTER 1: Perspectives on Globalisation and International Business
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CHAPTER 1: PERSPECTIVES ON GLOBALISATION AND

INTERNATIONAL BUSINESS
Learning By the end of this chapter, and having completed the

Outcomes Essential reading and activities, you should be able
to:
• define the major characteristics of globalisation
• assess the global economy and its broad trends
• explain the major trends in globalisation, and the

major players in the globalisation process
• enter into the major globalisation debates and

assess under what conditions and for whom
globalisation can be considered an advantage or

disadvantage
• describe the implications of globalisation for

companies operating internationally.
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1. What Globalisation can be defined as the shift towards a more

is
globalisat
integrated and interdependent world economy. In other
ion words, the world is moving away from self – contained national
economies towards an interdependent, integrated global system.
Globalization refers to in which activities of large number of
business enterprises is carried out in many different locations
across national boundaries. It is much more than just importing
or exporting from one country to another. True globalization
involves one firm procuring from, manufacturing in, and selling in
many different countries.
1• From a business perspective, you can think of globalization in

terms of the globalization of markets and the globalization of
production.
The globalization of markets refers to the merging of

historically distinct and separate national markets into one
huge global marketplace. As trade barriers between countries
fall, companies like Ikea, Sony, and Coca-Cola are able to sell
their products to a global market where consumers are more
and more alike.
The second facet of globalization—the globalization of

production—refers to the sourcing of goods and services from
locations around the globe to take advantage of national
differences in the cost and quality of factors of production
like land, labour, and capital. Companies hope that, by sourcing
and producing their products in the optimal location, they will
be able to better compete against their rivals.
Boeing, for example, outsourced about 65 percent of its 787

aircraft manufacture to foreign companies. Boeing believes
that this strategy allows it to use the best suppliers in the
world, an advantage that will help to win market share over its
rival Airbus Industries. Even healthcare is globalized. For
example, US and Canadian hospitals now routinely send X-rays
via the internet to be read in India, and some insurance
companies even recommend having certain medical operations
be conducted in foreign countries.
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The pictures below show that global production can be in any

part of the world.
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Figure
Figure 3.2
3.2 –– Who Builds the Boeing 777?
© 2002 Thomson Learning, Inc.
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• Some like Thomas Friedman describe globalisation as the

world becoming flat where each nation is part of a bigger
marker
• Also the WTO has been instrumental in dismantling

barriers to world trade making the world one big global
market for certain goods and services like, Banking and Finance
and Telecommunications
Examples
• global sourcing by Dell, Boeing, Apple and China’s C919( see
above )
• Keppel’s global reach (A 3) and PSA’s spanning the globe (A
4), Lego’s globalisation (A 5), Sakae Sushi (A 8), Singapore’s
Developer’s Abroad (A 9), Exodus of Chinese Table Tennis
Players (A 13,14), TATA’s globalisation (A 19)
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1.2 What is • The word globalisation would mean different things to
globalisation? different people. The following perhaps would represent
what is globalisation:
- accelerated speed of communication and

transportation technology – Hill, in his book, calls this
space shrinking technology
Examples
Singapore’s investment in digital infrastructure increased
access to mobile broadband, fire-optic cable connections
to households, combined with the rapid spread of
smartphones, has enabled Singapore to accelerate the
integration of its economy with intangible flows of data
and information, in addition to the tangible flows of
physical goods. (A 12)
- rising power of MNE and increased in inequality of

income
- increased in competition for jobs, especially for

low skilled workers
- is a force eliminating differences between

distinctive cultures
- world is moving towards a homogenous plain

without national boundaries
How the word globalisation is received depends on how

and in what context is one referring to. As can
be seen from the aforesaid there are a plethora of
interpretation on what is globalisation.
Video
V 1 Globalisation easily explained
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Study guide
• Define the major characteristics of globalization
1.2a What are • It is recognised as a complex set of process

the influencing the world economy.
characteristics
of • It involves increasing amounts of cross border
globalisation trade, with traditional distances between nations
lessening, due to advances in transportation and
telecommunications technology.
• It involves the rise of MNEs and has seen the

globalisation of markets and productions that has
resulted in increased competition for jobs and
between nations.
• Globalisations has seen some erosion of

differences amongst distinctive national
cultures and identities, but according to
Ghemawat’s CAGE framework, the extent may be
exaggerated.
• Globalisation is also the development of

international bodies to try to deal with all this
increased interconnectedness such as the WTO which
may have powers over sovereign national governments.
In addition the IMF helps to improve the efficacy of
national financial markets while the World Bank
promotes world economic development by providing
funds to national governments to finance infrastructure
development

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Study Guide
• Assess the global economy and its broad trends

• Explain the major trends in globalization and the major
players in the globalization process
1.3 Trend • Globalisation is not new. People have been trading over
towards several thousands years. Jones has identified two
globalisation waves.
1) first wave as starting in 1880 and rising to a high in

1929 and then declining and disintegrating from 1930 to
1980
2) second wave starting from Post WW11 and rising from

1950 to beyond 2010.
We will focus on the second wave.
• 1950s and 1960s – barriers were pervasive to trade

and capital movements. While developing countries such as
China and the former USSR sought to achieve self –
sufficiency.
In the 1970s and 1980s globalisation as a form of trade
remained largely a matter for developed economies in the
TRIAD nations comprising of US, Western Europe and
Japan.
However globalisation accelerated dramatically in the
1990s. This is due to the development of emerging
economies – these economies are characterised as having
low or middle level income amongst their population, and
above average economic growth compared to other nations
– so the called BRIC countries – Brazil, Russia, India and
China. However from 1990s onwards world output has been
through a roller coaster ride experiencing the 2008/2009
global economic crises with a rebound during mid 2009s.
Overall the 2010-2012 according to Jones ( 2004) has been
less steep as globalisation slowed down.
• Two major factors that have been driving

globalisation:
1) the decline in trade and investment barriers since
WW11 and
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2) technological change especially the dramatic

improvement in communication, information processing, and
transportation technologies. With the formation of GATT
barriers to trade have been falling and FDI has been rising
as governments opened their economies
• Hill(2011) suggests that four trends have been

particularly important
1. Changes in world output and world trade.
In the 1960s US dominated the world economy and world

trade. US MNCs were powerful. Today the picture has
changed. US now only account 20% of world economic
activity. Similarly other developed nations saw their
declined in economic output as well.
But developing countries saw the reverse. Their share of
world output is rising and by 2020 it is expected thay they
will account for more than 60% of world output. China,
Thailand, Indonesia have emerged as global economic
players . See diagram below:
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2 FDI (Foreign Direct Investment)
In the 1960s – USA accounted for over 66% of worldwide

foreign direct investment flows; UK 10%.
But today FDI by developing nations are on the rise while
FDI by rich industrial countries is falling. From 1980 – 2007
FDI by six important sources - USA, UK, Japan, Germany,
France and Netherlands has changed significantly from 1980
to 2007. US FDI declined from 38 to 18% and the
developing countries FDI has moved from under 1% to 15%.
Also developing countries have become an important source
of FDI and this has resulted in the internationalisation of
companies creating MNCs.
3. Types of companies
An MNC is any business that has productive activities in two

or more countries. Since 1960s two important trends have
emerged.
1. Firstly MNCs from France, Germany, Britain and

Japan have become more important and those of US
firms have became less. Firms from developing
countries such as China and S.Korea have emerged as
important players. Think of S.Korea’s Samsung and HK’s
Hutchinson Whampoa.
Video
V 2 What are MNCs?
2. Secondly, the trend is the growth in the number of

mini-multinationals. China’s Lenovo acquired IBM’s PC
division in an effort to become a global player and moved
its HQ to USA as part of its strategy. The internet sales of
smaller companies have become significant compared with
well established MNCs.
4 Change in world order
The collapse of the Russian communism as well as the

opening up of the Chinese market with the adoption of two
systems – politically China is communist but economically it
is capitalist, has brought enormous business opportunities
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for MNCs. Also the development of emerging economies of

Latin America as well as in S E Asia and India has created
new opportunities for foreign firms. These emerging
economies are now home to global MNCs and this has
brought about an interesting competitive threat.
Latest:
US – North Korea Summit in Singapore – reduction of
tension will lead to more trade in East Asia
Trends as mentioned in the Examiner’s report -

2014
Indicative trends include reduced barriers to trade and

capital investment, increased foreign direct investment
(FDI), growing affluence in many countries creating more
attractive markets globally, and increasing manufacturing
and services industries in emerging developing countries.
Mention of Friedman’s ten flatteners will gain some marks,
depending on detail.
Study Guide
• Under what conditions and for whom globalisation can be

considered an advantage and disadvantage
• Enter into the major globalisation debates and assess under

what conditions and for whom
1.4 The 1.4a The Benefits and Critics of Globalisation

Benefits and
critics of 1 What is the façade of the global economy in the
globalistion 21 st century? As the world moves towards a more
and the integrated system, it brings about both benefits and
globalisation criticism.
debates
• Benefits - Bhagwati – proponent of globalisation have
the following benefits – lower prices, more economic
growth and more employment, more open foreign markets,
exploit national comparative advantage
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Examiner’s Report 2014
candidates are expected to discuss advantages, such as

more open foreign markets for exporting, and national
comparative advantages that can be leveraged; and
Example
Globalisation enables large group of people living in
emerging countries to converge (catch-up) on the
achievements of advanced countries and the process is
still continuing (A 17)
disadvantages such as increasing economic instability and

dynamism due to connected world, and loss of economic
sovereignty to regional blocs. A couple of marks would be
given for country examples
Example
1997 Asian Financial Crisis or the Asian Contagion hit
many economies across Asia – the markets connected by
technology experienced the fall in share prices and
exchange rates
(Chapter 6 A 7)
• Critics – would say that it will cause job losses,

damage the environment, create cultural imperialism,
economic instability and dynamism due to connected world
and loss of economic sovereignty to regional blocs
1.4b The Globalisation Debate
By this simple introduction we can identify four major

areas of debate.
Jobs and income.

CRTICS SUPPORTERS
Firms have an attraction Supporters of globalization
to transfer low value would claim otherwise. If
jobs to developing the home consumers
countries as trade pay less then he/she will
barriers have been have more money to
removed. It will simply be spend on other goods and
foolish to keep low cost services and this has the
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jobs at home when it is effect of boosting the

cheaper to produce in domestic economy.
China, India, Honduras for
that matter. Such transfer
in production overseas will
create unemployment at
home
Labour policies and the environment.
CRITICS SUPPORTER
MNCs will have incentive Critics would argue that as
to move the production to the country progresses
pollution haven the host government is
countries where lax likely to impose
regulations on stricter regulations on
pollution and labour pollutions and protect
laws will reduce their cost the environment. Take
of operation and add more the e.g. of China. Now
to their profits the government has waken
up to the fact that their
cities are polluted and
thus have taken measures
to curb pollution and
protect their workers from
unscrupulous and
exploitionist MNCs.
Shifts in economic power
CRTICS SUPPORTER
Governments of countries Supporter would say that
will lose their power to this is not true as
manage, in other words policies are introduced
governments will lose to promote the
their sovereignty to collective interest of
supranational member countries and will
organizations such as aid their development
WTO, IMF, European rather than retard it.
commission in the case of
the EU.
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Wealth distribution
Critics Supporter
Globalisation enrich the Supporter would say that
pockets of countries the inequality in income
which have strong is the creation of
global brands and that domestic governments
the income equality who are NOT able to
between the haves and curb population
have nots will widen growth, corruption and
usually to the detriment of poor economic
developing countries who management. For
are usually devoid of example some totalitarian
global brands governments may pursue
their own self interest
rather than the interest of
the people. And also
economic growth in the
developing countries is due
to loan debt rather than
productivity growth.
These are not the faults
of globalization
1.5 Does Friedman’s View However, Friedman may not

Distance Friedman (2007) believes provide the only valid
Still globalization is argument for defining
Matter? accelerating and is globalization. Although to
flattening the world so hyperglobalists
that every nation will globalization literally
eventually be part of means the free co-
the global marketplace operation and
and production process. connection with nations
Dicken (2007) calls this a all over the world, to
‘hyper people like Ghemawat
globalist view’. (2001) and Dicken
(2007), flattening is a
gross overstatement and
Friedman has a
creates a general
technological stance on
misconception about the
globalization believing that
extent of globalization's
technology has a
reach. In his influential
significant part to play
article Distance Still
flattening the world. The
Matters , Ghemawat
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dependence on the argues that companies in

internet and the their pursuit of the
WWW enables distance to benefits from globalization,
be reduced, call centres to consistently
be created, co-ordination ‘overestimate the
of outsourcing is made attractiveness of
possible with the use of
fast data transmission,
foreign markets .
Ghemawat argues that the
conferences between two
true amount of trade and
of more overseas
investment between
operations is made possible
countries is influenced
with the help of video
largely by geographical
conferencing. So the
and cultural
world has become flatter
differences. He cites
with inter-connected
that countries 5,000 miles
global operations.
apart only perform 20
percent of the trade they
Friedman argues that ten
would otherwise do if they
flatteners have shaped
were 1,000 miles
globalization and have
apart, and furthermore
caused increased
trade is ten times
homogeneity in the world.
more likely to take
These include (see
place if a country was
separate article ) :
a former colony of
1 the fall of the Berlin
another – which,
Wall representing
economic liberalization, Ghemawat argues ,
2 the development of significantly lowers the
internet protocols, cultural barriers to trade.
3 workflow and open These figures taken
source software, together explain a key
4 open source software point in Ghemawat’s
and uploading argument, which is
5 & 6 the increased use of that ‘distance still
outsourcing and offshoring, matters and companies
7 the development of must explicitly and
global supply chains, thoroughly account for it
8 the increased use of when they make decisions
specialized firms to carry about global expansion’.
out internal functions, Arguing against Friedman’s
9 the development of flattening argument,
search engines, Ghemawat elaborates
10 and latterly (recent) of that global
wireless, digital, mobile, communications and
personal, and virtual technologies have
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technologies. been argued to be

‘shrinking the world,
Personal technology running it into a small
relationship is and relatively
gaining momentum, where homogenous place. But
people not content with when it comes to
established information business, that’s not only an
sharing bodies, take incorrect assumption
matters into their own but also a dangerous
hands with blogs, review one’.
sites, and establishing The cultural difference
their own media channels. between countries
Everyone essentially is still wide and complex,
becomes in control and although outsourcing
of their own personal and foreign direct
networking and investment have recently
spread of influence. grown between nations, it
is evident, as we shall see
Video in chapter 3, that cultural
differences still prove
V 3 Thomas Friedman – challenging. In support of
The World is FLAT Ghemawat’s statement,
Dicken (2007) argues that
V 4 Thomas Friedman quantitative and
on globalisation aggregative evidence
suggests that the world
economy was ‘more open
and more integrated in the
half century prior to the
First World War, than it is
today’. Ghemawat also
supports this empirical
based analysis stating that
cultural differences in
religious beliefs,
language, social norms,
and behaviours have a
huge impact in the risk
involved in trading and
the likelihood of
succeeding.
Therefore, according to
these theorists,
globalization cannot be
characterized as
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flattening the world. As

Dicken puts it:
‘there are undoubtedly
globalizing forces at
work, but we do not
have a
fully globalized world’ .
Dicken explains that part
of the problem with
defining globalization is
understanding that
aggregative and
quantitative analysis
though valid, are not the
only story we should take
on board when thinking
about the world economy
today. The economy today
he goes on to suggest,
constitutes a deep and
complex integration that
cannot be captured in the
statistics of trade and
foreign direct investment
(FDI). Instead
globalization is:
‘a supercomplex series
of multicentric,
multiscalar,
multitemporal,
multiform and
multicausal processes’.
This explanation, in
contrast to Friedman’s
linear model of
technological progress,
is more dynamic and
circulatory in design. To
summarize, it would seem
that globalization
includes
fluctuating levels of
trade and FDI,
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economic growth of
emerging markets,
growing Transnational
Corporations (TNCs),
outsourcing and labour
force migration, as
well as technological
innovations that have
facilitated these
movements.
In his article Distance Still

Matters, Ghemawat
complements this view by
suggesting that companies
often overestimate the
ease with which their
business can move abroad.
The cultural,
administrative, and
geographical distance
between nations
presents a fundamental
challenge to firms
facing the
globalization of the
world economy today.
Ghemawat uses the
example of Rupert
Murdoch’s venture in Asia
with Star Television
network, which assumed
that the Asian audiences
would be enthusiastic
about English language
programmes and films.
Furthermore, Murdoch’s
underestimating of the
administrative differences
between Asia and the USA
led him into political
calamity as he claimed live
on television that freedom
to watch what one
wanted was a threat to
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Asian ‘totalitarian regimes

everywhere’. This led to
the blocking of Star TV
from Chinese television,
which is a huge market for
Murdoch. Coca-Cola
also had problems in the
Peruvian market
when they attempted to
replace Inca Kola,
the national beverage, with
their own US branded Cola.
The Peruvian people held
mass demonstrations
against Coco-Cola
until their Inca Cola was
returned to the shelves.
Being sensitive to national
differences is not just a
consideration; in
international business
it may well be an
imperative to survival
Video
V Ghemawat 5, 6 & 7
Study Guide
• Describe the implications of globalisation for companies

operating internationally
1.6 What 1 In order to become successful it is obvious that

does companies should work with forces for globalisation
globalisation and improve their global performance. The following are
mean for ways by which companies should work with such forces
companies?
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1.1 Low barriers to trade and investment
Now is an allure to locate their operations in other countries

rather than be dependent on their own domestic market. Low
trade and investment barriers also mean that firms can locate
production facilities in optimal location. Take the e.g. of OSIM
and BreadTalk who have expanded regionally. These create
multiple markets having interdependency between countries for
goods and services.
1.2 Technological change
Advances in communication, information processing and

transportation have helped companies to be become global even
smaller companies. The advent of microprocessor brought about
high power, low cost computing that has accelerated the
process of globalisation. Girls can order their trendy clothes by
simply clicking on the website. The order will be transmitted in
real time and whichever supplier is nearer to the girl’s home
country she will be delivered her order within a few days of the
order. Further she will be given an order number which can
help her tracked down her order. A call centre can be
maintained in inexpensive India or Philippines. Oh Yes! My
friends the internet has enabled small and big firms to become
global players. Also the internet and WWW has facilitated the
control and co-ordination of globally dispersed value chain
activities ( overseas operations ) making the firm a truly global
company.
1.3 Transportation improvements
Over the years the logistics of transportation have significantly

improved making the transportation of goods seamlessness.
Containerisation and development of super freighters
has helped in the movement of trade. Refreighted
containers has enabled the transportation of perishable items
like diary products and meat and fish. Hence the time taken to
transport goods from one part of the world to the next has
significantly been reduced and with the use of containers the
cost too has fallen drastically.
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Note: There is evidence that there are huge global shifts in the ways in which
we do business, and overall the strongest companies are international and are
also strategically sensitive to localising their products or service when operating
indifferent markets. For example Google search engine found this to be a
winning combination in their combination in their expansion into China. Here
Goolge pursued a local strategy for their Chinese market using a Chinese name
for their search engine and customising their web page to fit the tastes of
Chinese internet users who tend to spend longer on a given page and read the
left hand side of the screen first. However later Google ran into subsequent
problems with the Chinese government on a number of issues.
1.7 What Challenges does Globalisation present to International

Business
Challenges • protectionism – Trump and the regional blocs pose

faced by barriers to entry for exporting firms
International
Business • regional barriers – an inward looking trading blocs
when going poses great threat to global trade e.g. Mercusor
global
• heightened competition from diverse countries
and industries – opening of markets creates ferocious
competition especially from globally establilshed brands
like McDonald, Nike and Microsoft
Examiner’s Report - 2014
challenges might include protectionism and regional

barriers, heightened competition from diverse countries
and industries – just two examples candidates could
draw on.
A discussion of using globalisation to corporate
advantage would include factors like technological
advances to promote international trade, lower barriers
to trade and investment, and transportation
improvements that mean easier global business.
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1.8
Advantages of • Greater employment opportunities for people.
globalisation • Availability of greater variety of goods and services
to the consumers.
• More competitive price to the competitors.
• Ability of companies to achieve lower costs.
• Access to bigger markets to business firms.
• Faster and wider spread of new technologies across
the world.
• The development of Third World nations
• The democratizing effect of communications
• Equalization of income distribution among nations
Disadvantages • Unrestricted globalization can hamper the

of development of less developed countries.
globalisation • Smaller firms may lack the resources to compete
internationally and therefore may be forced out of
business.
• Countries become increasingly dependent on other
countries for meeting their needs for goods and
services. This can become a major disadvantage in
situations like war.
• Adverse economic condition in one country can
escalate to other countries and may even adopt global
proportion.
• Globalization may also lead to faster spread of
infectious disease, for people animals and plants.
Such infection may be carried through, people or
goods.
• It has increased inequality and environmental
degradation
• In many poorer nations, globalization is the result of
• foreign businesses
utilizing workers in a country to take advantage of
the lower wage rates.
• Income Inequality
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THE WORLD IS FLAT
The World Is Flat: A Brief History of the Twenty-First Century

is an international bestselling book by Thomas L. Friedman that
analyzes globalization, primarily in the early 21st century. The title is a
metaphor for viewing the world as a level playing field in terms of
commerce, where all competitors have an equal opportunity. As the first
edition cover illustration indicates, the title also alludes to the
perceptual shift required for countries, companies, and individuals to
remain competitive in a global market where historical and
geographical divisions are becoming increasingly irrelevant.
Friedman himself is a strong advocate of these changes, calling himself a
"free-trader" and a "compassionate flatist", and he criticizes
societies that resist these changes. He emphasizes the inevitability of a
rapid pace of change and the extent to which emerging abilities of
individuals and developing countries are creating many pressures on
businesses and individuals in the United States; he has special advice for
Americans and for the developing world (but says almost nothing about
Europe). Friedman's is a popular work based on much personal research,
travel, conversation, and reflection. In his characteristic style, he
combines in The World Is Flat conceptual analysis accessible to a broad
public with personal anecdotes and opinions. The book was first released in
2005, was later released as an "updated and expanded" edition in 2006,
and yet again released with additional updates in 2007 as "further
updated and expanded: Release 3.0." The title was derived from a
statement by Nandan Nilekani, the former CEO of Infosys. The World
is Flat won the inaugural Financial Times and Goldman Sachs
Business Book of the Year Award in 2005.
Summary
In his book, The World is Flat, Friedman recounts a journey to Bangalore,
India, when he realized globalization has changed core economic concepts.
In his opinion, this flattening is a product of a convergence of personal
computer with fiber-optic micro cable with the rise of work flow
software. He termed this period as Globalization 3.0,
differentiating this period from the previous Globalization 1.0
(in which countries and governments were the main
protagonists) and the Globalization 2.0 (in which multinational
companies led the way in driving global integration).
Friedman recounts many examples of companies based in India and China
that, by providing labor from typists and call center operators to
accountants and computer programmers, have become integral parts of
complex global supply chains for companies such as Dell, AOL, and
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Microsoft. Friedman's Dell Theory of Conflict Prevention is discussed in

the book's penultimate chapter.
Friedman repeatedly uses lists as an organizational device to communicate
key concepts, usually numbered, and often with a provocative label. Two
example lists are the ten forces that flattened the world, and three
points of convergence.
Ten flatteners
Friedman defines ten "flatteners" that he sees as leveling the
global playing field:
• #1: Collapse of the Berlin Wall – 11/9/89: Friedman called the
flattener, "When the walls came down, and the windows
came up." The event not only symbolized the end of the Cold War,
it allowed people from the other side of the wall to join the
economic mainstream. "11/9/89" is a discussion about the Berlin
Wall coming down, the "fall" of communism, and the impact
that Windows powered PCs (personal computers) had on the
ability of individuals to create their own content and connect to one
another. At that point, the basic platform for the revolution to
follow was created: IBM PC, Windows, a standardized
graphical interface for word processing, dial-up modems, a
standardized tool for communication, and a global phone
network.
• #2: Netscape – 8/9/95: Netscape went public at the price of $28.
Netscape and the Web broadened the audience for the
Internet from its roots as a communications medium used primarily
by "early adopters and geeks" to something that made the Internet
accessible to everyone from five-year-olds to ninety-five-year-olds.
The digitization that took place meant that everyday occurrences
such as words, files, films, music, and pictures could be
accessed and manipulated on a computer screen by all people across
the world.
• #3: Workflow software: Friedman's catch-all for the standards and
technologies that allowed work to flow. The ability of machines
to talk to other machines with no humans involved, as
stated by Friedman. Friedman believes these first three forces
have become a "crude foundation of a whole new global
platform for collaboration." There was an emergence of
software protocols (SMTP – simple mail transfer protocol; HTML
– the language that enabled anyone to design and publish
documents that could be transmitted to and read on any computer
anywhere) Standards on Standards. This is what Friedman called the
"Genesis moment of the flat world." The net result "is that
people can work with other people on more stuff than ever before."
This created a global platform for multiple forms of collaboration.
M.Nageb 27
The next six flatteners sprung from this platform.

• #4: Uploading: Communities uploading and collaborating on online
projects. Examples include open source software, blogs, and
Wikipedia. Friedman considers the phenomenon "the most
disruptive force of all."
• #5: Outsourcing: Friedman argues that outsourcing has allowed
companies to split service and manufacturing activities into
components which can be subcontracted and performed in the
most efficient, cost-effective way. This process became easier with
the mass distribution of fiber optic cables during the
introduction of the World Wide Web.
• #6: Offshoring: The internal relocation of a company's
manufacturing or other processes to a foreign land to take
advantage of less costly operations there. China's entrance in the
WTO (World Trade Organization) allowed for greater competition in
the playing field. Now countries such as Malaysia, Mexico, Brazil
must compete against China and each other to have businesses
offshore to them.
• #7: Supply-chaining: Friedman compares the modern retail supply
chain to a river, and points to Wal-Mart as the best example of a
company using technology to streamline item sales,
distribution, and shipping.
• #8: Insourcing: Friedman uses UPS as a prime example for insourcing,
in which the company's employees perform services –
beyond shipping – for another company. For example, UPS
repairs Toshiba computers on behalf of Toshiba. The work is done at
the UPS hub, by UPS employees.
• #9: Informing: Google and other search engines are the prime
example. "Never before in the history of the planet have
so many people – on their own – had the ability to find
so much information about so many things and about so
many other people," writes Friedman. The growth of search
engines is tremendous; for example take Google, in which Friedman
states that it is "now processing roughly one billion searches per
day, up from 150 million just three years ago."
• #10: "The Steroids": Wireless, Voice over Internet, and file
sharing. Personal digital devices like mobile phones, iPods,
personal digital assistants, instant messaging, and voice
over Internet Protocol (VoIP). Digital, Mobile, Personal
and Virtual – all analog content and processes (from
entertainment to photography to word processing) can be
digitized and therefore shaped, manipulated and
transmitted; virtual – these processes can be done at high
speed with total ease; mobile – can be done anywhere,
M.Nageb 28
anytime by anyone; and personal – can be done by you.
Proposed remedies
Thomas Friedman believes that to fight the quiet crisis of a flattening
world, the United States work force should keep updating its work
skills. Making the work force more adaptable, Friedman argues, will keep
it more employable. He also suggests that the government makes it easier
to switch jobs by making retirement benefits and health insurance less
dependent on one's employer and by providing insurance that would
partly cover a possible drop in income when changing jobs.
Friedman also believes there should be more inspiration for youth to
be scientists, engineers, and mathematicians due to a decrease in
the percentage of these professionals being American.
Critical reception
The World is Flat received generally positive popular and critical
reception, and some negative criticism. As of November 2013, Amazon.com
showed an average rating of four stars (on a five point scale) with 1,105
reviewers.
The Washington Post called the book an "engrossing tour" and an
"enthralling read". The review closed with, "We've no real idea how the
21st century's history will unfold, but this terrifically stimulating book will
certainly inspire readers to start thinking it all through".
An opposing viewpoint was found in a 2007 Foreign Policy magazine
article, Harvard Business School where Professor Pankaj Ghemawat
argued that 90% of the world's phone calls, Web traffic, and
investments are local, suggesting that Friedman has grossly
exaggerated the significance of the trends he describes: "Despite talk
of a new, wired world where information, ideas, money, and
people can move around the planet faster than ever before,
just a fraction of what we consider globalization actually
exists."Indian development journalist P. Sainath, Rural Affairs Editor for
The Hindu, says "it's not the ‘world’ that is flat, but Thomas Friedman’s
‘brain’ is flat."[
Some critics have pointed out that the book is written from an American
perspective. Friedman's work history has been mostly with The New York
Times, and this may have influenced the way in which the book was
written – some would have preferred a book written in a more "inclusive
voice".
Nobel Prize-winning economist Joseph Stiglitz has been supportive
of Friedman's book. In Making Globalization Work, Stiglitz writes:
Friedman is right that there have been dramatic changes in the
global economy, in the global landscape; in some directions, the
M.Nageb 29
world is much flatter than it has ever been, with those in

various parts of the world being more connected than they
have ever been, but the world is not flat. Not only is the
world not flat: in many ways it has been getting less flat.
Richard Florida expresses similar views in his 2005 Atlantic article "The
World is Spiky".
John Gray, formerly a School Professor of European Thought at the
London School of Economics and Political Science, wrote another
critical review of Friedman’s book called "The World is Round".
In it, Gray confirms Friedman’s assertion that globalization is
making the world more interconnected, and in some parts,
richer, but disputes the notion that globalization makes the
world more peaceful or free. Gray also declares, “least of all does
it make it flat”.
Geographers on the whole have been particularly critical of Friedman's
writings, views influenced by the large body of work within their field
demonstrating the uneven nature of globalization, the strong
influence place still has on peoples' lives, and the dependent relationships
that have been established between the have and have-not regions in the
current world-system. Geographer Harm de Blij has detailed these
arguments for the general public in Why Geography Matters: Three
Challenges Facing America (2005) and The Power of Place: Geography,
Destiny, and Globalization's Rough Landscape (2008)
Video
V 3 The World is Flat
M.Nageb 30
Sample Questions
1a What is globalisation?
1b For an individual country, what are the likely advantages

and drawbacks that come with globalisation?
1c How can an international business use globalisation trends

to its advantage? What problems can globalisation trends
create for an international business? Work with these
arguments to establish competitive advantage
internationally?
Tutorial Questions
1 “ The world is flat “ ( Thomas Friendman, 2003 ). Is it?

a. Define globalisation and assess the trends towards and
against globalisation ( 10 marks )
b. Assess the role of national government intervention and

multilateral organisations like the IMF and World Bank in
the globalisation process. ( 10 marks )
c. Use examples to illustrate your points ( 5 marks )
UOL Exam Question 1 – 2014
a. Define globalisation and describe the major trends in

globalisation over the last twenty years (5 marks)
b. For an individual country what are the main business and

economic advantages and disadvantages that come with
globalisation? Use illustrative countries to support your
argument. (10 marks)
c. What challenges does globalisation present to an

international business? How can an international business use
globalisation trends to its advantage? (10 marks)
M.Nageb 31
Examiner’s reports
Reading for this question
Relevant material and references for Question 1 are in pp.14–21 of the

subject guide.
Approaching the question
For (a), a definition as well as elaboration on the basic definition, and a

discussion of trends are needed. Indicative trends include reduced
barriers to trade and capital investment, increased foreign direct
investment (FDI), growing affluence in many countries creating more
attractive markets globally, and increasing manufacturing and services
industries in emerging developing countries. Mention of Friedman’s ten
flatteners will gain some marks, depending on detail.
For (b), candidates are expected to discuss advantages, such as more

open foreign markets for exporting, and national comparative advantages
that can be leveraged; and disadvantages such as increasing economic
instability and dynamism due to connected world, and loss of economic
sovereignty to regional blocs. A couple of marks would be given for
country examples.
For (c), challenges might include protectionism and regional barriers,

heightened competition from diverse countries and industries – just two
examples candidates could draw on. A discussion of using globalisation to
corporate advantage would include factors like technological advances to
promote international trade, lower barriers to trade and investment, and
transportation improvements that mean easier global business.
STUDENTS’ ESSAY
What is globalization?
Globalisation is defined as a shift towards a more integrated and

interdependent world economy. There are basically two dimensions of
globalization namely globalization of markets and globalization of
production. The globalization of markets are the merging of historically
distinct markets into one global market and globalization of production is
the sourcing of goods and services all over the world wherever it is
cheaper. It is An expansion of trade in goods and services between
M.Nageb 32
countries and an increase in transfers of financial capital across national

boundaries including foreign direct investment (FDI) by multi-national
companies and the investments by sovereign wealth funds.
To begin with, globalization has contributed to the world’s economies in
many beneficial ways. The advances in science and technology have allowed
businesses to easily cross over territorial boundary lines. Consequently,
companies tend to become more productive and competitive thereby raising
the quality of goods, services and the world’s living standard.
Secondly, several companies from the more developed countries have
already ventured to establish foreign operations or branches to take
advantage of the low cost of labor in the poorer countries. This kind of
business activity will provide more influx of cash or investment funds into
the less developed countries.
Over the past twenty years, we’ve witnessed different trends in
globalization. Firstly, the significant change in world output and trade in
the 1980s contributed by the triad nations namely North America, Western
Europe and Japan. However by 2020, developing countries would likely
account for 60% of the global economy(the World Bank). Furthermore,
since the 1980s, the USA accounted for 66% of the world foreign
investment however, in today’s time, investment by developing nation is
rising and the investment of the USA firms are falling. FDI has also
increase due to the activities of Sovereign Wealth Funds(Temasek Holdings
& Government Investment Coporation of Singapore).
If technological advancement and IT development were assumed as the
technological driving force for economic globalization, then the market-
oriented reform carried out throughout the world should be regarded as
the institutional driving force forthis trend. Under the framework of GATT
and WTO, many countries have gradually cut down their tariff and non-
tariff barriers, more and more countries open up their current accounts
and capital accounts. All of these have greatly stimulated the
development of trade and investment. Moreover the transition of the
former centralized planned economies to market economies has made it
truly possible to for the world’s economies to integrate into a whole.
In addition, Multinational corporations (MNCs) have become the main
carriers of economic globalization. They are globally organizing production
and allocating resources according to the principle of profit maximization.
In 1996, there were altogether only more than 44,000 MNCs in the whole
world, which had 280,000 overseas subsidiaries and branch offices. In
1997, the volume of the trade of only the top 100 MNCs already came up
to 1/3 of the world’s total and that between their parent companies and
their subsidiaries took up another 1/3. In the US$ 3,000 billion balance of
foreign direct investment at the end of 1996, MNCs owned over 80%.
Furthermore, about 70% of international technological transfers were
conducted among MNCs. Multinational companies such as International
Companies(UOL), Multi Domestic Companies(Breadtalk), Global
M.Nageb 33
Companies(SIA), Transnational Companies(Dell). These companies are taking

advantage of the opening up of markets and the deepening of
globalization.
Furthermore, since the abolishment of the Russian Communism(collapse of
the Soviet Union) created business opportunities in the former communist
block(China, Eastern Europe, Cuba, Vietnam, Myanmar) resulted a change in
world order. The improve and spread of communication and transport
technology such as the internet, www, google search engine, voip, use of
webcast/podcast, html, skyping. All these facilitates easier and efficient
communication amongst companies and enhances coordination and
control(toyata, banks) communicate widely and daily. The homogenisation
of culture dissolves the differences amongst distinctive national cultures.
Americanisation is the spread of western civilization into Asian culture.
Convergence of behaviour, MTV, HBO, Harry Potter, Levis, Coca Cola,
MacDonald, Apple, Samsung. All the above factors are self reinforcing and
contribute to a deeper integrated, coordinated, globalised world.
What challenges does globalization present to an international

business?
One of the main challenges faced by an international business would be

the differences in cultures as different countries have different cultures
in their societies. Gift giving is acceptable in Japan however it may be
considered as corruption in the USA. In addition, Germans value time and
they are very punctual and view time frames set for meeting seriously
whereas in Africa, meeting times are viewed more as a guideline to follow
rather than to abide by it. Futhermore, in China, they view having strong
relationships between one another as a key to having a successful business
deal. However, the importance of building strong relationships in business is
not a novel concept for western businesses. While in the other parts of
the world, you may be able broker a deal just through formal business
meetings; in China it is necessary to spend time getting to know your
Chinese counterparts outside the boardroom during tea sessions and dinner
banquets.
Another challenge faced is the differences in language and religious

beliefs. Different countries converse in different languages and if these
languages were directly translated although meant in a different context,
would be viewed as a form of insult in their own language. One frequently
cited example of how variations within a single language can affect
business occurred when a U.S. deodorant manufacturer sent a Spanish
translation of its slogan to their Mexican operations. The slogan read "if
you use our deodorant, you won't be embarrassed." The translation,
however, which the Mexican-based English-speaking employees saw no
reason to avoid, used the term "embarazada" to mean "embarrassed." This
M.Nageb 34
provided much amusement to the Mexican market, as "embarazada" means

"pregnant" in Mexican Spanish. Yeo Hiap Seng is a drink in Singapore
however Yeo in Thai language meant horse urine. Chanel 4 couldn’t be sold
in Japan because 4 in Japanese means death, as such it was changed to
Chanel 5. In addition, Ronald MacDonald mascot white powdered face
represents ghost in Japan and therefore parents objected it which
resulted in rejection. Multinational companies must therefore respect
religious belief in which the countries it is operating in. MacDonald in India
doesn’t serve beef as cows as cows in India are viewed as sacred and also
pork in Malaysia is also not widely accepted as Muslims make up the
majority of the population. Hinduism as a religion emphasizes on spiritual
attitude rather than individualism achievement thus there’s a lack of
entrepreneur behavior.
Lastly, managerial issues is another one of the challenges faced by an
international business. For multinational companies when managing in a
different country may have to adopt different style of management. An
example to name would be in India, it focuses on masculinity and therefore
the management style is more directional but in Norway, there is high
feminity and therefore management style is more participative and focuses
more on teamwork rather than individualism.
In conclusion, an international business have to do its research and have a
good understanding of the country it is going to operate in before deciding
to enter its market. It have to find out if its line of business would be
suitable to operate in and if it is able to adapt to the differences in the
foreign country.
Student’s Essay
Sample Examination Questions
1. Define globalisation and describe the major trends in

globalisation over the last twenty years.
Globalisation is a shift towards a more integrated and

interdependent world economy. According to Marshall, globalisation has
been described as “the concrete structuration of the world as a whole;
that is a growing awareness at a global level that the world is
continuously constructed environment”. Globalisation has two
dimensions; globalisation of production, where firms can transfer
production to wherever it is cheaper to produce and, globalisation of
market, where now world is one big market and consumers have the
same preferences.
Globalisation occurs because of these major trends. One of the
trends is, first, change in world output and trade. On the 1960s Triad
M.Nageb 35
(US, Japan, Western Europe) countries dominated world economy.

However, their dominance is being challenged by growth in the
developing countries today. By 2020, the forecast of World Bank is
that the developing countries would represent 60% of world trade.
This is mainly due to potential growth of the developing countries.
Second, in terms of foreign direct investment (FDI), the efforts
of World Trade Organisation (WTO) encourage the governments to
lower the barriers towards FDI to encourage FDI for the development
of economic growth. For example, America is the lead nation with the
highest total FDI in 2011; the outflow from America was $400billion
while the inflow was $300billion.
Third, because of technological advancement, small firms can
become global through Internet, e.g. eBay, Zalora, Qoo10, Alibaba, etc.
The advancement causing lower cost of transportation for container
shipping and airfreight. Technology brings financial market to one big
global market, e.g. Black Monday in 1987 that loses almost all market
around the globe.
Fourth, changes in the world order. Collapse of communism in the
former USSR brought the birth of Common Wealth Independent
States (CIS). Communist countries such as China, Vietnam, Cuba, and
Myanmar all are opening up their market and this contributed to
further globalisation of markets.
Fifth, in term of World Trade Organisation, WTO has various
rounds of talks to lower trade barriers such as import tariffs and
other non-tariff measures to facilitate greater trade as well as
foreign direct investment. For example, non-discriminating principle,
when one country lower tariffs to another country it must do so for
other members, is promoting global trade.
Sixth, types of MNE also contributed to globalisation. For instance,
international companies (UOL), multi-domestic companies (Popular Book
Store and Bread Talk), global companies (SIA, McDonalds), and trans-
national companies (banks, consumer electronics, and cars) all such
international businesses contributed to greater trade.
Lastly, globalisation causing merging of world’s culture, it is
westernisation of Asia. Asian mainstream television programs have
been influenced and conceptualized based on American television
programs, e.g. American Idol, X-Factor, True Blood, etc. As a result
that is convergence in behaviour of people especially teenagers which
tend to live parallel lives across borders.
In conclusion, globalisation is a shift of world economy to be more
integrated and interdependent. There are 7 major trends in
M.Nageb 36
globalisation, which are changes in the world output and trade, foreign
direct investment (FDI), technological advancement, changes in world
order, World Trade Organisation (WTO), types of MNEs, and
globalisation of culture.
2. For an individual country what are the main business and economic
advantages and disadvantages that come with globalisation? Use
illustrative countries to support your arguments.
Globalisation brings many advantages and disadvantages towards an

individual country. Below are the advantages that a country can get
from globalisation.
Globalisation attracts to greater trade for other countries. For
example, China and Europe, once the Multi Fibre Agreement expired at
1 January 2005, China increased their textile exports by 500%.
However, not only did China make profit from it, but also Bangladesh.
In fact, Bangladesh’s exports increased in value by about $500 million
in 2006. Moreover, because of globalisation, UK recently tied up a
multibillion dollar with China, which includes nuclear reactors
(Landmark Agreement). Another example, Singapore and China recently
have direct currency trade, which can facilitate international trade.
Globalisation brings its advantage by creating employment globally.
Between 1991 and 2001, US – based multinationals created close to 3
million jobs overseas and they also created 1-5 million jobs inside US –
an increase of about 30% in payrolls. Other example is the integrated
resort in Singapore, which compromises Marina Bay Sands, Universal
Studio, and other services providing firms created 10,000 jobs.
Globalisation also allows country do what they can do best
(comparative advantages). For instance, since Sri Lanka has
comparative advantage on tea, therefore they export tea, while
Thailand exports rice and Columbia exports coffee.
Another advantage is developed countries can import low skilled
cheap labour. Singapore, for example, hires workers from Bangladesh,
India, Sri Lanka, China, and including foreign maid from Philippines,
Indonesia, Myanmar, and Sri Lanka.
Despite of its many advantages, globalisation also brings

disadvantages for an individual country, such as environmental
problems. Since a company may want to establish factories in other
countries as their environmental laws are not as strict as at their home
(pollution haven countries, such as Vietnam, India, and Laos).
Therefore, many environmental problems will arise, for example BP
M.Nageb 37
Gulf Oil Spill in Mexico that caused devastating impacts on marine life
and Ok Tedi River Mining Ltd. that has been dumping about 90 million
tons of waste per year into the river in Papua New Guinea.
Other disadvantage of globalisation is greater competition in local
markets and domestic firm may not be able to withstand the ferocious
onslaught of multinational companies. For example, SME fashion
industries in Singapore may not be able to compete with MNEs, such as
Forever 21, H&M, Uniqlo, Mango, Zara, etc.
Globalisation brings contagion effect to world. In 2008-2009,
economic crises in US affected global financial market due to
interdependent and interconnectedness, which brought about the
collapse of global financial system.
3. What challenges does globalisation present to an international

business? How can an international business use globalisation
trends to its advantages?
There are many challenges arising due to globalisation present to an

international business. One of them is issue arising from adapting to
the host country’s culture. For example, McDonald faced this kind of
issues when they set up their business in India, because Indian
consumers do not allow pork and beef to be served. Another example is
IKEA in Saudi Arabia; due to Saudi Arabian’s culture there is
censorship on pictures of woman in IKEA’s catalogues.
Institutional framework in other counties also can be challenges
for an international business because they have to comply with all the
rules and regulations that are applied in that country. For example,
Chinese government censored Google as it promoted freedom of
communication and Google threatened to withdraw from China.
Another challenge for an international business is cultural
imperialism – spreading of own culture to other countries – e.g. because
of Americanisation, France opposed the presence of Disneyland and
also banned the use of ketchup in primary school meals.
However, an international business can also get advantages from
these globalisation trends, which are increase in FDI, removal of trade
barriers, homogenisation of culture, and the availability of modes of
entry to do business. Increase in FDI, which happens because there
are fewer restrictions on FDI by other countries. This resulting
multinational companies to freely invest in other countries. For
example, in telecommunication, banking and finance due to the effort
of WTO.
M.Nageb 38
Due to the removal of trade barriers – WTO rules and regulations

on non-discrimination – every country can export to each other. For
example, the expired Multi Fibre Agreement let China increases its
export of textile to Europe by 500%.
Another advantage is since today world is approaching
homogeneity, which leads teenagers to live parallel lives across
borders. Teenagers around the world have the same preferences that
can be an advantage for this companies, such as McDonald, Coca-Cola,
MTV, HBO, Levi’s, Samsung, Apple, etc.
The availability of modes of entry to do business making
multinational companies is able to venture abroad as various options are
available to them. According to Ronald Coase, if the transaction cost is
low, companies can export using third party entry, which are licensing,
franchising, or contract manufacture. However, if the transaction cost
is high, FDI should be internalised by acquisition, joint venture, or
Greenfield investment.
In conclusion, challenges that an international business face when
they set up business in other countries can be due to culture,
institutional framework, and cultural imperialism. Despite that, there
are also many advantages that an international business get from
globalisation trends, which are companies can freely invest in other
countries, countries can export to each others, homogenisation of
culture, and various modes of entry to manage business in other
countries.
STUDENTS’ ESSAY
1. What is globalization?
• A shift towards a more interconnected and interdependent
world economy.
• Two dimensions
1. Globalization of markets- merging of historically distinct
markets into one global market.
2. Globalization of production- sourcing of goods and services
from all over the world where ever it is cheaper.
• Represented by cross border trade and investment.
• Dissolves the differences among distinctive national cultures
into one global distinct identity.
• 1980s the word globalization was classified as a jargon,
nowadays it has become a cliché.
M.Nageb 39
2. For an individual country, what are the likely advantages

and drawbacks that come with globalisation?
The advantages and drawbacks of globalisation for Singapore.
Advantages Drawbacks
Can import low skill workers for There is unemployment for low skill
industries. workers because companies transfer
Ex. Construction workers, Domestic production to cheaper labor economy
helpers, Counter service. countries such as call centers,
production of tires, kitchen utensils,
to countries such as India, China,
Vietnam.
Create more job opportunities for Greater competition due to inroads

the community. made by multinational companies in
Eg. The integrated resort in Singapore arising from government’s
Singapore which attracted Las deregulation of industries.
Vegas Sands for casino, Universal Ex. Aviation, banking and finance and
Studios for entertainment, Grand telecommunication.
prix formula 1, created ten
thousand jobs.
Singapore can specialize in its It can destroy the environment.

comparative advantage and seize on Ex. Heavy industries are located in
the global market. Tuas including oil refineries and the
Ex. SIA, keppel, Singtel. air quality is poor for residents
staying in those areas.
An increase in demand for skilled Loss of cultural identity due to

workers causes subsequent demand usage of foreign products that
in good colleges, which can be found change lifestyles.
in Singapore. Eg. Smartphones
Eg. SIM, etc
Businesses coming in and out of Singapore top brass get a lot from
Singapore cause a rise in GDP. foreign business, which means the
Eg. Most stores in Orchard rd income gap between rich and poor
increases.
M.Nageb 40
3. How can an international business use globalisation trends to

its advantage? What problems can globalisation trends create
for an international business? Work with these arguments to
establish competitive advantage internationally?
Using Apple as example
Advantages Problems
It can exploit its unique operating Apple has to abide with formal
system and take advantage of the institutions(legal requirement) of the
global market to increase its global country as well as informal
sales. institutions(culture).
eg. iphone, macbook, ipad, ipod,
itunes.
Outsourcing of production to Quality and social issues.

cheaper labor economies. Eg harsh working conditions in
eg Foxconn in China. Foxconn as a result ten employees
committed suicide and gave Apple a
bad name globally, parts and
components can also be of sub
standards and apple has to monitor
quality.
Sharing of knowledge world wide Problem of control and coordination

Apple subsidiaries and affiliates and Apple has to coordinate its
able to share knowledge world global network which is not an easy
wide. method to avoid over or
Eg iphone games from UK, operating underproduction.
system from US, parts and
components world wide.
Materials can be bought in bulk and Global economic recession, apple is

cheaper from nearby countries not immune to this.
where production is happening. Reason for American financial crisis
Eg. China and nearby countries as well as the Euro financial crisis
affected its global sales.
iOS specifics help Apple permeate Apple’s product is notoriously

into others cultures. expensive, which can impede sales in
Eg. App makers in Europe make 3rd world countries.
relevant apps for people in Europe Eg. Apple sales in India and other
Asian countries
M.Nageb 41
Work with these arguments to establish competitive advantage

internationally?
Apple should use the resource based model and produce products that
differentiate its product globally. eg the recent launch of iphone6, iwatch.
May 2015 Zone A Q4
The phenomenon of globalisation has given rise to major

benefits and costs for countries and companies in the
contemporary world economy. Discuss this statement by
considering the following questions:
a What are the major trends underlying contemporary

globalisation? 8 marks
b What are the major issues in the debate about the pros
and cons of globalisation in the twenty-first century
17 marks
Examiner’s report

Relevant material and references are in pp.14-21 of the subject guide. See
also Willcocks (2013) Chapter 1.

For a), a definition of globalisation was needed (something like ‘the
shift towards a more integrated and interdependent world economy’),
with elaborations on the basic definition and a discussion of trends, for
example, reduced barriers to trade, and capital investment, increased FDI,
growing affluence in many countries creating more attractive markets
globally. The examiners expected candidates to make around eight points.
Mention of Friedman’s ten flatteners gains some marks, depending on
detail.
Part b) can be approached in many ways. On pros and cons, these may
well be different for a company as opposed to a nation or an individual.
A candidate may well choose one or two of these stakeholders, in which
case we looked for a richer answer on the stakeholder(s) chosen. However,
the examiners did expect country advantages and disadvantages, and also
company advantages and disadvantages to be addressed.
M.Nageb 42
Advantages for a country got up to 4 marks (e.g more inward investment).
Disadvantages for a country got up to 3 marks (e.g. increasing economic

instability and dynamism due to connected world). Advantages for an
international business using globalisation to its advantage got 4 marks
(e.g. technological advances promote international trade; lower barriers
to trade and investment). Challenges for an international business got 3
marks (e.g globalisation promotes protectionism and regional barriers as
a reaction; heightened competition from diverse countries and industries).
The examiners allowed 3 marks for illustrative examples.
Student Essay
The phenomenon of globalization has given rise to major

benefits and costs for countries in the contemporary world
economy. Discuss this statement by considering the following
questions:
a. What are the major trends underlying contemporary
globalization? (8 marks)
b. What are the major issues in the debate about the pros and
cons of globalization in the twenty-first century?
(17 marks)
Definition of • Globalization has been described as the concrete

globalization structuration of the world as a whole that is, a
growing awareness at a global level that the world
is a continuously constructed environment.
(Marshall)
• Shifting towards a more integrated and
interdependent world economy
• Globalization can be divided into two terms:
• Globalization of markets: the world has become one
big global market place/ global village with a global
consumer who demands global product and a global
brand eg. Apple, Starbucks
• globalization of production: multinational companies
are now able to transfer their production across
borders in order to get lower costs of production to
improve their global competitiveness
• The world has become flat and each nation is part of
a bigger marketplace. There are ten flatteners
contributing to this phenomenon. (Friedman)
• to different people, the word globalization means
different things. About two decades ago, the word
was a jargon, but nowadays the word is a cliché
M.Nageb 43
Trends of • decline of barriers to trade and investment – the

globalization work of WTO in reducing barriers has contributed
to multilateralism where countries can trade with
one another and engage in foreign direct
investment in each other’s country
• Technological change – Internet is a tool for
companies to control their worldwide branches,
apart from coordination; space-shrinking
technologies; the Internet together with WWW
enabled people and firms to communicate with
each other in real time, furthermore, it is now
cheaper to travel to any part of the world eg.
using budget airlines
• globalization of culture – culture has become
homogenized eg Teenagers live parallel lives across
borders, demanding the same type of products and
brands – Apple, Coca Cola, McDonald’s, Levis, Nike,
MTV, HBO
Trends as in the Examiner’s Report - 2014
Indicative trends include reduced barriers to trade and

capital investment, increased foreign direct investment
(FDI), growing affluence in many countries creating
more attractive markets globally, and increasing
manufacturing and services industries in emerging
developing countries. Mention of Friedman’s ten
flatteners will gain some marks, depending on detail.
b Major issues in the debate about the pros and cons of

globalization in the twenty-first century
Full Answer
The phenomenon of globalization has given rise to major
benefits and costs for countries in the contemporary world
economy. Discuss this statement by considering the following
questions:
a. What are the major trends underlying contemporary
globalization? (8 marks)
b. What are the major issues in the debate about the pros
and cons of globalization in the twenty-first century?
(17 marks)
M.Nageb 44
Globalization has been described as the “concrete structuration of the

world as a whole that is, a growing awareness at a global level that the
world is a continuously constructed environment.” (Marshall) It is a shift
towards a more integrated and interdependent world economy and can be
categorized into the globalization of markets and production. The
globalization of markets means that the world has become a global market
place where the global customer demands a global product with a global
brand such as Apple and Starbucks. The globalization of production refers
to the ability of multinational companies (MNCs) being able to transfer
their production across borders in order to get lower costs of production
to improve their global competitiveness.
There are several trends of globalisation, such as the decline of barriers
to trade and investment, technological change and the globalisation of
culture.
The decline of barriers to trade and investment around the world can be
seen through the work of World Trade Organisation (WTO) in reducing
barriers, which has contributed to multilateralism where countries can
trade with one another and engage in foreign direct investment (FDI) in
each other’s country.
Technological change is exemplified through the advancement of
communication and transportation technology. The Internet is used by
companies to coordinate and control their worldwide operations. It is also
a space-shrinking technology which has enabled people and firms to
communicate with each other in real time across wide geographical
boundaries and at a much lower cost than before. The advancement of
transportation technology which was propelled by the system of
containerisation and advanced commercial jet airplanes, has made the
transportation of goods and people cheaper. With the advent of budget
airlines, it is now even cheaper to travel to many parts of the world.
The globalization of culture refers to the phenomenon where culture has
become homogenized. For example, teenagers live parallel lives across
borders, demanding the same type of products and brands such as Apple,
Coca Cola, McDonald’s, Levis, Nike, MTV and HBO.
What are the major issues in the debate about the pros and cons of
globalization in the twenty-first century? (17 marks)
- see notes or class discussion
M.Nageb 45
May 2015 Zone B Q3
‘ The world is flat. ‘ ( Thomas Friendman, 2003 )

Assess the validity of this statement by considering the
following questions:
a What is globalisation and what are its main trends?

6 marks
b How does globalisation help companies looking to

internationlise their markets? 6 marks
c Ghemawat argues that ‘distance still matters’. What

distances ( or differences ) does his CAGE framework
refer to, and why do they matter to business? 8 marks
d How do national governments intervene in markets to

protect themselves from adverse effects of globalisation?
5 marks
Examiner’s report
The material appears in the subject guide, Chapter 1, and Willcocks

(2013) Chapter 1.

For a), some meaning of the term ‘globalisation’ is required in terms of a
more integrated and interdependent global economy, and trends are many
(e.g. reduced barriers to cross border trade and investment especially
FDI; creation of global supply chains). The examiners gave 2 marks for
explaining globalisation and 4 marks for main trends.
In b), we looked for the type of arguments mentioned in the subject

guide, Section 1.5 (pp.20–21) which was also covered in Willcocks (2013)
Section 1.6 (pp.20–21).
For c), we gave 2 marks each for cultural, administrative, geographic and
economic dimensions of Ghemawat’s CAGE framework.
M.Nageb 46
In d), candidates need to understand that this is not about why but
how governments intervene in markets – see Section 1.8 (pp.25–27) in
Willcocks (2013). Instruments include tariffs, subsidies, quotas, VERs,
local content requirements, administrative trade policies and antidumping
policies. We expected candidates to make five points.
Mock 2017
4 Growing interconnections between national economies have

created opportunities and risks for firms and countries in the
world economy. Therefore:
a Explain how globalisation has given rise to the creation of

global supply chain by transnational corporations.(5 marks)
b Discuss why conducting business outside a firm’s home

country gives rise to a liability of outsidership. (8 marks)
c. Discuss the pros and cons of FOUR major criticisms that can
be advanced about the phenomenon of globalisation in the
contemporary world economy (12 marks)
a Take a typical product nowadays - it is not manufactured in its entirety

in one location but rather in many places. The value chain activities that
bring about the final product are globally dispersed. The firm wants to
ensure that its costs are reduced. The firm looks from the design of the
product until the distribution as well as after sales service. The idea is
not to reduce the costs of production but also improve quality by
exploiting locational advantages like in the automobile industry such as low
labour cost and technological advantage, also logistic management
facilitated by containers enable the firm to outsource its production.
Containerisation also enable tracking, security and safety of items being
transported – which contributes to logistic management efficiently. Do
note, globalisation between countries also enable the co-ordination of
globally dispersed value chain activities. Also take note globally supply
chain can be disrupted due to natural calamity like floods in Thailand,
Tsunami in Fukushima. Hence better to have multiple supply chain to
reduce calamity.
b. What is this liability of outsidership?

The Peng and Meyer book page 12 gives you the understanding that this
refers to the inherent disadvantages that foreign firms experience in a
new environment because of their lack of familiarity with certain domestic
features. Domestic firms, on the other hand, are at an advantage because
M.Nageb 47
they are more familiar with certain domestic conditions. Although there is
this liability of outsidership
• distant origins gives rise to lack of local experience and also lack of
nearby experience – contributes to lack of familiarity, networks, and
legitimacy in the local context – it may not be seen as a domestic player.
They are relevant variables between home and overseas markets. Home
firm is familiar with local regulations, languages, cultural, norms that
prevail. Also foreign firms are also unaware of supply chain network as
well as government channels. Business environments are different in
different countries. Hence foreign firms tend to employ local lawyers to
look at legal matters e.g. set up of foreign firms as well as accounting
firms to satisfy the local accounting laws and standards. In addition
foreign firms need to employ local advertising media to promote the
foreign firms’ products.
c
Pros Cons
Jobs and income More jobs created and Benefits are not
those with skills enjoy universal e.g. those
higher income without skills and
thereby unemployed
and income does not
increase or even
reduction in income
See notes
Immigration and Foreign talent e.g. in Foreign supply
skills Health and increases the total
Construction workers. supply of labour and
thereby reduce the
overall wages.
The public
infrastructure is also
burdened by excessive
labour force. Cost of
houses are likely to
rise.
National Autonomy Country’s freedom of Country’s economy is
and Power action e.g. China has more integrated and
more freedom but also hence changes in
has become more overseas governemnt
powerful due to its can be a threat e.g.
richness and increases Donald Trump is more
its military might inclusive. International
tensions would affect
M.Nageb 48
stock markets. In other

words globalisation can
make a country more
vulnerable to
uncertainty.
May 2017 Zone A Q4 and Zone B Q6
‘Globalisation consists of many trends and represents both

benefits and challenges to countries and businesses alike.’
a. Define globalization and describe the major trends in

globalization over over the last twenty years.
5 marks
b. For an individual country, or countries, of your choice, assess

the major business and economic advantages and disadvantages
that come with globalization. 8 marks
c. What major challenges does globalization present to an

international business? Use illustrative examples.6 marks
d. How can an international business leverage globalisatin

trends to its advantage? Use illustrative examples
6 marks
Relevant material and references are in pages 14 to 21 of the subject

guide. See also Willcocks (2013) Chapter 1.
a. The answer needs a definition, for example: ‘The shift towards a more
integrated and interdependent world economy’, with elaborations on
the basic definition and a discussion of trends, such as:
• reduced barriers to trade, and capital investment

• increased foreign direct investment (FDI)
• growing affluence in many countries, creating more attractive
markets globally.
M.Nageb 49
Mention of Friedman’s 10 flatteners gained some marks, depending on

the level of detail supplied.
b. This question can be approached in many ways. We allowed some

flexibility in the answers to be given. On pros and cons, these may
well be different for a company than for a nation or an individual.
Examples for a country include: more inward investment, more open
foreign markets for exporting, but increasing economic instability and
dynamism due to a connected world and loss of economic sovereignty
to regional blocs.
c. Challenges for an international business include: globalisation

promotes protectionism and regional barriers as a reaction, and
heightened competition from diverse countries and industries.
d. We expected up to five advantages for an international business

using globalisation, for example, technological advances promote
international trade and lower barriers to trade and investment.
May 2018 Zone A Q 2 and Zone B Q 4
‘The trends toward globalization can seem overwhelming, and

therefore business strategy straightforward, but international
businesses still encounter major challenges because of country
differences’. In light of this statement, discuss the following,
using illustrative examples:
a What are the main trends towards globalization?

9 marks
M.Nageb 50

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University of London

Business and Management

CHAPTER 1: PERSPECTIVES ON GLOBALISATION AND

Learning By the end of this chapter, and having completed the

• assess the global economy and its broad trends

• explain the major trends in globalisation, and the

• enter into the major globalisation debates and

globalisation can be considered an advantage or

• describe the implications of globalisation for

1. What Globalisation can be defined as the shift towards a more

1• From a business perspective, you can think of globalization in

The globalization of markets refers to the merging of

The second facet of globalization—the globalization of

Boeing, for example, outsourced about 65 percent of its 787

The pictures below show that global production can be in any

© 2002 Thomson Learning, Inc.

• Some like Thomas Friedman describe globalisation as the

• Also the WTO has been instrumental in dismantling

- accelerated speed of communication and

- rising power of MNE and increased in inequality of

- increased in competition for jobs, especially for

- is a force eliminating differences between

- world is moving towards a homogenous plain

How the word globalisation is received depends on how

V 1 Globalisation easily explained

• Define the major characteristics of globalization

1.2a What are • It is recognised as a complex set of process

• It involves the rise of MNEs and has seen the

• Globalisations has seen some erosion of

• Globalisation is also the development of

• Assess the global economy and its broad trends

1) first wave as starting in 1880 and rising to a high in

2) second wave starting from Post WW11 and rising from

• 1950s and 1960s – barriers were pervasive to trade

• Two major factors that have been driving

2) technological change especially the dramatic

• Hill(2011) suggests that four trends have been

1. Changes in world output and world trade.

In the 1960s US dominated the world economy and world

2 FDI (Foreign Direct Investment)

In the 1960s – USA accounted for over 66% of worldwide

An MNC is any business that has productive activities in two

1. Firstly MNCs from France, Germany, Britain and

V 2 What are MNCs?

2. Secondly, the trend is the growth in the number of

4 Change in world order

The collapse of the Russian communism as well as the

for MNCs. Also the development of emerging economies of

Trends as mentioned in the Examiner’s report -

Indicative trends include reduced barriers to trade and

• Under what conditions and for whom globalisation can be

• Enter into the major globalisation debates and assess under

1.4 The 1.4a The Benefits and Critics of Globalisation

Examiner’s Report 2014

candidates are expected to discuss advantages, such as

disadvantages such as increasing economic instability and

• Critics – would say that it will cause job losses,

1.4b The Globalisation Debate

By this simple introduction we can identify four major