IB Ch 2

• Worldwide reduction of barriers to trade and investment
• Market liberalization and adoption of free markets
• Industrialization, economic development, and modernization
• Integration of world financial markets
• Advances in technology, including communications, data, and engineering

• Integration and interdependence of national economies
•          Governments contribute by lowering trade and investment barriers
• Rise of regional economic integration blocs
•          Free trade areas are formed by two or more countries to reduce or eliminate barriers to trade and investment, such as the EU, NAFTA, and MERCOSUR
• Growth of global investment and financial flows
•          Associated with the rapid growth in FDI, currency trading, and global capital markets
• Convergence of buyer lifestyles and preferences
•          Facilitated by global media, which emphasize lifestyles found in the U.S, Europe, or elsewhere
• Globalization of production activities
•          Firms manufacture in low labor-cost locations such as Mexico and Eastern Europe
• Globalization of services
•          Banking, hospitality, retailing, and other service industries are rapidly internationalizing
• Worldwide reduction of barriers to trade and investment
• Market liberalization and adoption of free market reforms in China and the former Soviet union 
• Industrialization, economic development, and modernization
• Rising living standards have made such countries more attractive as target markets for sales and investment

• Value chain
• Primary or support activities of firms that try to gain competitive advantage

• Integration of world financial markets. Enables firms to raise firms to raise capital, borrow funds, and engage in foreign currency transactions wherever they go.
• Advances in technology. Reduces the cost of doing business internationally, but allowing firms to interact cheaply with suppliers, distributors, and customers worldwide

• Profound advances have occurred in computers, digital technologies, telephony, and the internet
• MNEs leverage acts to optimize their performance, managing operations around the world

• Contagion
• Loss of National Sovereignty
• Offshoring and the flight of jobs
• Effect on the poor
• Effect on the natural environment
• Effect on the national Culture

Contagion

• MNE activities can interfere with governments' ability to control of their own economies and social-political systems.
• To minimize harm and reap benefits, governments should ensure the freedom to enter and compete in markets, protect private property and enforce the freedom to enter and compete in markets, protect private property and enforce the law and support voluntary exchange through markets rather than political processes

Jobs are lost as firms shift production of goods and services abroad, in order to cut costs and obtain other advantages.

• In poor countries, it tends to disrupt local job markets. MNEs may pay low wages, and many exploit workers or employ child labor
• The benefits are not evenly distributed
• Example: Nike's Foreign Factories

It harms the environment by promoting industrialization and other activities that generate pollution, habitat destruction, and other environmental harm.

It opens the door to foreign firms, global brands, unfamiliar products, and new values.

• Research and Development
• Procurement (sourcing)
• Manufacturing
• Marketing
• Distribution
• Sales and service