GLOBALIZATION - forcing competition - opportunities for small companies - sustainable development - worldwide protests against globalization - growing power of MNCs - OECD Guidelines for MNCs - specific consequences - globalization and the environment

see witiger.com/internationalbusiness/globalizationSustainableDevelopment.htm
see  witiger.com/internationalbusiness/globalization-soverignty-issues.htm
see  witiger.com/internationalbusiness/globalization.htm
see  witiger.com/internationalbusiness/globalization-reverse.htm

including material from Global Business Today, 2nd Ed. Hill, McKaig ... and Richardson ISBN-10: 0-07-098411-5

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The debate over the positive and negative effects of globalization is a hot topic for many individuals, agencies, organizations and government departments who find themselves in a position to defend or attack the current globalization trends. We can have an interesting debate in class about the merits of globalization but in the end, whether we like it or not, it is a situation we have to deal with. WTGR

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OBJECTIVES

After reading this online unit, and attending the lecture, the student will     o be able to define what globalization means in the context of int'l business    o understand the effects of globalization in terms of corporate competitiveness    o be able to define U.S. and Canadian differences in opinion on the issue of globalization    o know some of the positions that entities have on the "pro" and "con" side     o be aware of some of opportunities, and challenges, facing SMEs dealing with globalization    o be able to explain how globalization effects sustainable development    o be aware of some of the issues in the worldwide protests for, and against globalization    o be able to explain how globalization effects social justice in some effected regions    o understand how the global activities of large companies may effect national sovereignty     o know some specific examples of the effect of globalization on business in Canada WTGR

INTRODUCTION GLOBALIZATION

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The economic "disclocation" of the North American economy in 2008-2009 has created substantial "ripples" which have effected, and are effected by the economic upheavals in Asia (North America's largest trading partner) and Europe. One thing that has become "evident" from the results of the North American economic problems is that the economy of Asia's exporters has been effected by  reduced North American consumption  and consequently reduced North American importing  - this "reaction" seems to substantiate claims that Globalization is indeed intense. WTGR

GLOBALIZATION TRENDS 2015

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According to the World Economic Forum (Davos)  - as quoted in Forbes magazine "Every year the WEF forecasts the 10 biggest trends for the coming year, specifically looking at how they will influence global and regional economic, political and social change." 2015 http://reports.weforum.org/outlook-global-agenda-2015/top-10-trends-of-2015/

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GLOBALIZATION TRENDS 2014

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According to the World Economic Forum (Davos)  - as quoted in Forbes magazine 2014 http://www.forbes.com/sites/louiscolumbus/2013/11/15 /top-ten-trends-of-2014-from-world-economic-forum-underscore-the-need-for-cloud-security/

 
 

INTRODUCTION GLOBALIZATION 2007

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"The great challenge facing political leaders today is to persuade the public that continuing to liberalize trade will bring more benefits than costs. Distrust of globalization has probably never been higher in the past 60 years....China and India are among the reasons. There is widespread fear that globalization means job losses and lower wages as the export power of these huge nations grows. So countries are becoming more protectionist, more unwilling to deal with change and make adjustments." David Crane well known economics and int'l trade journalist for The Toronto Star    2006 Dec 31

Definition of Globalization

  o  People around the globe are more connected to each other than ever before.
  o  Information and money flow more quickly than ever.
  o  Goods and services produced in one part of the world are increasingly available in all parts of the world.
  o  International travel is more frequent.
  o  International communication is commonplace.
This phenomenon has been titled "globalization."
From Keith Porterhttp://globalization.about.com/cs/whatisit/a/whatisit.htm

The term “globalization” describes the increased mobility of goods, services, labour, technology and capital throughout the world.
 http://www.canadianeconomy.gc.ca/English/economy/globalization.html

"Globalization is a term for the horizontal and vertical integration of manufacturing and trade on an international level"
www.endgame.org/gtt-globalization.html

Globalization, an example in the forest products industry

 

The vertical integration of the wood products industry "is probably the single most recognized characteristic of the industry" -- for example, most paper sales are by corporations which also control timberland. Now the horizontal integration of the industry is also being completed, as corporations like International Paper spread their operations to dozens of countries." www.endgame.org/gtt-globalization.html 1.

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The reason why we emphasize the forest products industry in a Canadian course on International Business is  historically it was the rich forests of Canada which were one of the big incentives for European explorers to investigate the waterways of our country as a way to ship back logs to Europe for the French and British navy.  currently the forest products industry exporting paper exporting pulp exporting dimension lumber is the biggest industry by dollar amount, and volume, in Canada

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Forestry trade Deforestation Globalization

"The effects of deforestation have been known since ancient times. Empires from Roman to colonial times have expanded to acquire wood supplies for shipbuilding and fuel for industry, and have collapsed when those wood supplies were depleted. The post-World War II ascendancy of U.S. timber corporations has brought the industry to new heights, and promises to take it to new lows as well. The global timber industry has tried to escape the ecological limits to raw materials, and the social and economic limits to markets, by relying on frontiers. While multinational timber corporations use the rhetoric of sustainability and jobs, the centuries-old reality of cut and run continues. Despite the public relations strategies of the corporations, timber industry overcutting has been confirmed by numerous industry, academic, and government studies. Now that the end of the forest frontier is being reached, free trade agreements are threatening to remove the last barriers to total industrialization and depletion."  by George Draffan, Public Information Network, Seattle permission to quote Draffan received in an email  Oct 11th, 2002. Copies of emails kept in the permissions binder

."Globalization forces everyone to compete with the cheapest producers."
see youtube.com/watch?v=YFVzjLqZj7g&feature=related
Italy's 'Made in China' Label

Is this a good thing or a bad thing?

"In the early 1990s, bleached hardwood pulp cost

• $78 per ton to produce in Brazil,
• $156 per ton to produce in eastern Canada, and
• $199 per ton to produce in Sweden."

 - therefore the cutting down of the rainforest in Brazil !
by George Draffan, Public Information Network, Seattle

Globalization of Markets / Customers Globalization of Production Globalization of Government and NGOs as discussed in Hill / McKaig Global Business Today, 2nd Ed.

Chpt 1

The Globalization of Markets / Customers Globalization of markets refers to the "merging of historically distinct and separate national markets into one huge global marketplace" For some products and services "the tastes and preferences of consumers in different nations are beginning to converge on some global norm" - a consequence of the "globalization of the customer" Why is this happening? advances in the technological environment more people travelling information through the web blending across social - cultural environment

Chpt 1

The Globalization of Markets / Customers "Most global markets are not for consumer products ... but markets for industrial goods and materials that serve a universal need the world over".   Industrial Services Industrial Goods Consumer Services Consumer Goods ...

Chpt 1

The Globalization of Markets / Customers   Industrial Services Industrial Goods Consumer Services Consumer Goods ... A tricky concept One the one hand, there is an increasing tendancy for consumer product companies to narrow their "target market segmentation" for certain types of consumer products and services, - this helps achieve very large economies of scale which drive down the price of things such as consumer electronics; yet, for many things, ie cell phone ring tones, there is an increasingly diverse segmentation based on pandering to the diverse social/cultural market. "While modern communication and transportation technologies are ushering in the 'global village', very significant national differences remain in culture, consumer preferences, and business practices. A firm that ignores differences between [nations] does so at its peril"

Tim with his Tim's

Tim Hortons has been named [2014] the Top Canadian Brand for the second year in a row in the Canadian Business Magazine survey—but what does the brand actually mean to Canadians?  http://www.canadianbusiness.com /lists-and-rankings/best-brands/ 2014-tim-hortons-marc-caira-interview/ CEO Caira says "We keep doing the same thing over and over, and we do it better than anybody else... in each of our 3,600 stores" Caira "While we do have a foothold in the U.S. with 850 locations, in the past we saw the U.S. as simply an extension of Canada and, in my view, that’s the wrong strategy. There’s no such thing as a global consumer. Consumers are local: local tastes, local traditions, local recipes. So we have to be able to adapt our offering to the American consumer." CB How are you adapting the formula for the U.S. market? Caira "Different flavours, bolder flavours and, in some cases, larger portions in some cases. We’ve put a strategic business unit right in the U.S. market. Whereas in the past everything was done out of the Canadian office, we now have a dedicated team, with Mike Meilleur heading up our U.S. business. His job is to really cater to the needs of the U.S. consumer. There are differences, even in the coffee profiles. If we think we’re going to sell the same coffee to Americans that we sell to Canadians, I think that’s wrong."

Chpt 1

The Globalization of Production 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, labor, and capital" Why is this happening? advances in the technological environment and  regional advantages and variances in the economic environment have allowed for transportation of larger volume goods over longer distances bigger stuff travelling farther  technology effecting information/communications it is possible to "know" where to buy components parts at cheaper prices the "modular: aproach to manufacturing - few things "made" in a factory, most stuff is assembled from component parts that come from a variety of locations, some national, some international

. Where the iPhone parts come from

The Globalization of Production Erosion of "national identity" associated with a branded consumer product. Given the diverse origins of component parts, it becomes increasingly challenging to say a complex consumer product (such as a large TV, computer or car) is predominantly from "X" country. Influences of, and changes in,  the economic environment competitve environment technological environment have resulted in Supply Chain Management solutions that source parts all over, based on the lowest price and fastest deliverly time. Example: One particular model of a consumer branded electronic product may have internally three different battery pack arrangements, depending on how the supply chain people sourced the parts at the time a long production run was being carried out - some may come from Korea, some may come from China or Taiwan. When large companies establish extremely large production runs, supplier companies sometimes cannot meet the volume of requirements so supply chain staff source from multiple locations.

. Where the iPhone parts come from

The Globalization of Production, iPhone parts from https://www.scmp.com/infographics/article/2017191/iphone-sum-parts South China Post newspaper   where the different parts of the iPhone circuit board come from

Chpt 1

The Globalization of Government / Emergence of Global Institutions WTO - World Trade Organization IMF - International Monetary Fund United Nations World Bank As companies grow from national to trans-national organizations, we have seen an emergence of institutions needed to "help manage, regulate and police the global marketplace".

Chpt 1

The Globalization of Government / Emergence of Global Institutions Drivers: decline in trade barriers (as encouraged by WTO and IMF) advances in the "technological environment" - which effects  communications, WWW - we can be in touch with more people, in more complex ways - globalization of TV and entertainment  - blends differences between cultures - allows "immigrant cultures" to remain viable information processing  - allows for more complex decision making - relates to facilitating banking transactions globally - provides capability to know more detail about customers (CRM) transportation  - people, - global travel facilitates global business - contanerization; products, supplies

"Globalization and the  Internet have created  unprecedented opportunities for small and medium-sized  businesses in Canada"
is the title of a Sept 2002 story by Lopez-Pacheco
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KEY POINTS

There are a lot of stories in some media that discuss how Globalization is challenging [read difficult and painful] for small and medium sized enterprises because they are being forced by the competitive environment to sell product and services to their customers, at lower prices ; cause - if they don't, some vendor in another part of the world will steal away their customers. However with every challenge, there are also opportunities - in some situations, the consequences of globalization can be a benefit for SME's cause the "shrinking world" [ facilitated by the developments in the technological environment] can bring more opportunities to SME's that previously they could not deal with. Therefore we have included in this section on Globalization a story from the National Post about how "Globalization and the  Internet have created  unprecedented opportunities for small and medium-sized  businesses in Canada". WTGR

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National Post, September 23, 2002 by Alexandra Lopez-Pacheco

The key thing about this story is that one of the ways small and medium sized companies are dealing with opportunities afforded by globalization is to be bigger companies !!! - and this can be affected through using strategic alliances.

"Globalization and the Internet have created unprecedented opportunities for small and medium-sized businesses in Canada -- an environment where competition is fierce. To take advantage of these opportunities, while avoiding some of the competitive obstacles often faced by the little fish in the big ocean, many of  these businesses are forming partnerships or, more precisely, strategic alliances. "There are various advantages to forming strategic alliances," says Estelle Metayer, president of Montreal-based Competia Inc., a leading competitive intelligence and strategic planning company and publisher of  Competia Online.  "One is the ability to penetrate markets that would be too costly to develop on your own. For example, if you form an alliance with an American partner who can take on your products and distribute them through their network, you could  save a lot of money on the marketing side." Another big advantage  comes from joining forces with a business that can provide your enterprise  with access to expensive  technology you might not  be able to afford otherwise. Management-based  strategic alliances are also             advantageous, Ms. Metayer says. "Often, smaller companies don't have big management teams. So if they need someone who has a certain expertise, but they really can't afford to hire such a person, then they can form an alliance  with a company that has that management expertise."

"Strategic alliances also benefit the big companies. "With large corporations, one of the problems often is the inability to move quickly, because of bureaucracy and more complicated internal politics. Smaller companies are able to react more quickly to changes in the marketplace. So from both parties' perspectives, it serves their needs," he says.  Although the concept of a strategic alliance can sound so appealing to a struggling small business that they might be tempted to run out and get one, experts warn businesses should not rush into partnerships, especially if  another company comes courting."
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Globalization, the development of strong, and sustained protests worldwide
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KEY POINTS

By mentioning the worldwide growing protests movement against aspects of globalization, we are not endorsing the violence by which the protestors are conveying their message - we are recognizing that it has become an issue and some consequences are effecting international business management. The screen capture below comes from a newspaper article following the G8 Summit in Genoa in July 2001 - which was a particular noteworthy event due to the large organized scale of the anti-globalization forces, and the fact the police countered with lethal force. WTGR

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"This is the anti-globalization movement. Sprawling, disparate, powerful. A political force unto itself that, given its international  scope and staggering number of  participants, is unprecedented in history. And, it would appear, at a significant  crossroads." Vinay Menon

Menon makes reference to Seattle, saying that "... Seattle, where approximately 60,000 protesters from all political, social and environmental persuasions managed to  shut down a meeting of the World Trade Organization.  Once perceived as staid centres of international bureaucracy, the WTO, as  well as the World Bank and International Monetary Fund (IMF), are now targets of anti-globalization activists, who regard these institutions as murky  cabals - unaccountable, undemocratic and unwitting facilitators of the corporate  agenda."

Menon, noting comments from Ronald Deibert, a political science professor at the University of Toronto, says that "....another challenge anti-globalization protesters face: Many members of the public can't grasp the abstract, socio-economic principles upon which the movement is based. So critics start dismissing groups as "militant radicals," "Yuppie freaks," "Hippie wannabes," "flat-Earth advocates," "neo-Marxists," "neo-Luddites" and "anti-capitalist pipe dreamers."

Even the term "anti-globalization movement" is misleading. There is no formal structure, no hierarchy. No one leader. No one platform. For some, there isn't  even an "anti" - they believe it's not a question of "if we globalize," but how. There are, instead, widely different groups, with widely different agendas. And  these groups will only get bigger and more effective".
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Globalization, social justice issues - commentary by David Crane - Article 1
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KEY POINTS

Whether or not one agrees with the "social justice issues" being evangelized by some special interest groups - it must be aknowledged that these opinions are increasingly being expressed in many circles and it would be responsible for us to review what these people are trying to communicate. WTGR

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David Crane writing in The Star 2001 Nov 20th "Globalization can't ignore social justice"

Crane's article refers, in part, to the G-20 meetings in Ottawa in mid-November 2001

Crane quotes some of the key figures at the event.

"As Gordon Brown, Britain's chancellor of the exchequer and chairman of the IMF and World Bank weekend meetings, said, "The real issue is not whether you are  for or against globalization, because globalization is moving forward. The real issue is whether you are for or against social justice on a global scale, and I  believe there is an increasing recognition that we have to work together to make the world and the global economy a better place for the world's poor."  According to World Bank president James Wolfensohn, "in the next 30 years, the population of the world will increase from 6 to 8 billion, and virtually all of those 2 billion additional people will live in the developing world. The sooner we are able to grasp the implications of this, the better."

Crane further quotes Wolfensohn adding ""Some form of globalization is with us to stay," Wolfensohn said. "But the kind of globalization is not yet certain: it can be either a globalization of development and poverty reduction - such as we have begun to see in recent decades, although this trend still cannot be taken for granted - or a globalization of conflict, poverty, disease, and inequality." Our huge task is to tip the scales toward good globalization."
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KEY POINTS

So, one of the reasons we discuss globalization and social justice issues is that it relates to issues of stability or instability which in turn are part of the concerns about risk and threat situations for international business in developing economies.. WTGR

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Globalization, social justice issues - commentary by David Crane - Article 2
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David Crane writing in The Star 2003 Feb 9th "Putting a human face on Globalization"

Crane's article refers, the OECD - which we discuss in this course + the Canadian Federal Government web site of Canada's National Contact Point for the  OECD Guidelines for Multinational Enterprises   www.ncp-pcn.gc.ca/menu-en.asp
 

click to see Zambia

Crane writes "When a group of Zambian farmers faced eviction by a Canadian mining company  from lands they were using, they were able to get help in Canada. They were able to remain on the land for some further time as a result of a code of responsible  corporate behaviour developed by the Organization for Economic Co-operation and Development in Paris. The guidelines for multinational enterprises were adopted by the OECD in 2000, and since then have become an important way of holding multinational corporations  to a set of core standards of behaviour."

 " In the process, they have provided companies operating internationally with a set of standards that lets hem know how they should perform.  In the case of the Zambian farmers, they were able to enlist the help of Oxfam Canada, which went to Canada's National Contact Point for the guidelines — each OECD country has to maintain such a contact point where complaints can be  raised — and a dialogue was launched. The TSE-listed company, First Quantum Minerals Ltd. of Vancouver, agreed to allow the Zambian farmers to stay on the land, though not permanently."
 

www.oecd.org click to see get to OECD site

from the OECD site  "The OECD Guidelines for Multinational Enterprises are non-binding  recommendations to enterprises, made by the thirty-seven  governments that adhere to them. Their aim is to help Multinational Enterprises (MNEs) operate in harmony with government policies and with societal expectations."

Crane explains that "The guidelines, which can be found at http://www.ncp-pcn.gc.ca, cover corporate disclosure, employment and industrial relations, the environment, bribery, consumer protection, science and technology, competition, and taxation. They   represent not a bad summary of what should be standard corporate citizenship and  ideally would be taught to all MBA students."

Crane also adds that "the [OECD] guidelines are of value to the International Monetary Fund and the  World Bank in their own dealings with developing countries and international corporations." The point being that companies in contravention of the guidelines cannot be participants in IMF and World Bank projects.
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KEY POINTS

Crane's article is helpful because it ties in Globalization with social justice issues in a real context, and also shows the links to OECD, IMF and World Bank issues. WTGR

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Globalization, social justice issues - commentary by David Crane - Article 3
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David Crane writing in The Star 2004 Feb 25th "Globalization is not the Enemy"

Crane's article refers to an article written by John Saul - husband of the Governor General. In this article, Saul suggests Globalization is bad and Crane counters by explaining that Saul's interpretation is flawed.

Crane argues "Saul's thesis is that globalization is essentially dead, and deserves to be dead because it has been nothing more than an assault on society and the environment  by narrow corporate interests. If that were true, then he would have a case. But of course globalization is much more  complicated than Saul's gross oversimplification.  For him [Saul], globalization is a world in which global markets leave the nation-state powerless to look after the needs of  its citizens.

But there are many concepts of globalization. And while there are some who argue and even advocate the end of the nation-state, more serious discussion of globalization is about how we can create a more prosperous global community, with fairer sharing of the wealth, while sustaining the environmental health of the planet, thwarting international crime and terrorism, and doing all of this in a way that takes into account the views and concerns of people everywhere.

The fundamental problem is that Saul does not seem to understand what globalization is really about. His quarrel  should be with neoconservatism and market fundamentalism, not globalization. It is the neoconservatives, the market fundamentalists that have done damage, and they have done it both at the global level and within the nation-state.  The challenge we face is to sustain globalization in a more human form, not to promote its collapse. More than ever  we will need stronger global rules and institutions if we are to have a stable world in which population could increase  50 per cent by the middle part of this century. We will also need more international trade and investment if the  world's poor are to be lifted out of poverty."
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Globalization and poverty

contact was made with the World Bank head office June 9th, 2005 for the purposes of obtaining permission to use this screen capture. Copies of emails kept in the permissions binder

if you are interested, here is the site where you can read the entire text of the World Bank, World Development Report 2000

www.worldbank.org/poverty/wdrpoverty/report/index.htm
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Globalization, big companies forcing small companies to compete at an unfair level
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How Canadian Tire's overseas sourcing  led to a Canadian icon losing business

Woods Canada Limited was founded in 1885 and has been a well known Canadian manufacturer of outdoor clothing and equiment. They were most famous for good quality sleeping bags which they made in Canada (in Toronto) right up til 2005 As explained by the president of Woods,  David G. Earthy,   www.woodscanada.com/_Messages/Msg_02_Dec06.html a significant part of Woods business was supplying Canadian Tire - in fact the two companies had a supplier - retailer relationship more than 80 years. Earthy explained Woods had to shut down operations following "...a decision by the Company’s largest customer, Canadian Tire, to discontinue purchasing domestically manufactured sleeping bags." It has been suggested by others in the industry that Canadian Tire (facing competition from Wal-mart and other big vendors of camping equipment) had to further cut costs and was simply geting cheaper sleeping bags from suppliers in China.

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How Walmart's low price policy was accused of shutting down a  North American manufacturing company

An example of North  American workers losing jobs to cheaper labor overseas Schrade is (was) a very old family based American manufacturing company that made, since 1904, a limited range of folding knives and fixed blade knives for decades at their factory in the small town of Ellenville in New York state. Some of their product line can still be seen at  http://www.knivesplus.com/schrade-knives.html Like many small and medium sized manufacturers, Schrade was flattered when Wal-mart expressed interest in buying their product - the obvious consequence was that Schrade would be able to manufacture in larger numbers and have a better chance of staying in business in a competitive marketplace. Over a period of time, Wal-mart became Schrade's largest customer to the point where 80% of Schrade's product was going to the large discount chain. Then, Wal-mart squeezed Schrade by asking them to compete with low priced knives they were beginning to source in China. Schrade could not match the very low price from China so Wal-mart abruptly cut their business with Schrade. Faced with the loss of its largest customer, Schrade crashed in 2004 barely reaching the 100th anniversary of the founding of the company before all its assets were sold at auction as it was forced in bankruptcy. There are a number of "walmart sucks" sites on the web that have this story recounted by walmart insiders, and other similar tales, check  http://www.freewebs.com/wallmartsucks/

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KEY POINTS

American public opinion is, in the majority, negative towards Globalization. Canadians are even further effected, on an individual basis, by international trade since a higher proportion of Canadians have jobs which are effected by international business competitiveness. WTGR

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Globalization U.S. opinion

Wall Street Journal/NBC News poll found that 58% of Americans believed that trade had reduced U.S. jobs  and wages, a view that is almost never expressed by commentators or those who shape public opinion. from  www.cepr.net/GlobalPrimer.htm

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1.There are positive and negative aspects of Globalization. Some people who champion the negative aspects are very intense in their efforts to persuade others to see their point of view.
www.endgame.org discusses the downside of competition cause by globalization.

Resources

Toward Globalization of the Forest Products Industry
 http://www.rff.org/documents/RFF-DP-06-35.pdf
David Bael and Roger A. Sedjo

Mill closures devastate Canada’s forest industry
 http://www.wsws.org/articles/2006/oct2006/fore-o31.shtml

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