Globalization of production;

• The globalization of production means that the world has become the global village and
now the producers can get the benefit from the different countries’ cheap labors and high
technological knowledge.
Example:
• Honda who is making the spare parts in china, assembling the products in Pakistan and
designing the engine in Japan so the production is distributed into three places

The Globalization of Markets

The globalization of markets means that the expansion and access of businesses to all over the
world to reach the needs of the customers internationally.
The European Union (EU) 28 members
o A unified economic and trade entity
o Economic and monetary unit (Euro)
North American Free Trade Agreement (NAFTA)
o Eliminated barriers to free trade
o United States, Canada, and Mexico
Association of Southeast Asian Nations (ASEAN)
o Trading alliance of 10 Southeast Asian nations
African Union 55 member
South Asian association for regional cooperation (SAARC) 8 members

Process of globalization:
Globalization approaches:
1. global outsourcing:
• Purchasing material and labour from around the world wherever it is cheapest.
2. exporting and importing
 Making products domestically and selling them abroad
 Getting products made abroad and selling them domestically
3. Licensing and franchising
Licensing relates to manufacturing and franchising relates to services to foreign firms to use the
brand name, technology, or product specifications developed by the firm.
4.Strategic Alliances
Partnerships between an organization and a foreign company in which both share resources and
knowledge in developing new products or building new production facilities.
e.g., Joint Venture
5. Foreign Subsidiary
 Directly investing in a foreign country by setting up a separate and independent
production facility or office.

Constraints on Globalization:
1. The Legal Environment
 Stability or instability of legal and political systems
2. Economic Systems
 Market economy
It is an economy in which resources are primarily owned and controlled by the private sector.
 Command economy
It is an economy in which all economic decisions are planned by a central government.
3. Monetary and Financial Factors
 Currency exchange rates
 Inflation rates
 tax policies
4. Cultural differences
• National Culture may have more influence on an organization than the organization
culture.
• Working with multicultural work teams.

Benefits of Globalization:
• Increased Wealth (cheap labor n more profits)
• Availability of Foreign Goods
• Competitive prices of products
Management’s responsibilities n challenges in global environment
 Need for lifelong learning
 Responsiveness and Adaptability
 Having global perspective and developing local knowledge
 Understand diversity management
 Understand ethical differences around the world