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Flashcards in Globalization Deck (9)
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What are the major drivers of globalization 3.0 today? Why?

Individuals, Non-western people

-Advanced technology makes the world a much smaller place
-People in developing countries move into developed countries to seek a better life as immigrants.


1. How is globalization changed over the past few hundred years?

2. How will it change going forward?

1. (Thomas Friedman)
Globalization1.0 (1492-1800)
Military force drove global integration (often inspired by religion or imperialism, or a combination of both)

Globalization2.0 (1800-2000)
-Multinational corporations
-Technological innovation in hardware
→Breakdown of Soviet system symbolized the end of this period

Globalization3.0 (2000-present)
-Shrinking world scale (small to tiny)
-Global fiber-optic network

*1.0 and 2.0 driven by European and American and mostly companies. 3.0 by non-westerners and individuals



In firm strategy, profit determined by: (2 things)

- The amount of value customers place on firm’s goods or services
- Firm’s cost of production


Firm creates profit by

increasing value or lowering cost


Two basic strategies to create value and attain competitive advantage:

-Low cost
-Differentiation strategy


What is location economy and what are the benefits?

Realized by performing a value creation activity in an optimal location anywhere around the globe.

Can lower costs of value creation to enable low cost strategy and/or help in differentation of products from competitors.


Main drivers of Globalization

-reducing trading barriers
-free markets (market based economy)


Why has the US a relativly small trade intensity compared to other developed countries?

Trade intensity:
(Import+Exports)/ GDP
- US GDP is enourmos compared to the world GDP and People who live in the US ( 25 % of World GDP, 5 % of people)
- GDP is so high because of:
- no war damages
- Invention of liberalization of markets
- immigration ( the did not have to sell to other countries because everyone was coming to the US)
- very high consumption


Difference between Manufacturing location and innovation location

-labor availabilty
-labor cost
-custom cost