FSU CTE 4829 - Chapter 1 – What is Globalization?

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Chapter 1 – What is Globalization?Make sure to know all terms in bold italic, and know everything in red. The textile and apparel industry provides more employment than any other business segment. In this country, we are at a disadvantage because most of our production occurs elsewhere. Until mid 20th century, goods were produced within the domestic economy. Textile and apparel production now involves numerous countries.Where do things come from? Most people don’t care, as long as they can get it. Some are concerned with things like: Product of sweatshops, child labor, slave labor, dangerous working conditions, and environmental concerns.Levels of Trade – know difference between theseDomestic trade: Exchange of goods/ services within a nationInternational trade: Exchange of goods/services between two countriesGlobal trade: Many groups, cultures, and nations involved in production and distribution of products/ services.A primary driver of the growth of international trade of textiles and apparel into global trade is the sourcing products by firms based in developed countries from firms based in developing countries with lower labor costs.The following three types of integration are occurring in the international business environment: • Financial, which tends to be globally integrated• Trade and investment, which tends to be regionally integrated• Labor, which tends to be nationally regulatedControlling TradeTrade Agreements: Established by Governments to encourage, regulate, or restrict trade between countriesTrade Barriers: Regulate or restrict trade (Import limits, tariffs, quotas)Measuring Levels of Trade Trade is based on imports and exports.Trade balance: Difference between exports and imports – know thisTrade surplus means that the value of exports exceeds the value of imports (positive trade balance).Trade deficit means that the value of imports exceeds the value of exports (negative trade balance).A trade surplus is sometimes regarded as desirable. There is a net gain in revenue that can be invested in domestic resources. It is important to note that a trade surplus does not necessarily mean that more products are available for trade than can be consumed domestically. A trade deficit is sometimes regarded as undesirable.Know that the United States has a trade deficit. Most developed countries have a negative trade balance because we don’t produce as much as we buy in the textiles and apparel area.Measuring Levels of Development of Countries – know thisBased on country’s economic developmentKnow about the World Trade Organization (WTO): it is a global organization that categorizes countries in different commodities based on how they are doing (rich or poor).Least developed: greatest level of poverty; a nation whose gross domestic product per capita and other economic measures are among the lowest in the world; has little involvement in industrial development, which often involves production of apparelNewly developing: poor; a nation whose gross domestic product per capita and other measures of well-being fall well below the world average but that is beginning to be engaged in industrial development, probably related to apparel productionDeveloping: transitioning from developing to developed status; less poor; a nation whose gross domestic product per capita and other measures of well-being fall near or slightly below the world average, based on the benefits of industrial growthDeveloped: richest; a nation whose gross domestic product per capita and other measures of well-being fall well above the world averageLevel of development is described by: unemployment rate, population below poverty line, literacy (male/female), infant mortality, life expectancy, and GNP as well as GDP. Another way of describing countries is: first world, second world, and third world.Economics of DevelopmentGross National Product, GNP: Average output per domestic worker in a nation, within that nationGross national product per capita: gross national product of a country divided by the number of people in the population Gross Domestic Product, GDP: Market value of outputs of products/ services within country in a yearGross Domestic Product per capita: GDP divided by the number of people in the populationPurchasing Power Parity, PPP: Adjusted GDP in each country from Consumer Price Index (CPI); determines relative buying power of each currency, making it much easier to do comparisons between countries.When comparing the wellbeing of individual nations, it is essential to select the same measures. If the GNP of one nation were compared with the GDP of another, the results would be of little use in understanding the overall economic picture. Newly developing and developing countries are involved with production.Developed countries are involved with consumption, design, and technology.Firm: A business, corporation, proprietorship, or partnership (Manufacturer, contractor, supplier, retailer)Changing patterns of trade Past 20th Century firms: small, family-ownedToday’s 21st Century firms: large transnational/ multinational (Mergers and acquisitions, vertical integration)Changes in textile firms Merger: a consolidation of two companies to form a new companyAcquisition: the purchase of one company by another with no new company being formedA merger is usually friendly. An acquisition is sometimes friendly and sometimes not friendly. Firms in Textile Complex – know structure of textile complexLevel 1- Textile & Findings Manufacturers• All production of fibers, yarns, fabrics, fabric finishing, and production of findings (Findings- apparel materials added to face fabric)• Many firms are vertically integrated in yarns, weaves and finishes• Many fabric mills are horizontally integratedLevel 2- 3 categories of business structure: Apparel Manufacturer, Contractors (apparel production vendors) and Retail Product Developer• Apparel manufacturers- firms engaged in the entire manufacturing process, including merchandising (line planning, design, and product development), production, and wholesale marketing of apparel (Less local production; sourcing/ development by contractors). The term apparel manufacturer has been replaced by simply apparel firm or brand manager because of the emphasis on marketing nationally and internationally known brands of merchandise. • Retail Product Dev.- Individuals or teams who create designs and develop merchandise plans and specifications for

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FSU CTE 4829 - Chapter 1 – What is Globalization?

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