the globe is getting smaller, right? The world is getting smaller. So in dealing with this,

what we're looking at is more cross-border movement between country and country and country,

and in doing so they're reducing some of those trade restrictions. Remember we talked about

a tariff, a quota, an embargo. We're trying to get rid of a lot of these things so that

way we can work more closely with other countries, and then the whole world benefits. It says

here economic globalization refers to the increasing economic interdependence of national

economies across the world to a rapid increase in cross-border movement of goods, service,

technology and capital. It�s led to a single world market which has developed economies

with integrated, they�ve integrated with less countries, wait, they�ve integrated

with less developed countries by means of foreign direct investment, a reduction of

trade barriers, like we said tariffs, quotas, embargoes and the modernization of developing

countries. Now, the comparative advantage of natural resources and low-cost labor attract

business to go overseas because overseas they have all these natural resources, maybe their

forests still exist where ours may not, and labor is a lot less expensive. So it's very

attractive. Companies in developed countries, such as ours, are able to compete with those

other countries because we will make, let's say, a better quality product. So, some the

advantages of a developed country: use of sophisticated technology. Why is that beneficial?

Because that'll help reduce some of our production costs. Effective process management. So we're

managing the entire production process. Innovative, innovation in PERT products or services, the

quality of our products at least used to be much higher than others, customer service.

Again, you call up our client, call up the company, and you get someone to help you.

And also, adopting a global strategy. Now. It�s also important if you're dealing overseas,

you need to understand the culture, the customs, the values, the behavior because you want

to be careful that you're not insulting, right, the companies overseas. It says here that

in looking at a global strategy, we also need to think about some of the benefits. Some

of the benefits are pooling international production to one or a few locations. That

helps us to increase our economies of scale. What was economies of scale? Remember, we

had economies of scale. It looked kind of like this where we had that picture earlier...where

we talked about...whoosh...like that. We talked about production. Here, output is greater

than input. Here, input equals output. Here, input is greater than output. So we talked

about great better economies of scale. So, in other words, the optimum size of a production

facility. Manufacturing costs can be cut quite a bit. Why? Because overseas labor costs are

a lot lower. A firm can switch production among different countries. That has increased

bargaining power over labor, supplies, the government as well, and worldwide access because

we have all of this globalization available to us. So as we look at this globalization

of economics, we�re talking about economics, micro-, macro-, but we're also looking at

the world as a whole where if we were to do an outsource things, like a lot of companies

lately are outsourcing, right? HP, �Let�s outsource jobs overseas.� All the sudden,

it benefits that country, it sometimes benefits us because it helps to reduce the cost. The

downside is that it outsources some of the jobs that we would have done here, which means

now we have more unemployment, which means now those people have to find a different

type of job. Hopefully they're not structurally unemployed, which means that they have skills,

but we'll just have to re-adjust them in another area. So, again, that's what it kind of looks

at. Let's try a question on this, number 25. It says, �All of the following are ways

that companies in developed countries like us, U.S., generally may compete with companies

in developing countries except:� So what does that except mean? It means, that what

are some of the ways that we can compete, but what is one way we don't really compete.

A: technology? Yes. We're usually pretty good in technology. Customer service? Yes. You

make a phone call, you get someone here to help you. Quality? Yes. We keep the quality

up. Low-cost resources? No because usually low-cost resources, such as resources or labor,

those costs are usually less expensive in developing countries, not here in a developed

country. So in a developed country, U.S., Japan, that's where labor costs are going

to be high. In a more undeveloped country, labor costs are a lot lower, but again, why

is there always recalls on goods that come in from China? Because they use less expensive

dye that causes cancer, they're using plastics that break. You know, with us we have windshields

that are supposed to be a certain law that if they�re hit, they�re impact resistant,

so they don't just get break in...They break into little pieces, but they're not sharp,

whereas someone else may manufacture a less expensive sheet of glass, but when there's

a car accident, people die because they get stuck with the glass. So, again, it's less

expensive but the quality isn't there. So, again, these are some of things you have to

worry about, especially if you have a company and you�re going to outsource to other countries,

you�ve got to be concerned. What other potential risk reliability are you exposing yourself

to? That my friends is economics. Again, this is like 1 or 2 years of college economics

in one class. It is about 16 to 20% of the exam. It's an area that I understand is difficult,

but it's kind of interesting because as you get more involved in understanding it, all

the sudden all these different investment opportunities make sense to you, and you too

can became an economic genius. Alright, study hard! See ya soon!