1. Environment of Global Managers Flashcards
What is Globalisation?
Global competition characterised by networks of international linkages that big countries, institutions, and people in an interdependent global economy (Friedman, 2005)
What is the globalisation of markets?
- Historically distinct and separate national markets are merging
- “Global market”
- Firms follow each other in the world
Features of a “Global market”
- Falling trade barriers make it easier to sell globally
- Consumers tastes and preferences converging
- Firms promote by offering same basic products worldwide
France decrease in average Tariff rate
1913 = 21% 2010 = 3.9%
US decrease in average Tariff rate
1913 = 44% 2010 = 3.2%
Still significant differences amongst national markets, this requires what?
- Customise market strategies
- Product features
- Operating conditions
To meet conditions in particular markets
Example of customised difference in national market?
Bharti Airtel in India, call tariffs based on seconds not minutes
What % of all US exporters have less than 500 employees?
97%
What % of all small and mid-sized German companies participate in international markets?
98%
Benefits of globalisation of markets?
- Ease of exporting
- Access to international markets
What is the Globalisation of Production?
Firms source goods and services from locations around the globe to capitalize on national differences in the cost and quality of factors of production like land, labor, energy, and capital
What are the benefits of the globalisation of production for companies?
- Lower cost structure
- Improve quality or functionality of product offering
What is the globalisation of human capital?
- Some firm reshoring jobs to lower shipping costs
- Firms are outsourcing white-collar jobs to India
- Winning war for talent is a pressing issue for global firms
What is the globalisation of Information technology?
- Explosive growth of IT is both cause and effect of globalism
- Speed and accuracy of info transmission changing nature of jobs
- Cultural barriers gradually lowering
- Tech dispersed globally by MNEs
Effects of Globalisation on Corporations?
- Less tied to specific locations
- Have to develop experienced international managers to remain competitive
- Small companies also affected and effect globalism
What are the challenges to globalism?
- Backlash against capitalism and rockingly of nationalism
- Increased protectionism of high-demand resources
- Need top managers with international understanding
- Increasing pressure and publicity for CSR
“Guarded Globalisation” (Bremmer, 2014)
- Political crises, cybertheft, protectionism, increased trade barriers, global trade slowdown
- Govs find risky to continue opening to foreign competition
- Governemnt intervention to give local players chance
- Some countries build large foreign exchange reserves and boosted exports
Who coined “Guarded Globalisation”?
Bremmer 2014
Globalisation in the age of Trump (Pankaj, 2017) HBR
Problem: North America and Europe anti-globalisation sentiment, uncertain whether to retreat, change strategy or stay
Big Picture: Important to understand
- World is less globalised than most realise
- Even in face of a trade war, international trade and investment would still be too large for strategies to ignore
What is Pankaj (2017) Problem?
North America and Europe anti-globalisation sentiment, uncertain whether to retreat, change strategy or stay
Globalisation in the age of Trump
What is Pankaj (2017) Big Picture?
Important to understand
- World is less globalised than most realise
- Even in face of a trade war, international trade and investment would still be too large for strategies to ignore
What are Pankaj (2017) Recommendations? Globalisation in the age of Trump
- Don’t overreact to protectionist rhetoric, but do make adjustments
- If operations unprofitable, retrench
- Focus more on adapting to local needs
- Ensure you’re creating value, not just extracting
What are the there globalisation options?
Adaptation
Aggregation
Arbitrage
Why Adaptation?
Boosts revenues and market share by tailoring products
and services to suit local tastes and needs
Why Aggregation? (cluster)
Delivers economies of scale by expanding operations into regional or global markets.
Why Arbitrage? (simultaneously buy/sell)
Exploits differences in labor costs, tax regimes, and other factors between national and regional markets.
How Will The Global Economy Of The 21st Century Look?
- Globalisation is not inevitable
- Globalisation brings risks
Example that Globalisation is not inevitable
Signs fo a retreat from liberal economic ideology in Russia
Examples of risks of Globalisation?
- South East Asia financial crises late 1990s
- Global financial crisis started in US 2007-2008
Supporters of increased trade and cross-border investment believe it means:
- Lower prices for goods and services
- Greater economic growth
- Higher consumer income
- More jobs
Critics of globalisation worry it will cause:
- Job losses
- Environmental degradation
- Cultural imperialism of global media and MNEs
- Protesters show up at major meetings of global institutions
How does Globalisation negatively affect jobs and income?
- Critics argue that falling trade barriers are destroying manufacturing jobs in advanced countries
How does Globalisation positively affect jobs and income?
- Countries will specialise in what they do most efficiently and trade for other goods so all countries will benefit
How does Globalisation positively affect labour policies and the environment?
Supporters argue that tougher environmental and labor standards are associated with economic progress as countries get richer from free trade
How does Globalisation negatively affect labour policies and the environment?
Firms avoid cost of adhering to labor and environmental regulations by moving production to countries where such regulations do not exist, or are not enforced
How does Globalisation negatively affect National Sovereignty?
Unelected bureaucrats have the power to impose policies on the democratically elected governments of nation-states
How does Globalisation positively affect National Sovereignty?
Power of these organisations is limited to what nation-states agree to grant
National Sovereignty and Globalisation
Is today’s global economy shifting economic power away from national governments toward supranational organizations like the WTO, the EU, and the UN?
Gap between rich and poor nations getting wider?
1870, average income per capita in the world’s 17 richest nations was 2.4 x that of all other countries
1990, 4.5 x rich as the rest
Critics believe that if globalization was beneficial there should not be a divergence between rich and poor nations
Supporters claim that the best way for poor nations to improve their situation is to:
- Reduce barriers to trade and investment
- Implement economic policies based on free market economies
- Receive debt forgiveness for debts incurred under totalitarian regimes
Globalisation impacts:
Corporations Jobs and Income Labour Policies and Environment National Sovereignty World's Poor
Globalisation of
Markets
Production
Human Capital
IT
