Chapter 1

Question 1

The globalization of markets is…

Answer 1

The merging of historically distinct and separate national markets into one huge global marketplace

Question 2

Name characteristics of globalization of markets

Answer 2

• Falling barriers to cross-border trade and investment
• global tastes
  -Benefits small and large companies
• significant differences between national markets
  -Products that serve universal needs are global: oil
• competitors may not change among nations

Question 3

The globalization of production is…

Answer 3

The sourcing of goods to take advantage of differe modern communicationnces in cost and quality of factors of production. Factors of production include labor, energy, land and capital.
Early outsourcing was confined to manufacturing, modern communication and technology has advanced outsourcing today for service activities

Question 4

Impediments that prevent optimal dispersion of activities

Answer 4

-Formal and informal barriers to trafe
-Barriers to foreign direct investment
-Transportation costs
-Political and economic risk
-Challenge of coordinating globally dispersed supply chain

Question 5

Institutions are needed to

Answer 5

Help manage, regulate, and police global markets.

Question 6

Examples of institutions

Answer 6

WTO, World Bank, UN, International Monetary Fund.

Question 7

Standards are

Answer 7

Guidelines that describe the best way of doing something.

Question 8

Examples of standards are

Answer 8

ISO, Fairtrade, sustainable development goals

Question 9

International standards are

Answer 9

Technical standards developed by internationals (intergovernmental organization). International standards are a set of audited criteria which is recognized and used worldwide. These standards are voluntary and not mandatory. They are not a set of guidelines, working group, association framework but a set of independently verified and certified set of criteria. Standards in industry and commerce became highly important with the onset of the industrial revolution and the need for high precision machine tools and interchangeable parts.

Question 10

Examples of international standards

Answer 10

The International Organization for Standardization (ISO) = an international nongovernmental organization made up of national standards bodies that develops and publishes a wide range of proprietary, industrial and commercial standards.

Sustainable development goals = 17 interlinked goals designed to be a blueprint to achieve a better and more sustainable future for all.

SEDEX= a membership organisation that provides one of the worlds leading online platforms for companies to manage and improve working conditions in global supply chains. More than 60000 businesses in over 150 countries use SEDEX

Forest Stewardship Council FSC = protection forests. Developed by NGO’s only and members form 3 chambers: economic, environmental and social.

The programme for the Endorsement of Forest Certification (PEFC) = an international non-profit, non-governmental ofganisation dedicated to promoting.

Sustainable Forest Management SFM through independent third-party certification. PEFC is an umbrella organization. It works by endorsing national Forest certification systems developed through multi-stakeholders processes and tailored to local priorities and conditions.

The Fairtrade Foundation = a charity based in the UK that works to empower disadvantaged producers in developing countries by tackling injustice in conventional trade, by promoting and licensing the Fairtrade Mark, a guarantee that products retailed in the UK have been produced in accordance with the internationally agreed Fairtrade standards

The Rainforest Alliance = an international non-profit organization working in the intersection of business, agriculture, and forests to make responsible business the new normal. We are building an alliance to protect forests, improve the livelihoods of farmers and forest communities, promote their human rights, and help them mitigate and adapt to the climate crisis.

Question 11

What are the Drivers of Globalization

Answer 11

Decline in trade and investment barriers

Role of technological change

Question 12

International trade is

Answer 12

When a firm exports goods/services to another country

Question 13

Foreign direct investment

Answer 13

Is when a firm invests resources in business activities outside its home country.

Question 14

What is the singlemost important innovation since ww2

Answer 14

The development of the microprocessor

Question 15

Moore’s Law predicts

Answer 15

That the power of the microprocessor technology doubles and its cost of production falls in half every 18 months.

Question 16

The changing demographics of the global economy is because of

Answer 16

The changing world output and world trade picture

The changing foreign direct investment picture

The changing nature of the multinational enterprise

The changing world order

Global economy of the 21st century

Question 17

The changing world output and world trade picture

Answer 17

US world output declined. This reflects fast economic growth of several other economies particularly China. China and BRIC countries growing more rapidly. Developing nations may account dor more than 60% of world economic activity by 2025

Question 18

The changing foreign direct investment picture

Answer 18

As barriers to free flow of goods and services fell, non-U.S. firms increasingly invested across national borders.

The desire to disperse production activities to optimal locations and to build a direct presence in major foreign markets. Outward stock of foreign direct investment: the total cumulative value of foreign investments by firms domiciled in nations outside of that nation’s borders.

Question 19

The changing nature of the multinational enterprise

Answer 19

MNE is a business with productive activities in two or more countries. In 2003, 38,8% of the worlds 2000 largest multinatuonals were U.S. firms. By 2019 that was only 28.8%. The growth in the number of medium and small sized businesses resulted in mini-multinationals. The internet is lowering barriers that smaller firms faced in international trade.

Question 20

The changing world order

Answer 20

Former communist countries present export and investment opportunities.

Signs of unrest and commitment to market-based economic systems cannot be assumed and risks of doing business in these countries are high.

China is moving to industrial superpower.

In Latin America debt and inflation are down, more private investors, expanding economies.

Question 21

Global economy of the 21st century

Answer 21

Barriers to the free flow of goods, services and capital have been coming down.

This is strengthened by the widespread adoption of liberal economic policies by countries that had opposed them.

Globalization is not inevitable: countries may pull back and trade risks are high.

Question 22

Anti globalization protests

Answer 22

These are held due to the globalization debate.

This began in 1999 at the WTO meeting in seattle.

Protestors show up at major meeting of global institutions now.

Protesters believe globalization causes detrimental effects on living standards, wage rates, and the environment

Question 23

Why managing an international business is different from managing a domestic business for at least four reasons.

Answer 23

1. Countries are different
2. The range of problems confronted by a manager in an international business is eider and the problems themselves are more complex than those confronted by a manager in a domestic business.
3. Managers in an international business must find ways to work within the limits imposed by governments intervention the international trade and investment system
4. International transactions involve converting money into different currencies