Chapter 1: Globalization & International Business Flashcards
What is Globalization?
The process of broadening relationships between countries by reduction of barriers
What is International Business?
Commercial transactions between 2 or more countries
What are 4 indicators that International Business has increased since WWII?
1) 25% of global production is sold outside of country of origin, 2) Restrictions on imports have decreased, 3) Foreign ownership of assets has increased, and 4) world trade has grown more rapidly than production
Why compare globalization now to WWII?
UN was established, tariffs and other restrictions began to decrease, and trade was at a standstill during the war
Company with the highest global sales
Walmart
Country with the highest economic freedom
Hong Kong (1997 handover back to China, part of the agreement is that it is allowed to function as independent for 50 years)
How do you measure how “global” a company is?
Measure by the number of countries and involvement in Europe, Asia, and the Americas (must be all 3 to be considered global)
How many countries are there?
Around 200. Ranges anywhere from 193-204 depending who you ask (countries like Vatican City, Hong Kong, more complicated situations)
DRIVERS behind Globalization
1) Increase in technology
2) Liberalization of trade and resource movements
3) Development of services (transportation, banking)
4) Growing consumer pressures
5) Increased global competition
6) Changing political situations and government policies
7) Expanded cross-national cooperation (NAFTA)
Negative Effects of Globalization
1) Threats to national sovereignty (own interests first, lose uniqueness)
2) Environmental stress (depletion of resources, greenhouse gases)
3) Growing income inequality & stress (job-loss, greater divisions between rich and poor)
Why does globalization matter to future managers?
1) Larger market for sales
2) Understand and respond to competition
3) To Understand non-business stakeholders
4) Expanded career opportunities
LDC
Less developed countries (Many countries in Africa)
BEMs
Big Emerging Markets (China, South Korea, Malaysia, Chile)
BRICs
Brazil, Russia, India, China (and South Africa)
RDEs
Rapidly Developing Economies
NICs
Newly Industrialized Countries (add examples)
Commonalities of Big Emerging Markets?
1) Large territory
2) Big populations
3) Massive infrastructure needs
4) Significant economic policy strides (liberalization)
5) Aspirations of technological leadership
6) Market growth spillovers
7) Significant political influence
What are Global Challengers?
Companies identified to have significant footprint outside of their home country, aspirations to become more global, 10% overseas revenue or more, and are more credible as future competitors (examples: Qatar Airways, Grupo Bimbo)
How did the Global Challengers get here?
1) Privileged access (government protected)
2) Freedom from legacy assets
3) Access to low cost labor
4) Global ambition (risk)
5) Effective defenses
6) Partnering to build world-class facilities
7) Using acquisitions to expand quickly
8) Management with global outlook
Why would domestic firms go international?
1) To expand sales
2) To acquire resources
3) Minimize risk
Explain the dilemma of the floating subsidiary
The parent company is still held to laws and demands at home while the local culture and government have different interests and can create opposite pressures and multiply the demands of the firm.
Differences between international and domestic business?
Societal factors (legal, political, economic, behavioral), Competitive factors, Now must track domestic AND foreign environments
Additional challenges of IB?
Decision making is MUCH more complex, strategy is forward-looking (3D chess example)
Basic country analysis framework
- Research country context (socio-cultural, political/legal, economic/financial, infrastr./resources)
- Assess country on: contextual factors, impact of government policies
- Decide one: opportunity, risk, entrance strategies, etc.
