Chapter 1: Globalization & International Business

Question 1

What is Globalization?

Answer 1

The process of broadening relationships between countries by reduction of barriers

Question 2

What is International Business?

Answer 2

Commercial transactions between 2 or more countries

Question 3

What are 4 indicators that International Business has increased since WWII?

Answer 3

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

Question 4

Why compare globalization now to WWII?

Answer 4

UN was established, tariffs and other restrictions began to decrease, and trade was at a standstill during the war

Question 5

Company with the highest global sales

Answer 5

Walmart

Question 6

Country with the highest economic freedom

Answer 6

Hong Kong (1997 handover back to China, part of the agreement is that it is allowed to function as independent for 50 years)

Question 7

How do you measure how “global” a company is?

Answer 7

Measure by the number of countries and involvement in Europe, Asia, and the Americas (must be all 3 to be considered global)

Question 8

How many countries are there?

Answer 8

Around 200. Ranges anywhere from 193-204 depending who you ask (countries like Vatican City, Hong Kong, more complicated situations)

Question 9

DRIVERS behind Globalization

Answer 9

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)

Question 10

Negative Effects of Globalization

Answer 10

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)

Question 11

Why does globalization matter to future managers?

Answer 11

1) Larger market for sales
2) Understand and respond to competition
3) To Understand non-business stakeholders
4) Expanded career opportunities

Question 12

LDC

Answer 12

Less developed countries (Many countries in Africa)

Question 13

BEMs

Answer 13

Big Emerging Markets (China, South Korea, Malaysia, Chile)

Question 14

BRICs

Answer 14

Brazil, Russia, India, China (and South Africa)

Question 15

RDEs

Answer 15

Rapidly Developing Economies

Question 16

NICs

Answer 16

Newly Industrialized Countries (add examples)

Question 17

Commonalities of Big Emerging Markets?

Answer 17

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

Question 18

What are Global Challengers?

Answer 18

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)

Question 19

How did the Global Challengers get here?

Answer 19

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

Question 20

Why would domestic firms go international?

Answer 20

1) To expand sales
2) To acquire resources
3) Minimize risk

Question 21

Explain the dilemma of the floating subsidiary

Answer 21

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.

Question 22

Differences between international and domestic business?

Answer 22

Societal factors (legal, political, economic, behavioral), Competitive factors, Now must track domestic AND foreign environments

Question 23

Additional challenges of IB?

Answer 23

Decision making is MUCH more complex, strategy is forward-looking (3D chess example)

Question 24

Basic country analysis framework

Answer 24

1. Research country context (socio-cultural, political/legal, economic/financial, infrastr./resources)
2. Assess country on: contextual factors, impact of government policies
3. Decide one: opportunity, risk, entrance strategies, etc.