Chapter 10 - Test 3 Flashcards
What is Globalization?
A process of closer integration and exchange between countries and people worldwide
Foreign direct investment
Investments in value chain activities abroad
Multinational enterprise
Deploys resources and capabilities in two countries or
more
Global Strategy is part of a firm’s corporate strategy to
- Gain and sustain a competitive advantage
- Compete against foreign and domestic companies
Stages of Globalization
Globalization 1.0 - 1900 to 1941
Globalization 2.0 - 1945 to 2000
Globalization 3.0 - 21st Century
The Current State of Globalization
The world is only semi-globalized since the level of globalization is at 10-25% total
Advantages of International Expansion
- Gain access to a larger market
- Gain access to low-cost input factors
- Develop new competencies
Disadvantages of International Expansion
- Liability of foreigness
- Loss of reputation
- Loss of intellectual property
Advantages of Going Global
- Gain access to a larger market
- Gain access to low-cost input factors
- Develop new competencies
CAGE acronym
- Cultural
- Administrative and political
- Geographic
- Economic
The CAGE Distance Framework
Guides multinational enterprise decisions on which
countries to enter
Cultural Distance
Disparity between a firm’s home and host country,
in social norms and morals, beliefs, and values
Administrative and Political Distance
Captured in factors such as
- Shared monetary or political associations
- Political hostilities
- Weak or strong legal and financial institutions
Economic Distance
Wealth and per capita income of consumers. Wealthy countries trade with wealthy countries. Wealthy countries trade with poor countries.
Modes of Foreign-Market Entry along the
Investment and Control Continuum
Less investment and control - contract-based
In the Middle investment and control - strategic alliances
More investment and control - subsidiary
