chapter 9: globalization and international business Flashcards
what is gloabalization
Interdependent relationships among people from different nations. the elimination of barriers to international movement. Influence the integration of world economies.
what does globalization enable?
get more variety, better quality and lower prices.
what is the result from activities of IB
global connections between suppliers and markets
IB consists of all commercial transactions between two or more countries. Difference between IB private and goal and government?
private firms: profit
gov: may or may not be motivated by profit
6 reasons to study IB
- most companies are internation and/or compete with international companies
- modes of operation may differ from those used domestically
- helps manager decide where to find resources and how to sell
- way of conducting business may differ by countries
- helps make better carreer decision
- helps decide what governmental policies to support
globalization is hard however
- globalization has been growing
- it is less persasive than generally thought
- it has economic and non-economic dimensions
- it is stimulated by several factors
7 factors that increase globalization
- rise in and application of technology
- liberalization of cross-border and resource movements
- development of services that support IB
- growth of consumer pressures
- increase is global competition
- changes in political situations and gov policies
- expansion of cross-nation cooperation
liberalization of cross-border trade and resource movements, lower restrictions because:
citizens want greater variety of goods and services at lower prices, competition spurs domestic producers to become more efficient, they hope to induce other countries to lower their barriers in return
why encourage cross-nation cooperation
- to gain reciprocal advantages
- to attack problems jointly instead of alone
- to deal with areas of concern that lie outside the territory of any nation
the critisms of globalization
- countries’ sovereignty is diminished
- the resultant growth hurts the environment
- some people lose both relatively and absolutely
- greater insecurity increases personal stress
why companies engage in IB, 3 reasons
- sales expansion
- resource acquisition
- risk reduction
(sales expansion)
persuing international sales usually…
- increases the potential sales and profit
(resource acquisition)
foreign locations may give companies…
- lower costs
- new or better products
- addtional operating knowledge
(risk reduction)
international operations may reduce operating risk by…
- smoothing sales and profits
- preventing competitors from gaining advantages
Ib operating modes
- merchandise exports and imports
- service exports and imports are international nonproduct sales purchases
- investments
types of investments
- foreign direct investments (control over investment)
- portfolio investments (financial interest in another entity so no control)
key components of portfolio investments are
- non-controlling interest of a foreign operation
- extension of loans
what includes service exports
- travel, transportation, banking, patents
- very important for some countries
- include many specialized IB operating modes
understanding institutional factors and how they affect all business functions helps assure success abroad, name 3 factors
- physical factors
- insitutional factors
- competitive environment
physical factors affect
- where different goods and services can be best produced
- operating risks
institutional factors affect
- political policies
- legal policies
- behavioral factors
- economics forces
competitive environment affect
companies’ competitive situations may differ by
- relative size in different countries
- competitors they face by country
- resources they can commit internationally
