Globalisation Flashcards
International and Multinational
International Business: firms engaging in international economic activities and/or the activity of doing business abroad
Multinational Enterprises (MNEs): a firm that engages in FDI (foreign direct investments) and operates in multiple countries
- companies that have offices abroad and operate in different countries and own foreign assets which are actively controlled
- symbol of globalisation
- important to the global economy and contribute substantially to the growth of world trade
- multinationals increasingly come from non-Western countries
Unified Framework
Fundamental question:
What determines the success and failure of firms around the globe?
Institution-based view:
- suggests that success and failure of firms are enabled and constrained by the different rules of the game
- institutions establish the rules of the game, come in many forms, and vary per country
- formal rules are established by governments about the treatment of foreign firms
- informal rules are the culture, norms, and values that come into play, it is the influence of the external environment
Resource-based view:
- focuses on a firm’s internal resources and capabilities
-focuses on internal resources and capabilities that make you unique and survive
- foreign firms often have to overcome the liability of outsiders, an inherent disadvantage that outsiders experience in a new environment because of their lack of familiarity with local context and networks
- liability of outsiders increases the more firm’s origins differ from the host environment, the less the firm has experience in the host country
Globalisation
Global exchange of goods, services, and capital as well as information, ideas, and people.
Process leading to a greater interdependence and mutual awareness among economic, political and social units in the world, and among actors in general
Views on globalisation:
- young people see it as the information and communication opportunities it creates, quickly connecting and adapting information as well as new business models
- the rising power of MNEs and growing inequality around the world, people feel they lose control over their lives due to globalisation and more MNEs have bargaining power with national governments
- unskilled workers lose out: highly skilled wages increase, while people with lower wages only account for a small proportion of income
- globalisation makes us more similar which creates anxiety in traditional communities
Poverty has declined a huge amount thanks to globalisation.
How did globalisation take off so quickly after WWII?
- political changes: liberalisation of financial markets, opening up of national markets
- international collaboration: trade agreements, international standards, international institutions, European integration
- socio-cultural changes: cultural exchange via international travel, film and TV
- technological factors: communication, information and transportation innovations
Cultural globalisation
- consumer preferences are becoming more homogenous (similar), due to globalisation people are exposed to the same products, ideas, services, norms and much more
To summarise
- globalisation refers to the increasing interdependence of the world economy
- globalisation has been around for centuries but has increased sharply, especially from the 1980s
- international cooperation, technological innovation and social developments play an important role in increased globalisation
Globalisation vs Regionalisation
Effects of Globalisation:
- strong increase in trade
- strong increase in international investments
- strong circulation of international capital
- strong increase in the international circulation of knowledge and ideas
- strong circulation of people
Countries have become richer and there is less poverty due to globalisation, but:
- rising income inequality within countries
- increase vulnerability of international supply chain, due to increased interdependence
Climate issues:
- increase in international travel and transport
- exploitation of raw materials
- deforestation
Regionalisation: institutions or organisations become more regionally focused
Liberalisation: less rules of governments
To summarise:
- globalisation has fostered economic growth world wide and reduced poverty in many countries, yet it has also fostered:
1. social inequality within countries
2. dependence on external parties for essential supplies
3. climate change and other adverse ecological effects
- because of political and societal pressures, the world may be moving towards stronger regionalisation in the next decade
Implications for Practice
Ethnocentric perspective: view the world through the lens of one’s own culture and believe are superior -> best practices in one country will work everywhere
Not-invented-here syndrome: the tendency to distrust new ideas coming from outside of one’s organisation or community -> disregard views from others as you assume they lack the knowledge
Managers are cosmopolitans: people embracing cultural diversity and the opportunities of globalisation
The Environmental Context
Environment: everything that is outside of the organisation that influences the functioning and survival
Task Environment includes:
- customers & buyers
- competitors
- suppliers
- government
- social interest groups
Broader Environment includes:
- technological
- political
- economic
- socio-cultural
- climate ecology
- Task environment refers to specific groups and organisations that affect a firm
- the environment of organisation determines organisational opportunities and ultimately defines success of organisations
Technological Context
Technological innovations are the engines behind economic growth, they lead to new products and services companies and business concepts, but also the disappearance from companies and business concepts
-technological advances are supported by digitalisation
- technological change also helps improve business operations
- technological change also affects people in organisations (e.g. remote working)
Many changes in organisations are linked to digitalisation
- the use of digital technologies to change a business model and develop new revenue opportunities
Companies need to adapt to stay relevant in the long run.
Political and Economical Context
Economic context: related to the national and international economy
- there is an increasing importance of emerging countries, especially Asian countries are emerging and are even exceeding the US
Political context:
- government actions: local, national and supranational authorities (e.g. EU)
- governments impose rules & regulations, taxes and subsidies (e.g. working conditions, requirements, environmental issues)
- governments control cross-border business activities (e.g. import tariffs, sanctions, supplementary rules)
Economic developments often lead to political reactions and political actions have economic consequences.
Political tensions between countries negatively affect the international economic context.
Socio-Cultural and Ecological Context
Socio-cultural: social developments in a political country, concern social norms and cultures
2 recent important social developments:
1. #MeToo: social movement and awareness campaign against sexual abuse
- it led people to think about diversity in organisations and the disadvantaged position of groups in society
2. Black Lives Matter: social movement that aims to highlight racism, discrimination, and racial inequality experienced by black people and to promote anti-racism
- made people aware of racial inequality in organisations
Socio-cultural developments influence organisations in many ways, they influence:
1. our expectations regarding the ethical behaviour of companies
2. how we manage and organise companies
Ecological context: the natural environment in which we live and exploit to produce goods and service
The climate and environment are becoming more important to companies. Climate change results in environmental requirements which means that some products & services are no longer meeting requirements.
- changes in the ecological context lead to higher costs for businesses and likely more economic disruption in the future
