Globalisation and Internationalisation of Firms

Question 1

What is the definition of International Business?

Answer 1

all commercial transactions between two or more countries. the IB goal of private businesses is to make profits

Question 2

What is globalisation?

Answer 2

widening set of interdependent relationships among ppl from different parts of a world that is divided into nations (= groups of ppl). Interdependence may involve different dimensions that are economic, cultural, political and technological

OR

the elimination of barriers to intl movement of goods, services, capital, techno, and ppl

Question 3

What are the 7 drivers of globalisation?

Answer 3

1. Increase in and application of technology
2. liberalisation of cross-border trade and resource movements
3. development of services that support international business
4. Growth of consumer pressures
5. Increased global competition
6. Changing political situations and government policies
7. Expanded cross-national cooperation

Question 4

Why is expanded cross-national cooperation a driver for globalisation?

Answer 4

• gain reciprocal advantages (trade agreements, IOs, lobbying)
• multinational problem solving (ie climate change)
• areas outside of national territories (ie Antarctica)

Question 5

What are 3 costs of globalisation?

Answer 5

1. threats to national sovereignty (local objectives in policies, small eco’s overdependence, cultural homogeneity)
2. economic growth and environmental stress
3. growing income inequality and personal stress

Question 6

What is the “world is flat” argument made by Thomas Friedman?

Answer 6

world is flattening + shrinking due to the web and internet
flattening increases opportunity + intensifies global competition
lower logistic costs => higher global value chains

Question 7

What the “world is spiky” argument made by Richard Florida?

Answer 7

Economic landscapes has steep peaks and valleys
uneven distribution of innovation
clusters matter, backwaters matter - uneven growth and opportunity
uneven distribution of population

Question 8

What are 5 myths of globalisation, and why are they considered myths?

Answer 8

1. Globalisation is new (been around forever)
2. Globalisation is extensive (25% of world trade is intl)
3. It is unavoidable (uneven interdependence, pol/soc > econ factors)
4. Globalisation erases geographical distance (no, spike view)
5. Globalisation erases economic distance

Question 9

What is the connection between IB and market integration?

Answer 9

IB aims to create a sustained competitive advantage in a world characterised by varying degrees of distance/differences.
When market integration is low, each market is completely different, and a company needs a national strategy. Parallelly, integration is equally when all markets are the same and companies use a one-size-fits-all strategy.
However, companies need IB strategy when the need for coordination is high

Question 10

In which directions and how can a firm grow?

Answer 10

DIRECTION:
vertically - value chain
horizontally - products/services, expand breadth of offerings
geographically - location, new spots

HOW:
Organic - do it alone
Joint venture/partnership - collaborate
merger/acquisition - unify

Question 11

What are arguments for off-shoring production as a strategy?

Answer 11

1. If it results in reducing costs while improving products, its good
2. cost-saving => growth => (high-value) jobs bc low-income jobs are moved abroad
3. aggregate employment figures show that those that lose their jobs find other ones
4. losing jobs from offshoring isnt different from losing job from automatisation of processes

Question 12

What are arguments against offshoring of production as a strategy?

Answer 12

1. lower production prices => higher compensation for high-up managers
2. in aggregate, % of nat income going to labour has gone down while % of nat income going to profits/upper-lvl employees has increased
3. increase in high-wage jobs doesnt provide better conditions for low-wage ones, reduces just their advantages and social mobility
4. Companies should rather focus on innovative technologies
5. offshoring causes abnormal dynamic of job-switching

Question 13

Why do companies engage in IB?

Answer 13

Expand sales, acquire resources and diversify/reduce risks

Question 14

what are the two types of import/export?

Answer 14

you can import/export goods (=merchandise) and services

Question 15

What are two types of investments?

Answer 15

Foreign Direct Investment: investor takes controlling interest in foreign company

Portfolio Investment: non-controlling financial interest in another entity

Question 16

What is a Joint Venture?

Answer 16

business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task

Question 17

What is a synonym of collaborative arrangement?

Answer 17

strategic alliance

Question 18

What is the PESTEL Framework?

Answer 18

A PESTEL analysis studies the key external factors (Political, Economic, Sociological, Technological, Legal and Environmental) that influence an organisation. It can be used in a range of different scenarios, and can guide people professionals and senior managers in strategic decision-making.

Question 19

Which questions do one ask in the different factors in the PESTEL framework?

Answer 19

Politics - how are gvt and societal decisions made? who has the power?

Economy - what is the current state of the economy? where is it headed?

Social - what are the prevailing attitudes, trends, demographics and demands?

Technology - What technologies can be used or adapted successfully?

Environment - which factors must be considered? (footprint, climate change, weather, …)

Legal - what legal systems/customs prevail? How are they enforced?

Question 20

What are different types of competitive strategy for products firms can use?

Answer 20

1. cost strategy
2. differentiation strategy
   - favourable brand image through advertising, long-term cons experience w brand
   - developing unique characteristics
3. focus strategy = selling products to a niche market

Question 21

What are the predictions for IB and globalisation?

Answer 21

1. Further globalisation is inevitable (connectography, intl networks established)
2. IB will grow primarily along regional rather than global lines (regionalisation as transition stage before going global)
3. Forces working against further glob + IB will slow down both trends
   (antiglobalisation trends worldwide, promotion nationalism)

Question 22

What is the CAGE framework?

Answer 22

Way of analysing what is important for a business when they go to another country, diff between their own + other country to which they might expand. If all factors are similar, youll continue using same products, strategies etc.

Cultural = language, values
Administrative/Political = legal system, admin
Geographic = physical distance
Economic = income, institutions, labour market size, consumption, PP

Question 23

What is market integration?

Answer 23

a situation in which separate markets for the same product become one single market, for example when an import tax in one of the markets is removed: It has long been recognized that market integration is far more efficient than firm integration