Globalization Flashcards
What is globalization?
The distribution of industrial and service activities across an increasing number of nations
What are multinational corporations?
Entities that conduct business outside the country in which they are organized
What is globalization measured?
As a percentage of GDP
What factors drive globalization?
- Improvements in transportation
- Technological advancements
- Deregulation of international financial markets
- Organizational/operational options for international business
What are motivations for international business operations?
+ Comparative advantage
+ Imperfect markets : The limitation of free trade caused by physical immobility of resources or regulatory barriers
+ Product cycle
What is comparative advantage?
Specialization in the production and trade of specific products which produces an advantage in relation to trading partners
What are methods of conducting international business operations?
International trade Licensing Franchising Joint ventures Direct foreign investment Global sourcing
What is international trade?
Import/export operations
What is a direct foreign investment?
The purchase of a foreign company as a subsidiary or by starting a subsidiary operation within the borders of a foreign country
What is global sourcing?
The synchronization of all levels of product manufacturing, including research and development, production, and marketing on an international basis
What are several relevant factors to globalization?
Political and legal influences Potential for asset expropriation Taxes and tariffs Limitations on asset ownership/joint ventures Content or value added limits Foreign trade zones Economic systems Culture
What are three types of economic systems?
Centrally planned economies
Market economies
Conglomerates
What is a centrally planned economy?
Factors of production are owned by the government and are subject to restriction
What is a conglomerate?
Self sustaining entities that could not exist in the US
What are five different ways that culture can impact international business?
Individualism vs. Collectivism Uncertainty avoidance Short term vs. long term orientation Acceptance of leadership hierarchy Technology and infrastructure
