Globalization

Question 1

What are the major drivers of globalization 3.0 today? Why?

Answer 1

What:
Individuals, Non-western people

Why:

• Advanced technology makes the world a much smaller place
• People in developing countries move into developed countries to seek a better life as immigrants.

Question 2

1. How is globalization changed over the past few hundred years?
2. How will it change going forward?

Answer 2

1. (Thomas Friedman)
   Globalization1.0 (1492-1800)
   Military force drove global integration (often inspired by religion or imperialism, or a combination of both)

Globalization2.0 (1800-2000)
-Multinational corporations
-Technological innovation in hardware
→Breakdown of Soviet system symbolized the end of this period

Globalization3.0 (2000-present)

• Shrinking world scale (small to tiny)
• Individuals
• Software
• Global fiber-optic network

*1.0 and 2.0 driven by European and American and mostly companies. 3.0 by non-westerners and individuals

2.
Uncertain

Question 3

In firm strategy, profit determined by: (2 things)

Answer 3

• The amount of value customers place on firm’s goods or services
• Firm’s cost of production

Question 4

Firm creates profit by

Answer 4

increasing value or lowering cost

Question 5

Two basic strategies to create value and attain competitive advantage:

Answer 5

• Low cost

- Differentiation strategy

Question 6

What is location economy and what are the benefits?

Answer 6

What:
Realized by performing a value creation activity in an optimal location anywhere around the globe.

Benefits:
Can lower costs of value creation to enable low cost strategy and/or help in differentation of products from competitors.

Question 7

Main drivers of Globalization

Answer 7

• reducing trading barriers
• technolgy
• education
• peace
• free markets (market based economy)

Question 8

Why has the US a relativly small trade intensity compared to other developed countries?

Answer 8

Trade intensity:
(Import+Exports)/ GDP
- US GDP is enourmos compared to the world GDP and People who live in the US ( 25 % of World GDP, 5 % of people)
- GDP is so high because of:
- no war damages
- Invention of liberalization of markets
- immigration ( the did not have to sell to other countries because everyone was coming to the US)
- very high consumption

Question 9

Difference between Manufacturing location and innovation location

Answer 9

• labor availabilty
• labor cost
• custom cost
• logistics