Introduction Flashcards
What is International Business? International business…
- … is conducted across national borders
- … uses distinctive/special business methods
- … is in contact with countries that differ in terms of culture, language, political system, legal system, economic situation, infrastructure, and other factors.
=> Reminder: PESTEL - Political, Economical, Societal, Technological, Environmental, Legal
What means gloabalization of markets?
Ongoing economic integration and
growing interdependency of national economies
What means Value Chain?
The sequence of value-adding activities the firm performs while developing, producing, marketing, and servicing a product.
Which four types of risk does international business face?
-
Cross-Cultural Risks: e.g.,
* different Ethics, negotiation (direct-indirect) -
Commercial Risks: e.g.,
* logistic chains (weak partners)
* timing of market entry
* competitive Intensity (great strategy but bad execution, government restrictions) -
Currency Risks: e.g.,
* Currency exposure
* Taxes
* Inflation abroad
* Transfer-Pricing (landed cost of a good > end-consumer price range) -
Country Risks:
* regulations on im-/export (licence)
* trade embargos
* political instability
Phases of Socio-economics Development – How did we get here?
agricultural e > industrial e > service e > knowledge e > the 4th industrial revolution
What are the phases of Globalization and by what are they characterized?
- 1830-1900: steam powered technology => ++ manufacturing
- 1900-1930:rise of electricity & steel prod. => emerge and dominance of MNEs
- 1948-1970: GATT (General Agreement for Taxes and Trade), end WW2 => – trade barriers, glob. cap. markets, eastern MNEs
- 1980-2006: privatization of companies, revolution in transportation & ICT, growth EM => ++ CB trade, SMEs
- 2007-present: digital technologies => ++manufacturing and efficiency in int. trade
Which Phase of Globalization was characterized through reduction of trade barriers?
3rd Phase
The third phase of globalization was triggered by …
the end of World War II
- What are the 4 Archetypes of Internationalization Strategy and Organization (name and alternative names) and what do they aim?
They aim either to put
1. Preassure for Global Integration & cost Reduction => vertical: ++Global (Standardization, Geocentric) Strategy
or
2. Preassure for Local Responsiveness => horizontal: ++Localization (Multi-domestic, Polycentric) Strategy
or both => ++++Transnational (Regiocentric) Strategy
=> low in both is the **+International ** (Home Replication, Ethnocentric) Strategy
What are the four main internationalization strategies?
- Transnational (Regiocentric) Strategy
- **Global (Standardization, Geocentric) **Strategy
- **Localization (Multi-domestic, Polycentric) **Strategy
- International (Home Replication, Ethnocentric) Strategy
Name the strategy
A company aims high Local Responsive and low Global Integration & Cost Reduction
Localization (Multi-domestic, Polycentric) Strategy
Name the strategy
A comany aims high Cost Reduction but low Local Responsiveness
Global (Standardization, Geocentric) Strategy
Name the strategy
A company goes for low Global Integration and low Local Responsiveness
International (Home Replication, Ethnocentric) Strategy
Name the strategy
A company aims high Global Integration & Cost Reduction and high Local Responsiveness
Transnational (Regiocentric) Strategy
What organization type does a Regiocentric Strategy have?
Global Matrix Structure
What organization type does the Polycentric Strategy have?
Geographic Area Structure
What organization type does the Home Replication Strategy have?
International/Export Division Structure
What organization type does the Standardization Strategy have?
Global Product/Functional Structure
What organization type does the Transnational Strategy have?
Global Matrix Structure
What organization type does the Ethnocentric Strategy have?
International/Export Division Structure
Where is the Multi-domestic Strategy positioned and what organization type does it have?
- Position: high Local Responsiveness and low Global Integration & Cost Reduction
- Organization: Geographic Area Structure
Where is the Geocentric Strategy positioned and what organization structure does it have?
- Positioned: top-left => high Global Integration & Cost Reduction
- Organization: Global Product/Functional Structure
Name the strategy
Companies export their products or services with minimal local customization while the value chain maintains centralized at home.
=> Adaption & decentralization are unnecessary to sell generic products to similar markets
=> Export Division
International (Home Replication, Ethnocentric) Strategy
Name the strategy
Companies changes its product or service to the local market in order to meet the requirements of the local people. In this way they try to increase the profitability.
=> Adaption & decentralization are needed to sell customized products to differing markets
=> Geographic Area Structure (Area Division)
Localization (Multi-domestic, Polycentric) Strategy
Name the strategy
Companies focus on their global strategy, ignore the requirements of the local markets in order to have lower costs and better efficiency. The world is seen as single integrated market.
=> Standardization & centralization are imperative across international operations
=> Worldwide Product / Functional Devisions
Global (Standardization, Geocentric) Strategy
Name the strategy
Combination of localization and global strategy where the companies try to meet the preferences of the various countries and in the same time have lower costs and be efficient. So the products or services are almost the same in the whole word.
=> Global Matrix Structure
Transnational (Regiocentric) Strategy
Why do companies internationalize?
- Growth opportunities through market diversification
- Higher margins and profit
- New ideas about products, services, and business methods
- Co-location with international consumers
- Near to supply sources, benefits from global sources advantages, or gain flexibility in product sourcing
- Access to lower-cost or better-value factors of production
- To develop economies of scale in sourcing, production, marketing and research and development
- Effectively compete internationally or prevent the growth of competition in the home market
- Invest in a potentially rewarding relationship with a foreign partner
Societal Consequences of Globalization - What are the unintended consequences of globalization?
- Contagion - Rapid spread of monetary and financial crises
- Job Losses & Offshoring (Effect on the poor)
- Loss of National Sovereignty
- Environmental Degradation & Pollution
- Loss of National Culture
What are firm-level Consequences of Globalization?
- Product/Service Quality is no longer a differentiator
- Conventional business models are easily disrupted
- Companies need to focus on solution-oriented and data-driven business models that support the customer in their own decision making
=> Empowering the customer to make their own decision
What are the societal mega trends?
- sustainability
- wellness
- aging population
=> gained attention bc of the consequences of International Business
What are the Driving Forces of Globalization?
- Worldwide reduction in barriers to trade and investment
- Market liberalization and adoption of free markets
- Industrialization, economic development, and modernization
- Integration of world financial markets
- Advances in technology (important driving force and megatrend)
By which dimensions is the globalization of markets characterized?
- Integration and independence of national economies
- Rise of regional economic integration blocs (Gr. of countries which reduce trade and investment barriers among themselves => EU)
- Growth of global investment and financial flows
- Convergence of customer lifestyles and preferences (spend money same ways)
- Globalization of production (forces firms to reduce costs of production)
- Globalization of services (++ outsourcing of processes and services => also consumer do e.g. beauty surgeries abroad)
What are the stages in the Firm’s Value Chain?
- R&D
- Procurement (Sourcing)
- Manufacturing
- Marketing
- Distribution
- Sales & Services
The first phase of globalization was characterized by the …
growth of railroads
The fourth phase of globalization …
- facilitated the globalization of the service sector in such areas as banking and retailing
- privatization of enterprises
- revolutions in transportation & ICTs
- Growth of emerging markets > rise in cross-border trades
The … phase of globalization began around 1900 and was associated with the rise of electricity and steel production.
second
Over time, the GATT evolved into the …
World Trade Organization
What marked the end of the 50-year Cold War and smoothed the integration of former command economies into the global economy?
Free-market reforms in China and the former Soviet Union
