Lecture 1: Globalization Flashcards
def. globalization
widening set of interdependent relationships among people from different parts of a world that is divided into nations
-interdependence may involve economic, cultural, political, and/or technological dimensions
what is a way globalization has affected geographic and economic distance?
containerization
telecommunications and internet
What does it mean to say that the world is flat? (Thomas Friedman)
-world is flattening and shrinking due to the web and internet
-flattening increases opportunity and intensifies global competition
-lower logistic costs–> global value chains
-Flat view:
—-– “telecommunications trumps
terrorism” - Friedman 2005 Wired
––internet helps diffuse democratic values
What does it mean to say the world is spiky?
• Economic landscape has steep peaks & valleys • Uneven distribution of innovation • Clusters matter; backwaters matter – Uneven growth & opportunity • Uneven distribution of population – shown by uneven luminosity seen from space – urban – rural disparity in developing countries • Spiky view: – terrorist groups use social media to recruit – governments can shut down internet “to squash dissent” • In 2018 there were 196 government shutdowns of internet in 25 countries. (Kingsley 2019 NYT Sept 2)
How can geographic distance affect international business strategy?
- Natural resources are present in some locations and not others
- Talent is concentrated in some locations
- Transportation costs are not uniform even within a country
- Communications & coordination costs rise with global operations
How can economic distance affect international business strategy and organization?
– mixed effects
• Purchasing power varies between (& within) countries
– challenge to design product/ service for sale in a country with less purchasing power than home country
⇒ high economic distance is disadvantage
• Wages vary between countries
– firm can lower costs by offshoring activities to country with wages below home country
⇒ high economic distance is an advantage
CAGE framework (what are the four things and who developed it)
- developed by Pankaj Ghemawat
- 4 things:
- Cultural Distance
- Administrative Distance
- Geographic distance
- economic distance
def. cultural distance
things having to do with differences in values, beliefs, norms, tastes; differences in language, religion, ethnicity, trust, social networks
def. administrative distance
things having to do with differences in laws, regulations, politics, legal systems, trading blocs or membership in international organizations, level of protectionism, historical ties & conflicts
def. geographic distance
things having to do with differences in physical distance, common borders,
time zones, natural physical
environment, physical infrastructure, communications, climate, population density
def. economic distance
things having to do with differences in income, economic institutions, natural resources, financial resources, human
resources, information/knowledge,
innovation systems, savings,
investment, consumption, level of economic development.
what is a multinational corporation (MNC)?
a company that operates in more than one country
What are the five myths of globalization?
- it’s new
- it’s extensive
- it’s unavoidable
- it erases geographical distance
- it erases economic distance
What are the two ideas of measuring poverty?
income inequality and absolute poverty
What are different ways to measure inequality?
income inequality(pre-tax and transfers) vs. consumption inequality (after tax plus transfers & subsidies)
-inequality of condition vs inequality of opportunity
