Topic 11

Question 1

Globalization 1.0

Answer 1

Between 1492 and 1800, old world expands markets. Gov’s and countries are the main players.

Question 2

Globalization 2.0

Answer 2

From 1800 to 2000, multinational companies increasingly went global for markets and labor and technoligcal innovations continued to reduce transportation communication and production costs.

Question 3

Globalization 3.0

Answer 3

Indivuduals and small groups are connecting to all the knowledge pools in the world. Empowering individuals to compete & collarborate with each otehr in teh flattened global play field.

Question 4

Jospeh Stiglitz things

Answer 4

“Globalization is something that has to be shaped”

In recent history, special interests have driven teh globalization agenda.

Hollowing out of the middle class is not due to global. but government that hasn’t effectively responded to these forces.

Criticises the IMF, WTO & World Bank.

Question 5

What is Economic Globalization?

Answer 5

The integration of national economies into the international economy through trade, foreign direct investment capital flows, migration and the spread of technology. It leads to the emergence of a global marketplace or a single world market.

Question 6

Four globalization forces:

Answer 6

• Advancement of science & technology, shipping costs half, airfreight costs (1/6th) telecommunication costs 1% of the 1930 price and has had similar quailty improvements.
• International and regional free trade agreements. (WTO, ASEAN, NAFTA.
• Market oriented economic reforms (china entry to WTO, soviet collapse).

Question 7

Why are trade barriers used?

Answer 7

Protecting demestic employment

Protecting consumers

Nurturing developing industries

Helping domestic fims establish monopolies in worl market

National security.

Question 8

Exchange rate exposure

Answer 8

• Balance sheet exposure: Enterpise has foreign affiliates keeping record books - and assets - in local currency. Must be translated for reporting.
• Market based exposure: If the firm operates globally, then it is obviously exposed.

Question 9

How can financial markets manage exchange rate exposure?

Answer 9

• Forward contracts: Two corporations agree to exchange currancies at some rate in the future.
• Currency futures, same as forward contracts but differ in amount, delivery date and tradability.
• Currency Options: The right to trade currency at a specific rate in the future, but not forcing to.
  
  • Call option, the right but not obligation to buy some currency at some rate at or before some date.
  • Put option: the right but not obligation to sell some currency at a specified rate at or before some date.

Question 10

What is a multinational corporation?

Answer 10

Business that own and ontrol foreign subsidiaries in more than one country. Control is important, seperates MNC from FDI.

Question 11

Why do businesses go multinational?

Answer 11

• Industry life cycle and MNC.
• The eclectic paradigm.
• Locational advantages.
• Internalization advantages.

Question 12

Why is Industry life cycle and MNC an advantage to multinational corporations?

Answer 12

• When the market is saturated, launch overseas.

Question 13

Why is the eclectic paradigm an advantage to MNC’s?

Answer 13

Developed by Dunning (1980’s).

Three advantages:

Ownership; superior technology & R&D, product differenciation & global branding, managerial skills, corporate culture.

Location; Avaliability of resources, cost of shit, transport & tax crap, economic climate.

Intenalization; benifits of estabilshing overseas subsidiary are greater then costs of arranging a contract with external party. Transaction costs get fucked up going internationally.

Question 14

Problems for MNC’s?

Answer 14

• Langauge
• Selling and marketing in foreign markets
• Attitudes of host government
• Communication and coordination between subsidiaries.