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International Management > Why do companies go international? > Flashcards

Why do companies go international? Flashcards

1
Q

What are the 3 eras of globalisation?

A
  • Globalisation 1.0
  • Globalisation 2.0
  • Globalisation 3.0
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2
Q

What was the focus of globalisation 1.0?

A

The focus was set on competition on a country level.

The question that was faced was: how can I collaborate through my country?

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3
Q

What was the focus of globalisation 2.0?

A

The focus was set on competition on a company level.

How can I go global with others through my company?

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4
Q

What was the focus of globalisation 3.0?

A

Focus was set on competition on an individual level.

How can I collaborate globally on my own?

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5
Q

What are 2 performance indicators for countries?

What do they fail to measure

A

GDP (Gross Domestic Product - BIP)

GNP (Gross National Product - BNE)

–> They both fail to measure quality of life

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6
Q

What is a measurement for economic and social wealth?

A

The Better Life Index

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7
Q

What is the Better Life Index based on?

A
  • Individual well-being–> Quality of life (work/life-balance, health status) AND Material conditions (income/jobs/housing)
  • Sustainibility of well being over time (Nature Capital, Human Capital, Economic Capital)
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8
Q

What is the relationship between life satisfaction and the GDP

A

There is a positive relationship between the two, yet the GDP does not include any measure for life satisfaction

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9
Q

What is the definition of international trade

A

International trade its the exchange of goods and services across international borders

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10
Q

How can globalisation be defined

A

Globalisation is the process of social, political, economic, cultural and technological integration among countries around the world

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11
Q

What are some organisations or agreements that implement regulation through global and international integration?

A
  • WTO (World Trade Organisation)
  • TTIP (Transantlantic Trade and Investment Partnership)
  • CETA (Comprehensive Economic and Trade Agreement)
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12
Q

How does the WTO establish regulation through global and regional intergration?

A
  • consists of agreements that cover goods, services and intellectual property
  • Include commitments by countries to lower tariffs & other trade barriers
  • Require governments to make their trade policies transparent
  • Prescribe special treatment for developing countries
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13
Q

How does TTIP establish regulation through global and regional integration?

A

TTIP helps individuals as well as large/small businesses by:

  • creating access to overseas markets
  • making exports to EU/US easier and cheaper by decreasing regulations
  • setting new rules to make overseas investments, imports/exports easier and fairer
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14
Q

How does CETA establish regulation through global and regional integration?

A

CETA is a trade agreement between Germany and Canada

- Cuts 99% of tariffs in order to increase investments & trade

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15
Q

What are some Pros and Cons of globalisation

A

Pros

  • brings wealth/jobs/tech. to many regions of world
  • increases availability of goods and decreases prices
  • forces companies to be more competitive

Cons

  • is not responsive to needs of developing countries
  • off shoring to low wage countries
  • possible downward pressure on wages and working conditions
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16
Q

What are effects of protectionism and deglobalisation?

What is a possible way to persue protectionism?

A
  • Slow down the trade within and thereby the growth of the global economy
  • A way of achieving protectionism/deglobalisation is through taxes and tariffs on imports
17
Q

What are some benefits of global market expansion?

And what are the advantages for firms that engage in international Marketing?

A

Benefits are higher performance through indepedence, lower costs, higher profits.

These firms:

  • outperform domestic counterparts
  • grow more than twice as fast in sales
  • have high ROE & ROA
18
Q

What is FDI (Foreign Direct Investment)?

A

FDI is making an investment to create direct, stable and long-lasting links between econmies

  • FDI is a key element of globalisation
  • FDI can be beneficial for both the receiving and investing economy
19
Q

What are 4 types of FDI (reasons for going global)?

A
  1. ) Market Seeking FDI
  2. ) Efficiency Seeking FDI
  3. ) Resource Seeking FDI
  4. ) Strategic Asset Seeking FDI
20
Q

How can Market seeking FDI be characterised?

What is trade-off faced with variety seeking FDI?

A

Also called horizontal FDI
- leads to proximity to customers –> therewitw savings in transport and tariffs

Proximity-Concentration Trade-Off
- firms might decide against FDI and rather export due to benefits from concentration in production

21
Q

How can efficiency seeking FDI be characterised?

A
  • is manufacturing different products in different locations
  • -> goal of seeking aboslute and comparative cost advantages
22
Q

How can resource seeking FDI be characterised?

A
  • seeking to get access to scarce resources (ex. Siemens in Australia to get magnets)
23
Q

How can strategic asset-seeking FDI be characterised?

A
  • getting links to strategically important information & communication networks
    ANDS
  • achieve cross investment –> reward foreign investor for investment in local market (ex. Renault Nissan/Daimler)
24
Q

What are Pros of FDIs for the host countries?

In what categories can these pros and cons be distinguished

A

Pros
Capital Market Effects
–> broader access to outside capital
–> risk sharing

Technology & Production Effects

  • -> Access to new tech and development of R&D
  • -> Support & development of infrastructure
  • -> Export diversification

Employement Effects

  • -> Creation of new jobs
  • -> income multiplier effects
25
Q

What Internationalisation Theories exist?

A
  1. ) Trade Theories
  2. ) Theories of FDI
  3. ) Across the board theories
26
Q

What are the different trade theories?

A
  1. ) New Trade Theories
  2. ) Ultra-Classical Trade Theories
  3. ) Classical Trade Theories
27
Q

What are the basic assumptions, the types of trade and the effects of the New Trade Theory?

A

Basic assumptions:
–>firms offer horizontally differentiated goods/have increasing returns to scale

Type of trade:
–>Intra trade = trade of similar goods within an industry (ex. BMW & Toyota)

Effects of trade:

  • -> lower prices through increasing competition
  • -> emphasis on horizontal differentiation
  • -> More choices for consumers (through more horizontal differentiation)
28
Q

What are the different theories within the Ultra-Classical Trade Theories?

A
  1. ) Mercantilism –> trade arises because countries want to generate wealth
  2. ) Theory of absolute (cost) advantage –> trade arises because countries specialize in production of goods where they have abs. cost adv.
  3. ) Theory of comparative (cost) advantage –> -“- specialize in goods where they have comp. cost advantage
  4. ) Factor proportions trade Theory –> country that is wealthy in factor should export goods that use a lot of that factor
29
Q

What are different approaches of the Classical Trade Theory?

A
  1. ) (Non-) Availibility Approach –> trade arises because products not available in other countries
  2. ) Lindner Hypothesis on Demand Structure –> trade arises between countries with similar demand structures - similar wealth (ex. specialise in certain product qualities (high/low) then trade between each other)
  3. ) Technology Gap Theory –> trade arises because countries display different levels of tech capabilities (time lag between invention in one country and imitaion in other)
30
Q

What two approaches belong to the Theories of FDI?

A
  • Trade Barrier Approach

- Theories of oligopolistic parallel behaviour

31
Q

Explain the Trade Barrier Approach (Theories of FDI)

Name examples of trade barriers

A
  • FDIs arise due to prevention of other trade forms through barriers
  • FDI sometimes only possibility to enter foreign market due to regulations

Examples of trade barriers:

  • Tariff barriers (duties)
  • Non tariff barriers (import/export license quotas, “buy national” policies
32
Q

Explain the Theories of Oligopolistic Parallel Behaviour (Theories of FDI)

A
  1. ) Follow the leader thesis –> investment in countries where leaders have already inversted
  2. ) Cross investment thesis –> investment in leader’s home country
33
Q

What Models belong to “across the board theories” and what do these types of theories explain

A
  1. ) Uppsala Model
  2. ) Porter’s Diamond Model
    - -> They both explain forms of internationalisation
34
Q

What does the Uppsala Model say?

What types of firms do not go a long with this model

A

Uppsala Model says:

  • companies gain experience in home market and then start to export
  • after this, creation of subsidiaries in foreign countries that are most like own

–> Born global firms are not congruent with Uppsala Model

35
Q

What are the components that are taken into account with Porter’s Diamond Model? Explain them and their implications briefly

A
  1. ) Strategy, Structure, Rivalry
    - high local rivalry –> less global rivalry
    - high local rivalry –> creates pressure to innovate and improve
  2. ) Demand Conditions
    - trend setting markets –> allow firms to anticipate global trends
    - demanding local markets –> lead to international adv. for firms
  3. ) Related & Supporting Industries (clusters)
    - Presence of clusters –> drives growth/innovation within specific industry
  4. ) Factor Conditions
    - value creating factors (skilled resources) –> support founding of clusters/innovativeness
    - adverse conditions (labour shortage) –> force firms to seek innovative solutions leading to national comparative advantages
36
Q

What are Cons of FDIs for the host countries?

In what categories can these pros and cons be distinguished

A 
Cons
Capital Market Effects
--> higher competition for scarce local capital
--> increasing interest rates
--> unequal balance of payments

Tech & Production Effects

  • -> Tech not always appropriate
  • -> Govt. investment in infrastructure higher than benefits

Employement Effects

  • -> Limited skill development/creation
  • -> Competition for scarce skills
  • -> Unstable employement (possibility to easily move production)

International Management (7 decks)

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