d270 midterm mega cheat sheet

Tom Schwaub's overall message

Hard skills prepare you for the world, but soft skills are what make you good.

Guest speaker Tom: 4 learned truths

1) Communication approaches differ greatly 2) Authority structures shape the work 3) Social norms must be understood 4) Try everything legal

Guest speaker Tom: 3 tips

1) Take advantage of Kelley international 2) Meet people around you 3) Get to know the faculty

When stressed, people tend to revert to…

Their old, comfortable nature (the status quo).

The Platinum Rule (Garcia's golden rule)

Treat others the way they want to be treated ("Do unto others as they'd like done unto them").

What Professor Garcia said was most important in globalization

Consumer pressures, since they force companies to expand and improve.

Main countries focused on in class

Norway, Australia, Chile, US, India, and China

Chapter 1 Case 1 (sports): key point

Sports are an international business in themselves, and some sports are much better known in other parts of the world.

Premier League and La Liga player nationalities

Premier League: players from 66 countries. La Liga: players from 50 countries.

ATP tournaments in 2019

64 tournaments in 31 countries

2020 Australian Open prize money

About US $50 million

Roger Federer's deal after leaving Nike

Uniqlo, a guaranteed US $300 million over 10 years

Global stars

Athletes like Cristiano Ronaldo who earn far more than the average pro in less popular sports

Globalization

The widening and deepening of interdependent relationships among people from different nations. Sometimes refers to eliminating barriers to cross-border movements of goods, services, capital, technology, and people.

What globalization enables

More variety, better quality, and lower prices

What globalization is about

The flows of people, goods, and services

International business (IB)

All commercial transactions (sales, investments, transportation) that take place between two or more countries

Motives for IB: private companies vs. governments

Private companies do it for profit. Governments do it for profit and for other (political, economic, social) reasons.

Why global growth is hard to measure

Countries are interdependent and boundaries shift.

How globalization is measured

Degree of trade openness and degree of connectedness

Degree of trade openness includes

World trade, restrictions on imports (tariffs, quotas), and restrictions on foreign ownership of assets (fewer restrictions = more globalization)

Trade Openness Index

(World imports + world exports) / world GDP

DHL Global Connectedness Index

Measures globalization with more than 3.5 million data points across trade, capital, information, and people flows

3 aspects of the DHL Index

1) Focuses on actual flows between countries 2) Goes beyond trade (4 flows, 12 components) 3) Looks at the depth and breadth of each flow

Most highly globalized countries tend to be

Small, high per capita income, with lots of imports

Share of world production sold outside its country of origin

About 25% today vs. about 7% in 1950

iPhone 7 value earned in China

About $8 of the $237.45 factory cost

Seven forces behind globalization

1) Rise in and application of technology 2) Liberalization of cross-border trade and resource movements 3) Development of services that support IB 4) Growth of consumer pressures 5) Increase in global competition 6) Changes in political situations and government policies 7) Expansion of cross-national cooperation

Growth of consumer pressures

The most important force behind globalization, because it pushes companies to expand

Cost of a 3-minute New York to London call

$10.80 in 1970 vs. under $0.20 today. VoIP is virtually free.

How fast globalization advances

Faster than our ability to process information

Born-global company

A company founded with a global focus, thanks to its founders' international experience and better communications (e.g., SoundCloud)

G20 share of world totals

About 90% of world production, 80% of world trade, and two-thirds of world population

Three areas that belong to no single country

Noncoastal ocean areas, outer space, and Antarctica

Why governments restrict cross-border trade

To protect domestic producers from foreign competition, even though citizens want more goods at lower prices

How tariffs influence foreign trade

They raise import prices, so consumers buy fewer or cheaper imports and favor domestic products

Effects of economic freedom

Low tariffs, few ownership restrictions, and fewer taxes

Most trade flows between

Rich/advanced countries and other rich/advanced countries

Zero-sum game (Garcia)

Emerging economies gain traction while industrialized countries fall behind

Globalization 1.0

Silk Road, about 200 BC to the 1700s (Han Dynasty). Birth of trade between East and West.

Globalization 2.0

About 1500 to 1945. Rise of European colonial empires through the end of WWII.

Globalization 3.0

About 1950 to 1998. World war recovery, MNE expansion, spread of democracy and export development.

Globalization 4.0

1999 to present. Modern deglobalization pressures: terrorism, pandemics, financial crises, income inequality, new nationalism, fraying democracy.

Important 1999 event for globalization

Protestors disrupted a World Trade Organization meeting

Changes in globalization since WWII

Fewer import restrictions, more foreign ownership of assets, more democracies, more world trade, more production sold outside its country of origin

Pros of globalization

Spread of business, ideas, and cultures; higher profits from more customers; access to cheaper or better foreign resources; more sales and jobs; better products from more R&D; reduced risk; more competition; growth of the middle class and poverty reduction

Cons / criticisms of globalization

Threats to national sovereignty; environmental stress; growing income inequality and personal stress; local businesses hurt; poor working conditions; more competition and unemployment; pandemics; overreliance; automation eliminating jobs

Three main anti-globalization concerns

1) Threats to national sovereignty 2) Environmental stress 3) Growing income inequality and personal stress

When small countries feel overly dependent on large countries

When there is a threat to national sovereignty

What personal stress leads to

Social and economic unrest

Negative effects of globalization

Environmental damage, exploitation, job losses, loss of local culture, dependency, loss of technology

Positive effects of globalization

Efficiency, competition, varied products, quality, and relations

Poverty reduction

The middle class has enough to cover basic needs plus wants. Before the Industrial Revolution there was no middle class.

Extreme poverty

Severe deprivation of basic human needs (living on no more than $1.90 a day)

Extreme poverty rates over time

About 50% in 1950, 47% in 1990, 10% in 2019, about 8% in 2020

Middle class: Asia vs. US

Asia's middle class grew enormously after 1980. The US middle class barely changed while the top 1% got wealthier.

Environmental stress

Resource depletion and higher emissions and pollution

Growing income inequality and stress

A bigger gap between rich and poor. The threat of job loss causes personal stress.

Carbon footprint

The total set of greenhouse gases emitted

Mega-ship pollution

Emissions from 15 mega-ships match all the cars in the world. Each mega-ship pollutes as much as 50 million cars.

Effect of more competition on globalization

Both good and bad

"Have nots" of globalization

Places like much of Africa, Cuba, North Korea, and Iran, with one or no major trade partners

Biggest trading partner of the US

Mexico

Offshoring

Relocating business processes to a lower-cost foreign location, often shifting from a domestic source. Especially white-collar, technical, professional, and clerical services.

Pros of offshoring

Lower costs and more jobs for people in poorer countries

Cons of offshoring

Fewer high-value US jobs and lower US earnings

Outsourcing

Turning over much of the responsibility for production to independent suppliers

A company that makes items abroad, such as Microsoft, is an example of

Outsourcing

Reshoring / rightshoring

Bringing operations back from abroad to domestic locations

Jobs lost to automation and AI by 2030 (one prediction)

800 million worldwide

Worldwide globalization concerns

Immigration and terrorism, Brexit, COVID, NAFTA under attack, the Russia-Ukraine war, US exit from the Trans-Pacific Partnership

COVID's effects on globalization

Merchandise trade volume fell; international internet traffic rose 25-50%; international tourism fell 74%; portfolio equity investment fell, stabilized, then rallied; GDP declined about 30% (per class)

Has COVID pushed the world into deglobalization?

No. The world is not in deglobalization.

Deglobalization

The process of diminishing interdependence and integration between nations; the view that globalization will slow down or collapse

Connectography

The view that globalization is inevitable because connecting infrastructure keeps accelerating and consumers want the best products regardless of origin

Three scenarios for globalization's future

1) Further globalization is inevitable 2) IB grows mainly along regional rather than global lines 3) Forces against globalization slow the growth of both

Why globalization should matter to you

Larger markets, more resources, understanding and respecting competition, expanded career opportunities

Coca-Cola singing ad

Brought people together at the peak of globalization and was translated into many languages

Interdependence

Countries relying on one another for resources, goods, or services

Agglomeration

Clustering of industries for mutual advantage

Microprocessor

The central processing unit, generally made from a single integrated circuit

Carnival Cruise Lines' legal nationality

Panamanian, an example of a flag of convenience

Filipinos in ship crews

About a third of the world's ship crews, because of English fluency and willingness to work for low wages

Issues facing the international cruise business

Terrorism and funding

Baseball ties: US vs. Japan

US games continue until there is a winner. Japanese games end in a tie after 12 innings.

Why companies engage in IB (3 objectives)

Sales expansion, resource acquisition, and risk reduction ("business is a game with no 4th quarter")

SMEs and US exporters

About 280,000 SMEs with fewer than 500 workers make up 98% of US exporters

Two modes of IB operations

Merchandise (tangible) and services (invisible)

Fastest-growing part of IB

Service exports and imports

Factors in a company's external environment

Physical, institutional (government policies), behavioral, and economic

Big reason companies make products in other places

Cost and differentiation strategies, using brand image

Types of market penetration in IB

Direct imports/exports, sales operations, licensing/franchising, foreign direct investment, transportation and distribution, strategic alliances

Entry mode approaches

Capital-related, transfer-related, and trade-related

Turnkey operation

A contracted construction project handed to the owner once operational. The contractor trains local staff, then turns the key over to local management for a fee.

Management contract

One company provides personnel to perform management functions for another for a fee. Less risky, costly, and complex.

Licensing agreement

One firm lets another use its assets (trademarks, patents) to produce and market its product in a region in return for royalties

Franchising

A type of licensing where the company gives continuous assistance and lets the other use its trademark

Royalties

The percentage of sales a licensee pays a licensor, usually 5 to 15%

Foreign direct investment (FDI)

The investor takes a controlling interest in a foreign company

Portfolio investment

A noncontrolling financial interest in another entity, such as shares or loans