part 1: introduction to the global business environment

Business management in a global context chapters 1, 2, 3.

Define globalization

Globalization is the shift towards a more integrated and interdependent world economy increasing the amount of cross-border trade.

Differentiate between the globalization of markets and the globalization of production.

globalization of markets - merging historically distinct and separate national markets into one huge global marketplace

globalization of production - sourcing of goods and services from locations around the globe taking advantage of national cost differnces (arbitrage)

What are the characteristics of globalization ?

• increasing amounts of cross-border trade

• rise of MNEs and increased competition for jobs between nations

• erosion of differences among distinctive national cultures and identities

• development of international bodies to try to deal with the increased interconnections

What are the four trends towards globalization?

• changes in world output and world trade - the share of global economic activity of developed countries falling while the share of global economic activity of developing countries rises

• foreign direct investment - investments by developing nations are on the rise while the FDI stock ( total cumulative value of foreign investments) by rich industrial countries is falling

• types of companies - increase in the number of non-US multinational enterprises and a growth in the number of mini-multinationals due to advancements in technology and the internet

• changes in world order- the collapse of russian communism, emergence of mexican and latin american markets, changes in government structures all create new opportunities and inward investment.

Define slowbalization

slowbalization is the process of slowing down, or even reversing, the trends of globalisation. It is an era of slouggish ness marked by cross-border investment, trade , bank loans and supply chaiuns shrinking or stangnating as part of world GDP

what are the reasons leading to slowbalisation ?

• advantages of economies of scale and arbitrage from global sourcing has worn away

• cost of moving goods stopped falling

• protectionist poilicies continue to tighten

• geopolitical rivalry grows

implications of slowbalisation

• deeper links with regional blocs

• supply chains are closer to home

• tension between trading pattern and a global financial system

• cannot fix climate change, migration, tax avoidance without global cooperation

how can companies take advantage of globalization trends ? ( what are the forces of globalization ?)

1. low barriers to trade and investment

   • companies can locate production facilities in the optimal location

   • production and sales take place in multiple markets creating interdependence between countries

2. technological change

   • advancements in communication information processing and transportation

   • the micro-processor facilitates high-power low-cost computing

   • the internet and e-commerce became a global equilizer lessening the constraints of scale, location, and time zones

3. transportation improvements

   • containerisation and development of super freighters (huge trains, trucks and ships) have facilitated the growth of glowbalization

What id Freideman’s hyperglobalist view ?

according to Friedeman (2005) globalization is accelerating and is flattening the world so that every nation will eventually be a part of a global marketplace that is shaped considerably by technological advancements increasing homogeneity in the world which means free cooperation and connection all over the world

- bonus -

world flatteners include :

• fall of the berlin wall

• increased outsourcing and offshoring

• development of global supply chains

• etc

What is Ghemwatt’s semi-globalist view ?

according to Ghemwatt (2001 ; 2017)companies consistently overestimate the attractiveness of foreign markets. The true amount of trade and investment between countries is affected by the geographical distance between countries ( there is an inverse relationship between countries’ distance and magnitude of trade)

What is Ghemwatt’s CAGE framework ?

the CAGE framework states that barriers of trade could form due to

Cultural distance - language, race , social norms, values

Administrative distance - political and institutional differences

Geographic distance - physical distance, size, climate

Economic distance - differnces in income, infrastructure, human talents

- bonus -

the law of distance states that international interactions are dampened by CAGE

What are the globalization debates in jobs and income ?

What are the globalization debates in terms of labor policies and environment?

What are the globalization debates in shifts in economic power?

What are the globalization debates in wealth distribution ?

What are the key functions of institutions ?

• to reduce uncertainty by limiting the range of acceptable actions

• to reduce transaction costs from research and information,bargaining, policing and enforcement due to opportunistic behavior

Why do institutions matter to international businesses ?

1. managers and firms rationally pursue their interests and make choices withing formal and informal constraints

2. formal and informal institutions combine to govern firm behavior in situations where formal constrains fail, informal constraints play a larger role

what is a political system ?

A political system represents the rules of the game on how a country is governed politically and has 2 dimensions: the degree to which the emphasize collectivism vs individualism and the degree to which they are totalitarian or democratic

define collectivism

collectivism refers to a system that stresses the primacy of collective over individual goals ( the needs of society as a whole are viewed as more important than individual freedoms)

(Denmark tax and gov spending example)

define individualism

individualism is based on two concepts, : that individual freedoms and self expression are guaranteed and that people are allowed to pursue their own self interest within the rule of law and that will maximize society’s welfare