Midterm IMS 3310- Henderson

What is globalization?

The tendency toward an international integration of goods, technology, information, labor and capital, or the process of making this integration happen.

Why is globalization important?

International business is important because of the increasing scale and scope of activities that occur across national borders.

What was Dubai's story?

Dubai was faced with the challenge of not having a future in terms of economic value with only a desert. So it's the people decided to build, not only build structures build land out at sea.

What was Dubai's path toward globalization?

They decided to build, it was built by immigrants, its architects, accents, even its aspirations are due to globalization, meaning they came from many places from around the world and other cultures.

Why do companies globalize?

Companies tend to globalize to gain a larger customer base, new revenue sources, competition, new capital, access to cheaper labor, and access to resources.

FDI versus non equity modes of entry, what are the pros and cons to each?

Non equity: An agreement between two or more firms to work together on a certain project or to operate in a paritcular market by establishing a new entity taht is jointly owned by all the partner. The profits/losses, risks and the control of the operations are shared by all the partners. It helps a firm to take the benefit of local partner's knowledge of the local market. At the same time it involves the risk of opportunistic behavior by the partner and chances of conflicts between the partners for control are also high.

Foreign Direct Investment: This has direct ownership of facilities to produce or market a product in a foreign country. Establishing a wholly owned subsidiary is the most costly method of serving a foreign market and the firm has to bear the full capital costs as well as all the risks associated with overseas operations. But at the same time it provides the highest degree of control over the operations.

Why do firms and countries trade?

Most countries trade for the need of resources, demand factor conditions, supporting industries, strategy, structure, and competition.

What are the major trading pacts?

North American Free Trade Agreement (NAFTA), European Union (EU), Association of Southeast Asian Nations (ASEAN), Asia-Pacific Trade Agreement (APTA)

Why are trading pacts relevent to Multinational Entities?

Trade pacts help multinational entity's trade and save costs while trading for resources which they need.

Absolute Advantage

The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources.

Comparative Advantage

Producing something if he can produce it at lower cost than other competitors.

Does trade lead to foreign direct investment?

Historically, foreign direct investment has followed foreign trade. The reason is that engaging in foreign trade is typically less costly and less risky than making a direct investment in foreign markets. Today, due to technology, competition, and the new production firms are dispersing activities closer to resources, to integrate regionally or globally.

What is the internalization theory?

The concept that to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary rather than sell it in the open market.

Why is the internalization theory important?

The firm may have superior knowledge, but due to inefficiencies the firm keeps this knowledge within the firm by investing in foreign subsidiaries, thus gains a superior return on the investment made to produce products or services.

Monopolistic Advantage Theory

Theory that foreign direct investment is made by firms in oligoploistic industries possessing technical and other advantages over indigenous firms.

Why is knowing if an industry has monopolistic advantage in a country important?

The firms in these industries must possess advantages not available to local firms in order to overcome the liabilities associated with being a foreigner.

What role do institutions play?

These are organizations constructed by a group, society, or cultures to achieve a common goal that function to provide stability and meaning to social life.

United Nations (UN)

A 192 member organization which is dedicated to the promotion of peace and global stability.

International Monetary Fund (IMF)

Establishes rules, cooperation, trade high employment, economic growth, and reduction of poverty for international monetary aspects.

World Bank

An institution which lends money for development projects.

Socio Cultural Forces

These are elements in society that are capable of causing a change in cultural ideas and influence people.

What are the dimensions of culture?

1. Individualism/Collectivism-degree which culture are integrated into groups in a culture.

2. Power Distance-accept/expect power to be distributed unequally.

3. Uncertainty Avoidance-a society's comfort with uncertainty.

4. Masculinity/Femininity- distribution of roles among genders.

5. Confucian Dynamism- the virtue of will power in a culture.

Renewble Resources

These resources can recycled and reused as an energy source. (wind, hydro, solar, and geothermal energy)

Non-renewable Resources

These are resources such as petroleum, coal, and natural gas which cannot be reused as an energy source.

Sustainability

Commitment of business to operate without reducing the capacity of the environment to provide for future generations.

Collaborative Governance

Participants (parties, agencies, stakeholders) representing different interests are collectively empowered to make a policy decision or make recommendations to a final decision-maker.

What is the Tetra Pak sustainability model?

Their model is about suppliers, their company, customers, consumers, and society and their packaging/processing solutions which are sustainable. Strategic priorities: growth, innovation, environment, performance

What is triple bottom line?

An approach to accounting that measures the firms social and environmental performance in addition to economic performance.

EEM Model

An approach for identifying the business drivers of an organization which is seeking a sustainable business value.

What is fracking?

The process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside.

Greenhouse Effect

The greenhouse effect occurs when Earth's atmosphere traps solar radiation because of the presence of certain gases which causes the planet to get warmer.

Purchasing Power Parity

A measure of how many units of currency are needed in one country to buy the amount of goods and services that one unit of currency will buy in another country.