Global Business Mid-Term

Be able to define global business.

-       International business occurs when production or distribution of goods or services crosses borders.

1.     Comprehend how strategic management is related to international business.

-       Strategic management answers questions about the development and implementation of strategies.

1.     Understand how entrepreneurship is relevant in today’s workforce.

-       Entrepreneurship creates jobs, it is the recognition of opportunities and use of resources to implement new ideas for new ventures.

1.     Identify what global managers need to understand about globalization.

-       Globalization is a shift towards a global economy, increases opportunities for international business.

1.     Understand who the 8 stakeholders are and what role they play in business.

-       Shareholders, social groups, communities, employees, suppliers, customers, environmental groups, governments.

1.     What are the determinants of culture in a business.

-       Culture is how we think and function, it includes beliefs, mindsets, and practices of a specific group of people. Political, economic, and social philosophies all impact value formation.

1.     How does culture impact local business management practices.

-       The pace of business, business protocol, decision making and negotiating, managing employees and projects, propensity for risk taking, marketing sales and distribution.

1.     What is global business ethics and how is it impacted by culture.

-       People’s culture influences what they view as right vs wrong.

-       Global business ethics – the view of what is right or wrong in a global business setting.

1.     Know areas within a company where there are different kinds of cultural norms.

-       Human resources.

1.     International trade theory

-       An exchange of goods and services between people or entities in two different countries. Economists developed theories to explain the mechanisms of trade.

1.     What do FDI’s comprise of

-       Horizontal – entering a new market similar to its domestic market

-       Vertical – invests internationally to provide input into its core operations.

-       Backward vertical FDI – brings goods back into its home country.

-       Greenfield – builds new facilities from scratch.

-       Brownfield – purchasing or leasing existing facilities.

-       Inward – investment coming into home country by a firm in a foreign country.

-       Outward – investment by a firm into foreign companies in other countries.

1.     Compare and contrast trade theories

Classical or Country Based Theories:

-       Mercantilism – more gold.

-       Absolute Advantage – wealth is judged by living standards, trade show flow freely.

-       Comparative advantage theory – specialize in producing what they do better.

-       Factor Proportions Theory – gain advantage by producing and exporting goods that require resources or factors they have in great supply.

 

Modern or firm-based trade theories:

-       Developed to address interindustry trade. – trade between two countries in the same industry.

-       Product life cycle theory – new product, maturing product, standardized product. New product production occurs in home country of innovation.

-       Global strategic rivalry theory – firms encounter global competition and must have advantages to prosper sometimes through barriers to entry.

-       Porter’s competitive advantage theory – a nation or firm’s competitiveness in an industry depends on the capacity of the industry and firm to innovate and upgrade.

1.     Determine which international trade theory is most relevant today and how it continues to evolve.

-       No one theory is dominant, most use a combination of these theories. Impacted by new info and business, economic, and political realities.

1.     Review different political systems

-       Anarchism – no gov control, totalitarianism – total gov control, democracy – derives power from the people, pluralism – both public and private groups are important to a well-functioning political system.

-       Capitalism vs Planned Economy.

1.     Identify different legal systems

-       Civil law – based on a detailed set of laws that constitute a code and focus on how the law is applied to facts.

-       Common Law – based of traditions and precedence. Judges interpret the law and judicial rules to set new precedent.

-       Religious law – based on religious guidelines.

-       Hybrid legal systems – uses a combination of these systems.

1.     Why managers evaluate expanding internationally.

-       Draw managers interested in expanding revenues, markets, profitability, and future potential. To improve cost effectiveness, expand into new markets, or follow global customers.

1.     Review the input criterion for scenario analysis:

-       1. Choose target issue, scope, and time frame the scenario will explore
2. Brainstorm key drivers and decision factors that influence the scenario
3. Define the two dimensions of greatest uncertainty
4. Detail the four quadrants of the scenarios with stories
5. Identify indicators that could signal which scenario is unfolding
6. Assess the strategic implications of each scenario.

1.     Know the components of PESTEL analysis

-       Political, economic, sociocultural, technological, environmental, and legal.

1.     Know the components of CAGE analysis :

-       Cultural, Administrative, Geographic, Economic

1.     Traditional Entry Modes for International Expansion

-       Importing – the sale of products or services in one country that are sourced in another country.

-       Outsourcing – when a company contracts with a third party to do some work on its behalf.

-       Offshoring – Taking some business function out of the company’s country of origin to be performed in another country generally at a lower cost.

-       International outsourcing – the term for outsourcing to a nondomestic third party.

-       Business process outsourcing – the contracting of nonprimary business activities and functions to a third-party provider. Ex. Payroll, HR, Accounting, tech support.

1.     What are the main entry modes to expanding globally.

-       Exporting

-       Licensing and franchising

-       Partnership and Strategic Alliances

-       Establishing new subsidiaries

-       Acquisition

1.     Why import or export.

-       Exporting has fast entry and low risk. It can be cheaper to import. Exporting is done because it is the easiest way to participate in global trade and less costly than other strategies and is easier to exit.

 

1.     What are the components of countertrade.

-       Bartercard – functions like a credit card but no cash is involved, it is funded with its own goods and services.

Counter purchase – the seller receives cash contingent on the seller buying local products or services in amount of the cash.

1.     Why would a company engage in global sourcing?

-       Reduced costs, speeding up innovation, reducing operational issues.

-       Global sourcing is buying raw materials, components, or services from foreign countries.

1.     What options do companies have to finance their importing and exporting.

-       Financing against collateral (secured financing) Can also ask for cash in advance. Open account – an arrangement in which exporters ship goods and then bills the importer. Some companies provide credit to their business customers. Government supported organizations also help.

1.     Review SWOT analysis for global managers

-       Strengths, weaknesses, opportunities, and threats.

1.     What is strategy?

-       The concept of how a firm will achieve its objectives.

1.     Types of strategies:

-       Business strategy – how a firm competes.

-       Corporate strategy – what business will compete in and how these choices work together as a system.

1.     Vision Statement vs Mission Statement:

-       Vision statement – a future oriented declaration of an organization’s purpose and aspirations.

-       Mission statement – an organization’s statement of purpose that describes who the company is and what it does.

1.     Types of Scope

-       Vertical scope – all the activities from gathering of raw materials to the sale of the finished product that a business goes through to make a product. 

-       Horizontal scope – the number of similar businesses or activities at the same level of the value chain.

Geographic scope – the number of different geographic markets a firm participates in.