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Globalization moves toward integration and interdependence among 5 levels, what are they?
Country, Global, Company, Industry, and Cultural level
how to calculate FDI?
inflows or outflows as ratio (%) of GDP (so divided by GDP)
Globalization at the country level means?
countries integrating into global economy at different percentages
globalization at the global scale implies?
implies greater worldwide convergence of variables and economic dimensions
what are foreign trade flow and foreign direct investment used to measure?
used to measure the degree of globalization of specific countries
Foreign direct investment (FDI)
Investment by a MNC (or country) in a foreign country's economy.
Foreign trade flow formula?
X + M as % of GDP (so over GDP)
International Monetary Fund (IMF)
an international organization that acts as a lender of last resort, providing loans to troubled nations, and also works to promote trade through financial cooperation
How much of the world's economy does Asia represent?
A major chunk
What is the name of the fund that countries put $ into to help invest other countries
international monetary fund
Globalization at the global level for companies means?
means you will see the same company across the world competing in their market, like Unilever
Monsanto and patents?
Seeds can't be patented because they are naturally found, but genetically modified seeds can be patented
Globalization at a company scale impleis?
implies a a company has extended its presence through a large amount of world markets
Biggest beer company in the world?
Anheuser-Busch InBev
how is globalization at the company level measured?
through firm's global sales orientation and Trans-Nationality Index (TNI)
firm's global orientation takes into account?
where the company is selling its products-services and how much it is selling in each of the regions
firms global sales orientation?
has 3 main regions (US/Europe/Asia) and has 4 classifications of orientation, home-region, bi-regional, host-region, and global oriented
Global Sales Orientation, Home-region oriented?
at least 50% of sales in its home region
Global Sales Orientation, Bi-regional oriented?
at least 20% of sales in each of the two regions, but less than 50% in one of them
Global Sales Orientation, host-region oriented?
More than 50% of sales in a region different from the home region
Global Sales Orientation, Global oriented?
At least 20% of sales in each of the three regions but less than 50% in one of them
Trans-nationality index (TNI)
how much a company has extended its activities abroad considering 3 measures of activities: sales, employees, and assets
TNI formula?
international sales/Total sales + Int. Employees/T employees + Int Assets/T Assets
a larger TNI number means?
a company is more international
how is a company an international company?
if they pay international employees
Globalization at the industry level means?
means there is a large amount of the same company across the same industry across the world
what are 3 drivers for globalization?
economy liberalization,
What is the relationship between industries and competitive requirements?
different industries have different competitive requirements
subsidiary
a company controlled by another company, think of a daughter company
Before, the % of a country's population would be similar to their GDP output, what changed this?
industrial revolution
economies of scale
a proportionate saving in costs gained by an increased level of production; cost advantages companies get when increasing their output
Technological development from globalization has 2 components, what are they?
information and communication technologies (ICT) and evolution of transport systems
trade liberalization?
the process of reducing barriers to trade
what are the 3 components of economy liberalization ?
trade liberalization, liberalization of financial flows, and liberalization of FDI flows
NAFTA?
North American Free Trade Agreement; allows open trade with US, Mexico, and Canada.
ASEAN?
Association of Southeast Asian Nations, an alliance that promotes economic growth and peace in the region
Mercosur
Pact among Argentina, Brazil, Paraguay, and Uruguay to establish a free trade area
WTO
The World Trade Organization - an international body that enforces agreements that reduce barriers to international trade; successor to the GATT
liberalization of financial flows
promoted through the establishment of Bretton woods (which IMF took over their role)
Liberalization of FDI flows example?
FDI legalized in China in 1971 and India in 1991
information and communication technology
basically the creation of phones, internet, and GPS
evolution of transport systems
cheaper and better air travel, faster trains, and a more standardized container shipping system
when did containerized shipping begin?
1956
how many MNC are there? How many subsidiaries do they have?
around 65,000 with over 700,000 subsidiaries
what are some downsides of global independence? give exmaples
the EverGiven ship stuck in Suez canal, financial crisis of 2008, Brexit, Covid, Ukraine, etc
Financial Crisis of 2008
The worst financial crisis since the Great Depression of the 1930s during Bush's second term. It resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world.
Sustainability?
meeting the needs of the present without compromising the ability of future generations to meet their own needs
UN global compact initiative?
an initiative by the UN that set 10 points on which businesses should adhere to
Maquiladora
Factories built by US companies in Mexico near the US border to take advantage of much lower labor costs in Mexico.
Corruption Perception Index (CPI)
An annual list published by Transparency International that ranks countries by their perceived levels of corruption, as determined by expert assessments and opinion surveys
Bribe Payers Index (BPI)
Annual list published by Transparency International that ranks countries in terms of the degree to which international companies with headquarters in those countries are likely to pay bribes to senior public officials in key emerging market economies
What are the 4 main costs of corruption?
political, economic, social, and environmental
Corporate Strategy
Guides direction of corporate growth
Corporate Social Responsibility
balancing the needs of different stakeholders, thus fulfilling economic, social, and the environmental obligations
respecting - and especially going beyond - all legal requirements is?
corporate ethical behavior
what are the 4 costs to corruption?
political costs, economic costs, social costs, and environmental costs
the development of the firm's main goals and plans to achieve them is called?
a firm's strategy
strategy "as a plan" is called? Strategy "as a process of adaptation/learning"? is called?
as a plan is called deliberate strategy as a process if called emergent strategy
what are three types of firm strategies?
from smalled to biggest, functional strategy, business strategy, and corporate strategy
Ansoff Matrix
"A Matrix looking at growth potential of a firms products. It classifies strategies into market penetration, new product development, market development and diversification and measures the degree of risk associated with each strategy."
Diversification strategy has 2 types, what are they?
related diversification strategy and unrelated diversification strategy
related diversification strategy
A corporate-level strategy through which a company expands its operations into new areas that are related to its existing operations
unrelated diversification strategy
A corporate-level strategy through which a company expands its operations into areas that have no relation (unrelated) to its existing operations
adding new, but related products/services into the markets is called?
related diversification
adding new but unrelated products/services into the markets is called?
unrelated diversification
horizontal and vertical diversification both are a part of?
related diversification
horizontal integration
a business strategy in which one company grows its operations at the same level in an industry
horizontal integration aka?
horizontal diversification
vertical integration
a strategy that allows a company to streamline (make more efficient) its operations by taking direct ownership of various stages of its production process rather than relying on external contractors or supplier
Vertical diversification aka?
vertical integration
backward integration?
occurs when a vendor attempts to acquire a company prior to it along the supply chain
forward integration?
occurs when a vendor attempts to acquire a company further along the supply chain
backyard and forward diversification (integration) are a part of?
vertical integration (diversification)
any feature that helps a firm to be perceived as "better" than its competitors is called?
competitive advantage
the five forces framework
identifies the five most common threats faced by firms in their local competitive environments and the conditions under which these threats are more or less likely to be present
competition from competition
competition from potential competition to the industry
competition from producers of substitute products
supplier bargaining power
customer bargaining power
value chain?
tool oriented towards describing the sources of competitive advantage
functional analysis and strategic profile is useful for?
useful for describing resources and capabilities, value them, and compare them with competitors' ones
analysis of resources and capabilities is useful for?
for assessing the potential resources and capabilities for creating (sustainable) competitive advantages
what competes against and is combined with other corporate strategy (growth) options and requires having a broader scope and managing increased complexity?
international strategy
international strategy involves the management processes through which companies?
assess the changing international environment and develop organizational responses in a way that they grow beyond the limits of home markets
What are the 4 conditions of the Porter's Diamond Model?
-factor conditions -demand conditions -related and supporting industries -firm strategy, structure, and rivalry
and the fifth, the role of the government
Porter's Diamond Model
recognizes that international trade occurs between firms in one country and firms of another country; integrates the theory of the firm with trade theory; four areas + chance + government; firm strategy, structure & rivalry; factor conditions; demand conditions; related & supporting industries
what do factor disadvantages trigger?
innovation
what are the 4 types of factors in Porter's diamond factor conditions?
basic, advanced, general, and specialized factors
Porter's Diamond factor condition?
Basically is a country rich? Wealthy? Includes basic factors, advanced factors, and general factors
Porter's Diamond demand condition?
How are the customers in the nation
Porter's diamond related and supporting industries
Basically establishing links, and among, companies related
when local firms are competitive, firms enjoy more cost effectiveness and innovative inputs
Porter's diamond role of the government?
Under this model, government should not create artificial competitive advantages (like import barriers) but they should stimulate the other 4 conditions
how is porter's diamond as a system?
it is interactive and self-reinforcing
why do firms go international?
conditions and drivers
Porter's Diamond home market rivarly?
domestic rivalry forces innovation which triggers continuous learning and improvement
the presence of strong local competitors force domestic firms to?
to seek for new markets, resulting in early internationalization
threats in the home country that force the firms to find new markets abroad are called?
push factors
opportunities in the destination countries that attract the firm to foreign markets is called?
pull factors
conditions that create a climate and framework favorable to internationalization are called?
facilitating factors
what are the three factors for the internationalization of a firm?
push, pull, and facilitating
what are 4 types of pull drivers?
market-seeking, resource seeking, efficiency seeking, and strategic asset seeking
opportunistic selection of international markets is part of what strategy?
emergent strategy
systematic selection of international markets is part of what strategy?
deliberate strategy
systematic selection of international markets includes 4 stages, what are they?
stage 1: preliminary screening stage 2: industry sales potential stage 3: company sales potential stage 4: identification of market opportunities
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