(Mt) – St Cloud State University Globalization of Business Discussion

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Chapter 1. Globalizing Business 1 Learning Objectives • Explain the concepts of international business and global business • Give three reasons why it is important to study global business • Articulate one most fundamental question and two core perspectives in the study of global business • Understand the nature of the global economy and the key forces that drive globalization • Identify the characteristics of the next generation of multinational managers © Cengage Learning Globalization • Globalization refers to the shift toward a more integrated and interdependent world economy. Globalization has two facets: 1) the globalization of markets 2) the globalization of value-chain activities © Cengage Learning The Rise of Global Products and Global Customers • The needs of customers for many products and services are growing more similar (E.g., McDonald’s, Boeing, Toyota.) • MNCs around the world becoming more vulnerable to competition in their home markets • Semiglobalization Barriers to market integration at borders are high but not high enough to completely insulate countries from each other © Cengage Learning Foreign Direct Investment • Developed countries get the bulk of FDI (69%) while developing countries get around 30%. • Least developed countries get minimal FDI. • Emerging markets will continue to attract FDI. • Developing countries provide opportunities and risks. • Implications for managers – significant opportunities around the world. • Multinational managers should look at risk rating of countries. © Cengage Learning Emerging Economies © Cengage Learning The Internet and Information Technology • Electronic Communication – E-mail, World Wide Web, etc. • Allows multinationals to communicate with company locations throughout the world. • Allows multinationals to monitor worldwide operations. • Expands global reach of organizations. • Information technology is spurring a borderless financial market. © Cengage Learning New Competitors are Emerging • Global trade has two important effects in developing new competitors: • When developing countries are used as low-wage platforms for high-tech assembly, multinationals facilitate the transfer of technology. Assemblers may become builders and creators of technology. • Aggressive multinationals from emerging markets are also expanding beyond their own borders. © Cengage Learning Regional Trade Agreements • Regional Trade Agreements – agreements among nations to reduce tariffs and develop similar technical and economic standards. • 3 largest agreements account for nearly half the world’s trade – EU, NAFTA, APEC • European Union (EU) – includes 27 European countries, with additional countries being considered. – Allows free movement of goods and services and a common currency (EMU). © Cengage Learning Regional Trade Agreements • The North American Free Trade Agreement (NAFTA): links United States, Canada, and Mexico in an economic bloc. – Allows freer exchange of goods and services • The Asia-Pacific-Economic Cooperation (APEC): looser confederation of 19 Asian nations with less specific agreements on trade facilitation. © Cengage Learning Countries of the World • Transition economies: countries that have changed from mostly communist systems to market/capitalistic systems – E.g., Czech Republic, Hungary, Poland. • Emerging markets: those countries that are currently between developed and developing countries and are rapidly growing – E.g., India, China, Brazil, and Russia (BRIC) © Cengage Learning Countries of the World • Less developed countries (LDCs) have yet to show much progress in the global economy – Most are located in Central and South America and Africa. © Cengage Learning The Benefits of Globalization • Resulting in lower prices in many countries as multinationals are becoming more efficient. • Benefiting many emerging markets such as India and China as these countries enjoy greater availability of jobs and better access to technology. • Major reason why many new companies from Mexico, Brazil, China, India, and South Korea are the new dominant global competitors. © Cengage Learning Negatives of Globalization • Not all economies of the world are benefiting equally or participating equally in the process. • Terrorism, wars, and a worldwide economic stagnation have limited or reversed some aspects of globalization. • Producing negative effects such as scarcity of natural resources, environmental pollution, negative social impacts, and increased interdependence of the world’s economies. • Widening the gap between rich and poor countries. © Cengage Learning Why Firms Seek Globalization? • • • • • • • Seek new markets Exploit firm specific assets Leverage economies of scale Access low cost factors Lower risks Secure key supplies Follow competitors Managing in the Global Marketplace • Managing an international business differs from managing a domestic business because: ▪ Countries are different. ▪ The range of problems confronted in an international business is wider and more complex. • Firms have to find ways to work within the limits imposed by government intervention in the international trade. • International transactions involve converting money into different currencies. Multinational Management: A Strategic Approach • Considers how managers formulate and implement strategies to compete successfully in the global economy. • Strategies are the maneuvers or activities used to increase and sustain organizational performance. • Multinational strategies must include maneuvers that deal with operating in more than one country and culture. • Helps position yourself in evolving global economy. © Cengage Learning A Strategic Approach © Cengage Learning FIRST CORE PERSPECTIVE: AN INSTITUTION-BASED VIEW • An institution-based view suggests that the success and failure of firms are constrained by institutions • Formal rules – requirements that treat domestic and foreign firms as equals enhance the potential odds for foreign firms’ success or those that discriminate against foreign firms, would undermine the chances for foreign entrants • Informal rules – cultures, ethics, and norms play an important part in shaping the success and failure of firms around the globe © Cengage Learning SECOND CORE PERSPECTIVE: A RESOURCE-BASED VIEW • A resource-based view suggests that the success and failure of firms are determined by firm’s ability to develop resources and capabilities further core competences. • liability of foreignness – inherent disadvantage that foreign firms experience in host countries because of their nonnative status © Cengage Learning Corporate Social Responsibility and Business Ethics • Some MNCs are becoming more proactive in responding to social and ethical issues that arise from their overseas operations. • Some issues are: o Climate change o Environmental degradation and pollution o Sweatshop conditions for labor o Bribery © Cengage Learning Next Generation of Multinational Managers: Characteristics • Global mindset • Emotional intelligence • Long-range perspective © Cengage Learning Next Generation of Multinational Managers: Characteristics • Talent to motivate all employees to achieve excellence • Accomplished negotiation skills • Willingness to seek overseas assignments • Understanding of national cultures © Cengage Learning Trends Shaping Future Business Environment • • • • • Blurring of industry boundaries Flexibility matters more than size Focusing on niche Hyper-competition Emphasis on innovation and the learning organization © Cengage Learning Conclusion • Chapter provides key background information to support study of multinational management. • Must be prepared to compete with firms from any country. • Must be prepared to collaborate and align with firms from any country. • Develop organizational strategies and skills to compete in different nations in a global economy. © Cengage Learning

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