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Lecture 1 Charles Hill
* Globalisation o Of markets ? offering the same basic product worldwide, helps to create a global market. More in industrial goods than in consumer goods. (FIRM goes out to WORLD) o Of products ? sourcing goods and services for your product to take advantage of costs and quality of factors of production. (FIRM takes in WORLD)
* The emergence of global institutions o GATT?WTO, IMF, World Bank, G20
* Drivers of globalisation o Declining barriers to trade and investment
? Outsourcing becoming more common, economies becoming more interdependent, world economy has become wealthier o Technological change
? The internet has emerged as an equaliser
? Transportation technology has drastically improved
? Global markets increase because you can sell worldwide from home
? Global products increase e.g. radiology outsourcing in healthcare
* The changing demographics of the global economy o Emerging economies have begun to chip away at American dominance on world output and world trade. o Emerging economies are becoming strong participants in global FDI.
* The changing nature of the MNE o Rise of non-US multinationals - e.g. all the electronic companies o Rise of mini multinationals - e.g. GW Barth = less than 65ppl, 70%market share in cocoa bean roasting machinery
* Globalisation debate o Need to show that the share of national income labour receives is lower than the share capital receives
- not true for skilled labour, true for unskilled. Societies need to invest in education. o Even if labour's share of the pie has decreased, total pie may have increased i.e. higher standards of living - true, real labour compensation has expanded. o And is the decline in labours share because of moving production to low wage countries or simply because of improvements in production technology?
* Managing in the global marketplace o The country is different o The range of problems is wider and more complex: cultural complexity (in products, promotions etc.), economic complexity (which markets to enter etc.) o Firm must find ways to work within the local governments limits o International transactions involve converting between currencies. Daniels and Co. The forces driving globalisation (a little repetitive -- > streamline)
1. Increase and expansion of technology
2. Liberalisation of cross border trade a. Foreign competition spurs domestic producers b. Hope for reciprocal liberalisation with other nations
3. Development of services that support international business a. Banks deal in international currencies, transportation companies promise guarantees etc.
4. Growing consumer pressures
5. Increased global competition
6. Changing political situations
7. Expanded cross-national cooperation What's wrong with globalisation?
* Threats to national sovereignty o Local objectives and policies may be undermined by big firms o Small economies overdependence. George Akerlof - small nations don't have the administrative ability to handle globalisation o Cultural homogeneity "Coca-Colonisation"
* Economic growth and the resultant environmental stress o But may help in promoting uniform standards? ?
Growing income inequality and personal stress
Value added to firms that pursue globalisation
* Expanding sales o Sales increase in numbers and large fixed costs (e.g. R&D) better covered
* Acquiring resources o At lower costs or of better quality
* Minimizing risk o Different economies follow different cycles; diversify to hedge your risks Models of operation in international business
* Merchandise import export
* Service import export o Turnkey operations - hire a foreign firm to work on only one project o Management contracts - hire a foreign firm to provide personnel o Licensing agreements, royalties, franchising
* Investment o Direct Investment (FDI) - controlling interest in foreign firm o Portfolio Investment - non-controlling interest in foreign firms Pankaj Ghemawat - Redefining Global Strategy Uses Coca Cola's case study of globalising itself under different CEO strategies
* Countries are more different than perceived. Globalisation is less huge than perceived.
* Not a global network, but a collection of nation-state networks
* Goizueta - a one-size-fits-all strategy
* Isdell - it does not make sense to act the same way in all markets
* Author suggests: SEMI GLOBALISATION o Don't indulge in growth fever about foreign markets o Don't put too much faith in economies of scale o Statelessness does not really exist o Ubiquity is difficult o Centralisation and standardization are too often chosen by successful companies when competing abroad.
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