FORCES DRIVING GLOBALIZATION
The main drivers of globalization are: Cost factors. Market factors. Technology factors. Global business cycle.
Cost factors: Companies are looking for cheaper labour and manufacturing costs to enable them to stay competitive, so they outsource to other countries. The country receiving the inward investment benefits fromthe creation of jobs, skills development and technology transfer. Its low costs give it a major competitive advantage. True or false? Companies trying to safe money in labour and manufacturing costs benefit countries that have lower costs. True / false Market factors: As domestic markets become saturated so emerging markets offer new opportunities. The BRICs (Brazil, Russia, India, Chine) coulddominate world trade in the 21st century, as the US did in the 20th and the UK in the 19th. In any case, companies need to establish a global presence because customers are also global. It is dangerous to stand aside as competitors merge and make alliances. True or false? Companies shouldn’t let the BRICs merge and make alliances. True / false
GLOBAL BUSINESS ADMINISTRATION
Technology factors:The Internet makes comparison of supply chain costs easy for manufacturers, and comparison of final price easy for the end-user. Mobile communications allow employees to keep in touch all over the world. Software tools on company intranets allow managers to access information anywhere, anytime. True or false? Technology allows companies know the costs and prices of competitors at any moment. true/ false Global business cycle: The “business cycle” – shown below – used to happen separately in different national economies. With the integrated global economy it is now international. Recovery ( = upswing) Growth ( = expansion / boom) Recession (=contraction / downturn ) Depression (= slump)
In every turn of the cycle, the pace of globalization is likely to increase – particularly duringthe “recovery” and “growth” phases. Remember that not all recessions lead to a depression – there might just be a mild slowdown in the economy (seen as a reduction in GDP – gross domestic product.) True or false? With globalization all recession phases in a country’s economy lead to depression. true / false
GLOBAL BUSINESS ADMINISTRATION
Company Strategy in the Face of Globalization
Mainstrategies : Import / Export. Outsourcing. Foreign direct investment (FDI) If a company wants to trade outside its own national borders, it has three basic strategies, depending on the level of involvement in the foreign market. These three are not mutually exclusive, and one can often lead to another: 1. Import / Export: This is the lowest risk but also gives the lowest profit potential.Related options include franchising and foreign licensing. 2. Outsourcing: If companies want a deeper level of involvement, with a long-term contractual agreement they can outsource (= subcontract) some or all of their manufacturing. Increasingly, service jobs are also being outsourced. 3. Foreign direct investment (FDI): This is the highest risk but gives the most control and shows the most commitmentto the global market. Here companies buy property and businesses in the foreign nation. FDI includes acquisitions to create overseas divisions (= subsidiaries), joint ventures and strategic alliances. A costs and profits in a particular market, but keep their separate identities.
Match the strategies to their meaning Import / Export Outsourcing Foreign direct investment (FDI)
1.______________ refers to a company that contract with another company to provide services that might otherwise be performed by in-house employees. 2. _____________ is also known as international trading. Enterprises can work as distributor by focusing on goods and services that cannot be obtained on national soil. 3. _____________ is defined as a company from one country making a physical investment into...