Globalization Globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society.

Globalization

Globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society

Globalization is a term used to describe how human beings are becoming more intertwined with each other around the world economically, politically, and culturally.

Globalization broadly refers to the expansion of global linkages, the organization of social life on a global scale, and the growth of a global consciousness, hence to the consolidation of world society.

The present worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments.

The process of exploiting economically weak countries by connecting the economies of the world, forcing dependence on (and ultimately servitude to) the western capitalist machine.

Globalization refers to the distribution of the production of goods and services, through reduction of barriers to international trade as tariffs, export fees, and import quotas. Globalization has accompanied and allegedly contributed to rapid economic growth in developing countries through increased specialization and application of the principle of comparative advantage

Globalization is the growing economic interdependence of countries worldwide through increasing volume and variety of crossborder transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology. 

Ethical Considerations in International Operations

Cultural relativism holds that ethical truths are determined by the culture where decisions and actions occur.

Cultural normativism holds that there are universal standards of behavior that apply everywhere.

Ethical Considerations

Bribery consists of payments, or promises to pay cash or something else of value, to public officials and/or other people of influence.

The U.S. Foreign Corrupt Practices Act of 1997:

outlaws the payment of bribes by U.S. firms to foreign officials, political parties, party officials, or party candidates

applies to firms registered in the U.S. and to any foreign firms that are quoted on any U.S. stock exchange

was extended in 1998 to include bribery by foreign firms operating in U.S. territory

Ethical Considerations

Child Labor According to the International Labor

Organization: more than 250 million children between 5 and 17 are

working worldwide nearly three-quarters of those children who work are

very young or are working in ways that endanger their health or well-being because of hazards, sexual exploitation, trafficking, and/or debt bondage

Those who argue in favor of child labor claim that in many instances if the children were not employed, they would in fact be worse off.

While some firms simply avoid operating in countries where child labor is used, other firms work to establish responsible operating policies in those locales.

International Strategy

Strategy Formulation

Business LevelDiversificationInternational

Competitive Advantage

SynergyComplementarity

Complementarity: the filling-out, balancing, or extension of strategy to increase strategic opportunities.

Low CostDifferentiatedFocused/BroadIntegratedSpeed

RelatedUnrelated

InternationalGlobalMultidomesticTransnational

International Strategy

International Business – Conducts business across national boundaries

Multinational Corporation (MNC) – Controls business activities in more than one country

Assumptions

Strategies that favor global operations and brands are based on three assumptions:

Customer needs and preferences worldwide are becoming more homogenous

Customers worldwide prefer higher quality at lower prices

Economies of production and marketing can be achieved through global operations

Benefits of International Strategy

Four C’s Customers – expand markets Costs –economies of scale and scope Competition – utilization of resources Capabilities – opportunities for

learning

Political government instability; social unrest; terrorism;

absence of law Economic

trade barriers; tariffs and subsidies; property rights laws

Management differences in culture and customs, language,

customer preferences, distribution systems Currency

exchange rate changes

Risks of International Strategy

Porter’s National Diamond

Extends and adapts theory of comparative advantage to take account of three factors:International competitive advantage is about companies not countries—the role of the national environment is providing a home base for the company.

Sustained competitive advantage depends upon dynamic factors-- innovation and the upgrading of resources and capabilities

The critical role of the national environment is its impact upon the dynamics of innovation and upgrading.

Choices in International Strategy

Respond to Two Pressures• Pressure to Reduce Costs• Pressure for Local Adaptation

Results in Four Strategic Choices

• International• Global• Multidomestic• Transnational

Pressures and Strategies

Strengths and Limitations of Strategies

Strategy Strengths Limitations

International • Leverage and diffuse parent’s knowledge and core competencies.

• Lower costs because of less need to tailor products and services.

• Greater level of worldwide coordination

• Limited ability to adapt to local markets.

• Inability to take advantage of new ideas and innovations occurring in local markets.

Strengths and Limitations of Strategies

Strategy Strengths Limitations

Global • Strong integration across various businesses.

• Standardization leads to higher economies of scale which lowers costs.

• Helps to create uniform standards of quality throughout the world.

• Limited ability to adapt to local markets.

• Concentration of activities may increase dependence on a single facility.

• Single locations may lead to higher tariffs and transportation costs.

Strengths and Limitations of Strategies

Strategy Strengths Limitations

Multidomestic • Ability to adapt products and services to local market conditions.

• Ability to detect potential opportunities for attractive niches in a given market, enhancing revenue.

• Less ability to realize cost savings through scale economies.

• Greater difficulty in transferring knowledge across countries.

• May lead to “overadaptation” as conditions change.

Strengths and Limitations of Strategies

Strategy Strengths Limitations

Transnational • Ability to attain economies of scale.

• Ability to adapt to local markets.

• Ability to locate activities in optimal locations.

• Ability to increase knowledge flows and learning.

• Unique challenges in determining optimal locations of activities to ensure cost and quality.

• Unique managerial challenges in fostering knowledge transfer.

Entry Modes of International Expansion

Ext

ent

of I

nves

tmen

t R

isk

High

LowLow High

Degree of Ownership and Control

ExportingExporting

LicensingLicensing

FranchisingFranchising

Strategic AllianceStrategic Alliance

Joint VentureJoint Venture

Wholly OwnedWholly OwnedSubsidiarySubsidiary