1 Globalizing Business Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LEARNING OUTCOMES 1. Explain the concepts of international business and global business 2. Give three reasons why it is important to study global business 3. Articulate the fundamental question that the study of global business seeks to answer and the two perspectives from which to answer it 4. Identify three ways of understanding what globalization is 5. Appreciate the size of the global economy and the strengths of multinationals 6. Understand the organization of this book Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 2 LO 1 Global Business Concepts • International business • Business that engages in international economic activities • The action of doing business abroad • Multinational enterprise (MNE): Firm engaging in foreign direct investment and operating in multiple countries • Foreign direct investment (FDI): Investment in, controlling, and managing value-added activities in other countries Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 3 LO 1 Emerging Markets (Emerging Economies) • Contribute approximately half of the global gross domestic product (GDP) • Adjusted for purchasing power parity (PPP) ➖PPP: Conversion determining the equivalent amount of goods and services different currencies can purchase Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 4 LO 1 Emerging Markets (Emerging Economies) (continued) • The Great Transformation of the global economy • Embodied by the shift in economic weight and engines of growth toward emerging economies, such as BRICS ➖BRICS: Brazil, Russia, India, China, and South Africa Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 5 LO 1 Exhibit 1.1 - The Global Economic Pyramid Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 6 LO 2 Exhibit 1.2 - Why Study Global Business? Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 7 LO 3 Exhibit 1.4 - A Unified Framework for Global Business Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 8 LO 3 Institution-Based View • Firm performance is determined by institutional frameworks governing firm behavior worldwide • Institutional framework: Formal and informal institutions that govern individual and firm behavior • Deals with the external environment Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 9 LO 3 Resource-Based View • Focuses on a firm's internal resources and capabilities • Liability of foreignness: Inherent disadvantage experienced by foreign firms in host countries because of their nonnative status • Firm’s resources and capabilities can offset the disadvantage Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 10 Resource-Based View (continued) • Firms must have valuable and unique resources that are not shared by competitors in the same environment Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 11 LO 4 Advantages of Globalization • Greater economic growth and higher standards of living • Increase in technology sharing • Extensive cultural integration Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 12 LO 4 Disadvantages of Globalization • • • • • Undermines wages in rich countries Exploits workers in poor countries Gives too much power to MNEs Destroys the environment Undermines national sovereignty Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 13 LO 4 Views on Globalization • New force sweeping through the world in recent times • Result of technological innovation and Western ideology ➖Focused on exploitation and domination through MNEs • Long-run historical evolution since the beginning of human history Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 14 LO 4 Pendulum View of Globalization • Globalization rapidly accelerated as emerging economies, inspired by the Four Tigers, joined the world economy • Rapid growth in 1990s and 2000s drew backlash • Inaccurate historical view that globalization is new • Fear of loss of jobs in developed economies • Complaints alleging that MNEs are destroying local companies, cultures, and values in emerging economies Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 15 LO 4 Pendulum View of Globalization (continued) • The Great Recession, Brexit, and Trump remind all firms the importance of risk management • Risk management: Identification and assessment of risks ➖Preparation to minimize the impact of high-risk, unfortunate events • Scenario planning: Technique to prepare and plan for multiple scenarios Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 16 LO 4 Semiglobalization • Perspective that suggests barriers to market integration at borders are high • Not high enough for complete insulation among countries Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 17 LO 4 Semiglobalization Strategies • Total isolation - Suggests localization • Strategy that treats each country as a unique market • Expensive • Total globalization - Leads to standardization • Strategy of treating the entire world as one market Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 18 LO 5 Exhibit 1.7 - Recent Changes in the Fortune Global 500 Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 19 LO 4 Organization of the Book • Divided into the following parts: • Foundations ➖Comprises chapters 2 to 4 • Tools ➖Comprises chapters 5 to 8 • Managing around the world ➖Comprises chapters 9 to 15 Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 20 KEY TERMS • International business (IB) • Multinational enterprise (MNE) • Foreign direct investment (FDI) • Global business • Emerging economy (emerging market) • Gross domestic product (GDP) • Purchasing power parity (PPP) • BRIC • BRICS • Triad • Base of the pyramid (BoP) Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, wholeCengage or in part. GLOBAL4||CH2 CH1 Copyrightin©2018 Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 21 KEY TERMS (continued) • Expatriate manager (expat) • International premium • Institution-based view • Institution • Institutional framework • Resource-based view • Liability of foreignness • Globalization • Risk management • Scenario planning • Semiglobalization Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, wholeCengage or in part. GLOBAL4||CH2 CH1 Copyrightin©2018 Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 22 SUMMARY • International business refers to the action of doing business abroad • Understanding how global business decisions are made may facilitate one's own career in such firms • Perspectives in global business • Institution-based view • Resource-based view Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, wholeCengage or in part. GLOBAL4||CH2 CH1 Copyrightin©2018 Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 23 SUMMARY • Globalization is the close integration of countries and peoples of the world • There is an increase in the number of MNEs originating from developing countries Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, wholeCengage or in part. GLOBAL4||CH2 CH1 Copyrightin©2018 Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 24 Copyright ©2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part. GLOBAL4 | CH1 25
