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The Context
The global environment
Managing International University of Barcelona
Companies
Elio Shijaku elio.shijaku@ub.edu
Global Business
Concepts
Global business
Business around the globe.
International business
Firms engaging in international economic activities
The action of doing business abroad
Multinational enterprise (MNE)
Firms engaging in foreign direct investment and
operating in multiple countries.
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Global
Business
Concepts
Foreign direct investment (FDI): Investment in,
controlling, and managing value-added activities in
other countries.
Emerging economies: Developing countries
(emerging markets).
Gross domestic product (GDP): Sum of value added
by resident firms, households, and governments
operating in an economy.
Purchasing power parity (PPP): Conversion
determining the equivalent amount of goods and
services different currencies can purchase.
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Global
Business
Concepts
BRIC(S): Acronym for the emerging economies of
Brazil, Russia, India, China, (South Africa).
Triad: Developed economies of North America,
Western Europe, and Japan.
Base of the pyramid (BoP): Vast majority of
humanity who make less than $2000/year.
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Exhibit
The
Global
Economic
Pyramid
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Exhibit
Why study Global Business?
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Why research
Global
Business?
Determining the success and failure of firms around
the globe?
Interdisciplinary research
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Exhibit
A Unified Framework for
Global Business
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InstitutionBased View
on Firm
Performance
Firm performance is influenced by institutional
frameworks that govern firm behavior on a
global scale.
Institution
Defined as the 'rules of the game,' both formal
(laws, regulations) and informal (norms,
cultures).
Institutional Framework
Comprises the formal and informal institutions
that dictate how individuals and firms should
behave.
Encompasses mechanisms dealing with the
external environment, shaping interactions
outside the firm.
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ResourceBased View
on Firm
Performance
Firm performance is driven by internal resources and
capabilities unique to the firm.
Internal Resources
Liability of Foreignness
Describes the inherent disadvantages experienced by
foreign firms in host countries due to their nonnative
status.
Overcoming Disadvantages
The foundation of the RBV, emphasizing the firm's own
resources as the primary determinant of performance.
A firm's unique resources and capabilities can mitigate
the liability of foreignness.
Firm-Specific Resources
For a firm to excel, it must possess valuable and unique
resources not shared by competitors in the same market
environment.
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Globalization
Introduction
Globalization refers to the process of increasing
worldwide interconnection, impacting cultural,
political, and economic aspects of life. General
Definition
Globalization is the worldwide interconnection at
the cultural, political, and economic level
resulting from the elimination of communication
and trade barriers.
Levels
Globalization can be analyzed from various
perspectives, including the country, industry, and
firm levels.
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Globalization
advantages
The close integration of countries and peoples
across the globe yields significant benefits.
Economic Growth
Enhances economic development and elevates
standards of living worldwide.
Technological Advancements
Facilitates increased sharing and development of
technology among nations.
Cultural Integration
Promotes extensive exchange and blending of
cultural values and practices.
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Economic and Labor Issues
• Undermining of wages in wealthy countries.
• Exploiting workers in poorer countries.
Corporate Power and Market Dynamics
Globalization
disadvantages
• Excessive power granted to Multinational Enterprises (MNEs)
• Sales of MNEs are unevenly distributed across the globe,
indicating disparities in market penetration and economic
benefits.
Operational and Strategic Challenges for MNEs
• Necessity for MNEs to configure their value-chain activities on
a worldwide basis to avoid competitive disadvantages.
• Firms encounter a "liability of foreignness" when entering new
geographic markets.
Environmental Concerns
• Alteration of the physical environment as a consequence of
global business operations.
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Misconceptions
about
Globalization
Globalization is often misunderstood as a
uniform process of integration without regional
distinctions or local adaptations.
Uniform Integration
Homogenization of Products
Local Value-Chain Activities
Regional Significance for MNEs
Cultural Homogenization
Local Responsiveness
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Global
competition
features
Companies engaged in global competition often
exhibit several key traits that reflect the
complexities of operating on an international
scale.
Traits of Globally Competitive Firms:
Product Strategy
Market Presence
Product Offerings
Financial Management
Managerial Dynamics
Strategic Conversations
Organizational Structure
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Why do firms
pursue
globalization?
Seek revenue growth opportunities
Compete against global competitors
Support global customers
Access global knowledge
Achieve efficiency in managing value-chain
activities
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Distance and
Global
Strategy
Distance continues to play a factor in global expansion
decisions.
It will always be easier to cross an immediate border
than to enter a market many thousands of miles away.
Cultural distance includes language, religious,
cultural, and social differences.
Administrative distance involves a country’s
institutions and the degree to which they are related
to those of another country.
Geographic distance involves both the miles
between countries and the access to the
infrastructure of trade, such as harbors and airports.
Economic distance primarily involves the relative
wealth or income of a country’s consumers.
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Semiglobalization
Perspective that suggests that barriers to
market integration at borders are high
Not high enough for complete insulation between
countries
Types of globalization
Full isolation - Suggests localization
Strategy that treats each country as a unique
market
Expensive
Full globalization - Lead to standardization
Strategy of treating the entire world as one market
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Ethical
Dilemma
Opponents of globalization
Non-governmental organizations (NGOs):
Organizations not affiliated with governments
Firms view NGOs as partners
Current business school students exhibit values
and beliefs that favor globalization
Exhibit
Views on Globalization
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Conclusions
As the cross-border flow of people, knowledge,
ideas, products, services, and management
practices accelerates, the notion of homebased advantage is becoming weaker.
In many industries, geographic distance is
becoming increasingly irrelevant to buyers and
sellers.
https://www.youtube.com/watch?v=ZoDFteBVt6
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References
Daniels, J.D., Radebaugh, L.H. International
business : environments and operations,
Prentice Hall International 2001
Chapter 1 – Overview of International Business
and Globalization
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