International management exam 1 review
world
Developing _________: Countries that rank lower on various classifications including GDP and the HDI • Economies are focused on one or more key industries • Poor commercial infrastructure • Business environments lack transparency • Weak competition
How the World Got Flat
Friedman identifies ten major events that made the world flat: 1. 11/9/89: Walls came down in Berlin and the windows operating system went up 2. 8/9/95: Netscape went public, which brought us the internet, overinvestment in fiber optic, then they commercialized a set of open transmission protocols for the internet, so no company could dominate the internet, which made the internet more interconnected, lastly netscape triggered the .com boom which triggered the .com bubble, which triggered the accidental overinvestment of 1 trillion dollars in fiber optic cable, which made Bangalore, New Haven, and Bethesda next door neighbors. Made communication virtually free. 3. Work-flow software: (All that software and all the standards that connected all that bandwidth with all those pc's, like microsoft word, microsoft netmeeting, and proprietary software that any of us have to run our businesses or schools.) Have your application talk to my application, so all the applications could connect for collaboration. 4. Open-sourcing: (decentralized software-development model that encourages open collaboration to create things for the public for free and offered for free.) Self-organizing, collaborative communities. Ex. Firefox webrowser 5. Outsourcing: Y2K (reduce costs or improve efficiency by shifting tasks, operations, jobs or processes to an external contracted third party) 6. Offshoring: (basing some of a company's processes or services overseas, so as to take advantage of lower costs.) Running with gazelles, eating with lions 7. Supply-chaining: Eating sushi in Arkansas 8. Insourcing: What the guys in funny brown shorts (UPS) are really doing. you send in your toshiba laptop through UPS to get fixed and it ends up at UPS's hub at Louisville Airport in Kentucky, where in an airline hanger cleanroom a UPS employee fixes your laptop, which means it never touches the hands of toshiba 9. In-forming: (you can mine data all by yourself) Google, Yahoo!, MSN Web Search 10. The Steroids: (Wireless and voice over the internet, which turbo charges all 6 of these new forms of collaboration, like offshoring and insourcing, and allows you to do any one from anywhere with any device totally mobily) Digital, mobile, personal, and virtual
FDI
GA Services Offered Services to attract ______ • Customized site searches for available buildings or sites • Information on operating costs, taxes, potential suppliers, industry sectors, etc. • Information on Georgia business and financial incentives • Access to programs for work force recruiting and training
outbound
GA Services Offered Services to assist _________ trade • State Trade and Export Promotion Program (STEP) - Supports the growth of small business exports (100 emps or less) • Georgia Reaching Out Worldwide (GROW) - Matches GA exporters with Intl' buyers and country experts
GDP per person
GDP per _______: GDP adjusted for purchasing power - Indicator of how much income local residents have
Globalization 1.0
Globalization _____ - (1492-1800) Columbus's discovers the New World. Shrunk the world from a size large to size medium. You went global through your country.
Globalization 2.0
Globalization ______ - (1800 to 2000) Emergence of huge, multinational corporations, but disrupted by the Great Depression and both World Wars. Shrunk the world from size medium to size small. The dynamic agent of change in that era of globalization was not the country, but the company. The multinational which went global in search of markets and labor
Globalization 3.0
Globalization ______ - (2000-present) Major software advances, worldwide knowledge, connected people, unlimited potential. Shrunk the world from size small to size tiny and flattening the playing field at the same time. The dynamic agent of this era is the ability of the individual or small group to globalize
Government Intervention in Trade
Governments do this for a combination of political, economic, social, and cultural reasons
flexible
Great collaborators, leverages, and adaptors are the ________ people
Gross domestic product (GDP)
Gross domestic product (GDP): The value of all the goods and services produced by a country in a single year. The most common measure of output. GDP = C + I + G + (X - M) or GDP = private consumption + gross investment + government spending + (exports − imports) If a country has a big C relative to I and G, then we know there is a big opportunity in consumer goods. If the country has a large I, then the country may have a political climate that supports investments with human capital, R&D equipment and the like. Operating in a country with a large G will likely require a positive relationship with the government and building government ties is key. A country with a large level of NE is an exporting country and may be a great place to export from. IF GDP decreases for 6 months it is termed a recession. IF goes on for a longer time, it's called a depression. Governments engage in fiscal and monetary policy to help avoid this. Fiscal policies involve government spending, lowering taxes and racking up budget deficits.Monetary policy emphasizes the supply of money, meaning that if money is more available, people will do more spending and investing. This is enacted through changes in the discount rate or the rate the central bank charges other banks to borrow money, changes in the reserve requirement for the amount that banks are required to keep on hand and pen market operations or by buying bonds and stocks. Because growth is a good thing and recession is a bad thing, most governments target an increase in money faster than the rate of growth. This could cause inflation or a rise in prices. A small amount of inflation is often seen as a good thing and an insurance against recession, however if a government is too aggressive in increasing the money supply, the rate of inflation can increase dramatically and countries can enter periods of high inflation where prices increase rapidly, which is devastating to real growth.
Financial environment education stability
How is FDI promoted? _______ incentives Infrastructure Administrative processes & Regulatory _________ Invest in ________ Political, economic, & legal ________
European Economic Area (EEA)
Iceland, Norway, and Liechtenstein. Not apart of the EU, but if you're an EU citizen, you can live in these countries and they can live in yours. This is .because, in exchange for a freedom of movement for people, they have to pay membership fees to the EU, even though they aren't members and don't get a say in its'' laws that they still have to follow. However, they are granted a pass on some laws, such as farms, fish, tax, justice, and foreign policy rules.
technology
In terms of _________: Internet and advances in logistics
production
In terms of _________: Sourcing goods and services easily from other countries
markets
In terms of __________: Falling trade barriers and changes in buyer preferences
Semiglobalization in Trade
International trade that crosses borders (2008 highest on record) (argues numbers are inflated) 29% Foreign direct investment (FDI) crossing borders 9% Private charitable giving to foreign recipients <10% Internet traffic routed across borders (2006‐08) 18% Average level of internationalization in businesses (survey of several hundred corporate managers guessed an average of 30%) 10%
Gender Empowerment Measure (GEM)
designed to measure of gender equality. GEM is the United Nations Development Programme's attempt to measure the extent of gender inequality across the globe's countries, based on estimates of women's relative economic income, participations in high-paying positions with economic power, and access to professional and parliamentary positions. It was introduced at the same time as the Gender-related Development Index (GDI) but measures topics like empowerment that are not covered by that index.
internationalization; change; desirable
The Main Debate: Are we Globalized? • Opinions differ as to: - How the ___________ of businesses is affecting countries' cultural, consumer, and national identities - How much ______ is actually occurring - Whether these changes are __________
U.S.A.
The ____ is #1 in both the FDI inflows for host economies and FDI outflows doe home economies
Foreign Direct Investment (FDI)
The acquisition of foreign assets with the intent to control and manage them.
Newly Emerging Markets
The expected next emerging markets (MIST) Mexico Indonesia South Korea Turkey
globalization debate
The globalization __________ centers on whether and how fast markets are actually merging together
Globalization
The shift toward a more interdependent and integrated global economy
Triple Convergence
The ten factors had powerful roles in making the world smaller, but each worked in isolation until the convergence of three more powerful forces - New *software* and the rise of the Internet - The incorporation of *knowledge* into business and personal communication - The market influx of billions of *people* from Asia and the former Soviet Union who want to become more prosperous—fast
Porter's National Competitive Advantage
Theory of how nations become competitive and why they are successful in specific industries. • A nation's or firm's competitiveness in an industry depends on the capacity of the industry and firm to innovate and upgrade. In today's terms: Countries must get the basics right. These include a solid rule of law, with patents and protections for intellectual property, enforceable contracts, and courts to resolve disputes; access to finance, particularly for startups; and an efficient physical and communications infrastructure."
5.04
Value of U.S. investments abroad as of 2015?
Local Firm Characteristics
Which countries are the most competitive? Consider 12 factors: Institutions (legal, political, etc.) Infrastructure Macroeconomic stability Health and primary education Higher education and training Goods market efficiency Labor market efficiency Financial market sophistication Technological readiness Market size Business sophistication Innovation Switzerland is #1 at 5.8 Forbes top 20 of Global 2000: ICBC of China is #1 World's top 20 companies by Revenue: #1 is Walmart
facilities
Who is in the state of Georgia? Top 8 countries with _______ in Georgia: Ireland Switzerland Netherlands Canada France England Japan Germany
employment
Who is in the state of Georgia? Top 8 countries with _______ in Georgia: Switzerland Ireland NEtherlands Canada France England Germany Japan
jobs knowledge economic
Why is FDI promoted? To create ______ (rule of thumb: $1B in FDI = 10,000 jobs) Expand local technical ___________ Increase their overall ___________ standards
general
Why is ________ trade promoted? Gain access to goods not produced locally Sell local goods abroad
Real GDP
______ GDP: adjusted for inflation
Ad valorem tariffs
______ valorem tariffs: calculated as a percentage of the value of the prod/service
Worldwide
_______ flow • $2.14 trillion in 2015
How
_______ is general trade promoted? Trade assistance • SBA.gov - Office of International Trade • Export.gov • GDEcD International Trade Division (video) Free trade zone
Key Emerging Markets
________ Emerging market: A country that is transitioning from a centrally managed economy to a free market-oriented economy (BRICS) Brazil Russia India China South Africa
CAGE framework
________ framework: The analytical framework used to understand country and regional differences along the distance dimensions of culture, administration, geography, and economics
Specific tariffs
________ tariffs: levied as a fixed charge, regardless of the value of the prod/service
Factors
________ that influence FDI: • Cost • Logistics • Market • Know-how • Customers and competitors • Policy • Ease • Culture • Impact • Expatriation of funds • Natural resources • Exit
International trade
________ trade: the concept of exchanging goods and services between people or entities in two different countries
Sanctions
________: set of specific trade restraints
Trade
________: the concept of exchanging goods and services between two people or entities
Japan
-Close alignment between government and large business - Highly skilled workforce -Largest importer of numerous raw materials -Service-based economy (76.5% GDP)
Industries likely to receive intervention
Large employers National champion Products that are vital to national security (i.e. telecom, aerospace) Staples (goods essential to everyday life) Produces entitlement goods and services (i.e. healthcare) Exploits natural resources (foreign firms are seen as robbers) High sunk cost commitments (oil refineries, railway lines)
United States
-4th largest geographic country -1st largest single economy (25% of global GDP) -Very diverse economy -Service-based economy (76.9% GDP)
Germany
-EU Member -5th largest single economy -Largest and strongest economy in Europe -Service-based economy (72.3% GDP)
Multidomestic view
-Pankaj Ghemawat's __________ view: A metaphor for viewing the world's markets as being more different than similar, such that the playing field differs in respective markets.
Tom Friedman
-foreign affairs columnist in 1995 -interest oscillated between lexis issues of technology and finance and globalization, and then olive tree issues of conflict and traditional geopolitics -this changed on september 11, 2001, where he dropped the globalization theme and started covering the 9/11 war. -focused on the arab/muslim world in order to understand the roots of 9/11 and the impact of our response to it -started doing documentaries for the discovery channel (roots of 9/11, wall that israel built in the west bank) -had an idea to go to call centers around the world and interview young people, who spend their days imitating americans, on what they thought of america John Kerry came out with his blast against Benedict Arnold executives who engage in outsourcing -Friedman decides to take his team to Bangalore, the high tech capital of India, to do a documentary on the other side of outsourcing -realized that something big had been happening in globalization, that he had missed while focusing on 9/11
European Union
1. Countries pay membership dues. 2. Countries vote on laws 3. Citizens of member countries are automatically EU citizens, which means you are free to live, work, and retire in any of the other EU countries Belgium France Germany Italy Luxembourg Netherlands 01/01/1973 Denmark Ireland United Kingdom 01/01/1981 Greece Portugal Spain Austria Finland Sweden Cyprus Czech Republic Estonia Hungary Latvia Lithuania Malta Poland Slovakia Slovenia Bulgaria Romania Croatia
developing
A __________ country must: • Implement transparency in its government, political, and economic institutions to help inspire business confidence • Develop local commercial infrastructure • Reduce trade barriers (attracts foreign businesses) • Educate the population (enhances the workforce) • Create a healthy domestic workforce that is skilled and relatively cheap
investor
A foreign direct ________ could be the following: • Individual or group • Incorporated or unincorporated entity • Public company or private company • Group of related enterprises • A government body • An estate (law), trust or societal organization
Schengen Area
An agreement between countries to take a meh approach to borders. That means you can travel across country borders with no passport check or border officers of any kind. The only countries excluded from this agreement by choice are the United Kingdom, Cyprus, Ireland, Croatia, Bulgaria, and Romania.
survive
Classify the economies by: The ability to ________ - The country's business environment sophistication
business
Classify the economies by: The ability to do _________ in the country - The country's legal, regulatory, and commercial infrastructure
Revenue potential
Classify the economies by: _________ potential - The country's income and the purchasing power of its people
Pankaj Ghemawat
Common Wisdom about GLobalization -Views Globalization as "Globaloney -characterizes the world as "semiglobalized" and "multidomestic" -The world got flat...(obsolescing) geography, distance or, in the near future, even language -national borders really don't matter much anymore because cross border integration is close to complete and we live in one world -compiled data on things that could either happen within national borders or across national borders -looked at the cross border component as a percentage of the total
• New projects • New jobs • Higher wages
Countries seek FDI because of: • New p_______ • New j_______ • Higher w______
Euro
Currency used by the majority of EU members.
trade; New
Drivers of Globalization are: • Declining ______ and investment barriers and • _____ technologies
The Italian Footwear Cluster
Example of Local Market Demand, and Local Suppliers and Complementary Industries
Local Market Resources and Capabilities
Example: Tilapia Fast growing (8 mo.) Low feed First class protein "aquatic chicken" Nice color Mild taste
knowledge
FDI includes capital and ________ that flows into a country from outside its borders.
untouchable
Only certain jobs are "__________" in a flat world
Per capita GDP
Per _______ GDP: GDP divided by country population
Semiglobalization in Society
Physically mailed letters crossing national borders 1% Phone calling minutes that involve international calls 2% Internet traffic routed across borders (2006‐08) 18% News obtained from foreign sources (30 country average) 5% World population that is considered first‐generation immigrants 3% Students studying overseas 2% People that never leave the country in which they are born 90%
Outermost Regions of the EU
Portugal and Spain have colonial islands: the Canary Islands, Azores, and Madeira, while France also held on to French Guiana (South America), as well as the islands of Guadeloupe, Martinique, Reunion, and Saint-Martin, which extends the EU way beyond the border. This is known as the ____________ regions of the EU. Britain also has quite a few of these, so while people of these outside the border countries can live anywhere in the EU that they want, citizens of the EU may not live in these outside the border countries
inflow
Restricting ________: Enact ownership restrictions Host governments can specify ownership restrictions if they want to keep the control of local markets or industries in their citizens' hands
outflow
Restricting _________: Tax rates and sanctions A company's home government imposes restrictions in an effort to persuade companies to invest in the domestic market rather than a foreign one
Eurozone
This economic union is called the __________. Must first meet 3 financial goals to join. 1. Inflation less than 1.5% higher than the average of the lowest members. 2. Debt to GDP ratio less than 60%. 3. Government deficit less than 3%. Denmark, Sweden and the United Kingdom have asterisks attached to this section of the treaty, giving them a permanent opt out. 4 Tiny european countries: San MArino, Monaco, Andorra, and Vatican City; have an asterisk giving them the exact opposite, which is the right to print and use Euros as their money, despite not being in the EU at all.
Economic Health
To determine how attractive a country is to your company, you need to first examine the country's overall Economic ________. As the citizens of one country become wealthier their demand for goods and services increases accordingly. On the other hand, as their wealth decreases, their ability to buy goods and services drops. Ex. Wendy's had to pull out of Argentina, due to a declining economy and decrease in returns on profit Output- The more goods and services an economy produces per person, the wealthier it is. To increase output: 1. The supply of labor- by adding more, the output is likely to increase. 2. Capital or Investment- ex. Farm where robots feed the cows and milk them when the cows want to be milked, rather than keeping them on a strict schedule. As a result, output is very high. 3. Total Factors of Production (TFP)- The way in which labor and capital come together. TFP is the increase in output not attributable to labor or investments. Understanding how to increase output is one thing but measuring the growth or decline of output based on these factors is quite another. Ex. JIT (JUST in time) production, optimizes the production process through precise inventory control, leading to large output increases using the same workers and the same equipment, but more effectively organizing them.
Flat-world view Tom Friedman
Tom Friedman's ______-world view: A metaphor for viewing the world as a level playing field in terms of commerce, where all competitors have an equal opportunity
Trade surplus
Trade ________: exports > imports
Trade deficit
Trade ________: imports > export
International Business Liaison services
_________ Business Liaison services Help foreign executives address challenges of relocation and immigration: • Connecting with the home country's community in Georgia • Obtaining a social security number • Setting up a bank account • Establishing a credit history • Applying for a driver's license • Setting up utilities
Nominal GDP
_________ GDP: not adjusted for inflation
Gross National Product (GNP)
_________ National Product (GNP)- Measures the output of a country, but takes into account who owns the production. Output that is produced by citizens of that country count for GNP no matter where in the world they are produced. So if honda owns a car production plant in ohio, the output from the plant would be counted in the U.S.'s GDP, but in Japan's GNP, since it's a Japanese car company.
Exchanges
_________ are more than just money for goods. They can include international transfers of other resources (i.e. people, intellectual property, and contractual assets or liabilities).
Human development index (HDI)
_________ development index (HDI): measures a country's average achievements in three basic aspects of human development: Health (life expectancy) Knowledge (education) Decent standard of living (income)
Localized
_________ or anchored - jobs rely on the local information and resources that exist to that area - Hair dresser, plumber
Purchasing power parity (PPP)
_________ power parity (PPP): Accounts for currency exchanges rate to compare the cost of goods in different countries.
Boycott
_________: multilateral/collaborative effort
Embargo
_________: unilateral prohibition of trade
Developed economies
__________ economies: those countries characterized as postindustrial with high per capita incomes, competitive industries, transparent legal and regulatory environments, and well-developed commercial infrastructures
Protectionism
__________: The practice of imposing restrictions on imports and protecting domestic industry
Protectionism
__________: imposing restrictions on imports and protecting domestic industry
Specialized
___________ - jobs that cannot be automated, digitized or outsourced - Brain surgeons, sports stars
International business
___________ business: All cross-border exchanges of goods, services, or resources between two or more nations
Multidimensional Poverty Index (MPI)
_______________ Poverty Index (MPI): measures the most basic dimensions of deprivation: health short life (i.e., child mortality, nutrition) education (i.e., yrs of schooling, attendance) living standards (i.e., cooking fuel, toilets, water, electricity, floor, assets)
Gender-related Development Index (GDI)
measures gender gaps in human development achievements by accounting for disparities between women and men in three basic dimensions of human development—health, knowledge and living standards using the same component indicators as in the HDI
Multidomestic View
• Google has run into issues in more than 30 countries - Russian search engine Yandex has widened its lead on Google • Brazil - trade within states - 10x greater than trade between states - 280x greater than with foreign countries • China - trade within states - 27x greater than trade between states - 400x greater than with foreign countries Bottom line: Distance still matters!
Criticisms
• Lost jobs • Painful workforce migrations • Social upheavals • Greater threats to environment
Benefits
• New markets - U.S. markets provide <5% of world's customers and <25% of world's purchasing power (Rothaermel, Kotha, & Steensma, 2006) • Standardization of some practices • Higher living standards
Intervention for political reasons
• Sanctions • Embargo • Boycott
