WGU Global Business FVC1 V2 and D080 Module 1-4

What is the 5th stage of going Global

(creation of new markets), the focus is on market expansion.

What is the 2nd stage of going Global

(product specialization), companies transfer the full production process of a particular product to a single, low-cost location and export the goods to various consumer markets.

What is the 3rd stage of going Global

(value chain disaggregation) represents the next step in the company's globalization of the supply chain infrastructure; companies disaggregate the production process and focus on completing each activity in the most advantageous location.

What is the 4th stage of going Global

(value chain reengineering), companies seek to further increase their cost savings by reengineering their processes to suit local market conditions by substituting lower cost labor for capital.

What is the Role and Influence of The World Bank?

-5 constituent institutions aimed at restructuring economies, promoting investment, and reducing poverty. -Provides long term loans used for development projects. -Provides economic and technical advice. -Promotes FDI by facilitating foreign and domestic partnerships -Offers insurance against noncommercial and political risk. -Helps resolve disputes related to foreign direct investments (FDI).

Political systems that impact Globalization-Oligarchy

-A small, elite group holds power -Acheive power due to military, economic or other powers Ex-Russia

Cons of Globalization

-Benefits the rich at the expense of the poor -Job loss in developed countries -Environmental damage and unethical practices of labor -Loss of power of local government

What is the criticisms of the IMF?

-Conditionality causes the citizens of the borrowing country to pay a heavy price. -IMF policies are significantly impacted by the rich companies. -Imbalance of voting power

Pros of Globalization

-Economic Growth -Increased well-being of human society -increased trade and investment

What is the Role and Influence of The World Trade Organization (WTO)?

-Encourages international trade through the lowering of trade barriers. -Expanded through successive negotiations called "rounds". -A forum for negotiations to reduce tariff and non-tariff barriers to trade -Oversees trade agreements and facilitates disputes between member countries. -Promotes equality among trading partners and works to promote fair competition in the market. -Provides technical assistance to emerging economies so they can become competitive with more advance economies.

Political systems that impact Globalization-Democracy

-Equal Voice or vote in determining state policy

Challenges of Global Expansion

-Ethical business concerns -Organizational structure -Public Relations -Leadership -Legal and regulatory structure

Why do governments promote FDI?

-Expand their domestic economy -attract new technologies, business knowledge, and capital

What is H-O Theory (factor propositions)?

-Factors of production: Labor, Land, natural resources, capital and technology. -Ex. States that the reason Brazil is better with coffee and the US with corn is because of what we have to work with in each country.

How governments promote FDI?

-Financial Incentives: provide a combination of insurance, loans, and tax breaks. -Improve or enhance local infrastructure -By reducing bureaucracy and regulatory requirements -Human capital development: Improve their workforce through education and job training -Reduce uncertainty: reassure businesses that the local operating conditions are stable, transparent (i.e., policies are clearly stated and in the public domain), and unlikely to change. -

What is Country Similarity Theory?

-Firm based theory that incorporate other product and service factors into the understanding of trade flows. -Consumers in countries that are in the same or similar stage of development would have similar preferences. -Companies first produce for domestic consumption. When they explore exporting, companies often find that markets that look similar to their domestic one, in terms of customer preferences, offer the most for potential success.

What is the criticisms of The World Bank?

-Imbalance in the leadership -Enforced conditionality causes harm to developing countries. -Privatization of Healthcare. -Environmental damage caused by funded projects,

What are the types of Tariffs

-Import tariffs-Taxes on goods that are imported into a country -Export tariffs-Taxes on goods leaving a country -Protective tariffs-protect a domestic industry by making imported goods more expensive than equivalent goods produced domestically -Revenue tariffs-levied to raise revenue for the government -Specific tariffs-Import taxes expressed in an amount of money per unit imported -Ad valorem tariffs-Import taxes based on a fixed percentage of the assessed commercial value of imported goods -Compound tariffs-Taxes on imported goods that are a combination of a fixed amount and an amount based on the value of the goods

Module 2: Shaping the Economic Environment What is the Role and Influence of the International Monetary Fund (IMF)?

-It oversees the stability of the international monetary system. -Monitoring economic activity around the globe -Advising countries to adopt policies that are linked to a stable and growing economy -Provides technical assistance to help with creating monetary and financial policies and to promote sound fiscal policy and management. -Makes short term loans to deal with debt and financial crises as well as to correct balance of payment problems and maintain exchange rate stability.

What is Comparative Advantage Trade Theory?

-Limited resources lead to opportunity cost. -Lower opportunity cost determines comparative advantage. -Ex Brazil is giving up fewer opportunities that the US to produce coffee and the US has a lower opportunity cost for producing corn, than Brazil. What should they do?

Political systems that impact Globalization-Dictatorship

-Power is held by a single person (or a very small group of people) who wields complete and absolute authority over a government and population. -Ex Libya

Why do governments restrict FDI?

-Protect local industries and critical resources (petroleum, minerals, metals) -Preserve national and local culture -Maintain political and economic independence and control economic growth

What are reasons for limiting trade?

-Sanctions -dumping-When a country or company exports a product at a price that is below market price to gain an unfair share of the market -Infant Industry Argument -Health and Safety

Why do countries trade?

-Trade creates win win situation for both exporting and importing countries -Trade promotes economic development and increase living standard -Specialization and economies of scale

What is the criticisms of The WTO?

-Transparency requirement hurts national sovereignty. -The trade rules protect developed countries more than developing countries. -The MFN rule give MNCs an unfair advantage. -Agriculture product subsidy hurt developing countries. -The WTO has refused to address the impacts of free trade on labor rights. -Has been ignoring environmental concerns.

What is the Impact of Trade?

-With free trade: -Possible job loss in certain industries -Trade affects Wages -Labor standards and working conditions are concerned

What is Global Strategic Rivalry Theory?

-focuses on firm's competitive advantage -Barriers to entry

What are the 3 Legal Systems that Impact Globalization?

1. Civil Law-The judge applies the law code; inquisitorial system where the investigating judge investigates the facts of the case. Juries are rarely used. 2. Common Law-The judge interprets the law; judges interpret the law, and judicial rulings can set precedent.2 Common law systems are often adversarial because the judge's role is to act as a moderator between two opposing parties. A jury may determine the facts, and a judge decides which law will be applied to the case. 3. Religious Law-based on religious guidelines

What is the Cage analysis by Ghemawat?

1. Culture: cultural differences between two countries reduce their economic exchange 2. Administration: the greater the administrative differences between nations, the more difficult the trading relationship is to acquire—whether at the national or corporate level. 3. · Geography is perhaps the most clear difference between countries. Generally, as distance goes up, trade goes down, since distance usually increases the cost of transportation. 4. Economics: The most apparent economic difference between countries is size (compared with GDP: a measure of the goods produced and services provided by a country in one year). Another difference is per capita income.

What are the types of FDI?

1. Horizontal FDI: When a company is trying to open a new market-a retailer, for ex, that builds a store in a new country to sell to the local market. 2. Vertical FDI: when a company invests internationally to provide input into its core operations-usually in its home country. -backward vertical FDI: when a firm brings the goods or components back to its home country (ex acting as a supplier) -forward vertical FDI: when a firm sells the goods or components in the local or regional market (ex acting as a distributor) 3. greenfield-A new business built where no prior business existed, either physically or metaphorically or both 4. Brownfield-when MNC enter into host countries by purchasing or leasing existing facilities

4 Industry Globalization Drivers

1. Market Opportunities - opportunity for scale and scope; Convergence of needs 2.Cost Drivers-Economies of scale and scope; Exploiting cost of factors of production 3. Competitive Drivers- New Markets and increased level of trade 4. Government Drivers- Favorable Policies; Support for industries

What are the 4 Economic Systems that Impact Globalization

1. Traditional - Centered around family;everyone consumes the same good; relies on bartering; no surplus 2. Command-Controlled by the ruling class; all resources are owned by the government 3. Market- The market controls the dist of resources; no government control 4. Mixed-The market is the major determining power;partial government regulates as needed

What is the World is Flat Theory by Friedman?

10 factors had influential roles in making the world smaller, but each worked in isolation until, the convergence of three more powerful forces: new software and increased public familiarity with the internet, the incorporation of that knowledge into business and personal communication, and the market influx of billions of people from Asia and the former Soviet Union who want to become more prosperous quickly.

Globalization 1.0

1st Stage of globalism started with Columbus's discovery of the New World and continued from 1492 to about 1800 and is pushed forward by nationalism and religion.

Globalization 2.0

2nd stage of globalization 1800 to 2000, was disrupted by the Great Depression and both world wars and was largely shaped by the emerging power of huge MNCs and is characterized by advances in methods of transportation.

Globalization 3.0

3rd stage of globalization began around 2000 and is characterized by advancements across the board, especially technology and communication.

What are Multinational Corporations (MNC)?

A company that operates in two or more countries. Corporations that move resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located

What are the benefits of FDI?

An inflow of capital can benefit both the global and host country economy. -Increased jobs and reduced poverty -Improved human capital development -increased tax revenues Invested capital goes to businesses with the highest potential for growth. Investors can decrease their risk by diversifying. Investing capital in firms can lead to growth and subsequently increased jobs.

What is a portfolio investment?

An investment in another country is purely financial and does not involve any management responsibility

Module 3: International Agreements What is Mercantilism Trade Theory?

Can only gain with a trade surplus-more export/less import ("I sold more goods to the rest of the world than I bought from the rest of the world, so I win with trade") Gold and Silver are important to a country's wealth. An economic system where the government regulates trade for its own benefit at the expense of its rivals.

Which law system can vary from community to community and is found in countries without strong formal justice systems?

Customary is generally found at the tribal or local level, is based on longstanding local customs, and is often transmitted orally.

What is an example of competition drivers?

Entering new markets to beat competitors and identifying a market that does not have a lot of competition since it is a fairly new market.

What are the drawbacks of FDI?

Foreign ownership of strategically important industries could lower the competitive advantage of the nation (petroleum). Foreign investors could also take advantage of the company they are investing in and take away all valuable assets then leave the country (mining). Job losses to host countries that have cheaper labor cost.

Which action could a government take to encourage a company to keep production in the country?

Imposing tariffs on items made in other countries causing them to be more expensive.

What is Economic globalization?

It is the globalization of production, sales, and finance activities in international markets around the world.

What is one of the concern of outsourcing manufacturing?

Labor can be cheaper in other countries and could lead to job loss in the home country.

Benefits of Global Expansion

Larger Markets Lower Costs Advanced technologies

What is the 1st stages of going Global

Market Entry-Companies enter new countries using business models similar to the ones deployed in their home markets.

What is Neo-mercantilism?

Modern day thinking-Countries promote a combination of protectionist policies and restrictions and domestic industry subsidies.

Political systems that impact Globalization-Monarchy

Monarchy -single person rules until they dies or abdicates the throne. -claims the rights to the title by hereditary succession or as a result of a religious, or divine, appointment or calling. -the monarchies of most modern nations are ceremonial remnants of tradition, and individuals who hold titles in such sovereignties are often aristocratic figureheads. Absolute monarchies-Ex Oman -absolute or unmitigated power -most modern are in the Middle East and Africa. -citizens who live under the reign of an absolute ruler must contend with oppressive or unfair policies that are in place based on the unchecked ideas or political agendas of that leader Constitutional monarchies-Ex Great Britain;Canada -Today's common Monarchy -abide by the laws of a greater constitution. Most evolved from absolute monarchies. -feature elected prime ministers run the country; Monarchs have limited authority

What are the different forms of international business

Organizations Government Organizations NGOs (Non-Government Org)

Module 4: Relationships, Foreign Investment, and Trade What is FDI?

Primary a long-term strategy of investing in a foreign market through direct involvement in the operations of a company, either by acquisition or partnership or by creating a new business

What are the political effects of globalization

Recue the importance of nation-states NGOs

What is International Business

Relates to any situation where the production or dist og goods and svcs crosses country borders Opportunity is boosted in globalization as trade and investment barriers are reduced

Which accommodation should an American multinational company make to conduct business in China?

Restrictions of Freedom of Speech

Which economic system facilitates the global expansion that uses the law of supply and demand, goods are privately owned, and government interference is minimum.

This applies to the market economy,

What are the economic effects of globalization

Trade Investment Information Technology

How does the government limit trade?

Trade barriers: tariffs-A tax or duty to be paid on a particular class of imports or exports quotas-A limited quantity of a particular product that can be produced, exported, or imported under official controls

What are the cultural effects of globalization

Transmission of ideas, meanings, and values around the world.

What is the Characteristics of Trade Agreements?

Treaties-must be approved by the Senate with a 2/3 vote Trade Agreements-Must be approved by both the US Senate and the house Promote trade through International Groups-Ex The GATT and The WTO -Regional Economic Integrations

What is Absolute Trade Theory?

When a country can produce more of one item than another one. Specialization determined by absolute advantage to increase production efficiency.

What are the types of Quota?

absolute quota-strictly limits the quantity of goods that may enter a country tariff-rate quota-permits a specified quantity of imported goods to enter a country at a reduced rate during the quota period

Which type of law system is based on a code and focuses on how the law is applied to the facts?

civil law system is an inquisitorial system where the judge investigates the facts of the case.

Which law is based on tradition and precedent given that judicial rulings can stand as precedents for future cases?

common law systems, judges hear arguments from both parties and make a judgment. This judgment stands as precedent for future cases.

In which law system does a judge decide the applicable law for the case as a jury determines the facts?

common law systems, while a jury may determine the facts, a judge decides which law will be applied to the case.

What is globalization?

i international integration arises from the interchange of world views, products, ideas, and other aspects of culture.