COB 487 Exam 4 - Chapters 10-12
Describe Globalization 1.0.
- 1900-1941 - All important business functions were located in the home country - Only sales & distribution operations took place overseas - Strategy formulation & implementation followed a 1-way path (from domestic headquarters to international headquarters) - Saw the blossoming of the idea of MNEs
Describe Globalization 2.0.
- 1945-2000 - MNEs began to create smaller, self-contained copies of themselves with all business functions intact - Significant amounts of foreign direct investment
Describe Globalization 3.0.
- 21st century - China's entry into World Trade Organization (WTO) - Goal of WTO is to help companies conduct business across borders based on multinational treaties that are negotiated and signed by member nations - Business functions anywhere in the world - Communication can be 24/7 - MNE reorganizes from a multinational company with self-contained operations to more seamless global enterprise with centers of expertise
Is the world fully globalized?
No; it is at best "semi-globalized"
What does globalization allows companies to do?
- Source supplies at lower costs - Learn new competencies - Further differentiate products
What are the advantages of going global?
1. Gain access to a larger market 2. Gain access to low-cost input factors 3. Develop new competencies
What are some disadvantages of international expansion?
1. Liability of foreignness 2. Loss of reputation 3. Loss of intellectual property
What are the 2 consequences of continued economic development on MNEs?
1. Rising wages and other costs will cancel out any benefits of access to low-cost input factors 2. As the standard of living rises in emerging economies, MNEs are hoping that increased purchasing power will enable workers to purchase the products they used to make for export only
Define multinational enterprise (MNE).
A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least 2 countries
Define foreign direct investment (FDI).
A firm's investments in value chain activities abroad
Define location economies.
Benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be
What are some well-known US multinational enterprises?
Boeing, Coca-Cola, John Deere
Define global strategy.
Part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world
Define globalization.
Process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advanced in telecommunications, and reductions in transportation costs
