Lesson 1-3 Flashcards
What are the 3 dimensions of the “Basic Framework for International Business”?
Formal and informal “rules of the game”.
Industry competition and characteristics.
Firm-specific resources and capabilities.
Name the 3 enablers of Globalization?
Expansion of technology: Business has become more international because
• Transportation is quicker
• Communications enable control from afar
• Transportation and communications costs are more conducive for international operations.
Liberalization of cross-border movements: Lower governmental barriers to the movement of goods, services, and resources enable companies to take better advantage of international opportunities.
Development of supporting institutional arrangements that:
• Are made by business and government
• Ease flow of goods
• Reduce risk
Name the factors pulling towards complete localization?
Name the factors pulling towards complete globalization?
Name the 4 parameters to measures the depth of globalization?
Two “laws” seem to govern the depth and breadth of globalization.
Explain the terms.
Depth of globalization:
How much activities is international vs. domestic? The law of semi-globalization suggests that international business activity, while significant, is much less intense than domestic activity.
Breadth of globalization: The extent to which international activity is distributed globally rather than narrowly focused. The law of distance suggests that crossborder activities are dampened by distance.
Name the forces for global integration?
Name the forces for local Responsiveness?
Pressures for global integration
- Seek cost reduction through economies of scale and arbitrage benefits
- Capitalize on converging consumer trends and universal needs Provide uniform service to multinational consumers
- Conduct global sourcing
- Sense and respond to global competitors
- Take advantage of media with crossnational reach, e.g. Facebook, Twitter, TV
Pressures for local responsiveness
- Leverage local talent and cheap factors of input
- Cater to local customer needs
- Accommodate difference in distribution channels
- Respond to local competition
- Adjust cultural differences
- Meet local government regulations and legal requirements
Mention the difference between market- and non-market strategies?
**Market Strategies** Competetive advantage (what, where, why, when, how, what activity)
**Non-market Strategies** Other considerations (markets sentiments, trade policies, social media, NGO's, compliance, local benefits).
Name the three generic sources of competetive advantage?
Adaptation (local responsiveness):
Increases revenues and market share by tailoring one or more components of a company’s business model to suit local requirements or preferences.
Delivers economies of scale or scope by creating regional or global efficiencies; involves standardizing a significant portion of the value proposition.
Exploits economic or other differences between national or regional markets, usually by locating separate parts of the supply chain in different places.
Name the dimensions of the CAGE Framework?
Different languages different ethnicities; lack of connective ethnic or social networks different religions different social norms
Absence of colonial ties absence of shared monetary or political association political hostility government policies institutional weakness
physical remoteness lack of a common border lack of sea or river access size of country weak transportation or communication links differences in climate
differences in consumer incomes differences in costs and quality of:
• natural resources
• financial resources
• human resources
• intermediate inputs
• information or knowledge
Name the generic reasons of why nations trade?
- Availability of goods
- Differences in technology
- Differences in factor endowments
- Differences in consumer demand
- Transport costs
- Economies of scale in production
- Government policies
What are the gains from trade? And are all groups winners from trade?
- *A nation’s gains from trade consists of two components:**
1. the gain from the reallocation of consumption
2. the gain from specialization in production
Producers and workers in the export industry gain as a result of higher world prices and a larger volume of trade;
Consumers of the import competing good gain as a result of lower world prices and a larger supply; and
Firms which use imported components and materials in their production process gain as a result of lower import prices.
Producers and workers in the import-competing industry lose due to increased competition from imports;
Consumers of the export good lose due to the smaller supply available to the local market and higher world prices;
Firms which use exportable components and materials in their production process lose due to increased prices.
Mention the 6 theories of international trade?
Before 20th century:
- Absolute advantage
- Comparative advantage
- *In the 20th century:**
4. Product life cycle
5. Strategic trade
6. National competitive advantage
What is the basic ideas of the trade theory Mercantilism?
− International trade as a zero-sum game −
Basic assumption: the wealth of the world – measured in gold and silver – is fixed. − Thus, a nation that exports more and imports less becomes richer (as it enjoys the net inflows of gold and silver) – and vice versa. Sounds funny today, doesn’t it? – But is it that archaic? − The upshot? self-sufficiency would be best. − In a sense, it is the direct intellectual ancestor of contemporary protectionism.
What are the key points about the trade theory Absolute Advantage?
Emergence: As a criticism of Mercantilism
Thought leader: Adam Smith (1723-1790)
− The “invisible hand” of markets, rather than governments, should determine the scale and scope of economic activities (laissez-faire)
− By being self-sufficient and by (ineffectively) producing a wide range of products, mercantilist policies reduce the wealth of a nation in the long run
− Under “free trade”, each nation gains by specializing in economic activities in which it has an absolute advantage
- By specializing, each nation can produce more
- And, by trading, they can benefit more
- International trade is not a zero-sum game
What are the key points about the trade theory of absolute advantage?
“If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the product of our own industry, employed in a way in which we have some advantage”
“There is one thing you can do best. Find it. Concentrate on it. Trade for everything else!”