Transnational Management

Question 1

1.What is internationalization vs. globalization ?

Answer 1

Internationalization: Process of a business crossing national and cultural borders

Globalization: Process of social, political, economic, cultural, and technological integration among countries around the world.

 one global marketplace: no barriers to consumption, movement of capital and people, we are witnessing globalization of production and globalization of markets/consumption

Question 2

2.What’s driving globalization?

Answer 2

• Technology and Innovation.
• Improvements in Information Technology.
• Opening up of new economies.
• Reduction in tariffs.
• Offshoring: Companies undertake some activities at offshore locations instead of in their home countries, can reduce costs significantly, involves setting up physical infrastructure in other region/country
• Outsourcing: Subcontracting or contracting out of activities that had previously been performed by the firm to external organizations, employees working remotely, company contracts the service of another company to manage a project

Question 3

Criticism of globalization: Pros and cons

Answer 3

Benefits: Wealth, Better jobs, Access to technology, Lower prices, Availability of goods

Criticisms:

• jobs in developed countries are lost and get transferred to lower cost countries
• ability to exploit tax havens in other countries to avoid paying taxes
• accusation of social injustice, unfair working conditions, lack of concern for environment, mismanagement of natural resources, and ecological damage.
• Building products overseas in countries puts technologies at risk of being copied or stolen
• Multinational corporations are increasingly influencing political decisions, possible threat of corporations ruling the world because they are gaining power, due to globalization.

Question 4

What are Multinational/Transnational Enterprises/Corporations?

Answer 4

• large MNEs can have assets, budgets that exceed those of developing countries
  
  • historically headquartered in US, Western Europe

Question 5

Why do they go abroad?(Purpose of globalization)

Answer 5

Foreign Direct Investment (FDI): riskier than trade as differences in culture, politics etc are more visible when operations are established in a new market.

Marketing Seeking Behavior = Firms wanting to enter a market to be closer to their customers. Focus on selling in the market. (market size, openness, potential etc.)

Resource Seeking Behavior = Firms enter a market to seek resources that are not available in their home market.

Efficiency seeking Behavior = Firm enter a market to reduce manufacture or service costs that are not available in their market. (Labor cost, operating cost)  Kmart

Asset seeking =Firms enter a market to acquire advanced technologies or managerial expertise. Geely+Volvo = car companies