Week 1 Flashcards
(20 cards)
Elements of international business
International Trade
- Exchange of products &/or services across national borders (i.e. exporting, importing, etc)
international investment
- transfor of assets to another country or the acquisition of assets in another country
international portfolio investment
- passiv ownership of foreign securities for financial profit
international business risk
participants: governments, firms
foreign market entry strategies
globalization of markets:
ongoing worldwide economic integration and interdependency of countries
Drivers of international Business
PESTEL
- Political
- Economitcal
- Social
- Technological
- Environmental
- Legal
Socio-Economic: Rise of knowledge economies
Agricultural Economy
- the age of the plow
Industrial Economy
- the age of the machine
Service Economy
- the age of the computer
Knowlege Economy
- the age of the information
Phases of Globalization
1830-1900’s: Steam-powered technology leads to increased manufacturing
- Mostly via government supported trading companies
1900-1930’s: Rise of electricity and steel production
- Leads to emergence and dominance of MNEs in manufacturing, extractive and agricultural industries
1948-1970’s: Formation of GATT / End of WW2, (Marshall Plan for Europe), Reduction of trade barriers, development of global capital markets, eastern MNEs
1980’s-Present: Privatization of enterprises, revolutions in ICTs and transportation; growth of emerging markets leads to rise in cross-border trade, SMIEs, etc.
Technological: Digitization & Globalization
- sharing ecnomomy (UBER)
- increased transparency (Zweifel, Diamands)
- digital transformation (new Smartphones)
Societal / Environmental Global Mega trends
sustainability
wellness
aging population
Reasons for Internationalization
- growth opportunities through market diversification
- higher margins and profits
- co-location with international consumers
- proximity to supply sources, benefit from global sources advantages or gain flexibility in product sourcing
- access to lower-cost or better-value factors of production
- develop economies of scale in sourcing, production, marketing and R&D
- effectively compete internationally or thwart the growth of competition in the home market
- invest in a potentially rewarding relationship with a foreign partner
Firm-level Consequences of globalization
- product / servicfe qulity is no longer a differentiator
- conventional business models are easily disrupted
- companies need to focus on solution-oriented and data-driven business models that support the customer in their own decision making
consequences of globalization
contagion
- rapid spread of financial or monetary crises from one country to another
loss of national sovereignty
- brexit, grexit, etc.
offshoring
- job loss in developed countries
effect ont he poor
- increased global inequality, even as standards of living increase
effect on the environment
- depletion of non-renewable resources, and unsustainable use o frenewable resources
effect on national culture
- homogenization of preferences, globally; western culture as the status quo leading to abandoing of national cultures
four types of International business risk
- cross cultural risks
- cultural differences, negotiation patterns, decision-making styles, ethical practices - country risk
- unstable polotics, unfavorable laws &/ regulations, inadequate legal system, bureaucracy, corruption, government intervention and protectionism, mismanagement of national economy - currency risk
- currency exposure, asset valuation, foreign taxation, inflationary and transfer pricing - commercial risk
- weak partners, operational problems, timing of entry, competitive intensity, poor execution of strategy
international business participants
multinational enterprises (MNEs) - firms that are headquartered in one country but have operations in one or more other countries
small & medium (international) enterprises (SM(I)Es)
- smaller than MNEs, but with an international presence, usually supplers for MNEs
born global firms
- young, entrepreneurial firms that undertake substantial international business at or near its founding
non-government organization (NGOs)
- pursue special causes and serve as advocates for social issues, politics, education and research
competitive advantages for small & Medium international enterprises (SM(I)Es) come from
- innovation
- technology
- agility
- talent
- efficiency
conventional internationalization key concepts
market knowledge
commitment decisions
current activities
market commitment
- positive correlation betweek market knowledge and the commitment decisions
- emphasize the sequential development of market activities and their positive correlation to market commitment
- increased market knowledge leads to increased market commitment which leads to increased market commitment
uppsala model: progression of events
domestic focus
- management is unwilling of unable to internationalize
pre-export stage
- irregular exports to foreign markets
- testing feasibility for internationalization
experimental involvement
- regular exports to foreign markets
- management becomes favorable towards internationalization
active involvement
- sales offices in foreign markets
- management dedicates substantial resources to internationalzation
committed involvement
- FDI & M&A in foreign markets
- management makes internationalzation a key part of the firms profit-making and value-chain activities
Springboard model
motivational factors
- home government support
- willingness of global players to divest strategic resources
- targeting core & key institutional markets
- offshore availability of standardized technology
compelling factos
- late mover position
- global players in their markets
- fast change of technological and market landscape
- deficiencies in core competencies and strategic assets
unique challenges
- poor corporate governance
- post-spring integration
- lack of global experience
- weak product/process innovation
unique activits
- inward internationalization
- risk-taking entry modes
- path departure in location selection
motivation of EM MNEs
- asset / opportunity seeking
Springboard perspective
- compensate for competitive weakness
- overcome latecorner disadvantage
- counter-attack global competitors
- alleviate domestic institutaional & market conditions
- secure preferential treatments from home governments
- exploit competitive advantage in other emerging & developing markets
Ethical ABCs
Above th law
- ethical behavior means more than just meeting the letter of the law
beyond the bottom line
- what are the environmental as well as the profit impacts of the decision
consequent
- what are the negative consequences for all of the stakeholders that may be affected by the decision
Eight tests of ethics
- leagal test
- does the action violate the law - duties test
- is the action contrary to accepted moral obligations? - special obligations test
- will the action violate speical obligations unique to an industry - motives test
- is the intent of the action harmful? - consequences test
- what may be the major damages of the actions - virues test
- will the action reflect what the organization wants to be - rights test
- will the action infiringe on customer rights? - justice test
- does the action leave a stakeholder worse off?
process of ethical analysis
- awareness and sensitivity
- identify the ethical issues of questions
- articulate the stakeholders in the decision
- select an ethical theory or standard
- specify alternatives and ethical analysis
- make a justified decision
- monitor the decision’s outcomes
how would you describe the startegic management framework of international business
is in contact with countries that differ in terms of culture, language, political system, legal system, economic situation, infrastructure and other factors
