Managing in a Global Business Environment Study Guide for FVC1 V4 and D080 V3

1. What is globalization? Globalization is the process of interdependence of economic and cultural activities among nations around the globe. Globalization promotes trade, investment, information technology, and cultural and political integration across countries of the world. Globalization aims to improve economic growth and increase the interdependence among nations of the world. 2. What opportunities to businesses are brought by globalization? Business opportunities from globalization: • Increased consumer market/demand for products • Lower labor costs • Lower manufacturing costs • Realizing economies of scale • Business growth overall 3. What are the economic, political, and cultural effects of globalization? Elaborate on each of the aspect. • Economic- Improved economic state by increased job availability and higher standard of living. Increased availability to goods and services as well. • Political- with introduction of national trade organizations, such as WTO, helps to influence public and trade policies across national boundaries, which includes humanitarian aid and development efforts for underdeveloped countries. • Cultural- increases cross-cultural contacts, decreasing the isolation of communities. Decreases the digital divide, allowing less developed countries to become more technical. 4. What are the arguments for and against globalization from country’s perspective? For globalization: • Increased political and economic freedom • Increased manufacturing at lower cost • Increased selling potential (broader markets/more consumers) • Increased access to information • Increased jobs created • Increased competition, drives supply and demand and lower prices Against globalization: • Increased monopolization opportunities • Increased power to countries already in power • Influence of MNC on government • Losing cultural norms of that country/absorbing power countries norms • Currency manipulation can occur and give companies a price advantage 5. What are the different forms of international business? Explain each form. • Businesses (for-profit)- organization engaged in commerce for profit, measured in economic and financial terms. • Government – National governments participate in international treaties and trade agreements. For example, NAFTA is an agreement between the United States, Canada, and Mexico governments to create a trade bloc in North America. 6. What are the 5 stages of entering a global market? Explain each stage. 1. Market Entry- enter new countries with similar business models as they use in their home country in order to gain access to local customers. 2. Product Specialization- transfer of the production process of a product to a single, low-cost location and export to customer bases. 3. Value Chain Disaggregation- globalization of the supply chain infrastructure, putting each production activity in the most advantageous location. 4. Value Chain Reengineering- increase cost savings further by updating their processes to suit the local market conditions by substituting lower cost labor for capital. 5. Creation of New Markets- market expansion. By lowering costs in the previous stages, allows for lower sale price and movement into expanded markets and customer groups. 7. What are the 4 drivers of globalization? Explain. 1. Market- opportunity for scale and scope; convergence of needs 2. Cost- economies of scale and scope; exploiting cost of factors of production 3. Competition- new markets; increased levels of trade 4. Government-favorable policies; support for industry