MN30085 lecture notes
Context: Trade, foreign direct investment and political economy
Strategy: Broader corporate level considerations when deciding to operate in
international markets
Lecture 1 – Globalization
- Globalization- A process in which liberalization stimulates cross-border exchanges in
goods, services, capital and people. A shift towards interdependency and
integration. Distinct and national markets merging into a huge global marketplace.
Tastes and preferences converging.
- Liberalization- The reduction/removal of barriers. (Barriers can be economic,
political physical or cultural)
- Indicators of globalization- FDI (controlling or owning assets in a foreign country,
trade (imports and exports), foreign monetary/financial/indirect investment
(movement of cash and stocks), migration (movement of people across borders)
- Drivers of globalization- Political/regulatory factors (declining trade barriers e.g.
GATT/WTO), Technological factors (transportation technology, communications
technology), Infrastructural development (‘Soft -rules and regulations’ and ‘hard-
physical’ infrastructure)
- Globalization benefits- Access to markets (Faster growth, Increased revenues),
Access to cheaper supplies (Lower costs), Economies of scale (Lower costs), Access to
quality inputs, Access to natural resources
- Costs of globalization- Increased competition (falling revenues, business failure),
Riskier environment- volatility, complexity, dependency and contagion
- E.G, INCREASED COMPETITION The average lifespan of a S&P 500 company dropped
from 67 years in the 1920s to 15 years today. On average a S&P company is now
, being replaced every two weeks, and an estimated 75 percent of the S&P 500 firms
will be replaced by new firms by 2027
- E.g. COST ON LOCAL COMMUNITY- Thomas Cook’s failure to affect Gambia’s
tourism industry – 30% of tourists from UK and Thomas Cook brings between 45%-
50% of the tourists visiting Gambia. Tourism accounts for 20% of Gambia’s GDP.
-
-
- Transition Economies- Economies that are moving from being centrally planned
(government plays a big role) to being market based, free market. E.g. Vietnam,
China, Slovenia, Romania
,
, - Covid-19 and FDI- Boeing-Embraer $4.2 billion deal cancelled. Amazon delays
investment in Deliveroo – fined £55,000 by UK CMA
- See diagram below, most of the largest companies still generate a lot of their
revenues in foreign markets.
Context: Trade, foreign direct investment and political economy
Strategy: Broader corporate level considerations when deciding to operate in
international markets
Lecture 1 – Globalization
- Globalization- A process in which liberalization stimulates cross-border exchanges in
goods, services, capital and people. A shift towards interdependency and
integration. Distinct and national markets merging into a huge global marketplace.
Tastes and preferences converging.
- Liberalization- The reduction/removal of barriers. (Barriers can be economic,
political physical or cultural)
- Indicators of globalization- FDI (controlling or owning assets in a foreign country,
trade (imports and exports), foreign monetary/financial/indirect investment
(movement of cash and stocks), migration (movement of people across borders)
- Drivers of globalization- Political/regulatory factors (declining trade barriers e.g.
GATT/WTO), Technological factors (transportation technology, communications
technology), Infrastructural development (‘Soft -rules and regulations’ and ‘hard-
physical’ infrastructure)
- Globalization benefits- Access to markets (Faster growth, Increased revenues),
Access to cheaper supplies (Lower costs), Economies of scale (Lower costs), Access to
quality inputs, Access to natural resources
- Costs of globalization- Increased competition (falling revenues, business failure),
Riskier environment- volatility, complexity, dependency and contagion
- E.G, INCREASED COMPETITION The average lifespan of a S&P 500 company dropped
from 67 years in the 1920s to 15 years today. On average a S&P company is now
, being replaced every two weeks, and an estimated 75 percent of the S&P 500 firms
will be replaced by new firms by 2027
- E.g. COST ON LOCAL COMMUNITY- Thomas Cook’s failure to affect Gambia’s
tourism industry – 30% of tourists from UK and Thomas Cook brings between 45%-
50% of the tourists visiting Gambia. Tourism accounts for 20% of Gambia’s GDP.
-
-
- Transition Economies- Economies that are moving from being centrally planned
(government plays a big role) to being market based, free market. E.g. Vietnam,
China, Slovenia, Romania
,
, - Covid-19 and FDI- Boeing-Embraer $4.2 billion deal cancelled. Amazon delays
investment in Deliveroo – fined £55,000 by UK CMA
- See diagram below, most of the largest companies still generate a lot of their
revenues in foreign markets.
