, Managing in a Global Business Environment Study Guide
for FVC1 V4 and D080 V3
Unit 2 Globalization- Module 1: Political, Economic, and Legal Systems (Lessons 1-6)
1. What is globalization?
Answer: Globalization is when international integration arises from the interchange of
world views, products, ideas, and other aspects of culture.
2. What opportunities to businesses are brought by globalization?
Answer: Firms have benefitted from globalization by being able to specialize and focus
more on research and development, by having access to a broader market, and by
gaining access to cheaper labor.
o It has allowed corporations to outsource manufacturing and service jobs from high-
cost locations to lower cost locations, where corporations can pay workers lower
salaries and provide fewer (or no) benefits.
3. What are the economic, political, and cultural effects of globalization?
Elaborate on each of the aspect
Answer:
Cultural Globalization: refers to the transmission of ideas, meanings, and values around
the world that extends and intensifies social relations.
o Formation of shared norms and knowledge
o There is a decrease in the uniqueness of once-isolated communities.
o Anti-globalization movements have formed to the defense of once isolated countries
Political Globalization:
o May reduce the importance of nation-states (negative).
o Formation of international/regional organizations(positive) WTO, G8, EU, ICC.
o Some countries have embraced isolationist policies due to globalization (North Korea)
o (NGOs) influence public policy, including humanitarian aid and developmental efforts.
Economic Globalization: refers to the widespread, international movement of goods,
capital, services, technology, and information.
It is the increasing economic integration and interdependence of national, regional,
and local economies across the world through an intensification of the cross-border
movement of goods, services, technologies, and capital.
Economic globalization primarily comprises the globalization of production, finance,
markets, technology, organizational regimes, institutions, corporations, and labor.
o More trade, investment, information tech, and faster economic development
o Benefits the rich at the expense of the poor, manufacturing job loss in developed
countries, environmental damage, unethical practices of labor.
4. What are the arguments for and against globalization from country’s
perspective?
Answer: Globalization has resulted in a widespread sharing of ideas.
o Advocates for globalization feel that this sharing exposes people to more cultures
and ideas, making them more tolerant.
o Opponents to globalization worry that cultures are becoming homogenized,
especially in the spread of Western culture throughout the world.
5. What are the 5 stages of entering a global market? Explain each stage.
,Answer:
Stage 1: Market Entry: companies enter new countries using business models like the
ones deployed in their home markets.
Stage 2: Product Specialization: companies transfer the full production process of a
particular product to a single, low-cost location and export the goods to various consumer
markets.
Stage 3: Value Chain Disaggregation: companies disaggregate the production process
and focus on completing each activity in the most advantageous location.
Stage 4: Value Chain Reengineering: companies seek to further increase their cost
savings by reengineering their processes to suit local market conditions by substituting
lower cost labor for capital. Changing the method to setup the production line.
Stage 5: Creation of New Markets: The focus is on market expansion. This allows
companies to substantially lower their sticker prices in both old and new markets and to
expand demand.
6. What are the benefits and costs of global expansion from MNCs’
perspective?
Answer:
The Benefits of Global Expansion: more extensive array of products, services,
technologies, medicines, and knowledge will become available and that these developments
will have the potential to reach significantly larger customer bases
The Challenges of Global Expansion:
Ethical business practices: Arguably the most substantial of the challenges faced by
MNCs—ethical business practices in areas such as labor, product safety, environmental
stewardship, corruption, and regulatory compliance—has historically played a dramatic role
in the success or failure of global players.
Organizational structure: is the ability to efficiently and effectively incorporate
new regions into the value chain and corporate structure.
Public relations: Public image and branding are critical components of most
businesses.
Leadership: It can be difficult for businesses to find effective organizational
leadership that have the knowledge and skills to approach a given geographic
market.
Legal and regulatory structure: MNCs need access to legal expertise that will help
them understand in-country laws and comply with applicable regulations.
For organizations operating in developing and less-developed countries, additional
challenges can arise:
Infrastructure: Poor infrastructure makes it difficult for businesses to effectively
operate because they must shoulder additional cost and risk to compensate for what
the country does not provide.
, Technology: challenges include training workers on unfamiliar equipment;
inadequate transportation systems that increase production and distribution costs.
7. What are the 4 drivers of globalization? Explain.
Answer:
Market: steady convergence of customer needs. (Foreign consumers have same demand
as domestic consumers)
Cost: The globalization of customer needs and the opportunities for scale and
standardization that globalization brings will fundamentally alter the economics of many
industries.
Competitive: High levels of trade, competitive diversity, and interdependence increase
the potential for industry globalization.
Government: Government globalization drivers—such as the presence or absence of
favorable trade policies, technical standards, policies and regulations, and government-
operated or subsidized competitors or customers—affect all other elements of a global
strategy.
8. What is the difference between the world is flat view and the CAGE
analysis? Elaborate on each of them.
Answer:
The world is flat view: The playing field between countries is becoming more level, and
people, products, and ideas are more connected; since the world's flattening cannot be
stopped, new workers and workers facing dislocation should refine their skills and
capitalize on new opportunities.
o One key to doing this is to become an expert in a job that cannot be delegated
offshore.
Pankaj Ghemawat disagrees with the view that the world is flat he characterizes as
"semi-globalized" and "multi-domestic" world. If the world were flat, international business
and global strategy would be easy.
The CAGE framework covers these four factors:
Culture: Generally, cultural differences between two countries reduce their
economic exchange.
Administration: Bilateral trade flows show that administratively similar countries
trade much more with each other than dissimilar countries.
Geography: Geography is perhaps the clearest difference between countries. The
market for a product in Los Angeles is separated from the market for the same
product in Singapore by thousands of miles.
Economics: Economic distance refers to differences in demographic and
socioeconomic conditions.
9. List different political systems and differentiate them. How does each
political system impact business operation?
Answer: At one end of is anarchism: individuals should control political activities, and
public government is both unnecessary and unwanted. At the other extreme is
totalitarianism: every aspect of an individual's life should be controlled and dictated by a
strong government.
Neither exist and a combination of both is what we see today.
for FVC1 V4 and D080 V3
Unit 2 Globalization- Module 1: Political, Economic, and Legal Systems (Lessons 1-6)
1. What is globalization?
Answer: Globalization is when international integration arises from the interchange of
world views, products, ideas, and other aspects of culture.
2. What opportunities to businesses are brought by globalization?
Answer: Firms have benefitted from globalization by being able to specialize and focus
more on research and development, by having access to a broader market, and by
gaining access to cheaper labor.
o It has allowed corporations to outsource manufacturing and service jobs from high-
cost locations to lower cost locations, where corporations can pay workers lower
salaries and provide fewer (or no) benefits.
3. What are the economic, political, and cultural effects of globalization?
Elaborate on each of the aspect
Answer:
Cultural Globalization: refers to the transmission of ideas, meanings, and values around
the world that extends and intensifies social relations.
o Formation of shared norms and knowledge
o There is a decrease in the uniqueness of once-isolated communities.
o Anti-globalization movements have formed to the defense of once isolated countries
Political Globalization:
o May reduce the importance of nation-states (negative).
o Formation of international/regional organizations(positive) WTO, G8, EU, ICC.
o Some countries have embraced isolationist policies due to globalization (North Korea)
o (NGOs) influence public policy, including humanitarian aid and developmental efforts.
Economic Globalization: refers to the widespread, international movement of goods,
capital, services, technology, and information.
It is the increasing economic integration and interdependence of national, regional,
and local economies across the world through an intensification of the cross-border
movement of goods, services, technologies, and capital.
Economic globalization primarily comprises the globalization of production, finance,
markets, technology, organizational regimes, institutions, corporations, and labor.
o More trade, investment, information tech, and faster economic development
o Benefits the rich at the expense of the poor, manufacturing job loss in developed
countries, environmental damage, unethical practices of labor.
4. What are the arguments for and against globalization from country’s
perspective?
Answer: Globalization has resulted in a widespread sharing of ideas.
o Advocates for globalization feel that this sharing exposes people to more cultures
and ideas, making them more tolerant.
o Opponents to globalization worry that cultures are becoming homogenized,
especially in the spread of Western culture throughout the world.
5. What are the 5 stages of entering a global market? Explain each stage.
,Answer:
Stage 1: Market Entry: companies enter new countries using business models like the
ones deployed in their home markets.
Stage 2: Product Specialization: companies transfer the full production process of a
particular product to a single, low-cost location and export the goods to various consumer
markets.
Stage 3: Value Chain Disaggregation: companies disaggregate the production process
and focus on completing each activity in the most advantageous location.
Stage 4: Value Chain Reengineering: companies seek to further increase their cost
savings by reengineering their processes to suit local market conditions by substituting
lower cost labor for capital. Changing the method to setup the production line.
Stage 5: Creation of New Markets: The focus is on market expansion. This allows
companies to substantially lower their sticker prices in both old and new markets and to
expand demand.
6. What are the benefits and costs of global expansion from MNCs’
perspective?
Answer:
The Benefits of Global Expansion: more extensive array of products, services,
technologies, medicines, and knowledge will become available and that these developments
will have the potential to reach significantly larger customer bases
The Challenges of Global Expansion:
Ethical business practices: Arguably the most substantial of the challenges faced by
MNCs—ethical business practices in areas such as labor, product safety, environmental
stewardship, corruption, and regulatory compliance—has historically played a dramatic role
in the success or failure of global players.
Organizational structure: is the ability to efficiently and effectively incorporate
new regions into the value chain and corporate structure.
Public relations: Public image and branding are critical components of most
businesses.
Leadership: It can be difficult for businesses to find effective organizational
leadership that have the knowledge and skills to approach a given geographic
market.
Legal and regulatory structure: MNCs need access to legal expertise that will help
them understand in-country laws and comply with applicable regulations.
For organizations operating in developing and less-developed countries, additional
challenges can arise:
Infrastructure: Poor infrastructure makes it difficult for businesses to effectively
operate because they must shoulder additional cost and risk to compensate for what
the country does not provide.
, Technology: challenges include training workers on unfamiliar equipment;
inadequate transportation systems that increase production and distribution costs.
7. What are the 4 drivers of globalization? Explain.
Answer:
Market: steady convergence of customer needs. (Foreign consumers have same demand
as domestic consumers)
Cost: The globalization of customer needs and the opportunities for scale and
standardization that globalization brings will fundamentally alter the economics of many
industries.
Competitive: High levels of trade, competitive diversity, and interdependence increase
the potential for industry globalization.
Government: Government globalization drivers—such as the presence or absence of
favorable trade policies, technical standards, policies and regulations, and government-
operated or subsidized competitors or customers—affect all other elements of a global
strategy.
8. What is the difference between the world is flat view and the CAGE
analysis? Elaborate on each of them.
Answer:
The world is flat view: The playing field between countries is becoming more level, and
people, products, and ideas are more connected; since the world's flattening cannot be
stopped, new workers and workers facing dislocation should refine their skills and
capitalize on new opportunities.
o One key to doing this is to become an expert in a job that cannot be delegated
offshore.
Pankaj Ghemawat disagrees with the view that the world is flat he characterizes as
"semi-globalized" and "multi-domestic" world. If the world were flat, international business
and global strategy would be easy.
The CAGE framework covers these four factors:
Culture: Generally, cultural differences between two countries reduce their
economic exchange.
Administration: Bilateral trade flows show that administratively similar countries
trade much more with each other than dissimilar countries.
Geography: Geography is perhaps the clearest difference between countries. The
market for a product in Los Angeles is separated from the market for the same
product in Singapore by thousands of miles.
Economics: Economic distance refers to differences in demographic and
socioeconomic conditions.
9. List different political systems and differentiate them. How does each
political system impact business operation?
Answer: At one end of is anarchism: individuals should control political activities, and
public government is both unnecessary and unwanted. At the other extreme is
totalitarianism: every aspect of an individual's life should be controlled and dictated by a
strong government.
Neither exist and a combination of both is what we see today.
