Globalization and Economics Overview

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Questions and Answers

What requirement do private companies face due to globalization?

They can disregard international regulations.

They can prioritize employee well-being.

They can focus solely on local markets.

They must maximize profit. (correct)

How does HR management support organizations in a global context?

By navigating diverse cultures and attracting international talent. (correct)

By limiting diversity in the workforce.

By eliminating the need for organizational learning.

By complying with domestic regulations only.

What is a characteristic of a transnational company?

It must own operations in multiple countries.

It focuses only on domestic competition.

It coordinates operations across countries without ownership. (correct)

It lacks an international workforce.

What is meant by globalization?

Increased permeability and interdependence across national boundaries. Signup and view all the answers

Which of the following is a risk associated with globalization?

Economic and government instability in foreign markets. Signup and view all the answers

Why might organizations choose to expand internationally?

To find unlimited opportunities in saturated domestic markets. Signup and view all the answers

What role do HR management practices play in fostering organizational learning?

They enable adaptation and benefits from diversity. Signup and view all the answers

What is often prioritized by public institutions and NGOs due to globalization?

Fiscal concerns above their original purposes. Signup and view all the answers

What primary reason might drive an organization to pursue global markets?

Competition in the domestic market Signup and view all the answers

Which factor does NOT belong to the STEEPLE model?

Functional Signup and view all the answers

When considering international markets, which of the following is a cost factor organizations might utilize?

Reduced energy costs Signup and view all the answers

In terms of socio-cultural considerations, which factor is most beneficial for an organization looking to operate in foreign markets?

Familiar social customs Signup and view all the answers

Which aspect of the macro environment refers to the level of governmental regulation affecting businesses?

Legal considerations Signup and view all the answers

What is the importance of market size and growth rate in the micro environment?

They predict future demand Signup and view all the answers

Which of the following factors may negatively affect the profit potential in a market?

High distribution costs Signup and view all the answers

What effect do trading systems typically have on domestic companies?

Imposes tariffs and quotas Signup and view all the answers

What characterizes Foreign Direct Investment (FDI)?

Establishing manufacturing plants in foreign countries. Signup and view all the answers

How does foreign direct investment differ from portfolio investment?

FDI involves establishing a physical presence, while PIs do not. Signup and view all the answers

What is one effect of globalization on Human Resource Management (HRM)?

It has limited HRM's ability to set organizational strategy. Signup and view all the answers

What has globalization done to worker protections and wages?

It has led to declining protections and wages. Signup and view all the answers

Which of the following is a potential outcome for organizations managing in a globalized market?

Heightened challenges in determining equitable working conditions. Signup and view all the answers

What is an example of a company that primarily uses Foreign Direct Investment?

A corporation that sources production to foreign manufacturers. Signup and view all the answers

What is a key challenge for HRM due to globalization?

Control over local labor laws across different countries. Signup and view all the answers

What does the balance of payments indicate regarding a country's economy?

It reflects the country's borrowing to import goods and services. Signup and view all the answers

What is one ethical concern associated with targeting marketing at lower-income consumers in developing countries?

It can lead to exploitation of consumers. Signup and view all the answers

What does the geographical separation of business operations allow large multinational corporations to do?

Reduce taxes without breaking laws in different countries. Signup and view all the answers

How has the cultural landscape changed in China with the increase in middle-income consumers?

Cars are becoming the main form of transport. Signup and view all the answers

What is one effect of exporting consumerism according to the given information?

It encourages the spread of consumer values globally. Signup and view all the answers

What criticism has been directed toward pharmaceutical companies regarding their marketing practices?

They market products in countries with lower levels of control. Signup and view all the answers

What is a key advantage of global brands?

Economies of scale leading to lower prices Signup and view all the answers

Which recommendation is made for building a global brand?

Engaging in cultural immersion Signup and view all the answers

What is a defining characteristic of local brands?

They are marketed primarily in one country or region Signup and view all the answers

How can packaging contribute to brand perception?

By reassuring consumers about safety and quality Signup and view all the answers

What ethical issue arises from globalization regarding consumer protection?

Exploitation of lower standards in certain countries Signup and view all the answers

Why might younger consumers prefer global brands?

Global brands project a more appealing international image Signup and view all the answers

What is one disadvantage local brands face compared to global brands?

Limited economies of scale Signup and view all the answers

What is typically one of the advantages of local brands according to Kapferer?

Flexibility in adapting to consumer needs Signup and view all the answers

Study Notes

Balance of Payments

A country with a large current account deficit borrows money to purchase goods and services from other countries.

Foreign Direct Investment (FDI)

Companies establish plants and offices in other countries to produce or sell products and services.
Aim of FDI is to gain operational control, unlike portfolio investments (PIs) which focus on buying and selling financial assets.
Example: Tommy Hilfiger Corporation
- Headquartered in Hong Kong.
- Incorporated in the British Virgin Islands.
- Listed on the New York Stock Exchange.
- Owned by international institutional investors.
- Annual shareholder meetings held in Barbados.
- Production sourced to manufacturers in Mexico and Asia.
- Licensed its name to producers globally and retailed its classic American clothing in Europe and North America.

Role of HRM in Globalization

Globalization reinforces the importance of HRM, but limits its ability to set organizational strategy.
Emphasis on the 'free market' has declined worker protections and wages.
Created conditions for massive job insecurity, giving employers greater power to determine working conditions.
HRM must work with managers to attract and retain employees who fit the company culture.

Obstacles to Organizational Survival and Success in Globalization

Private companies face pressure to maximize profit, restricting their ability to prioritize other goals.
Companies must manage complex international pressures and an international workforce.
Public institutions and NGOs must prioritize fiscal concerns above their original purpose.

Role of HRM in Multiculturalism

HR Management helps organizations navigate diverse cultures.
HR Management attracts an international workforce and meets diverse needs and desires.
HR Management acts as information brokers, highlighting contrasting regulations and cultural expectations.
HR Management fosters a culture of organizational learning that encourages institutions to adapt and benefit from diversity.

Transnational and Global Firms

Transnational company: coordinates and controls operations in multiple countries, even if it doesn't own them.
Global firm: operates in multiple countries, gaining cost and reputation advantages over domestic competitors.

Globalization

Greater permeability and interdependence across national boundaries.
An economic, political, and cultural phenomenon.
Risks include: economic and government instability, legislative restrictions, trade barriers, and diverse cultural preferences.

Triggers for International Expansion

Saturated domestic markets: Limited opportunities in the domestic market.
Small domestic markets: Larger markets are necessary for survival.
Low-growth domestic markets: Economic recession motivates seeking growing markets overseas.
Customer drivers: Customer expectations drive global expansion.
Competitive forces: Competitors' global expansion motivates expansion.
Cost factors: Lower labor, energy or raw material costs in other countries.
Portfolio balance: Operating in diverse markets mitigates risks.

STEEPLE Model

Stands for Social, Technological, Economic, Environmental, Political, Legal, and Ethical.
Macro-environment aspects:
- Trading systems: Governments and trading blocs protect domestic companies.
- Socio-cultural considerations: Operating in similar cultures is easier.
- Technological considerations: Technological development affects viability of operation.
- Economic considerations: Analyze economic factors in prospective markets.
- Political and legal considerations: Political stability and regulations affect attractiveness.
- Ethical and legal considerations: Ethical issues in less developed countries can damage reputation.

Micro Environment

Market size and growth rate: crucial for predicting future demand.
Competition: strength and volatility influence market entry.
Costs of serving the market: distribution and control increase with distance.
Profit potential: market characteristics may limit profitability.

Packaging and Labeling

Packaging communicates brand identity and perceptions.
Secure packaging reassures consumers of product safety.
Sustainability is important: consumers prefer recyclable packaging.

Global and Local Brands

Global brands: Same marketing strategy and mix in all markets.
International brands: Same marketing mix elements across markets.
Local brands: Marketed in a single country or limited area.

Advantages of Global Brands

Economies of scale enable lower prices.
Stream of innovations.
International image appeals to younger and mobile consumer segments.

Advantages of Local Brands

Flexibility to adapt to local needs.
Flexible pricing strategies.
Insulation from global issues.
Close relationships and trust from consumers.

Building a Global Brand Recommendations

Cultural immersion: visiting and understanding local cultures.
Leveraging local influencers: incorporating insights from local markets.
Global frameworks with local relevance: Adapting marketing programs and messages to local markets.

Ethical Issues of Globalization

Consumer protection: Companies exploit differences in regulations.
Exporting consumerism: Spreading consumer values and increasing cultural homogenization.
Targeting lower-income consumers: Ethical issues arise when marketing products beyond reach of low-income consumers in developing countries.
Geographical segregation: Companies exploit national boundaries to reduce taxes.

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Description

This quiz covers essential concepts in economics and globalization, including the balance of payments and foreign direct investment. You'll explore the implications of globalization on human resource management as well. Test your understanding of these interconnected topics.