Globalization Overview Quiz

Topic 1: Globalization

• Globalization is the growing interconnectedness of firms, governments, and individuals
• Waves of globalization:
  • 1830-1890s: Growth of rail/ocean transport, rise in manufacturing
  • 1900-1930s: Emergence of MNCs and electricity/steel production
  • 1948-1970s: Establishment of GATT and increased demand for consumer products
  • 1980-2006: Technological advancements and rise of SMEs
  • 2007-: Rise of digital technology
• Drivers of globalization: Reduction of global investment/trade barriers, technological advancements, and industrialization.
• Levitt (1983) predicted a single global market for standardized products.
• Economic benefits of globalization:
  • Gains for manufacturing workers in technological sectors and workers in new manufacturing regions
  • Negative for low-skill workers in high-cost countries
  • Technological diffusion: Adoption of new technologies
• Environmental effects: Firms relocate to avoid strict pollution legislation. Host societies gain jobs, technology, and industrialization while home countries receive FDI growth and increased corporate profit.
• Social impact drawbacks: Host societies become vulnerable to location shifts and environmental degradation. Home countries lose low-skilled jobs.
• International firm: A firm engaged in trade activities with no FDI component.
• MNC: A large company with substantial resources. It performs activities through subsidiaries and affiliates in multiple countries.
• Competitive advantages of MNCs: Lower production costs, price stability, product quality, and flexibility of logistics.
• Case study: Ireland
  • 70% of manufacturing output is produced by MNCs
  • Second most effective globally for FDI
  • IDA Ireland: agency responsible for the attraction and retention of inward FDI
• Globalization of production: allows companies to break down manufacturing processes into stages, located in most advantageous locations
• Uniformity: Identical product everywhere, easily manageable and cost effective.
• Customization: Products tailored to different preferences.

Topic 2: Culture

• Liability of foreignness: Additional costs for overseas firms compared to local firms.
• National culture: Shared sense of belonging, language, history, and ethnic groups.
• Hall's Context Typology of Cultures:
  • High context: Establishing social trust first, emphasis on relationships, slow and ritualistic negotiations.
  • Low context: Business-oriented discussions, performance valued, efficient negotiations.
• Hofstede's Dimensions of Culture:
  • Power distance: Extent to which hierarchical differences are accepted.
    • High: Tall hierarchies, centralization (India/Brazil).
    • Low: Less centralization, smaller wage differentials (Sweden/Norway).
  • Uncertainty avoidance: Extent to which members of a society tolerate ambiguity.
    • High: More rules and structures, standardization (Portugal/France).
    • Low: Fewer rules, more variability (UK/USA/Ireland).
  • Individualism/Collectivism: Importance of self vs. group.
    • Collectivism: Loyalty and group interests (Colombia/Mexico).
    • Individualism: Individual interests (UK/USA).
  • Motivation towards achievement: Degree to which a society is driven by competitiveness, achievement, and success.
  • Long-term Orientation: Cultural attitude towards time.
    • Low: Societal change viewed with suspicion, honoring traditions
    • High: Pragmatic approach, long timeframes
  • Indulgence vs. Restraint: Extent to which people control their desires/impulses.

Topic 3: Internationalisation

• Internationalization: Exploring, understanding, and managing cultural differences, political, and legal environments.
• Born global firms: Conduct business in multiple countries from inception.
• Factors considered when internationalizing: Location, resource availability, language/cultural differences, product standardization, market entry options.
• Proactive vs. Reactive expansions:
  • Proactive: Future-oriented, driven by opportunity.
  • Reactive: Responding to a deterioration in the competitive position.
• First Movers:
  • Advantages: Market share, loyalty, cost advantages.
  • Disadvantages: Expenses, high risk, uncertainty.
• Second Movers:
  • Advantages: Lower risks, larger time frame, evaluating options, lower R&D costs.
• Exporting:
  • Direct: Firm produces and sells to foreign markets directly
  • Indirect: Firm outsources to intermediaries.
  • Export house: Buys products from the firm and resells.
  • Buying house: Finds sellers.
• Countertrade: Exchange goods or services for payment in another form.
• Transfer related modes
  • Licensing
  • Franchising
• Strategic alliances: Cross-border partnerships for shared interests and resources.
• Wholly owned subsidiaries: Complete ownership, achieved through Greenfield (new facilities) or Brownfield (existing facilities) investments, or mergers/acquisitions.
• Mergers and acquisitions: Combining previously separate organizations, gaining access to resources and competencies.

Topic 4: Political and Legal Context

• Political environment: Government, political parties, interest groups, public opinion.
• Political systems: Authoritarianism, democracy, monarchy, communism, theocracy.
• Legal issues for MNCs: Rule of origin laws, competition, patents, product liability, and anti-trust laws.
• Political risk: Potential loss to operations due to political/legal system changes.
  • Types of risk: Ownership (governance changes), operational (rules changes), transfer (impacts on resources transfers).
• Legal environment: Laws and regulations affecting businesses, common law, civil law, and theocratic law.
• Country risk: Legal systems, political systems, sanctions, boycotts, and terrorism.

Topic 5: Expatriation

• Expatriates: Employees working outside their home country for a period.
• Types of assignments: Management development, business development, technical assignments.
• International assignment cycle: Recruitment and selection, hiring, preparation/training, expatriation, repatriation
• Culture shock / repatriation; dealing with the effects and handling the transition when returning home
• Cultural context in Colombia: High context, collectivism, relaxed deadlines, religious background
• Expatriate issues: Familiarity challenges, language barriers, cultural differences.