IB 303 Exam 1 PDF

IB 303 Exam 1 Expatriate: assigned to work for a domestic company outside of your home country International business ​ Transnational, commercial business transactions ​ What crosses a border? Goods, services, capital, people ​ Who participates? Corporations, governments, individuals Cha...

IB 303 Exam 1 Expatriate: assigned to work for a domestic company outside of your home country International business ​ Transnational, commercial business transactions ​ What crosses a border? Goods, services, capital, people ​ Who participates? Corporations, governments, individuals Challenges and complexities ​ Market selection ○​ Research pros and cons, enter/avoid, national environment and global trading environments matter ​ Strategy options ○​ Going to market, serving our customers ​ Home vs. global market ○​ Operationally: geography, political economy, developmental levels ​ Transactional challenges ​ ALWAYS RISK Tremendous benefits ​ Increase income and sales ○​ Profits, new markers and customers, 1st mover advantage (first in a global market) ​ Acquire new resources and knowledge ○​ Natural resources, lower production costs, higher quality good and service ○​ More variety, better quality, lower prices - consumer benefit! ​ Reduce risk ○​ Maintain sales in economic downturns or other events International business strategies ​ Exporting: sell to foraging buyers ​ Importing: buy from another country ​ Licensing: a firm form country A gives a firm in Country B the right to manufacture its product under license, for a license fee ​ Joint venture: partnership between firms in different countries ​ Franchising: the firm gives another entity the right to sell its products under its name ​ Foreign direct investment: buy/own assets in another country ​ Management contracts: give operational control to 3rd party, outside your country Globalization: shift toward a more integrated, interdependent world market ​ Fewer self-contained national economy ​ Lower trade/investment barriers ​ distances/time zones don’t matter ​ Languages challenges are easy to overcome ​ Cultural differences are shrinking ​ Open flows of information, capital, trade, people 4 pillars of globalization: trade, capital, information, people What influences trade? ➔​ War ➔​ Technology ➔​ Barriers (trade, FDI) ➔​ Institutions (WTO) Globalization Driver: Technology ​ Communication / info processing ○​ Moore’s Law- power of technology will double every 18 months and will cost half as much ○​ Internet of Things- ​ Transportation advancements ○​ Containerization ​ World's largest container ship - 19,000 containers ​ One 20 foot container can hold 40,000 bananas or 60 refrigerators ○​ Commercial jet ​ Quantas airlines - “project sunrise” 20 hour flight, sydney to london Globalization Driver: Declining Barriers (Trade and FDI) ​ WTO and regional trade agreements promote free trade ​ Tariff / non tariff barriers ​ FDI restrictions ​ Result ○​ Increased efficiencies ○​ Positive impact on global wealth and output Globalization of markets - distinct, separate markets merging into one huge global market ​ Consumers products ○​ MNCs pushing, consumers pulling ○​ Convergence does not mean exactly the same ​ Non-consumer products ○​ Most global products: commodities, financial assets, industrial goods Globalization of production - sourcing goods and services from global locations ​ Decisions based on production factors cost and quality ​ Firms trying to gain competitive advantage by lowering cost structures and improving product offering ​ Offshoring- transferring portion of business operations in another country ​ Outsourcing- delegating business process to another firm- can be another country Globalization of services - huge opportunity driven by digital technology ​ Threat to service-sector and professional workers in developed economies ○​ Web Design - Vietnam ○​ Graphic specialists - Brazil ○​ MRIs read in India ○​ Software engineers in India ○​ Tech support - Philippines, Mexico ○​ IT Services Global institutions ​ World Trade Organization (WTO) ○​ “Police” global trade ​ International Monetary Fund (IMF) ○​ Promote financial stability and monetary cooperation ​ World bank​ ○​ Focused on economic development ​ United nations ○​ International peace and security ​ G20 ○​ 19 countries - largest world ○​ 80% of global GDP ○​ 75% of global trade ○​ 60% of global population ○​ Beyond G7, G8 ​ Russia was added in 1998, but was kicked out in 2014 Evolving Global Economy ​ US share of global manufactured output is shrinking ○​ Declining in relative ○​ Other economies growing faster (BRICS) ​ BRICS - brazil, russia, india, china, south africa ○​ Trade deficit ​ Impacts value of the dollar Globalization Pros/Cons  ​ jobs/income ​ labor/environment ​ National sovereignty ​ Culture ​ World’s poor Stopping globalization? ​ Deglobilization or slowablization? ​ Automation, 3D printing ​ Traditional supporters wavering ​ Staunchest defender now China ​ Multi-polarization? ​ COVID had significant impact on trade, travel, FDI ​ Measuring globalization ○​ DHL global connectedness index ○​ KOF index Chapter 2 - Political Economy ➔​ Political, economic, legal Political economy ​ Transfer risk- relates to currency convertibility issues ​ Ownership risk ○​ Expropriation - government takes private property ○​ Nationalization- a form of expropriation, covers entire industry like railroads ​ Operational risk- impacts a firm’s day to day operation Ex: china and its communist economy ​ Suppression, propaganda, surveillance, freedom, protest Assessing political systems: what to consider ​ Political environment ○​ Attitudes and policies that influence ○​ How business is conducted at home and globally ○​ Interaction between government and business ○​ Impacted by other nations, firms, NGS, individuals, fake news ​ Political system ○​ Institutions that create, enforce, and apply laws (parties, legislature, head of state) ○​ Rules, regulations, laws, norms ○​ Lots of influences and special interest groups ○​ Legitimacy (who is really in power?)  ○​ Ultimate test- section of country tries to leave but they stay (ex: Scotland from Britain) ​ Government’s view on the rights of an individual ○​ Individualism ​ Stresses personal freedoms and liberties found in democracy ​ Supports free markers with limited government intervention (laissez-faire) ​ Belief that self-regulation supports economic prosperity ○​ Collectivism ​ Stresses socialism (totalitarianism) ​ Group takes precedence over individual ​ Supports government intervention for the common good ○​ Firm implications ​ Give up autonomy and decision making ​ High regulated business environment ​ High taxation ​ Political ideologies ○​ Views about how a society should function ○​ Democracy vs. totalitarianism = freedom ○​ Democracy ​ Citizens participate widely in decision-making ​ Pluralistic system with at least two legitimate political parties ​ Various types: direct, representative, parliamentarian ○​ Totalitarianism ​ Political repression, NO free/fair elections ​ Various types ​ Secular (communism, facism, tribal) ​ Theocratic (governed according to religious principles, ex: saudi arabia, Iran) Civil Liberties and Political Rights ​ Democracy ○​ Free pass ○​ Equality by law ○​ Personal social freedoms ○​ Free form government corruption ​ Political rights ○​ Competitive elections ○​ Power for elected ○​ Right to organize ○​ Minority rights protected ​ Totalitarianism  ○​ Prohibit challenges to the government ○​ Denial of basic civil liberties ○​ Media censorship ​ Firm implications ○​ Deal with state-controlled media-propaganda ○​ Be careful what we say and do, major consequences “The Economist” Democracy Index ​ Considers 5 factors- civil liberties, political participation, electoral process & pluralism, democratic political culture, functioning of government ​ Scoring ○​ Full democracy - 8+ ​ Political culture supports flourishing democracy, function government, independent media, checks, balances, judiciary ○​ Flawed democracy- 6-8 ​ Elections free & fair but low participations, limited parties, weak governance ○​ Hybrid democracy - 4-6 ​ Sham elections, corruption ○​ Authoritarian -