Global Business Chapter 1 - Introduction PDF

Chapter 1 Introduction Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in wh...

Chapter 1 Introduction Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1  Learning Objectives By the end of this chapter, you should be able to: 1-1 Explain the concepts of international business and global business. 1-2 Give three reasons why it is important to study global business. 1-3 Articulate one fundamental question and two core perspectives in the study of global business. 1-4 Describe the importance of globalization, semi-globalization, and risk management. 1-5 State the size of the global economy and its broad trends and understand your likely bias in the globalization debate. 1-6 Participate in three leading debates concerning global business. (X) 1-7 Draw implications for action. 1-8 Understand the organization of the book and the course. Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2  1-1 International Business and Global Business Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3  1-1 International Business and Global Business International business (IB): (1) A business (firm) that engages in international (crossborder) economic activities and/or (2) the action of doing business abroad Multinational enterprise (MNE): A firm that engages in foreign direct investment (FDI) Foreign direct investment (FDI): Investment in, controlling, and managing value-added activities in other countries Global business: Business around the globe − Includes both (1) international (cross-border) business activities covered by traditional IB books and (2) domestic business activities Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  1-2 Why Study Global Business? Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5  1-2 Why Study Global Business? A student says: “Global business is relevant for top executives such as CEOs in large companies. I am just a lowly student who will struggle to gain an entry-level job, probably in a small domestic company. Why should I care about IB?” How do you convince him / her that he / she should care about it? Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6  Table 1.1 Why Study Global Business? Reasons to Study Global Business Enhance your employability and advance your career in the global economy Better preparation for possible expatriate assignments abroad Stronger competence in interacting with foreign suppliers, partners, and competitors, and in working for foreign-owned employers in your own country Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7  1-2 Why Study Global Business? Group of 20 (G-20): The group of 19 major countries plus the European Union whose leaders meet on a biannual basis to solve global economic problems Global mindset: Ability to “connect the dots” globally Expatriate manager (expat): A manager who works abroad International premium: A significant pay raise when working overseas Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8  Figure 1.1 The Impact of Globalization and Technology Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9  1-3 A Unified Framework Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 Figure 1.2 A Unified Framework for Global Business Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11  1-3 A Unified Framework Fundamental Question: What determines the success and failure of firms around the globe? Core Perspectives: 1. An Institution-Based View—Suggests that the success and failure of firms are enabled and constrained by institutions − Triple bottom line: Economic, social, and environmental performance − Stakeholder: Any group or individual who can affect or is affected by the achievement of a firm’s objectives 2. A Resource-Based View—Focuses on a firm’s internal resources and capabilities Liability of foreignness: The inherent disadvantage that foreign firms experience in host countries because of their nonnative status Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  1-4 Globalization and Semiglobalization Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13  1-4 Globalization and Semiglobalization (1 of 4) Global business is not limited to firms competing in developed economies. Globalization: The close integration of countries and peoples of the world Three major views conceptualize globalization as: − A new force sweeping through the world in recent times − A long-run historical evolution since the dawn of human history − A pendulum that swings from one extreme to another from time to time Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14  1-4 Globalization and Semiglobalization (2 of 4) Emerging economies: A term that has gradually replaced the term “developing countries” since the 1990s Emerging markets: A term that is often used interchangeably with “emerging economies” Base of the pyramid (BoP): Economies where people make less than $2,000 per capita per year Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15  1-4 Globalization and Semiglobalization (3 of 4) BRIC: Brazil, Russia, India, and China BRICS: Brazil, Russia, India, China, and South Africa Reverse innovation (or frugal innovation): An innovation that is adopted first in emerging economies and is then diffused around the world Risk management: The identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events Black swan event: An unpredictable event that is beyond what is normally expected and that has severe consequences Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16  1-4 Globalization and Semiglobalization (4 of 4) Semiglobalization: A perspective that suggests that barriers to market integration at borders are high, but not high enough to insulate countries from each other completely Total isolation - Suggests localization Total globalization - Leads to standardization Total Globalization Total Isolationism Semiglobalization Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17  1-5 Global Business and Globalization at a Crossroads Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18  1-5 Global Business and Globalization at a Crossroads (1 of 2) Gross domestic product (GDP): The sum of value added by resident firms, households, and governments operating in an economy Purchasing power parity (PPP): A conversion that determines the equivalent amount of goods and services that different currencies can purchase Gross national product (GNP): GDP plus income from nonresident sources abroad Gross national income (GNI): GDP plus income from nonresident sources abroad; GNI is a term used by the World Bank and other international organizations to supersede the term GNP Nongovernmental organizations (NGO): An organization that is not affiliated with any government Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19  Table 1.4 Top Ten Largest Firms in the World (Measured by Revenue in US$) 1 2 3 4 5 6 7 8 9 10 Walmart State Grid Amazon China Sinopec Apple CVS United- Toyota Volkswagen (USA) (China) (USA) National Group (USA) Health Health Motor (Germany) Petroleum (China) (USA) Group (Japan) (China) (USA) Update in 2022: https://fortune.com/global500/ 1 2 3 4 5 6 7 8 9 10 Walmart Amazon State China Sinopec Saudi Apple Volkswagen China State CVS (USA) (USA) Grid National Group Aramco (USA) (Germany) Construction Health (China) Petroleum (China) (Saudi Engineering (USA) (China) Arabia) (China) Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20  Table 1.5 Recent Changes in the Fortune Global 500 Developed Economies 2005 2010 2014 2021 United States 170 133 128 121 European Union 165 149 128 81 Japan 70 68 57 53 Switzerland 12 15 13 13 Canada 14 11 10 12 Australia 8 8 8 4 Emerging Economies China 20 61 95 135 India 6 8 8 7 Brazil 4 7 7 6 Russia 5 7 8 4 BRIC 35 83 118 152 Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21  1-6 Debates and Extensions Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22  1-6 Debates and Extensions Deglobalization: The process of weakening economic interdependence among countries Global value chain (GVC): A chain of geographically dispersed and coordinated activities involved in the production of a good or service and its supply and distribution activities Organizational slack: A cushion of resources that allow an organization to adapt successfully to pressures Resilience: Capacity to recover quickly from difficulties Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 Figure 1.3 Trade-offs Between Global Value Chain Resilience and Cost Per Unit Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24  1-7 Implications for Action: The Future of Global Business in a Less Global World Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25  Table 1.6 Implications for Action Implications for Action From a resource-based view, instead of only focusing on delinking, shrinking, withdrawals, and divestitures (which, of course, are important), develop resources and capabilities to identify and leverage opportunities for further globalization. From an institution-based view, enhance geopolitical savvy and be aware that globalization is a force for peace and prosperity. From a career standpoint, even a less global world presents tremendous opportunities, especially for professionals with skills in geopolitics, tariffs and trade compliance, supply chain reorganization, and management of stakeholders and climate change challenges. Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26  Summary At the end of this chapter, you should be able to: 1-1 Explain the concepts of international business and global business. 1-2 Give three reasons why it is important to study global business. 1-3 Articulate one fundamental question and two core perspectives in the study of global business. 1-4 Describe the importance of globalization, semiglobalization, and risk management. 1-5 State the size of the global economy and its broad trends and understand your likely bias in the globalization debate. 1-6 Participate in three leading debates concerning global business. (X) 1-7 Draw implications for action. 1-8 Understand the structure of the book and the discipline. Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27  Organization of the Course Divided into the following parts: − Part I: Foundations (IBV & RBV)  Comprises chapters 2 to 4 − Part II: Tools specific to IB  Comprises chapters 5 to 8 − Part III: Strategizing around the world  Comprises chapters 9 to 13 (Chapters 9 & 11will not be covered) − Part IV: Functional excellence around the world  Comprises chapters 14 to 17 (Only Chapter 17 will be covered) Prerequisites and preparation for each week Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28