Peng Chapter 1 - Globalizing Business PDF

CHAPTER 1: GLOBALIZING BUSINESS Wade C. Roberts, Ph.D. C211 GLOBAL BUSINESS INTRODUCTION… Course Mentor: Wade Roberts Education: PhD in Economics – University of Utah Expert Fields: Development, Labor, Public, Hea...

CHAPTER 1: GLOBALIZING BUSINESS Wade C. Roberts, Ph.D. C211 GLOBAL BUSINESS INTRODUCTION… Course Mentor: Wade Roberts Education: PhD in Economics – University of Utah Expert Fields: Development, Labor, Public, Health, Gender Current Research (Cambodia): Microfinance, Poverty, Inequality, Socioeconomics After studying you should be able to… 1-1 Explain the concepts of international business and global business, with a focus on emerging economies. 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 Identify three ways of understanding what globalization is. 1-5 State the size of the global economy and its broad trends and understand your likely bias in the globalization debate. WHAT IS GLOBAL BUSINESS? International Business business (firm) that engages in international (cross- border) economic activities or the action of doing business abroad Global Business business around the globe including both international (cross-border) activities and domestic business activities FIRMS IN GLOBAL BUSINESS Multinational Enterprise (MNE) firm that engages in foreign direct investments Foreign Direct Investment (FDI) investments in, controlling, and managing value-added activities in other countries Note: global business also addresses domestic firms competing and/or collaborating with foreign entrants THE IMPORTANCE OF EMERGING ECONOMIES IN GLOBAL BUSINESS Global business is not limited to firms competing in developed economies Emerging Economies (emerging markets) A term that has gradually replaced the term “developing countries” since the 1990s QUESTION: Can you name three or four emerging economies?  IMPORTANT ECONOMIC TERMS Gross National Product (GNP) - measured as the sum of value added by resident firms, households, and government operating in an economy Gross Domestic Product (GDP) - total market value of all final goods and services produced within a country in a given period of time usually a calendar year Gross National Income (GNI) - GDP plus income from nonresident sources abroad – the term used by the World Bank and other international organizations to supersede the GNP term Purchasing Power Parity (PPP) - adjustment made to the GDP to reflect differences in the cost of living  EMERGING ECONOMIES KEY TERMS Triad – North America, Western Europe and Japan BRIC – acronym for the emerging economies of Brazil, Russia, India, and China Group of 20 – leaders of 19 major countries + EU who meet on biannual basis to discuss global economic issues  VIEWING THE GLOBAL ECONOMY Base of the Pyramid - vast majority of humanity, about four billion people, live at the base of the pyramid and make less than $2,000 a year The “Bottom Billion” – concentrated in Africa and Central Asia – 58 small countries, stuck at the bottom in terms of growth, incomes, and human development QUESTION: What do you hope to gain from taking this course and studying global business? WORKING IN A GLOBAL FIRM Expatriate Manager A manager who works abroad, or “expat” International Premium Significant compensation “package” when working overseas QUESTION: What are some of the benefits you might enjoy as an expatriate manager? This unified framework will carry through the entire book as you study global business.  FIRST CORE PERSPECTIVE: AN INSTITUTION-BASED VIEW An institution-based view suggests that the success and failure of firms are constrained by institutions Formal Rules - requirements that treat domestic and foreign firms as equals enhance the potential odds for foreign firms’ success or those that discriminate against foreign firms, would undermine the chances for foreign entrants Informal Rules - cultures, ethics, and norms play an important part in shaping the success and failure of firms around the globe SECOND CORE PERSPECTIVE: A RESOURCE-BASED VIEW A resource-based view suggests that the success and failure of firms are determined by their environments Liability of Foreignness inherent disadvantage that foreign firms experience in host countries because of their nonnative status WHAT IS GLOBALIZATION? Globalization Close economic integration of countries and peoples of the worlds Semiglobalization Strategy that suggests that barriers to market integration at borders are high but not high enough to completely insulate countries from each other THREE VIEWS OF GLOBALIZATION A new force in recent times A long-running historical evolution A pendulum swinging between extremes LESSONS FROM A RECESSION Risk Management the identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events Scenario Planning a technique to prepare and plan for multiple scenarios (either high or low risk)  NONGOVERNMENT ORGANIZATIONS (NGOS) Nongovernment Organizations (NGOs) Heterogeneous organizations with numerous classifications: Advocacy - environmentalists, human rights activists, consumers, etc. that raise awareness, acceptance and knowledge by lobbying, press work and activist events Operational - design and implementation of development-related projects that may stress service delivery or participation; whether religious or secular; whether more public or private-oriented - can be community-based, national or international