Globalization Globalization refers to all those processes by which the peoples of the world are incorporated into a single world society, global society Globalization is a term used to describe how human beings are becoming more intertwined with each other around the world economically, politically, and culturally. Globalization broadly refers to the expansion of global linkages, the organization of social life on a global scale, and the growth of a global consciousness, hence to the consolidation of world society. The present worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments. The process of exploiting economically weak countries by connecting the economies of the world, forcing dependence on (and ultimately servitude to) the western capitalist machine. Globalization refers to the distribution of the production of goods and services, through reduction of barriers to international trade as tariffs, export fees, and import quotas. Globalization has accompanied and allegedly contributed to rapid economic growth in developing countries through increased specialization and application of the principle of comparative advantage Globalization is the growing economic interdependence of countries worldwide through increasing volume and variety of crossborder transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology.

Ethical Considerations in International Operations Cultural relativism holds that ethical truths are determined by the culture where decisions and actions occur. Cultural normativism holds that there are universal standards of behavior that apply everywhere.

Ethical Considerations Bribery consists of payments, or promises to pay cash or something else of value, to public officials and/or other people of influence. The U.S. Foreign Corrupt Practices Act of 1997: outlaws the payment of bribes by U.S. firms to foreign officials, political parties, party officials, or party candidates applies to firms registered in the U.S. and to any foreign firms that are quoted on any U.S. stock exchange was extended in 1998 to include bribery by foreign firms operating in U.S. territory

Ethical Considerations Child Labor According to the International Labor Organization: more than 250 million children between 5 and 17 are working worldwide nearly three-quarters of those children who work are very young or are working in ways that endanger their health or well-being because of hazards, sexual exploitation, trafficking, and/or debt bondage Those who argue in favor of child labor claim that in many instances if the children were not employed, they would in fact be worse off. While some firms simply avoid operating in countries where child labor is used, other firms work to establish responsible operating policies in those locales.

International Strategy Strategy Formulation Business Level DiversificationInternational Competitive Advantage SynergyComplementarity Complementarity: the filling-out, balancing, or extension of strategy to increase strategic opportunities. Low Cost Differentiated Focused/Broad Integrated Speed Related Unrelated International Global Multidomestic Transnational

International Strategy International Business – Conducts business across national boundaries Multinational Corporation (MNC) – Controls business activities in more than one country

Assumptions Strategies that favor global operations and brands are based on three assumptions: Customer needs and preferences worldwide are becoming more homogenous Customers worldwide prefer higher quality at lower prices Economies of production and marketing can be achieved through global operations

Benefits of International Strategy Four C’s Customers – expand markets Costs –economies of scale and scope Competition – utilization of resources Capabilities – opportunities for learning

Political government instability; social unrest; terrorism; absence of law Economic trade barriers; tariffs and subsidies; property rights laws Management differences in culture and customs, language, customer preferences, distribution systems Currency exchange rate changes Risks of International Strategy

Porter’s National Diamond Extends and adapts theory of comparative advantage to take account of three factors:  International competitive advantage is about companies not countries—the role of the national environment is providing a home base for the company.  Sustained competitive advantage depends upon dynamic factors-- innovation and the upgrading of resources and capabilities  The critical role of the national environment is its impact upon the dynamics of innovation and upgrading.

Choices in International Strategy Respond to Two Pressures Pressure to Reduce Costs Pressure for Local Adaptation Results in Four Strategic Choices International Global Multidomestic Transnational

Pressures and Strategies

Strengths and Limitations of Strategies StrategyStrengthsLimitations InternationalLeverage and diffuse parent’s knowledge and core competencies. Lower costs because of less need to tailor products and services. Greater level of worldwide coordination Limited ability to adapt to local markets. Inability to take advantage of new ideas and innovations occurring in local markets.

Strengths and Limitations of Strategies StrategyStrengthsLimitations Global Strong integration across various businesses. Standardization leads to higher economies of scale which lowers costs. Helps to create uniform standards of quality throughout the world. Limited ability to adapt to local markets. Concentration of activities may increase dependence on a single facility. Single locations may lead to higher tariffs and transportation costs.

Strengths and Limitations of Strategies StrategyStrengthsLimitations MultidomesticAbility to adapt products and services to local market conditions. Ability to detect potential opportunities for attractive niches in a given market, enhancing revenue. Less ability to realize cost savings through scale economies. Greater difficulty in transferring knowledge across countries. May lead to “overadaptation” as conditions change.

Strengths and Limitations of Strategies StrategyStrengthsLimitations Transnational Ability to attain economies of scale. Ability to adapt to local markets. Ability to locate activities in optimal locations. Ability to increase knowledge flows and learning. Unique challenges in determining optimal locations of activities to ensure cost and quality. Unique managerial challenges in fostering knowledge transfer.

Entry Modes of International Expansion Extent of Investment Risk High Low LowHigh Degree of Ownership and Control Exporting Licensing Franchising Strategic Alliance Joint Venture Wholly Owned Subsidiary