Lecture 5: Global Context I
What is Globalization?
What are its driving forces?
Specify the basic global strategy and global organizational structure a manager should pursue, and why. The Importance of Global Business to Canada:
* Canada exported over $455 billion
* Canada imported over $404 billion
* The United Nations has ranked Canada as one of the world’s best countries to live in. * Canada exports nearly 45 % of what it produces
* 33% of all Canadian jobs are related to our exports
What is Globalization?
* A process involving the integration of world markets and economies * Through cross-border transactions among people, assets, goods and services * Through growth in direct foreign investment
* Through transactions increasing economic interdependence Why is global trade important to the Canadian economy?
* Global or international trade between countries around the world improves relationships with allies and has economic benefits such as: * Creating growth in the economy,
* Increasing profits,
* Providing jobs, and
* Raising living standards that improve the
* Quality of life.
Management in The Global Context:
* International Trade
* The export or import of goods or services to consumers in another country. * International Business
* Any firm that engages in international trade or investment; also refers to business activities that involve the movement of resources, goods, services, and skills across national boundaries. * International Management
* The performance of the management process across national boundaries.
Management in the Global Context:
* Multinational Corporation (MNC)
A company that operates manufacturing and marketing facilities in two or more countries: managers of the parent firm, whose owners are mostly in the firm’s home country, coordinate the MNC’s operation. Some Reasons for Expanding Abroad:
* Sales expansion
* Reducing labour and other costs
* Sourcing high quality goods and services
* Smoothing out sales and profit swings
The Driving Forces to Globalization:
* The pull and push factors (EXPAND)
***What are some ways that organizations can engage in global business activity? Strategies of Global Activity:
* Selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributors. * Licensing
* An arrangement whereby a firm (the licensor) grants a foreign firm the right to use intangible property. * Franchising
* The granting of a right by a parent company to another firm to do business in a prescribed manner. * Foreign Direct Investment
* Operations in one country controlled by entities in a foreign country. * Strategic Alliance
* An agreement between potential or actual competitors to achieve common objectives. * Joint Venture
* The participation of two or more companies in an enterprise such that each party contributes assets, owns the entity to some degree, and shares risk. * Wholly Owned Subsidiary
* A firm that is owned 100% by a foreign firm.
Levels of Global Involvement:
Exporting Licensing Franchising Joint ventures/ strategic alliances Foreign direct investments Less involvement
Exporting as a Global Business Strategy:
•Selling goods and services to other countries
* Avoids the need to build factories in host country
* It is a relatively quick way of going international
* It is a good way to “test the waters” in the host country * Offers 6 billion potential customers around the world
* Transportation and tariff costs can be substantial
* Hard to find reliable intermediaries
Licensing as A Business Global Strategy:
* What do we mean by Licensing?
Licensing is an agreement where the licensor or exporter grants a foreign firm the right to use...
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