Ibus2101

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Ibus2101 Lecture Summary
Week 1
Why would a firm like to invest abroad? The Indigenous Firm
Cost-Reduction
Motives
Strategic
Motives
Market
Motives
The Indigenous Firm
Cost-Reduction
Motives
Strategic
Motives
Market
Motives

Week 2

What is globalisation?
Globalisation refers to the shift towards a more integrated and interdependent world. -Growth of world trade has accelerated since the early 1980s.

Drivers of globalisation
Includes
1. Political drivers
-Decline in trade and investment barriers, including reduction in tariff (4% on manufactured goods but high on agricultural products). -More than 2,000 bilateral treaties to protect and promote trade and FDI (eg, FTA). 2. Technological drivers

-Transportation technology.
-IT & information technology: microprocessor and telecommunication 3. Economic & cultural drivers.
What is economic globalisation?
-Globalisation of markets: Merging of separate national markets in one huge global market place. -Globalisation of production & service: Companies sourcing goods/services around the globe to reduce cost and improve quality.

Globalisation of markets
Theodore Levitt, Harvard Business Review:
“Companies must learn to operate as if the world were one large market. -The emergence of global markets for “standardized” consumer products (“a new commercial reality” -Erosion of national and regional consumer preferences (“global products”) -The ubiquity of desire for goods of the best quality and reliability at the lowest price.

Implications
Multinational Corporations (MNCs) vs. Global corporation (GC): Fox vs. Hedgehog. -End of MNCs, move to GCs.
Aggressively seek opportunities to create global market and become a global corporation -Do not accept the national differences as given or accommodate them (like MNCs) -Do not presume that marketing means giving what consumers want rather focus on what they would like -Standardization + low price + modern technology is a must.

Globalisation of production
Sourcing of goods and services from locations around the world to take advantage of: -Differences in cost or/and quality of the factors of production (labour, land, capital and knowledge). -Historically and primarily confined to manufacturing enterprises -Information technology helps to outsource service activities to low-cost producers in other nations Global web of suppliers: global products

Optimal dispersion of productive activities around the globe

Globalisation of services
1. Business process outsourcing (IT based business processes) 2. Customer service (voice and non-voice)
-Call centre
-Telephone marketing
-Customer surveys
-Email services
3. HR and payroll accounting
-Recruitment advertising
-Education and Training
4. Finance and accounting, book keeping
-Tax consulting
-Risk management
-Financial analysis and reporting
5. Content development
-Animation
-Document management
Location of outsourcing
Location of outsourcing
-Geographical information systems
6. Purchasing and logistics
outsourcing
outsourcing

Onshore outsourcing| Offshore Outsourcing|
Internal Onshore provisions| Captive Offshoring|

In-house provision
In-house provision

National
National
International
International

Pros & Cons of Globalisation

Pros:
* Lower prices for goods and services
* Increase the living standards
* Economic growth stimulation (capital flows & low interest rates) * Countries specialize in production of goods and services that are produced most efficiently (productivity) * Spurs innovation and knowledge diffusion

Pros:
* Lower prices for goods and services
* Increase the living standards
* Economic growth stimulation (capital flows & low interest rates) * Countries specialize in production of goods and services that are produced most efficiently (productivity) * Spurs innovation and knowledge diffusion

Cons:
* Wealthy, advanced...
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