International Business - Midterm Review

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AFM 333 Midterm Review

Module 1:

- Fall of Berlin Wall 1989
- Two Trends altering global market: globalization of markets and technological advances - Globalization: interconnectedness of national economies, growing interdependence of buyers, producers and suppliers in different countries

G6 economies: US, UK, Japan, Germany, France, Italy
- Account for half of global consumption with only 1/10 of population -

B6 economies: China, India, Russia, Brazil, Mexico, South Korea - China is the biggest market for phones, TVs, and cars in 2007 - China and India have more middle class households than all of the households in the United States - Growth in B6 more than 3x the growth in G6 economies

62 Multinationals in Fortune Global 500
20 of these multinationals are in China
12 from South Korea
6 from India
5 from Mexico and 5 from Russia

B6 have three times the labour force of G6 countries

33 million university-educated young professionals in developing world compared to 14 million in the developed world

300 000 IT Engineers in India vs. 50 K in US

In the decade to 2020, the working-age population of emerging economies is expected to increase by more than 500 million, compared with an increase of only 3.7 million in developed economies.

Drivers of Market Globalization
- 1. Reduction of trade and investment barriers
- 2. Market Liberalization: move to market based economies + adopt free trade in China + Soviet Union etc. - 3. Industrialization + Modernization + developing economies creating higher value adding products - 4. Integration of World Financial Markets: international banks, globalization of finance - 5. Advances in Technology: reduces cost and time, improves coordination and communication, facilitates development, helps share information/marketing, virtual space removes distance

Dimensions of Market Globalization
- integration/interdependence of global economies
- increase regional economic integration bloc
- growth of global investment
- convergence of buyer lifestyles/preferences
- globalization of production activities

Social Concequences
- loss of national soverignity
- offshoring/outsourcing jobs
- effects on the poor, the natural environment and national culture

Firm-level consequences
- new business opportunities
- new risks and rivalries
- more demanding buyers (less bargaining power to supplier) - international value chains

Phases of Globalization
1. 1830-1880: Introduction of railway and ocean transport (trains and ships) + phone and telegraph invented 2. 1900-1930: increased steel and electricity production + Western Europe most industrialized country so established first multinational subs through colonization (Nestle, Shell, BP) 3. 1948-1970: Form general agreement on tariff and trade + high demand for consumer products and input goods to rebuild after the war 4. 1980- now: radical advances in IT, communication, manufacturing, consultation, and privatization. Caused by: •Commercialization of the personal computer. •Arrival of the Internet and the web browser. •Advances in communication and manufacturing technologies. •Collapse of the Soviet Union and ensuing market liberalization in central and Eastern Europe. •Substantial industrialization and modernization efforts of the East Asian economies including China.

GDP growth rates highest in developing economies who emphasize global integration

Information travels faster now than ever before (ships/carraiges, steamships/cars, motor vehicles/aircraft, internet (speed of light)).

Firm Level Consequences of Globalization
- international value chain
- demanding buyers
- increased rivalry and competition
- increased opportunity for business
- Management must change focus
- Must partner and outsource better
- look for productivity and operational...
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