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Midterm Study Notes - Chapter 1-Globalization

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MGT491 Midterm Notes Chapter 1: Globalization WHAT IS GLOBALIZATION? N Globalization the shift toward a more integrated and interdependent world economy. There are several facets, including globalization of markets and globalization of production. The Globalization of Markets N Globalization of markets the merging of historically distinct and separate national markets into one huge global marketplace N Falling barriers to cross-border trade make it easier to sell internationally N Tastes and preferences of consumers in different nations are beginning to converge into a global norm, helping to create a global market o Ex. Coca-Cola, Sony Playstation, IKEA, Starbucks, MacDonalds o These firms are also facilitators of this trend, by offering the same product worldwide they help to create a global market N In the US, 90% of firms that export are small businesses employing less than 100 people N *072,3L89K0Z47O8O,7J0890[547907 98% of its small and mid-sized companies have exposure to international markets (via either exports or international production) N Differences occur in global markets among consumer tastes and preferences, distribution channels, culturally embedded value systems, business systems, legal regulations o Requires companies to use customized marketing strategies, product features, and operating practices to match conditions in a particular country N Most global markets are not for consumer products but for industrial goods and materials that serve a universal need (incl. aluminum, oil, wheat, microprocessors, computer memory chips, aircraft, computer software, financial assets, etc). N Many competitor rivalries are global ex. Coke competing with Pepsi all over the world, Boeing vs. Airbus, SonyNintendoMicrosoft, etc N If a firm moves into a nation not currently served by its competition, the competition will soon follow to prevent the first-mover from getting an advantage N Firms bring their products, operating strategies, marketing strategies and brand names across the world with them, creating homogeneity across markets The Globalization of Production N Globalization of production the outsourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production, in order to lower their overall cost structure or improve the quality or functionality of their product offering, allowing them to compete more effectively. N Factors of production labor, energy, land, capital N Ex. Boeing 8 Japanese suppliers make parts for fuselage, Singapore makes doors for nose landing gear, 3 Italian suppliers make wing flaps, etc. o Rationale for outsourcing so much production to foreign suppliers they are the best in the world at their particular activity, yields better final product, enhances the chances of winning a greater share of total orders than its rival Airbus o Also outsource because increases chance of winning significant orders from airlines based in that country o JO4-,OZ0-418:55OL078 N Ex. Vizio flat panel TVs components manufactured in South Korea, China and US, assembly in Mexico, selling them in the US. o JO4-,OZ0-41,.9L;L9L08 N Early outsourcing efforts usually for manufacturing activities, now service activities also being outsourced because of modern communications technology, mostly the internet N Outsourcing customer service functions like call centers N Ex. radiology hospitals send images to India, while the American doctors sleep they analyze it, have results in the morning N Dispersing value-creating activities can shorten time and lower cost required to develop products N Impediments to achieving optimal dispersion of productive activities to locations around the world informal and formal barriers to trade, barriers to foreign direct investment, transportation costs, issues associated with economic and political risk
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