[INTB 1209] - Midterm Exam Guide - Ultimate 14 pages long Study Guide!

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INTB 1209
MIDTERM EXAM
STUDY GUIDE
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Chapter 1 International Business- pages 3-22
Globalization- a shift to a more integrated and interdependent world economy
Moving away from a world in which national economies were self-contained, now
national companies are interrelated or interdependent (rely on each other, rather than
just oe’s o atioal eooy
Perceived distance between nations is decreasing as transportation and technology
advances
Vigorous and vocal groups protest the unemployment in developed countries (due to
outsourcing labor to poorer countries), degradation of the environment and the
Americanization of local culture
What’s in it for businesses? Cheap labor and supplies, greater profits, barriers of
international business have been reduced (international expansion)
With the shift of technology and increase in skilled foreign laborers, many companies no
longer need to develop the product nor provide jobs in the area of which the product is
being delivered
The Globalization of Markets
Refers to the merging of historically distinct and separate national markets into one
huge global marketplace
Firms that produce globally used and known products are helping facilitate and
create the global market (ex: Starbucks, IKEA, Coca-Cola)
Significant differences exist between national markets and international markets
often forcing companies to readjust their marketing strategies, product features and
operating practices
The most global of markets are not those aimed for consumers (Ex: oil, wheat,
aluminum)
As firms enter new nations, competitor firms are soon to follow, ultimately
decreasing diversity and increasing uniformity.
The Globalization of Production
Refers to the sourcing of goods and services from locations around the globe to take
advantage of the national differences in the cost and quality of the factors of production
(Ex: energy, land, labor and cost). Goal: reduce costs or improve functionality/ quality of
their product
Outsourcing was originally used by manufacturing companies such as Apple and Boeing,
however with the increase in better communication technology (particularly the
internet) many firms are looking to outsource their labor/ production
Companies must be careful in pushing the globalization of production
The Emergence of Global Institutions
Institutions are needed to help manage, regulate and police the new global market
General Agreement on Tariffs and Trade (GATT)- international treaty that committed
signatories to lowering barriers to the free flow of goods across national borders lead to
the World Trade Organization (WTO)
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The WTO is primarily responsible for policing the world trade system, making sure
nations adhere to rules and regulations, establishing additional multi-national
agreements
International Monetary Fund/World Bank-1944, IMF created to maintain order in the
international money system ofte see a otroersial due to the strigs attahed to
the loans) and the WB was set up to promote economic development in the worlds
poorer regions (low interest loans to cash strapped governments)
The United Nations- an international organization made up of 193 countries formed in
1945 to promote peace, security and corporation, also has to focus on the global
economy higher living standards, employment etc.
Group of Twenty (G20)- established in 1999 the G20 comprised by the finance ministers
and central bank governors of the 19 largest economics in the world. Established for
coordinated policy response to the global financial crisis that started in America and
spread throughout the rest of the world (2008-2009)
Drivers of Globalization
Two factors- decline of trade barriers since WW2 and the dramatic technological change
International Trade- occurs when a firm exports goods or services to consumers of
another country
Foreign Direct Investment (FDI)- occurs when a firm invests its resources in business
activities outside its home country
beggar thy neighbor- occurred when countries increased trade barriers against each
other, contributed to the Great Depression of the 1930s
2001 at the Doha in the Persian Gulf countries (WTO) decided to cut tariffs, phasing out
subsidies, reducing the use of antidumping laws and reducing barriers to cross border
investments
Lowering trade barriers allows countries to view the world as their market
According to WTO the volume of world trade in merchandised goods has grown at twice
the rate of the world economy since 1950
Reasons: firms are moving production processes to other countries, the economies of
the world are becoming more intertwined, nations are becoming interdependent
Forms are finding their domestic markets under attack
China: Us companies expanding their presence and in the US Japanese companies are
expanding their presences
The Role of Technological Change
Since the end of WW2 the world has seen major advances in communication,
information processing, and transportation technology, including the explosive
emergence of the internet.
Microprocessors- enables the explosive growth of high power, low cost computing,
vastly increasing the amount of information that can be processed by individuals and
firms
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