Chapter 1:
Conclusions:
- Globalisation survived the financial crisis, Trump Tariffs, US-China Trade War, Covid 19
- Slowdown of trend, but not reversal
- But now we are at the dawn of a new era -> new cold war with trade as the weapon
- Invasion of Ukraine was the catalyst. But real drivers?
- Uncharted territory. But history suggests reasons to be alarmed -> prebelligerence
period before ww2
- On the economic side: future highly uncertain
- But likely effects: slowdown of growth, innovation and poverty reduction; inflationary
pressures; and resilience highly unlikely.
Not the whole Chapter has been here because of the fact that the conclusion says it all. (This
is the essence)
What was in the chapter:
Case Study Adidas, sales, suppliers, and stakeholders around the world. How does Adidas
manage to deliver its shoes and sports clothing fast and at low cost?
- There was a lot of delocalization from Europe to Asia. There was also reshoring; first
in Asia and these suppliers are complemented by suppliers from UK, Europe, Italy and
other countries. There was a violation of labor.
Terminology: What is Global Business?
International business: Business (firm) that engages in international (crossborder) economic
activities or the action of doing business abroad, it can also be a small or medium sized. It’s
the action of doing business internationally.
Global business:
o business around the globe including both international (cross-border) activities and
domestic business activities
o domestic + international
Multinational enterprise (MNE):
o Firm that engages in foreign direct investments to manage value added activities in
other countries. FDI needs at least 10% of equity.
- foreign direct investment (FDI) investments in, controlling, and managing value-added
activities in other countries
,Important Economic Terms
- gross national product (GNP) – measured as the sum of value added by resident firms,
households, and government operating in an economy.
gross domestic product (GDP): Total market value of all final goods and services produced
within a country in a given period of time usually a calendar year.
What is produced within a country.
gross national income (GNI):
o GDP plus income from nonresident sources abroad – the term used by the World
Bank and other international organizations to supersede the GNP term.
o The GDP + income from non-residential
o It can be very different for different countries.
- Purchasing power parity (ppp):
o adjustment made to the GDP to reflect differences in the cost of living.
International business (IB) is about:
o businesses (firms) engaging in international (cross-border) economic activities
o the activity of doing business abroad.
1. We discuss issues worldwide as they are relevant to European businesses and
managers focusing on:.
▪ business in nearby countries,
▪ The institutions of the EU,
▪ small and medium-sized enterprises (SMEs),
▪ research by European scholars on these issues
2. We go beyond developed economies by devoting extensive space to emerging
markets (both business in emerging markets and EMNEs).(in the course:
International Business Strategy next year in the Master SIE)
- Institution-based view: companies are successful abroad when they play according to
the rules; when they know the formal (law, economic and political) and informal law
(ethical codes)
, - Resource-Based view: complementary to the first one. We look more internally to
the firm. Has nothing to do with the law and economic context of the country. We
look into firmspecific resources and capabilities. A firm is a collection of assets.
Institutional Perspective
- Doing business around the globe requires intimate knowledge about the formal and
informal rules of doing business in various countries.
o Some formal rules, such as the requirements to treat domestic and foreign firms as
equals, enhance the potential odds for foreign firms’ success. (see Chapter 2)
o informal rules such as culture, norms and values play an equally important part in
shaping the success and failure of firms around the globe. (see Chapter 3)
- an institution-based view suggests that the formal and informal rules of the game,
known as institutions, shed light on what is behind firms’ performance around the
globe.
Resource-based view
- An Institution based view which views performance as determined only by external
environments has its limitations.
- The resource-based view focuses on a firm’s internal resources and capabilities. • the
“liability of foreigness” (“LOF” infers the more a firm’s origins differ from the host
environment, the less the firm has experience in the host country and the further
away its nearest prior affiliate. It also includes difference of cultures or languages.
o There might be discrimination between local and foreigners in some places.
o Liability of foreigness: It means that you’re not familiar with the networks
(distribution…) you can reduce it by having nearby local experience.
- Firms as Coca Cola and Microsoft possess firm-specific resources that enabled them
to attain leadership positions around the globe.
o Hence the primary weapon of foreign firms is overwhelming resources and
capabilities that, after offsetting the liability of outsidership/foreignness, still
result in some significant competitive advantage.
, - Rising power: the multinational companies are masters of the world. They are more imp
than government and they also have increased inequality in the world specially for lower
skilled people (by means of outsourcing)
- Increased competition: it’s people with moderate qualification that are suffering from this.
- Elimination of differences: More neutral. Local tastes are disappearing, because there’s
more “world taste”. Countries are becoming more interdependent and there is mutual
awareness.
Guillén (2001) defines it as ‘a process leading to greater interdependence and mutual
awareness (reflexivity) among economic, political and social units in the world, and among
actors in general’
Three Views on Globalization
View 1: The world is flat (Friedman, 2005) – Globalization is advanced and inevitable
- It’s everywhere and you can’t avoid from taking part.
View 2: The world is spiky (Florida, 2005) – Globalization is concentrated and stable
- Globalization is good for global cities but there isn’t such thing as globaliziation in the
country side.
View 3: Semiglobalization (Ghemawat, 2007) – Globalization is partial and limited. “The 10%
rule”: immigration, phone call, direct investment, web traffic, private charity, patent,
portfolio investment, etc.
- He talks about semi-globalization. It’s partial and limited.
Unctad Transnationality index: arithmetic mean of the following three ratios:
- Ratio of foreign assets to total assets
- Ratio of foreign sales to total sales
- Ratio of foreign employment to total employment
