Samenvatting
Samenvatting International Business, Global Business (EBC2021)
Samenvatting Hoofdstukken Global business
[Meer zien]Voorbeeld 4 van de 65 pagina's
Voorbeeld 4 van de 65 pagina's
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Chapter 1 – Globalising business1.1 European and global business
International business is about firms engaging in international economics acitivites and/or
the action of doing business abroad. The most important actors are MNEs, multinational
enterprises who operate in multiple countries and engage in foreign direct investments,
investments in, controlling and managing value-added activities in other countries.
Sometimes domestic firms do not engage in FDI, but are involved in IB because they
collaborate or compete with foreign entrants. International is about spending time on
analysing the international environment of business. B is business and we want to
understand how and why the international environment is important.
You will look from a perspective of firms and individuals engaged in business activities which
is becoming increasingly important in the global business environment. You deal with
multiple sites across the globe and it is becoming more difficult to define what is domestic.
Most countries, especially EU, do business with their home region and countries around
them easier for smaller countries and firms. Even in the EU, there are small distinctions in
institutions which can cause big trouble and the EU has not such large growth opportunities.
The book also pays more attention to emerging markets/economies, economies that only
recently established institutional frameworks that facilitate international trade and
investment, typically with low- or middle-level income and above average economic growth.
Brazil, Russia, China, and India are the most known ones. Their GDP, sum of value added by
resident firms, households, and governments operating in an economy, is small but keeps on
growing.
1,2 Why study international business?
1. It is exciting, challenging, and relevant
2. It is a prerequisite if you want to lead a business unit or entire firm. It is a combination of
experience and knowledge and having the knowledge will set you apart for expatriate
assignments, temporary job abroad with a multinational company. As a top manager, you
are more likely to keep your job even with increasing international competition global
connectors necessary.
3. Even if you do not aspire to travel the world, you will deal with global suppliers and
customers. Your own company becomes global or deal with foreign competitors.
1.3 A unfified framework
There is a lot of information in IB and to get a hold of this, authors developed a framework.
The main question is: What determines the successes and failures of business around the
globe?: it allows you to treat the entire world as a battlefield. Some firms success
domestically, but fail globally, while others do both. This can be viewed from 2 perspectives:
1. Institution-based view: institutions establish the rules of the game, come in many forms,
and vary per country success and failure of firm constrained and enabled by different rules
of the game. Formal rules are estblahsied by governments about treatment of foreign firms.
Informal rules are the culture, norms, and values that come into play. It is the influence of
the external environement
,2. Resource-based view: focus on internal resources and capabilities that make you unique
and survive. Foreign firms often have to overcome liability of outsidership, inherent
disadvantage that outsiders experience in a new environment because of their lack of
familiarity with local context and networks liability increases less experience you have and
more you differ from country. Some firms have powerful resources that allows them to
overcome their liability and attain a leadership position.
1.4 Understanding globalisation
Globalisation is debtable and there are several views on it:
1. Young people see it as the information and communication opporutnties it creates
quickly connect and adapt onforamtion as well as new business models. Due to globalisation
4.0, disrputions of operations and supply chains through advances in digital technologies,
mature businesses have to reassess their operations and supply chains.
2. Rising power of MNEs and growing inequality around world. People feel they lose control
over their lives due to globalisation and more MNEs have bargaining power with national
governments. National politicians seem to have less control over their borders and shape
events.
3. Unskilled workers lose out: highly skilled wages increase, while people with lower wages
only account for small proportion of income. Discrepancies between nations reduced but
within increased. Low-skilled jobs get offshored and the welfare state is diminished.
However, proponents say it allows for specialisation and synergies of pooling resources.
4. Globalisation makes us more similar which creates anxiety in traditional communities.
There is some convergence, but still every person keeps living his life in distinct ways.
Globalisation is a process leading to greater interdependence and mutual awareness among
economic, political, and social units in the world and among actors in general.
Globalisation has been around for a long time and from the 19th century accelarted due to
advances in manufacturing, communication, transport and legal changes. The biggest change
was the liberalisation, removal of regulatory restrictions on business. People could start
their own business, a more stable exchange rate, and more movement between countries.
After the war, things got more natonalised again and travelling was more restricted. This is
called waves of globalistion, pattern of globalistion arising from a combination of long-term
trends and pendulum swings.
The current wave of globalisation developed after the 2nd world war. First, countries tried to
build up their own industries and prevented international trade. Then globalisation became
part of the developed Triad, North America, Western Europe, and Japan. In the late 1980s,
underveloped countries, mainly from Asia, joined as well as they saw that globalistion
helped developing your country. The participation of the emerging economies raised
awareness of the pyramid structure of the global economy. It lead to the base of the
pyramid, vast majority of humanity who makes less than 1500 a year. Then you have the 2 nd
and top tier. Poverty has declined by a huge amount, still globalisation is controversial:
1. Creates fear among people in Europe and North America because emerging economies
not only compete away low-end manufacturing jobs but also high-end jobs
2. MNEs have overwhelming power, destroying local companies and local cultures and
,values financial crisis. This made managers aware of risk management, identification and
assessment of risks and the actions taken to minimise their impact.
Globalsation is a continuous advancement in manfucacturing, tranpsortaiton, and
communication as well as pendulum swinging of politics not one comprehensive view.
1.5 A glance at the global economy
USA accounts for 13.5 trillion of GDP, China is 2nd largest and keeps expanding. EU is bigger
than all. The most popiluated countries are more of the emerging economies. There is a lot
of exports, but also smaller countries are home to MNEs. MNEs account for a lot of revenues
and hire lots of employees, more than single countries. The Triad is still increasing, however
Japan is a bit subject to its economic situation. China also has become a country hosting
MNEs.
1.6 Implications for practice
IB is full of debates:
1. How should societiies influence the path of gloablisation
2. Responsibility of business towards the consequences of globalisation, CSR.
3. How to develop strategies to take advantage of opportunities of globalisation.
4. How to manage people and organisations exposed to trends of globalisation.
The debates need to be approached with an open mindset to recognise international
connections and analyse their implications. There are 2 traps:
1. Ethnocentric perspective: view of the world through the lens of one’s own culture and
believe in superioryt of your culture best practice in one country will work everywhere.
You will fail and need to make slight adaptions.
2. Not-invented-here syndrome: tendency to distrust new ideas coming from outside of
one’s own organisation or community disregard views from others as you assume they
lack the knowledge. Not sustainable, not even in domestic country, due to global
competition. Country has unique institutions but adapted by experiences from others.
Successful managers will know about global best practices and local idionsyncracies but able
to integrate such knowledge to develop practices that outperform competitors in given
context. You have to think local, think global, integrate this knowledge, and communicate
effectively with those who are not in the global jet set.
Managers are cosmopolitans, people embracing cultural diversity and the opportunities of
globalisation. Elites are most likely to take advantage, but not all people in society will share
the same views as you empathise with them and understand them.
, Chapter 2 – Formal institutions: political, economic, and legal systems
Different countries have different institutions, formal and informal rules of the game. Such
rules appear in their home country, host country, and international organisations. The
institutional framework are formal and informal institutions governing individual and firm
behaviour. The institution based view is a theoraticel perspective suggesting that a firm
performance is partially determined by institutional frameworks goverining firms firms
must constantly monitor, decode, and adapt to changing rules of the game.
2.1 An institution-based view of IB
The idea that context influences economic behaviour has a long tradition state sets rules
to ensure market economy functions. An additional source is the transaction costs, costs of
organising economic transactions, stating it is costly to organise market mechanism so firms
organise themselves in less costly ways. Transaction costs are frictions in a mechanical
system and institutions will determine the height of these costs.
Formal institutions are institutions represented by laws, regulations, and rules by authorised
bodies. Informal institutions are rules that are not formalised but exist in norms, cultures,
ethics, and values what is right or wrong, what is important or not, sometimes required to
do more than the law. Institutions can be classified according to 3 pillars:
1. Regulatory pillar: coercive power of governments
2. Normative power: mechanism through which norms influence individual and firm
behaviour
3. Cognitive pillar: internalised, taken-for-granted values and beliefs that guide individual
and firm behaviour unconscious.
The key role of institutions is to reduce uncertainty what is acceptable and legitimate. It is
important to remove uncertainty as this reduces people’s willingness to make commitments
no trust. Business will also take extra pecautions if they believe others will show
opportunistic behaviour, seeking self-interest with guile. Institutions can prevent this by
establishing the rules of the game and punishing people if not followed or creating trust.
Without instituiosn it can become costly to the extent that certain transactions will not be
undertaken. Institutions are not static, especially in emerging economies, and this is called
institiutional transition, fundamental and comprehensive changes introduced to the formal
and informal rules of the game that affect organisations as players.
Firms behaviours are often a reflection of the formal and informal constraints of a particular
institutional framework because of 2 propositions:
1. Managers and firms rationally pursue their interests and make choices within the formal
and informal constraints in a given institutional framework.
2. Although formal and informal institutions combine to govern firm behaviour, in situations
where formal constraints are unclear or fail, informal constraints will play a larger role in
reducing uncertainty and providing constancy to managers and firms.
2.2 Political systems
Political system refers to the rules of the game on how a country is governed politically
interact with it indirectly but understanding is required. 2 broad types:
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