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Managing in a Global Business Environment Study Guide for FVC1 V4 and D080 V3
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Managing in a Global Business Environment Study Guidefor FVC1 V4 and D080 V3 ,
(highlighted areas have been revised to align with the revised course text)
Unit 2 Globalization
Module 1: Political, Economic, and Legal Systems
1. What is globalization? Globalization is defined as international integration arising from
the exchange of world views, products, ideas, and other aspects of culture.
2. What opportunities to businesses are brought by globalization? Access to New
Cultures, The Spread of Technology and Innovation, Lower Costs for Products, Higher
Standards of Living Across the Globe, Access to New Markets, Access to New Talent,
International Recruiting, Managing Employee Immigration.
3. What are the economic, political, and cultural effects of globalization? Elaborate on
each of the aspect. Economic effect-Trade, Investment, Information technology. Trade
is a type of economic globalization and a measure of economic integration. On a
national scale, it loosely represents the proportion of all production that crosses the
boundaries of a country, as well as the number of jobs in that country dependent upon
external trade. Investment is all invested capital in the world that is owned by non-
nationals. Information technology has become the driving force within the current
economy. Every business function and form of communication is handled through a
constantly changing IT environment. Political effect-Reduce the importance of nation-
states. Nation states is a state in which a great majority shares the same culture and is
conscious of it. The nation state is an ideal in which cultural boundaries match up with
political boundaries. Some countries that don’t like political integration might create
isolation policy. NGOs are non-governmental organizations. NGOs are a subgroup of
organizations founded by citizens, which include clubs and associations that provide
services to their members and others. Cultural effect-Transmission of ideas,
meanings, and values around the world.
4. What are the arguments for and against globalization from country’s perspective?
Some argue that globalization is a positive development as it will give rise to new
industries and more jobs in developing countries. Others say globalization is negative
in that it will force poorer countries of the world to do whatever the big, developed
countries tell them to do.
5. What are the different forms of international business? Explain each form. Imports: a
good or service brought into one country from another. Exports: a good or service
produced in one country then gets marketed to another country. Import-export is the
most fundamental and the largest international business activity, and it is often the first
choice when the businesses decide to expand abroad as it is the easiest way to enter
the market with a small outlay of capital. Licensing is one of the other ways to expand
the business internationally. Licensing is the arrangement between a firm, called
licensor, allows another one to use its intellectual property such as brand name, copy
right, patent, technology, trademark and so on for a specific period of time. The licensor
gets benefits in terms of the royalty. The company may choose to sell the products
under the licensing when the domestic production costs are too high, strict government
regulations, or the company wants to sell and produce standardized products
everywhere. Franchising is closely related to licensing. Franchising is a parent
company (franchiser) gives right to another company (franchisee) to do business using
, the franchiser’s name and products in a prescribed manner. Franchising is different
from the licensing in terms of the franchisees have to follow much stricter guidelines.
Moreover, licensing is more about the manufacturers while franchising is more popular
with restaurants, hotels, and rental services. A strategic partnership or alliance is a
positive aspect of the cooperation of two or more companies in different countries are
joined together for mutual gain. A joint venture is a special type of strategic alliance,
where the partners across globe collectively found a company to product goods and
services. The cooperation between the companies allow them to share the production
cost, technologies, development, and sales networks. The resources will be pooled to
mutual advantages and put the companies in win-win situations. Foreign direct
investment is a company’s physical investment such as into the building and facilities
in the foreign country, and acts as a domestic business with a full scale of activity.
Companies practice FDI to get benefits from cheaper labor costs, tax exemptions, and
other privileges in that foreign country. The host country will get benefits by the
introduction of new products, services, technologies, and managerial skills. Also, FDI
helps facilitate progressive internal policy reforms of the host country and enhance the
economic situation.
6. What are the 5 stages of entering a global market? Explain each stage. Stage 1 -
Market Entry: the business needs to enter into a foreign market. Stage 2 – Product
Specialization: the company is able to find a single location where it can move the
entire production of a single product to that location and reduce the production cost.
Stage 2 is really cost driven. Stage 3 – Value Chain Disaggregation: we separate all
of those steps in the entire production process. Look at where is the most
advantageous location for each single component to further decrease our production
cost. Stage 3 is also cost driven. They would produce things that are very light like
mouses or keyboards so that we can ship them around without having to spend too
much if they were heavy. Stage 4 – Value Chain Reengineering: the company could
change its production method. This stage is something we can do to reduce the costs
even further. Stage 5 – Creation of New Markets: now the company can create more
demand on their product because the sticker price would be much lower than before
because of this cost reduction.
7. What are the 4 drivers of globalization? Explain. Market: opportunity for scale and
scope and convergence of needs. Cost: economies of scale and scope, exploiting cost
of factors of production. Competition: new markets, increased levels of trade.
Government: favorable policies, support for industry.
8. What is the difference between the world is flat view and the CAGE analysis? The
World is Flat really means due to the use of technology and internet now adays, it’s just
so easy for companies to share information. Like I can upload everything on One Drive.
There is no barrier at all. CAGE analysis is the opposite of Friedman’s point of view.
Although countries have been working hard to reduce the barrier, barriers are still there.
C is for Culture, A is for Administration, G is for Geography and E is for Economics.
Culture really means if 2 countries’ cultures are so different, it’s less likely for them to
trade with each other. Administration refers to countries who are administratively alike.
For example, you know United Kingdom, Australia, and Canada are historically related.
It’s more likely for them to trade with each other and also for countries. Geography
refers to physical distance between 2 countries. The further these 2 countries are away
from each other, the less likely for them to trade with each other because of the
shipping costs. Economics refers to standard of living. So, if Country A and Country B
are so different in standard of living, such as the United States and Somalia, it is less
likely for them to trade with each other because the products that United States wants
to export may not be demanded in Somalia. It might be more expensive.
, 9. Elaborate on each of them. I ELABORATED IN THE ABOVE QUESTION.
10. What are the benefits and costs of global expansion from MNCs’ perspective? For
global companies, often referred to as multinational corporations (MNCs), common
benefits of expanding into developing markets include unsaturated demand for new
products, lower labor costs, less expensive natural resources, and other inputs to
products. Larger market and advanced technologies are other benefits. Challenges of
Global Expansion from company’s perspective include Ethical business practice
concerns, Organizational structure, Public relations, Leadership, Legal and regulatory
structure.
11. List different political systems and differentiate them. How does each political system
impact business operation? Communism: Classless society. Goods are distributed
equally among citizens. All factors of production are owned by the government.
Socialism: represented by some European countries. Government controls some
industries but not all. Strong labor union usually is seen in socialism economic ideology.
Capitalism: Government minimizes the role in the economy. Private ownership of
business is observed.
12. List different economic systems and differentiate. How does each economic system
impact business operation and economic production? Traditional Economy:
Centered around a family, everyone consumes the same goods, relies on bartering, no
surplus. Command (Planned) Economy: Controlled by the ruling class, all resources
are owned by the government. Market Economy: The market controls the distribution
of resources, no government control. Mixed Economy: The market is the major
determining power, partial government regulation as needed.
13. List different legal systems and differentiate. Civil Law—The judge applies law code,
rarely uses the jury. Applied in Continental Europe and Latin and Central American
countries. Common Law—The judge interprets the law, uses the jury to determine
facts. Applied in the U.S., UK, Wales, Australia, Canada, etc. Religious law—based on
religious guidelines. Islamic law is widely applied in middle-eastern countries and
Southeast Asian countries. Talmudic Law, Cannon Law, Customary Law, etc
Module 2: Shaping the Economic Environment
1. What are the IMF’s major functions, goals, and conditionalities? Initial Goal:
restore the international payment system, stabilize exchange rates, foster trade, and
correct the BOP issue (correct temporary trade imbalances with short-term loans).
Surveillance: Oversee international monetary and financial system. Guide member
countries to develop economic policies, provide technical assistance in banking,
oversee fiscal affairs and exchange rate stability. Voting: Based on a quota system. The
Special Drawing Right—international monetary reserve asset
2. What are the criticisms on the IMF? Elaborate on each of them. Conditionality
causes the citizens of the borrowing country to pay a heavy price in the short-run.
Requiring borrowing countries to make structural adjustment such as privatization or
deregulation can make conditions worse in a struggling country. IMF policies are
significantly impacted by rich countries. Imbalance of voting power—poorer countries
are underrepresented. IMF’s projects might hurt environmental quality.
3. What are the World Bank’s major functions, goals and criticisms? Initial Goal:
support reconstruction of Europe after the WWII. 1950-1960—focused on large
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