UARK SCMT 3643 Exam 1
How does the global business environment look now? - Answer- -integrated: its all
connected, accessible to customers, resources
-interdependent: businesses depend on each other
Globalization Waves - Answer- - 1500-1800
- 1950-2011 (Russia peaked in the 1990's because of the dissolution of the Soviet
Union
Globalization is a.... - Answer- reform process
Reform Process - Answer- -types of barriers: trade, investment, cultural, IT, political
-traditional consequence: win or lose
Decoupling - Answer- an economy that is able to sustain GDP growth without having
a negative impact on environmental conditions
What is the result of decoupling? - Answer- decouple from ups and downs of most
wealthy countries
-multi-polar economy
Institutions - Answer- facilitate globalization
-World Trade Organization (trade in agriculture, services, inventions and intellectual
property)
-Sovereign Governments (institutional structure - rules, enforcement mechanisms
and orgs that support market transactions)
What are the lessons we have learned from decoupling? - Answer- -diversify export
markets
-avoid subsidizing export sector (directly or indirectly)
-currency policy
-large populations (stabilizer)
-avoid over indulgence: living off credits (companies and state)
-regulate financial sector to limit risk-taking
Policy measures to promote globalization? - Answer- -good governance
-transparency
-domestic competitive markets (limit state-owned enterprise)
-property rights
-anti-corruption policies
Theory of Absolute Advantage - Answer- (Adam Smith) a theory suggests that a
country can produce a certain good more efficiently than other countries, it will trade
with countries that produce other goods more efficiently.
,Theory of Comparative Advantage - Answer- (David Ricardo) a theory that suggests
nations will trade with one another as long as they can produce certain goods
relatively more efficiently than one another.
Factor Endowment Theory - Answer- (Eli Hecksher and Bertil Ohlin)a theory that
suggests a country will enjoy a comparative advantage over other countries if it is
naturally endowed with a *greater abundance* of one of the factors of economic
production.
International Product Life Cycle Theory - Answer- (Raymond Vernon) a theory that
suggests a product will be manufactured in different types of countries, in stages,
generating trade between these countries.
-*Stage 1*: product is created in developed country, using new technology and
serving a market need.
-*Stage 2*: as sales grow, competitors start to make similar products in other
developed countries, responding to local needs.
-*Stage 3*: manufacturing of product has become routine and costs need to be
reduced, and production moves to developing countries.
Cluster Theory - Answer- (Michael Porter) a theory that suggests competitive
clusters form when companies in the same industry, as well as their suppliers,
concentrate in one geographic area
-when this happens, the companies "feed" on each other's know-how, pushing them
to innovate faster. They become so efficient and innovative that they become world-
class suppliers.
Logistics Cluster Theory - Answer- (Yossi Sheffi) a theory that suggests logistics
clusters form when logistics companies concentrate in one geographic area.
-when this happens, the companies allow manufacturers to operate more efficiently,
since all the services they need to ship are located in one area. The logistics
suppliers, even though they are competitors, actually help each other attract new
customers.
Business Drivers for International Trade - Answer- -*Market*: expansion, stability,
customer expect them in foreign markets and other tactical and strategic reasons
(Coke grows stevia in China)
-*Cost*: economies of scale, access to lower of operation (labor, taxes, operation
standards)
-*Access*: cost, skills + knowledge + capabilities, environment (carbon footprint)
-*Competition*: keep up with competitors, retaliate against them or enter a market
first
-*Technology*: internet -> "world has become flat <-info availability + eCommerce
Political System Environment - Answer- -*Democracy*: a system of government by
the whole population or all the eligible members of a state, typically through elected
representatives.
-*Totalitarianism*: a system of government that is centralized and dictatorial and
requires complete subservience to the state. (dictatorship, non-elected religious
leaders and totalitarian monarchy)
, Ideologies - Answer- -*Communism*: advocating class war and leading to a society
in which all property is publicly owned and each person works and is paid according
to their abilities and needs (EX: Cuba, China, NK)
-*Socialism*: a political and economic theory of social organization which advocates
that the means of production, distribution, and exchange should be owned or
regulated by the community as a whole (EX: Venezuela)
-*Capitalism*: an economic and political system in which a country's trade and
industry are controlled by private owners for profit, rather than by the state (EX: US)
Political Risks - Answer- the risks that political forces or problems in a given country
will have a meaningful negative impact upon the conduct of business in that country
Micro-Political Risk - Answer- a political risk that only affects a certain industry or set
of firms in a given country
Macro-Political Risk - Answer- a political risk that essentially affects all businesses in
a given country
Corruption - Answer- a situation where businesses are able to illegally alter relevant
private and/or public decision making by way of bribes, kickbacks, blackmail,
extortion, and related activities
Private Corruption - Answer- business corruption involving other private businesses,
individuals, or groups
Public Corruption - Answer- the practice of making illegal payments to government
officials or engaging in blackmail, extortion or other related activities to obtain
government contracts or governmental approval for business activities
Domestic vs. International Risks - Answer- -*Transportation*: coordinate more
carriers, multiple transfers, higher risk internationally
-*Lead Times*: lead times and lead time uncertainties are higher internationally
-*Cost*: international is more complex and expensive than domestic
-*Inventory*: holding inventory costs money (cost of products, cost of warehouse and
opportunity cost)
-*Product*: people internationally like different things, take them into account
-*Packaging/Labels*: international require different information and in different
languages
-*Complexity*: international is more expensive and complex than domestic logistics
Supply chains have become increasingly more complex because.... - Answer- supply
chains have elongated:
-partnerships
-outsourcing and off-shoring (thus more sophisticated management and control)
Supply Chains are... - Answer- multi-layered, interconnected and interdependent
Off-Shoring - Answer- refers to moving business activities out of the company's
home country to another location in a different country (usually to take advantage of
lower cost environments)
