MANA 4321 1nd Edition Exam 1 Study Guide Lectures 1 7 Lecture 1 August 26 Introduction to Globalization International competition is inevitable and future managers will be affected by international competition Firms that have experience in the foreign market will be tomorrow s winners Managers should be able to understand international industries and be able to formulate strategies to achieve competitive advantage To beat your rivals you must know your rivals For example their weaknesses strategies players objectives and goals The World is flat The barriers are gone trade outsourcing competition has come from the lack of those barriers The cold hard truth is that management shareholders and investors are largely indifferent to where their profit comes from or even where the employment is created But they do want sustainable companies Thomas Friedman o CEO has a fiduciary duty for the shareholders of the company The implications of a Flat World Flattening is progress and it poses a threat to historical U S and European prosperity and power The proper response is not to fight it but embrace it and adapt not only to survive but thrive in the new environment New economies need better education pervasive high speed connections and more globally aware government policies The playing field is a lot more layered High trade barriers were one of the causes of the Great Depression Globalization The shift towards a more integrated and interdependent world economy Two components o The globalization of markets all interconnected The merging of distinct national markets into one huge global marketplace o The globalization of production takes advantage of things made in different countries The sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production Ex Vizio Cheaper Employees only 300 people because of outsourcing all over the world Reasons for outsourcing flexibility communication transportation political conditions or trade barriers Lecture 2 August 28 Is globalization prosperity or improvement PROPONENTS Free trade results in greater efficiency innovation the whole economy is better off Reduction of poverty in less developed economies Low price for goods and services Free trade results in economic progress and tougher environmental regulations and stricter labor standards Bodies such as United Nations and the WTO exist to serve the collective interests of member states not subvert them Good Cheaper products have a wider range of choices innovation increase increase competition new products come in a much faster pace CRITICS Destroys manufacturing jobs in wealthy advanced countries Creates income inequality and social problems Wage rates of unskilled workers in advanced countries declines Manufacturing done in less developed countries that lack adequate regulations to protect labor and environment Unelected bureaucrats impose policies on nation states undermining sovereignty Bad lower salaries things outsourced for high level jobs Results in poverty structural shif GINI COEFFICIENT measure of income inequality Lecture 3 September 2 Changing Demographics of the Global Economy Changing world output and world trade picture Changing FDI picture Japan in India made in emerging economies Changing nature of the multinational enterprise o Non US multinationals o Rise of mini multinationals Changing world order PPP Purchasing Power Parity Lecture 4 September 4 International Diversification important questions to ask when entering a market STAGING o When should we go international How quickly should we expand into international markets ARENAS o Which geographic areas will we enter VEHICLES o Which market entry strategies will we use DIFFERENTIATORS o How does being international make our products more attractive to our customers ECONOMIC LOGIC o How will international diversification create value International Diversification Traditional Motivations Use underemployed resources fixed resources lower cost sell off the assets Seek new markets Secure key supplies Exploit firm specific assets Access low cost factors Benefit from government investment subsidies Lower risks When growth is low the competition is high Downward spiral of price Labor resources Cost of capital enticing you Lecture 5 September 16 International Diversification Emerging Motivations Increasing minimum efficient scale and economies of scale Escalating R D costs and shorter product life cycles Protect domestic markets Seek knowledge go to learn Follow competitors Competitive positioning 4 Factors Influencing Type of FDIs RESOURCE SEEKING o Availability price and quality of natural resources o Infrastructure to enable resources to be exploited o Investment incentives e g tax holidays STRATEGIC ASSET SEEKING o Availability of knowledge related assets o Institutional factors influencing ease or difficulty by which assets can be acquired knowledge related MARKET SEEKING o Large growing markets o Transportation costs tariff barriers o Need to be closer to users o Macroeconomic policies pursued by host governments EFFICIENCY SEEKING o Mainly production cost related factors o Removal of obstacles by government o Availability of specialized clusters e g science and industrial parks Fast Cycle Model product change more frequently Managing in the global marketplace Countries are different liabilities of newness and foreignness Range of problems confronted by a manager is wider o Which foreign markets to enter and which to avoid o Appropriate mode of entry o Where to site production activities Governance and coordination Work within the limits imposed by government intervention Which market to enter and avoid Governance control the way firms function Each governance is different MANAGERIAL TASKS IN A GLOBAL ENVIRONMENT Ensure that their company leads the industry in identifying and pursuing market opportunities worldwide Work relentlessly to convert global presence into global competitive advantage Cultivate a global mindset Strive to always reinvent the rules of the global game reinvent and create the market Lecture 6 September 18 ANALYZING THE INTERNATIONAL ENVIRONMENT Right answer of yesterday may not be the right answer of today International environment gives lots of opportunities and constraints ENVIRONMENT Socio cultural Political legal Economic Technological Competition ECONOMIC SYSTEMS Market Economy o Free interplay of demand and supply o No