If you can't read please download the document
Upload
julius-nash
View
294
Download
2
Embed Size (px)
DESCRIPTION
International business 5. Functional Area excellence 4. Entering and operating in International Markets. 3.Strategy and opportunity assessment 2. The environment of International Business 2.Globalization of markets and the Internationalization of the firm Foundation concepts of International business International Business: Strategy, Management, and the New Realities
Citation preview
2.Globalization of markets and the Internationalization
of the firm FM : FM : Anis Gunawan, MBA,MM,SP Copyright 2014
Pearson Education Copyright 2014 Pearson Education Inc.
International business
5. Functional Area excellence 4. Entering and operating in
International Markets. 3.Strategy and opportunity assessment 2. The
environment of International Business 2.Globalization of markets
and the Internationalization of the firm Foundation concepts of
International business International Business: Strategy,
Management, and the New Realities Overview on Globalization of
Markets
Globalization and technological advances have altered the
international business landscape more than any other trends. In
this class, globalization refers to the interconnectedness of
national economies andthe growing interdependence of buyers,
producers, suppliers, and governments around the world.
Globalization allows firms to view the world asone large
marketplace for goods, services, capital, labor, and knowledge.
Globalization of markets refers to the gradual integration and
growing interdependence of national economies. Globalization allows
firms to view the world as an integrated marketplace that includes
buyers, producers, suppliers, and governments in different
countries. Market globalization is manifested by the production and
marketing of branded products and services worldwide. Declining
trade barriers and the ease with which international business
transactions take place due to the Internet and other technologies
are contributing to a gradual integration of most national
economies into a unified global marketplace. WD Copyright 2014
Pearson Education Phases of Globalization
The first phase of globalization began about 1830 and peaked around
International business became widespread due to the growth of
railroads, efficient ocean transport, and the rise of large
manufacturing and trading firms. Invention of the telegraph and
telephone in the late 1800s facilitated information flows between
and within nations and greatly aided early efforts to manage
companies supply chains. The second phase of globalization began
around 1900 and was associated with the rise of electricity and
steel production. This phase reached its height just before the
Great Depression, a worldwide economic downturn that began in In
1900, Western Europe was the most industrialized world region.
Europes colonization of countries in Asia, Africa, and the Middle
East led to establishment of some of the earliest subsidiaries of
multinational enterprises (MNEs). European companies such as BASF,
Nestl, Shell, Siemens, and British Petroleum had established
foreign manufacturing plants by In the years before World War I
(pre-1914), many firms were already operating globally. The Italian
manufacturer Fiat supplied vehicles to nations on both sides of the
war. The third phase of globalization began after World War II. At
wars end in 1945, substantial pent-up demand existed for consumer
products, as well as for input goods to rebuild Europe and Japan.
The United States was least harmed by the war and became the worlds
dominant economy. Substantial government aid helped stimulate
economic activity in Europe. The pre-war years had been
characterized by high tariffs and strict controls on currency and
capital movements. After the war, leading industrialized countries,
including Australia, Britain, and the United States, sought to
reduce international trade barriers. Invention of the telegraph and
telephone in the late 1800s facilitated information flows between
and within nations and greatly aided early efforts to manage
companies supply chains. The fourth phase of globalization began in
the early 1980s, which saw enormous growth in cross-border trade
and investment. The phase was triggered by the development of
personal computers, the Internet, and Web browsers; the collapse of
the Soviet Union and ensuing market liberalization in Central and
Eastern Europe; and industrialization and modernization in East
Asian economies, including China. Copyright 2014 Pearson
Education
The Death of Distance Copyright 2014 Pearson Education The Drivers
of Market Globalization
Future Drivers of Market Globalization 1. Worldwide reduction of
barriers to trade and investment 2.Market liberalization and
adoption of free markets 3.Industrialization, economic development,
and modernization 4.Integration of world financial markets
5.Advances in technology The exhibit presents an organizing
framework for examining market globalization. The exhibit makes a
distinction between: (1) drivers or causes of globalization; (2)
dimensions or manifestations of globalization; (3a) societal
consequences of globalization; and (3b) firm level consequences of
globalization. In the exhibit, the double arrows illustrate the
interactive nature of the relationship between market globalization
and its consequences. As market globalization intensifies,
individual firms respond to the challenges and new advantages that
it brings. However, keep in mind that firms do not expand abroad
solely as a reaction to market globalization. They also
internationalize proactively in order to pursue new markets, find
lower-cost inputs, or obtain other advantages. Often, adverse
conditions in the home market, such as regulation or declining
industry sales, push firms to boldly venture abroad. Firms that do
so tend to be more successful in global competition than those that
engage in international business as a reactive move. Copyright 2014
Pearson Education HiTech The Drivers and Dimensions of Market
Globalization
Drivers of Market Globalization 2. Dimensions of Market
Globalization 1.Integration and interdependence of national
economies 2.Rise of regional economic integration blocs 3.Growth of
global investment and financial flows 4.Convergence of buyer
lifestyles and preferences 5.Globalization of production activities
6.Globalization of services Copyright 2014 Pearson Education The
Drivers, Dimensions, and Consequences of Market Globalization
1. Drivers of Market Globalization 2. Dimensions of Market
Globalization 3b. Firm-level Consequences of MarketGlobalization:
Internationalization of the Firms Value Chain Countless new
business opportunities forinternationalizing firms New risks and
intense rivalry from foreign competitors More demanding buyers who
source fromsuppliers worldwide Greater emphasis on proactive
internationalization Internationalization of the firms value chain
3a. Societal Consequences of Market Globalization Contagion: Rapid
spread offinancial or monetary crises from one country to another
Loss of national sovereignty Offshoring and the flight of jobs
Effect on the poor Effect on the naturalenvironment Effect on
national culture Dubai Fedex Dimensions of Market
Globalization
Integration and interdependence of national economies.Results from
firms collective international activities.Governments contribute by
lowering trade and investment barriers. Rise of regional economic
integration blocs.Free trade areas are formed by two or more
countries to reduce or eliminatebarriers to trade and
investment,such as the EU, NAFTA, and MERCOSUR. Integration and
interdependence of national economies. Internationally active firms
devise multicountry operations through trade, investment,
geographic dispersal of company resources, and integration and
coordination of value-chain activities. A value chain is the
sequence of value-adding activities performed by the firm in the
course of developing, producing, marketing, and servicing a
product. The aggregate activities of such firms give rise to
economic integration. Governments have facilitated this integration
by lowering barriers to international trade and investment,
harmonizing their monetary and fiscal policies within regional
economic integration blocs (also known as trade blocs), and
developing supranational institutionsthe World Bank, International
Monetary Fund, World Trade Organization, and othersthat seek
further reductions in trade and investment barriers. Rise of
regional economic integration blocs. Closely related to the first
trend is the emergence since the 1950s of regional economic
integration blocs. Examples include the North American Free Trade
Agreement area (NAFTA), the Asia Pacific Economic Cooperation zone
(APEC), and Mercosur in Latin America. These blocs consist of
groups of countries within which trade and investment flows are
facilitated through reduced trade and investment barriers. In more
advanced arrangements, such as the common market, barriers to the
cross-border flow of factors of production (mostly labor and
capital) are removed. For example, the European Union
(www.europa.eu), in addition to adopting free trade among its
member countries, is harmonizing fiscal and monetary policies and
adopting common business regulations. Copyright 2014 Pearson
Education Dimensions of Market Globalization (contd)
Growth of global investment and financial flows.Associated with
rapid growthin foreign direct investment(FDI), currency trading,
andglobal capital markets. Convergence of buyerlifestylesand
preferences. Facilitated by global media, which emphasize
lifestyles found in the U.S., Europe, or elsewhere. Firms market
standardized products. Growth of global investment and financial
flows. In the process of conducting international transactions,
firms and governments buy and sell large volumes of national
currencies (such as dollars, euros, and yen). The free movement of
capital around the worldthe globalization of capital extends
economic activities across the globe and fosters interconnectedness
among world economies. Commercial and investment banking is a
global industry. The bond market has gained worldwide scope, with
foreign bonds representing a major source of debt financing for
governments and firms. Information and communications networks
facilitate heavy volumes of financial transactions every day,
integrating national markets. Nevertheless, widespread integration
can have negative effects. For example, when the United States
experienced a banking crisis in 2008, the crisis quickly spread to
Europe, Japan, and emerging markets, triggering a global recession.
Convergence of consumer lifestyles and preferences. Around the
world, consumers spend their money and time in increasingly similar
ways. Lifestyles and preferences are converging. Shoppers in Tokyo,
New York, and Paris demand similar household goods, clothing,
automobiles, and electronics. Teenagers everywhere are attracted to
iPods, Levis jeans, and BlackBerry cell phones. Major brands have
gained a global following, encouraged by greater international
travel, movies, global media, and the Internet, which expose people
to products, services, and living patterns from around the world.
Movies such as The Lord of the Rings and Slumdog Millionaire
receive much attention from a global audience. Convergence of
preferences is also occurring in industrial markets, where
professional buyers source raw materials, parts, and components
that are increasingly standardizedthat is, very similar in design
and structure. Yet, even as converging tastes facilitate the
marketing of highly standardized products and services to buyers
worldwide, they also promote the loss of traditional lifestyles and
values in individual countries. Copyright 2014 Pearson Education
Dimensions of Market Globalization (contd)
Globalization of production. To cut costs, firms manufacture in low
labor-cost locations such as Mexico and Eastern Europe.Firms also
source services from abroad. Globalization of services. Banking,
hospitality, retailing, and other service industries are rapidly
internationalizing. Firms outsource business processes and other
services in the value chain to vendors overseas. And, in a new
trend, many people go abroad to take advantage of low-cost
services. Globalization of production. Intense global competition
is forcing firms to reduce their costs of production and marketing.
Companies strive to drive down prices through economies of scale,
by standardizing what they sell, and by shifting manufacturing and
procurement to foreign locations with inexpensive labor. For
example, companies in the auto and textile industries have
relocated their manufacturing to low labor-cost locations such as
China, Mexico, and Eastern Europe. Globalization of services. The
services sector is undergoing widespread internationalization.
First, banking, hospitality, retailing, and other service
industries are rapidly expanding abroad. The real estate firm REMAX
has established more than 5,000 offices in over fifty countries.
Second, as noted in the opening vignette, firms increasingly
outsource business processes and other services in the value chain
to vendors located abroad. Finally, in a relatively new trend, many
people go abroad to take advantage of low-cost services. For
example, many U.S. consumers regularly travel to India, Latin
America, and other international destinations to undergo medical
procedures like cataract and knee surgeries. Several U.S. health
insurance companies view international medical tourism as a means
to reduce costs. Copyright 2014 Pearson Education Drivers of Market
Globalization
Worldwide reduction of barriers to trade and investment.Over time,
national governmentshave greatly reduced trade and investment
barriers.The trend is partly facilitated by the World Trade
Organization (WTO), an organization of some 150 member nations.
Market liberalization and adoption of free markets.The launch of
free market reforms in China and the former Soviet Union marked the
opening of roughly 1/3 of the world to free trade. Worldwide
reduction of barriers to trade and investment. The tendency of
national governments to reduce trade and investment barriers has
accelerated global economic integration. For example, tariffs on
the import of automobiles, industrial machinery, and countless
other products have declined nearly to zero in many countries,
encouraging freer international exchange of goods and services.
Falling trade barriers are facilitated by the WTO. After joining
the WTO in 2001, China made its market more accessible to foreign
firms. Reduction of trade barriers is also associated with the
emergence of regional economic integration blocs, a key dimension
of market globalization. Market liberalization and adoption of free
markets. Built in 1961, the Berlin Wall separated the communist
East Berlin from the democratic West Berlin. The collapse of the
Soviet Unions economy in 1989, demolition of the Berlin Wall that
same year, and Chinas free-market reforms all signaled the end of
the 50-year Cold War and smoothed the integration of former command
economies into the global economy. Numerous East Asian economies,
stretching from South Korea to Malaysia and Indonesia, had already
embarked on ambitious market-based reforms. India joined the trend
in These events opened roughly one-third of the world to freer
international trade and investment. China, India, and Eastern
Europe have become some of the most cost-effective locations for
producing goods and services worldwide. Privatization of previously
state-owned industries in these countries has encouraged economic
efficiency and attracted massive foreign capital into their
national economies. Copyright 2014 Pearson Education Drivers of
Market Globalization (contd)
Industrialization, economic development, and modernization.These
trends transformed many developing economies from producers of
low-value to higher-value goods, such as electronics and computers.
Simultaneously, rising living standards have made such countries
more attractive as target markets for sales and investment.
Industrialization, economic development, and modernization.
Industrialization implies that emerging marketsrapidly developing
economies in Asia, Latin America, and Eastern Europeare moving from
being low value-adding commodity producers, dependent on low-cost
labor, to sophisticated competitive producers and exporters of
premium products such as electronics, computers, and aircraft. For
example, Brazil is now a leading producer of private aircraft, and
the Czech Republic excels in the manufacture of automobiles. As
highlighted in the opening vignette, India has become a leading
supplier of computer software. Economic development is enhancing
standards of living and discretionary income in emerging markets.
Copyright 2014 Pearson Education Copyright 2014 Pearson Education
Drivers of Market Globalization (contd)
Integration of world financial markets.Enables firms to raise
capital, borrow funds, and engage in foreign currency transactions
wherever theygo.Banks now provide arange of services thatfacilitate
global transactions. Advances in technology. Reduces the cost of
doing business internationally by allowing firms to interact
cheaply with suppliers, distributors, and customers
worldwide.Facilitates the internationalization of companies,
including countless small firms. Integration of world financial
markets. Integration of world financial markets makes it possible
for internationally active firms to raise capital, borrow funds,
and engage in foreign currency transactions. Financial services
firms follow their customers to foreign markets. Cross-border
transactions are made easier partly as a result of the ease with
which funds can be transferred between buyers and sellers through a
network of international commercial banks. For example, as an
individual you can transfer funds to a friend in another country
using the SWIFT network. Connecting more than 7,800 financial
institutions in some 200 countries, the network facilitates global
financial transactions. The globalization of finance contributes to
firms abilities to develop and operate world-scale production and
marketing operations. It enables companies to pay suppliers and
collect payments from customers worldwide. Ongoing advances in
information, manufacturing, and transportation technologies, as
well as the emergence of the Internet, have facilitated rapid and
early internationalization of countless firms, such as Neogen
(www.neogen .com). The firms founders developed diagnostic kits to
test for food safety. Compared to test kits available from other
firms, Neogens products were more accurate, more efficient, and
easier to use. As word spread about the superiority of its
products, Neogen was able to internationalize quickly and acquire a
worldwide clientele. Farmers use Neogen test kits to test for
pesticide residue; veterinarians use them for pharmaceuticals,
vaccines, and topicals; government agencies use them to test for E.
coli. Today, Neogen is a highly successful international firm.
Modern technology is promoting a higher level of international
business activity than ever before. For example, many companies in
software, gaming, and entertainment maintain a presence only on the
Web. Copyright 2014 Pearson Education Information and
Communications Technology (ICT)
Profound advances have occurred in computers, digital technologies,
telephony, and the Internet. MNEs leverage ICTs to optimize their
performance, managing operations around the world. ICTs opened the
global marketplace to firmsthat historically lacked the resources
tointernationalize. Technology greatly eases management of
international operations. Now firms interact more efficiently with
foreign partners and value-chain members than ever before. They
transmit all kinds of data, information, and vital communications
that help ensure the smooth running of their operations worldwide.
They use information technology to improve the productivity of
their operations, which provides substantial competitive
advantages. For example, information technology allows firms to
more efficiently adapt products for international markets or
produce goods in smaller lots to target international niche
markets. In addition, technological advances have made
international operations affordable for all types of firms,
explaining why so many SMEs have internationalized during the past
two decades. Managers use the latest technologies to manage
international operations: iPads that combine laptop functionality
with smartphone convenience; BlackBerry phones with crossnational
Wi-Fi capability that can take phone calls from anywhere on Earth;
iPods for listening to audio books or mini Sony Playstations for
that ride home on the train after work. Technological advances have
spurred the development of new products and services that appeal to
a global audience. Leading examples include the Wii and iPhone.
Emerging markets and developing economies also benefit from
technological advances, partly due to technological leapfrogging.
For example, Hungary and Poland went directly from old-style analog
telecommunications (with rotary dial telephones) to cell phone
technology, bypassing much of the early digital technology
(push-button telephones) that characterized advanced economy
telephone systems. China and India are the new beachheads for
technological advances. India has become a focus of global
Internet- and knowledge-based industries. Top management at Intel
and Motorola, two leading technology companies, agree that China is
the place to be when it comes to technological progress. Both firms
generate substantial sales there. Management predicts double-digit
increases in demand for technology products in China far into the
future. Intels CEO commented, I come back from visiting China and
feel as if Ive visited the fountain of youth of computing.
Copyright 2014 Pearson Education Manufacturing and Transportation
Technologies
Revolutionary developments permit manufacturing that is low-scale
and low cost, via computer-aided-design of products (CAD),
robotics, and IT-managed production lines. In transportation, key
advances include fuel-efficient jumbo jets, giant ocean-going
freighters, and containerized shipping.The cost of international
transportation has declined substantially, spurring rapid growth in
global trade. Collectively, technological advances have greatly
reduced the costs of doing business internationally. Violin
Computer-aided design (CAD) of products, robotics, and production
lines managed and monitored by microprocessor-based controls are
transforming manufacturing, mainly by reducing the costs of
production. Firms can make products cost effectively even in short
production runs. These developments benefit international business
by allowing firms to more efficiently adapt products to individual
foreign markets, profitably target small national markets, and
compete more effectively with foreign competitors that already have
cost advantages. Beginning in the 1960s, technological advances led
to the development of fuel-efficient jumbo jets, giant oceangoing
freighters, and containerized shipping, often through the use of
high-tech composites and smaller components that are less bulky and
lightweight. In the 20-year period through 2008, the number of
container-carrying ships quadrupled to over 4,000 vessels.
Increasing availability of cell phones in Africa has helped spur
economic growth there. Some farmers use cell phones to monitor crop
prices in various local markets where they can sell their harvests.
In the 20-year period through 2012, the number of containers
transported internationally increased by nearly five times to about
175 million twenty foot equivalent units. Containers are the big
boxes, usually 40 feet long (about 12 meters), loaded on top of
ships, trucks, and rail cars that carry the worlds cargo. Today,
the typical ocean-going container ship holds more than 2,300
containers, double the average of the 1980s.18 As a result, the
cost of transportation, as a proportion of the value of products
shipped internationally, has declined dramatically. Lower freight
costs have spurred rapid growth in cross-border trade.
Technological advances have also reduced the costs of international
travel. Until 1960, it was common to travel by ship. With the
development of air travel, managers quickly travel the world.
Copyright 2014 Pearson Education Societal Consequences of Market
Globalization
Contagion: Rapid Spread of Monetary or Financial Crises. Beginning
in late 2008, the world economy experienced a severe financial
crisis and global recession, the worst in decades. The crisis
emerged when pricing bubbles occurred in housing and commodities
markets worldwide.As bubbles in real estate markets burst, home
values crashed and many homeowners could not repay their debts.
Meanwhile, thousands of mortgages had been securitized, and their
values plunged or became uncertain. Contagion: Rapid Spread of
Monetary or Financial Crises Beginning in late 2008, the world
economy experienced a severe financial crisis and global recession,
the worst in decades.1 The crisis was precipitated by pricing
bubbles (excessively high prices) in housing and commodities
markets around the world. For example, by mid-2008, oil prices
climbed to an all-time high of nearly $150 a barrel, and gasoline
prices reached record levels in many countries. High commodity
prices resulted partly from rising demand, especially in emerging
markets such as China and India. As bubbles in real estate markets
burst, home values crashed, leaving owners with mortgage debts
greater than the value of their homes. Many homeowners found
themselves unable to repay their debts, a situation that worsened
as people lost jobs or experienced pay cuts. Meanwhile, thousands
of mortgages had been securitizedthat is, sold as investment
vehicles on stock markets worldwide. As the value of these
securities plunged or became uncertain, the stock markets crashed.
A recession occurs when a national economy undergoes a prolonged
period of negative growth. GDP growth in advanced, developing, and
emerging economies varies over time. It declined substantially in
recent years, due to the global recession and the financial crisis.
However, even following deep recessions, the global economy has
always returned to net GDP growth. The exhibit show how GDP growth
in advanced, developing, and emerging economies varies over time.
It declined substantially during the global recession and financial
crisis. One lesson of the exhibit is that even following deep
recessions, the global economy has always returned to net GDP
growth. The crisis began in the United States and, like a
contagious disease, spread around the world. In international
economics, contagion refers to the tendency for a financial or
monetary crisis in one country to spread rapidly to other
countries, due to the ongoing integration of national economies.
Dubai Copyright 2014 Pearson Education Example: Nikes Foreign
Factories
Nike has 100s of factories in Asia, Latin America, and elsewhere
Nike has been criticized for paying low wages and operating
sweatshop conditions. Labor exploitation and sweatshop conditions
are genuine concerns in many developing economies. However,
consideration must be given to the other choices available to
people in those countries. Nike and numerous other MNEs are making
efforts to improve working conditions in their foreign plants.
Copyright 2014 Pearson Education Global Financial Crisis
Contagion.The rapid spread of a financial or monetary crisis from
one country to another, as seen during the recent global financial
crisis. The financial crisis originated with pricing bubblesin
housing and commodities markets. Thousands of mortgages had been
securitized -- sold as investments on stock markets worldwide.As
they lost value, stock markets declined substantially. World
economies experienced recession -- negative growth. Beginning in
late 2008, the world economy experienced a severe financial crisis
and global recession, the worst in decades. The crisis was
precipitated by pricing bubbles (excessively high prices) in
housing and commodities markets around the world. For example, by
mid-2008, oil prices climbed to an all-time high of nearly $150 a
barrel, and gasoline prices reached record levels in many
countries. High commodity prices resulted partly from rising
demand, especially in emerging markets such as China and India. As
bubbles in real estate markets burst, home values crashed, leaving
owners with mortgage debts greater than the value of their homes.
Many homeowners found themselves unable to repay their debts, a
situation that worsened as people lost jobs or experienced pay
cuts. Meanwhile, thousands of mortgages had been securitizedthat
is, sold as investment vehicles on stock markets worldwide. As the
value of these securities plunged or became uncertain, the stock
markets crashed. Copyright 2014 Pearson Education Globalization,
Economic Freedom, and National Prosperity
Economic freedom is the extent of government interference in
business, strictness of the nations regulatory environment, and the
ease with which economic activity can be carried out. National
prosperity is strongly associated with -- participation in
international trade and investment; -- the nations level of
economic freedom. Thus, nations should emphasize economic freedom
and participating in international trade and investment.
Governments are responsible for ensuring the fruits of economic
progress are shared fairly. Developing countries can undertake
proactive measures to reduce poverty. They can improve conditions
for investment and saving, liberalize markets and promote trade and
investment, build strong institutions that ensure good governance,
and invest in education and training to promote productivity and
encourage upward mobility for workers. Advanced economies can help
reduce global poverty by making their markets more accessible to
low-income countries; providing debt relief to heavily indebted
nations; and facilitating the flow of technology, private capital,
and direct investment into poor countries. In the same month that
German carmaker BMW launched a new factory in South Carolina,
Jackson Mills, an aging textile plant a few miles away, closed its
doors and shed thousands of workers. Globalization created a new
reality for both these firms. By establishing operations in the
United States, BMW found it could manufacture cars cost-effectively
while more readily accessing the huge U.S. market. In the process,
BMW created thousands of high-paying, better-quality jobs for U.S.
workers. Simultaneously, Jackson Mills had discovered it could
source textiles of comparable quality more cost-effectively from
suppliers in Asia. Globalization drove these firms to relocate key
value-adding activities to the most advantageous locations around
the world. Copyright 2014 Pearson Education Copyright 2014 Pearson
Education Company Internationalization and the Value Chain
The most significant implication of market globalization for
companies is that a purely domestic focus is no longer viable in
most cases. Market globalization compels firms to internationalize
their value chain and access the benefits of international
business. Value chain: The sequence of value-adding activities
performed by the firm in the process of developing, producing, and
marketing a product or a service. Globalization allows the firm to
internationalize its value chain, leading to various advantages.
The globalization of markets has opened up countless new business
opportunities for internationalizing firms. At the same time,
globalization means that firms must accommodate new risks and
intense rivalry from foreign competitors. Globalization results in
more demanding buyers who shop for the best deals worldwide. A
purely domestic focus is no longer viable for firms in most
industries. Managers should replace parochial attitudes with a more
cosmopolitan orientation. Internationalization may take the form of
global sourcing, exporting, or investing in key markets abroad.
Proactive firms seek a simultaneous presence in major trading
regions, especially Asia, Europe, and North America. The most
direct implication of market globalization is on the firms value
chain. Market globalization compels firms to organize their
sourcing, manufacturing, marketing, and other value-adding
activities on a global scale. In a typical value chain, the firm
conducts research and product development (R&D), purchases
production inputs, and assembles or manufactures a product or
service. Next, the firm performs marketing activities such as
pricing, promotion, and selling, followed by distribution of the
product in targeted markets and after-sales service. The
value-chain concept is useful in international business because it
helps clarify what activities are performed where in the world. For
instance, exporting firms perform most upstream value-chain
activities (R&D and production) in the home market and most
downstream activities (marketing and after-sales service) abroad.
Each value-adding activity in the firms value chain is subject to
internationalization; that is, it can be performed abroad instead
of at home. Copyright 2014 Pearson Education Internationalization
of the Firms Value Chain
Copyright 2014 Pearson Education Internationalization of the Firms
Value Chain
The truly international firm configures itssourcing, manufacturing,
marketing, andother value-adding activities on a global scale.
Rationale: cost savings increase efficiency, productivity, and
flexibility of value chain activities access customers, inputs,
labor, or technology benefit from foreign partner capabilities.
Copyright 2014 Pearson Education International business
5. Functional Area excellence 4. Entering and operating in
International Markets. 3.Strategy and opportunity assessment 2. The
environment of International Business 2.Globalization of markets
and the Internationalization of the firm ? Foundation concepts of
International business International Business: Strategy,
Management, and the New Realities Societal Consequences of Market
Globalization
Quiz Societal Consequences of Market Globalization Contagion :
Rapid Spread of Monetary or . Crises. Beginning in late 2008, the
world economy experienced a severe financial crisis and
..recession, the worst in decades. The crisis emerged when pricing
bubbles occurred in housing and commodities markets worldwide.As
bubbles in real estate markets burst, home values crashed and many
homeowners could not repay their debts. Meanwhile, thousands of
mortgages had been ., and their . plunged or became .. Contagion:
Rapid Spread of Monetary or Financial Crises Beginning in late
2008, the world economy experienced a severe financial crisis and
global recession, the worst in decades.1 The crisis was
precipitated by pricing bubbles (excessively high prices) in
housing and commodities markets around the world. For example, by
mid-2008, oil prices climbed to an all-time high of nearly $150 a
barrel, and gasoline prices reached record levels in many
countries. High commodity prices resulted partly from rising
demand, especially in emerging markets such as China and India. As
bubbles in real estate markets burst, home values crashed, leaving
owners with mortgage debts greater than the value of their homes.
Many homeowners found themselves unable to repay their debts, a
situation that worsened as people lost jobs or experienced pay
cuts. Meanwhile, thousands of mortgages had been securitizedthat
is, sold as investment vehicles on stock markets worldwide. As the
value of these securities plunged or became uncertain, the stock
markets crashed. A recession occurs when a national economy
undergoes a prolonged period of negative growth. GDP growth in
advanced, developing, and emerging economies varies over time. It
declined substantially in recent years, due to the global recession
and the financial crisis. However, even following deep recessions,
the global economy has always returned to net GDP growth. The
exhibit show how GDP growth in advanced, developing, and emerging
economies varies over time. It declined substantially during the
global recession and financial crisis. One lesson of the exhibit is
that even following deep recessions, the global economy has always
returned to net GDP growth. The crisis began in the United States
and, like a contagious disease, spread around the world. In
international economics, contagion refers to the tendency for a
financial or monetary crisis in one country to spread rapidly to
other countries, due to the ongoing integration of national
economies. Copyright 2014 Pearson Education