01 - Globalizing Business

Question 1

international business

Answer 1

• a business (firm) that engages in international (cross-border) activities
• the action of doing business abroad

Question 2

global business

Answer 2

a business around the globe including both international (cross-border) activities and domestic business activities

Question 3

multinational enterprises (MNE)

Answer 3

• a firm that engages in foreign direct investments and operates in multiple countries

Question 4

foreign direct investment (FDI)

Answer 4

investments in controlling and managing value-added activities in other countries

Question 5

International Trade in Europe. Germanys export and imports

Answer 5

Export:

• 59% EU
• 9% US
• 6% China

Import:

• 66% EU
• 7% China
• 5% US

Question 6

TRIAD

Answer 6

North America, Western Europe, Japan

Question 7

Emerging Economies: BRIC

Answer 7

• Acronym for the emerging economies of Brazil, Russia, India and China

Question 8

Emerging Economies: EAGLE

Answer 8

• all emerging economies whose contribution to world economic growth in the next ten years is expected to be larger than the average of the G6 economies (Canada, France, Germany, Italy, Japan, the United Kingdom)
• dynamic concept where country members can change over time according to their forecasted performance relative to developed economies

Question 9

GNP (Gross national product)

Answer 9

• measures the total market value of all final goods and services produced by a country’s residents
• any output produced by foreign residents within the country’s borders must be excluded in calculations of GNP
• any output produced by the country’s residents outside of its borders must be counted

Question 10

GDP (Gross domestic product)

Answer 10

• total market value of all final goods and services produced within a country in a given period of time usually a calendar year

Question 11

Purchasing Power Parity (PPP)

Answer 11

• adjustment made to the GDP to reflect differences in cost of living

Question 12

A unified framework for global business

Answer 12

Question 13

Institution-based perspective

Answer 13

Doing business around the globe requires intimate knowledge about the formal and informal rules of doing business in various countries

• Some formal rules, such as the requirments to treat domestic and foreign firms as equals, enhance the potential odds for foreign firms’ success
• Informal rules such as cultures, norms and values play an equally important part in shaping the success and failure of firms around the globe

An institution-based view suggests that the formal and informal rules of the game, known as institutions, shed light on what is behind firms’ performance around the globe.

Question 14

Resource-based perspective

Answer 14

• The resource-based view focuses on a firm’s internal resources and capabilities
• Resources can be exploited by the firm in order to achieve sustainable competitive advantage
• Firms as Coca-Cola and Microsoft possess firm-specific resources that enabled them to attain leadership positions around the globe

Question 15

Reasons for the liability of outsidership

Answer 15

• distant origins
• lack of local experience
• lack of nearby experience

Question 16

Liability of outsidership

Answer 16

• inherent disadvantage of foreign firms due to lack of familiarity with local contexts and networks
• primary weapon of foreign firms: overwhelming resources and capabilities that, after offsetting the liability of outsidership, still result in some significant competitive advantage

Question 17

Globalization (definition by Guillén 2001)

Answer 17

• a process leading to greater interdependence and mutual awareness (reflexivity) among economic, political and social units in the world and among actors in general

Question 18

Factors hindering success in international business

Answer 18

• ethnocentric perspective: A view of the world through the len’s of one’s own culture
• not-invented-here-syndrom: The tendency to distrust new ideas coming from outside one’s own organization or community