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Quiz 1 :

Globalization

Quiz 1 :

Globalization

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How has the nature of foreign direct investment changed over the last half century?
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The basic trend has been that the inflow in both the developed and developing countries has increased over the last 15-20 years. There was a slight slowdown during 2008-9 due to the global slowdown. However the share of the developing countries in the inflow has increased since the late 1990s. Also the share of developing nations as investors has increased over the last few years.
Another trend is in the increase of Multi-National Corporations (MNC). Earlier these were mainly from US, Japan and the European countries. Today one will find many MNCs from China, India and South Korea competing in the global market place. Also today these are not necessarily large corporation like the US corporations of the past but could be mini-MNCs with a restricted exposure to either a few countries or a niche market in many countries.

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Globalization Use the globalEDGE™ site to complete the following exercises: You are working for a company that is considering investing in a foreign country. Investing in countries with different traditions is an important element of your company's long-term strategic goals. As such, management has requested a report regarding the attractiveness of alternative countries based on the potential return of FDI. Accordingly, the ranking of the top 25 countries in terms of FDI attractiveness is a crucial ingredient for your report. A colleague mentioned a potentially useful tool called the "FDI Confidence Index," which is updated periodically. Find this index and provide additional information regarding how the index is constructed.
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The main indicator as to the suitability of a nation for FDI in the next three years has been the " A.T Kearney -FDI Confidence Index". This ranks various countries in the world
The methodology used in the research done for this report is to construct the data from a proprietary survey conducted during November and December 2012. This involved senior executives from over 300 companies in 28 countries. They included executives at the top three levels and included many regional and business heads.
All companies had global revenues exceeding $ 500 million with two-thirds of the respondents topping $ 1 billion. Also to take into consideration the growing focus on emerging markets more than one-third of the respondents were headquartered in a developing country.
The survey is based on a weighted average of the high, medium and low responses to the survey questions. Responses from the source country are not considered for evaluation of that country.
Given below is a table showing the top 25 FDI destinations for 2013 and the positions of those countries in 2012.
2013 FDI Confidence Index (Source: A T Kearney - Foreign Direct Investment Confidence Index ® 2013)
img The FDI Confidence Index is rated on a scale of 0 to 3. As a barometer of how near the various countries are the highest in 2013 was 2.09 and the lowest 1.60. The above table shows the top countries as rated by their attractiveness for FDI. It may be pertinent to mention at this point that 10 top countries have received 50 percent of the global inflows within 12 months of publication of these reports. The top 5 countries accounted for 35 percent of the inflows of FDI.

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Describe the shifts in the world economy over the past 30 years. What are the implications of these shifts for international businesses based in Great Britain? North America? Hong Kong?
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Over the last three decades, the national economies of the world have become more interconnected. Money, workers, goods and services all across national borders have become easier due to the collapse of the Soviet Bloc, less trade restrictions, and new technology such as the Internet. Companies and workers are facing increasing competition from India, Japan, Brazil, China, Mexico and other nations. Wages have driven down and some occupations have moved partly or in whole to nations with cheap labor, cheap land, cheap energy and/or less intrusive regulations. Businesses increasingly have found customers and suppliers from other nations. The World Economy is larger and more interconnected. Economic growth has gone up in many developing or undeveloped nations. The economic balance has shifted.
Great Britain, a former superpower, has become less industrialized due to foreign competition from Brazil because now it has a smaller economy than Brazil. Britain has involved itself into free trade, becoming a member of both the Commonwealth of Nations (Britain's former empire) and the European Union. Businesses have many opportunities to outsource jobs to cheaper areas in Eastern Europe and India. Easy migration rules also allow British companies to recruit workers from places like Poland and India. London remains the world's most prominent financial center, but Singapore and Hong Kong are increasing in importance. Financial, Insurance, and other London white collar companies increasingly set up subsidiaries or strategic partnerships across the planet to diversify.
North American companies benefit from a free flow of investment capital and ideas. The North American Free Trade Agreement has led to increased trade and outsourcing between Mexico, Canada, and the US. Restrictions on international labor flow in all three countries encourage illegal immigration and outsourcing. Many manufacturing, high tech, and green companies faced massive (often foreign government supported) competitive pressures from East Asia and Europe. Many companies collapsed, but others thrived, often by exporting to burgeoning foreign markets. There has also been in sourcing. International companies including Japanese car makers often move production to North America to decrease shipping costs or to generate political goodwill from the governments, which is still the world's largest market.
Hong Kong is widely known as one of the most business friendly places in the world. It has free capital flows, free labor flows, non-existent trade barriers, and is one of the easiest places on earth to create a new business. This has enabled Hong Kong to grow from a barren rock to one of the fourth Asian Tigers. Honk Kong also benefits from ties with Britain's former empire, its access to China's market, and its location at the crossroads of the most economically dynamic areas over the last three decades. Hong Kong business is likely to grow in importance and reach.

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What is meant by the globalization of production? Why are production systems being globalized?
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How has the world output and trade picture changed over the last half century?
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Given these differences, what skills do managers in an international business need to develop?
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Which groups gain from the outsourcing of legal services? Which groups lose?
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What kind of legal services are most amenable to outsourcing?
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What are the benefits to a law firm of outsourcing of legal services to a foreign country? What are the potential costs and risks?
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How do declining trade and investment barriers contribute toward the globalization of production and markets?
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"The study of international business is fine if you are going to work in a large multinational enterprise, but it has no relevance for individuals who are going to work in small firms." Evaluate this statement.
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What is meant by the globalization of markets? Which product markets tend to be the most global?
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Since the industrial revolution, the United States and Europe have dominated world economic activity. How is this now changing? What are the implications of these changes for international business?
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Explain the role of new technology in facilitating the globalization of production and markets.
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What does the evidence tell us about the relationship between globalization and wage rates in developed nations?
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How have changes in technology contributed to the globalization of markets and production? Would the globalization of production and markets have been possible without these technological changes?
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How does managing an international business differ from managing a domestic businesses?
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Globalization Use the globalEDGE™ site to complete the following exercises: Your company has developed a new product that has universal appeal across countries and cultures. In fact, it is expected to achieve high penetration rates in all the countries where it is introduced, regardless of the average income of the local populace. Considering the costs of the product launch, the management team has decided to initially introduce the product only in countries that have a sizable population base. You are required to prepare a preliminary report with the top 10 countries in terms of population size. A member of management has indicated that a resource called the "World Population Data Sheet" may be useful for the report. Because growth opportunities are another major concern, the average population growth rates should be listed also for management's consideration.
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Outline the main arguments made for and against globalization.
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What does the evidence tell us about the relationship between globalization and pollution?
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