Chapter 7 - MGMT 6850

Globalization
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Terms in this set (27)
Globalization
a term that has two meanings; (1) the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information; (2) the growing similarity of laws, rules, norms, values, and ideas across countries
diamond of national advantage
a framework for explaining why countries foster successful multinational corporations, consisting of four factors - factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry
factor endowments (national advantage)
a nation's position in factors of production
demand endowments (national advantage)
the nature of home-market demand for the industry's product or service
related and supporting industries (national advantage)
the presence, absence, and quality in the nation of supplier industries that supply services, support, or technology to firms in the industry value chain
firm strategy, structure, and rivalry (national advantage)
the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry
multinational firms
firms that manage operations in more than one country
arbitrage opportunities
an opportunity to profit by buying and selling the same good in different markets
reverse innovation
new products developed by developed-country multinational firms for emerging markets that have adequate functionality at a low cost
political risk
potential threat to a firm's operations in a country due to ineffectiveness of the domestic political system
rule of lawa characteristic of legal systems where behavior is governed by rules that are uniformly enforcedeconomic riskpotential threat to a firm's operations in a country due to economic policies and conditions, including property rights laws and enforcement of those lawscounterfeitingselling of trademarked goods without the consent of the trademark holdercurrency riskpotential threat to a firm's operations in a country due to fluctuations in the local currency's exchange ratemanagement riskpotential threat to a firm's operations in a country due to the problems that managers have making decisions in the context of foreign marketsoutsourcingusing other firms to perform value-creating activities that were previously performed in-houseoffshoringshifting a value-creating activity from a domestic location to a foreign locationinternational strategya strategy based on firms' diffusion and adaptation of the parent companies' knowledge and expertise to foreign markets, used in industries where the pressures for both local adaptation and lowering costs are lowglobal strategya strategy based on firms' centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaptation is low and the pressure for lowering costs is highmultidomestic strategya strategy based on firms' differentiating their products and services to adapt to local markets, used in industries where the pressure for local adaptation is high and the pressure for lowering costs is lowtransnational strategya strategy based on firms' optimizing the trade-offs associated with efficiency, local adaptation, and learning, used in industries where the pressures for both local adaptation and lowering costs are highregionalizationincreasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, rules, and norms within a region such as Europe, North America, or Asiatrading blocsgroups of countries agreeing to increase trade between them by lowering trade barriersexportingproducing goods in one country and selling them in anotherlicensinga contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable intellectual propertyfranchisinga contractual agreement in which a company receives a royalty or fee in exchange for the right to use its intellectual property; franchising usually involves a longer time period than licensing and includes other factors, such as monitoring of operation, training, and advertisingwholly owned subsidiarya business in which a multinational company owns 100 percent of the stock