Globalization of Manufacturing and Markets: With Advances in Tech, We Have the Opportunity to Disperse Value Creating Operations All Over the World
Autor: jame_hock • October 31, 2016 • Study Guide • 1,569 Words (7 Pages) • 1,035 Views
Page 1 of 7
- → Chapter I
- Globalization of manufacturing and markets: with advances in tech, we have the opportunity to disperse value creating operations all over the world
- Markets: More global market place vs. only selling domestically
- Manufacturing: supply of goods from around the world (leads to cheaper production facilities, specialization, higher quality)
- Globalization is a result of:
- Improvements in tech/transport: allows communication
- Reductions of international barriers
- Globalization debate:
- Pros:
- Lower production cost
- Increase in consumer income
- Creates jobs
- Higher product quality
- Economy is better off: countries produce goods that they are efficient at producing and import those they are not
- Cons:
- Jobs at home are being lost to countries with cheaper labour
- This leads to decreased wages
- Lax environmental and labour regulations
- Loss of sovereignty
- → Chapter II
- Greenfield investments: establishment of a wholly new operation in a foreign market (vs. M&A)
- Pros: More control over investment
- Cons:
- Slower
- Riskier
- Harder to enter market: no connections to distributors, suppliers,
- Acquisition or merging with existing firm:
- See above (opposite)
- Also pro: firms believe they can increase efficiency of an acquired unit by transferring tech, capital, and management skills
- FDI – Host
- Pros:
- Resource transfer effect (capital, tech, skills spillover)
- Employment
- Balance of payment: imports substituted with higher exports
- Research and development occurs in host country
- Cons
- Competition negative effects: dumping
- Negative balance of payment: earnings repatriated so higher number of imports through raw materials, resources
- Loss of national sovereignty
- FDI – Home:
- Pros:
- Gains in knowledge
- Growth in capital and earnings
- Positive employment effects
- Cons
- Initial capital outflow
- Current account suffers if FDI is a substitute for exports
- Export of jobs
- → Chapter III
- Political economy: political, economic, and legal systems
- Shift towards market based economies:
- Deregulation
- Privatization
- Legal systems
- Regional economic integration: agreement between countries in a geographic region to reduce barriers to trade to the free flow of goods, services, labour, and capital
- Free trade area: NAFTA (no trade barriers to G+S)
- Customs union: ANDEAN (no trade barriers to G+S ; common external trade policy)
- Common market: MERCOSUR (above + no trade barriers to K+L)
- Economic union: EU (above + common currency and econ/monetary policy)
- Political union: US (all of above + everything else)
- Pros of EI:
- Regional integration is easier than global integration
- Added bonuses for countries involved
- Political links between countries reduces chances of violence
- Political stronger as a block against other nations
- Allow firms to tap into previously protected markets
- Allows firms to determine costs and benefits more accurately: fuller info on barriers, taxes, legal systems, etc.
- Cons of EI:
- Can result in loss of national sovereignty
- Can be costly to establish and unsure as to winner and losers
- Allow firms to tap into previously protected markets: increased competition can drive out domestic business
- Could lead to increased price competition within blocks
- Firms outside block risk getting shut out
- May limit a firm within the block’s actions if the governing body intervenes…
- → Chapter IV
- Hofstede’s dimensions:
- Collective vs. individualistic
- Power distance
- Uncertainty avoidance
- Masculinity vs. femininity
- Long term orientation
- We are diverse and need to adapt products and services to different markets
- Importance of global managers to develop cross cultural literacy
- → Chapter V
- International Business Strategies:
- Global Standardization Strategy: standardized, low cost, global product
- Transnational strategy: low-cost, differentiated products (e.g. IKEA)
- Localization strategy: adapting products to each market
- International strategy: little low cost and low local responsiveness pressures
- Methods of entry:
- Exporting: low cost, low risk, but can result in no profits due to barriers to entry
- Turnkey Project: contractor handles building plant and training staff
- Licensing: firm avoids barriers yet suffers from loss of control
- Franchising: can be hard to control
- Wholly owned subsidiary: firm has full control but more costs/risks
- Greenfield investments
- Acquisitions
- Strategic alliances: cooperative agreements between potential or actual competitors
- Can be beneficial through sharing of know-how, resources, contacts…
- Can be detrimental to one firm if the other benefits far more → steals…
- → Chapter VI
- HRM strategies:
- Ethnocentric: international
- Polycentric: localization
- Geocentric: global standardization strategy and transnational
- Deciding where to operate internationally:
- Country factors: PEST analysis, trade barriers, barriers to entry, etc.
- Tech factors: type of tech used in manufacturing process
- Level of fixed costs involved (high FC leads to establishing a single manufacturing center vs. multiple small ones)
- Minimum efficient scale of output: larger means single factory
- Flexibility of tech: when flexible tech is available use single factory (flexible tech = quick startup times, increased utilization through scheduling, improve quality control)
- Product factors:
- Value to weight ratio: high means transport costs are low (single plant)
- Does the product serve international needs (if so, then single plant)
- → Chapter I
- Globalization of manufacturing and markets: with advances in tech, we have the opportunity to disperse value creating operations all over the world
- Markets: More global market place vs. only selling domestically
- Manufacturing: supply of goods from around the world (leads to cheaper production facilities, specialization, higher quality)
- Globalization is a result of:
- Improvements in tech/transport: allows communication
- Reductions of international barriers
- Globalization debate:
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