Globalization Basics
What is globalization?
A process of closer integration and exchange between countries and peoples.
One advantage of going global?
Access to larger markets.
What does CAGE stand for?
Cultural, Administrative, Geographic, Economic distance.
Which strategy has LOW pressure for cost reduction and LOW pressure for local responsiveness?
International Strategy.
What is the “death of distance” hypothesis?
Certain industries cluster in specific nations despite globalization.
Name one major driver of globalization.
Falling trade/investment barriers OR advances in telecommunications OR reduced transportation costs.
Give an example of a low-cost input factor.
Lumber, iron ore, oil, coal, low-cost labor.
Give one element of cultural distance.
Power distance, uncertainty avoidance, masculinity–femininity, etc.
Which strategy has HIGH responsiveness but LOW cost pressure?
Multidomestic Strategy.
Name one example of a country and its competitive industry.
Germany–cars, Italy–fashion, U.S.–biotech, etc.
What is a multinational enterprise (MNE)?
A company that deploys resources and capabilities in two or more countries.
What is “location economies”?
Locating value-chain activities in optimal geographic areas.
What is administrative/political distance?
Differences in laws, policies, currency unions, political ties.
Which strategy focuses on economies of scale and minimal local adaptation?
Global-Standardization Strategy.
What are “factor conditions”?
A country’s natural and human resources, infrastructure, institutions.
During which period was Globalization 2.0 and what was its purpose?
1945–2000; rebuilding after WWII with focus on Europe, Japan, Australia.
What is liability of foreignness?
Extra costs and risks due to unfamiliar cultural/economic environments.
Name two factors included in geographic distance.
Physical size, topography, time zones, access to waterways, infrastructure.
What is the motto for the Transnational Strategy?
“Think globally, act locally.”
Why do demanding domestic customers help national competitiveness?
They force companies to innovate and improve value creation.
Is the world fully globalized today? Provide one statistic from the slides
No — only semi-globalized (10–25%). Example: Only 9% of investments are FDI or 2% of calling minutes are cross-border.
Why is losing reputation a disadvantage for MNEs?
Reputation is a key resource; issues like poor labor conditions or corruption damage competitiveness.
How do wealthy and poor countries differ in trade patterns?
Wealthy-to-wealthy trade is for scale and standardization; wealthy-to-poor is for low-cost inputs (economic arbitrage).
Why is the transnational strategy the hardest to implement?
Organizational complexity + duplication of efforts.
Explain how related and supporting industries reinforce national advantage.
Complementors boost value of primary products, strengthening industry clusters.