978-0134324838 Chapter 2 Lecture Notes

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PART 1

FOUNDATION CONCEPTS

CHAPTER 2

GLOBALIZATION OF MARKETS

AND THE INTERNATIONALIZATION OF THE FIRM

Instructor’s Manual by Marta Szabo White, Ph.D.

I. LECTURE STARTER/LAUNCHER

The Value Chain concept is central to this chapter. To ensure that students understand this

concept, you might start the chapter with a basic example. Project the basic value chain model

on the screen, and select a simple business. How about shoes, or laptop computers, or

automobiles? Suppose you manufacture one of these products. Next, proceed step by step

through the model from research & development; to procurement (sourcing raw materials); to

manufacturing; to marketing; to distribution; to sales & service. Follow each activity and

commensurate value that is added at each step along the way. Now consider locating each one

of those activities in a different country, if it is more efficient to do so. If you don’t want to create

an example, you can always use the examples in Exhibit 2.10.

Useful tools for introducing the chapter include the following:

[1] Globalization & Assessing Global Markets for Potential Entry

Published on Oct 25, 2012

This video discusses globalization and variables to evaluate when considering entering different

markets.

https://www.youtube.com/watch?v=2yVMnuhYp4c

11.36 Minutes

[2] Connecting You to Global Markets

International Trade Administration

Published on Feb 11, 2014

The U.S. Commercial Service hosts regional conferences for small and midsized companies

interested in starting or expanding international sales.

https://www.youtube.com/watch?v=PR269o7s66M

9.41 Minutes

[3] Diversity and globalization: James Sun at TEDxBayArea Ignite

Published on Dec 22, 2012

James Sun is an entrepreneur, public speaker, and international television personality.

Currently, he’s CEO of Pirq where he sets and leads the overall business strategy,

communication, and execution.

https://www.youtube.com/watch?v=Q-K_bYQ11DE

16.54 Minutes

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[4] Kjell Nordstrom: International Business Thought-Leader, Best Selling Author, Keynote

Speaker

Published on Jul 17, 2013

Dr. Kjell A. Nordström has 20 years of experience of working as an advisor/consultant to several

large multinationals throughout the world, speaks on globalization and information technology.

https://www.youtube.com/watch?v=FBZiYq712Qw

6.00 Minutes

[5] What is the Credit Crisis?

Global Financial Crisis Explained

Author: Jonathan Jarvis

Uploaded on Aug 23, 2010

The Short and Simple Story of the Credit Crisis.

The goal of giving form to a complex situation like the credit crisis is to quickly supply the

essence of the situation to those unfamiliar and uninitiated. This project was completed as part

of my thesis work in the Media Design Program, a graduate studio at the Art Center College of

Design in Pasadena, California.

http://www.youtube.com/watch?v=Q-zp5Mb7FV0

10.54 Minutes

II. LEARNING OBJECTIVES AND THE OPENING VIGNETTE

LEARNING OBJECTIVES

After studying this chapter, students should be able to:

2.1 Understand market globalization as an organizing framework

2.2 Know the drivers of globalization

2.3 Understand technological advances and globalization

2.4 Comprehend the dimensions of globalization

2.5 Appreciate firm-level consequences of market globalization

2.6 Understand the societal consequences of globalization

1■

Key Themes

■ In this chapter, there are six themes:

[1] Market globalization as an organizing framework

[2] The drivers of globalization

[3] Technological advances and globalization

[4] The dimensions of globalization

[5] Firm-level consequences of market globalization

[6] Societal consequences of globalization

■ Globalization has been around for centuries- the early civilizations in the Mediterranean,

Middle East, Asia, Africa, and Europe have all contributed to its growth.

■ Globalization of markets is the integration and interdependence of national economies.

■ Globalization is chronicled through international trade, triggered by world events and

technological discoveries. Globalization has progressed through four phases, since the early

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1800s. The current phase was stimulated by the rise of IT, the Internet, and other advanced

technologies.

■ The organizing framework used to explain globalization consists of drivers (inputs),

dimensions (processes) and consequences – both societal and firm-level (outputs).

Globalization can be modeled in terms of its drivers, dimensions, societal

consequences, and firm-level consequences

■ Drivers–

Falling trade and investment barriers; market liberalization and adoption of free market

economics in formerly closed economies; industrialization and economic development

(emerging markets); integration of world financial markets; and technological advances.

■ Globalization makes internationalization an imperative, technology provides the means.

■ Technological advances and globalization

Technology is one of the Drivers in the organizing framework

■ Key advances- information technology, communications, the Internet, manufacturing, and

transportation. These systems help create an interconnected network of customers, suppliers,

and intermediaries worldwide.

■ IT has enabled international business to be affordable for all types of firms.

■ Dimensions-

Growing global interconnectedness of buyers, producers, suppliers, and governments.

Globalization has fostered the emergence of regional economic integration blocs, growth of

global investment and financial flows, the convergence of buyer lifestyles and needs, and the

globalization of production and services.

■ Global Sourcing means reconfiguration of the value chain so as to capitalize on the most

advantageous locations for sourcing, manufacturing, marketing, and distribution—on a global

scale.

■ Consequences- Firm

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DRIVERS DIMENSIONS

CONSEQUENCES

SOCIETAL

FIRM

Firms are compelled to globally reconfigure key value-adding activities to reduce the costs of

R&D, sourcing, manufacturing, marketing, and other value-adding activities on a global scale, or

to gain closer access to customers..

■ Consequences- Societal

There is much debate about globalization’s benefits and harm.

■ Globalization was a major factor in the recent global recession and financial crisis.

■ Critics complain that globalization interferes with national sovereignty, the ability of a state to

govern itself without external intervention.

■ Globalization is associated with offshoring, the relocation of value-chain activities to foreign

locations where they can be performed at lower cost by subsidiaries or independent suppliers.

■ Globalization tends to decrease poverty, but it may also widen the gap between the rich and

the poor.

■ Unrestricted industrialization may harm the natural environment.

■ Globalization is also associated with the loss of cultural values unique to each nation.

■ Trade and investment can help address many of Africa’s development needs.

Teaching Tips

■ Input-Process-Output model: As this chapter is framed with a globalization model consisting

of drivers (inputs), dimensions (processes) and consequences – both societal and firm-level

(outputs), make it simple for your students and start with an explanation of a fundamental

input-output model from Systems Theory. This model can be applied to any open system- from

biology to business. Once you highlight the essence of the model, you can break your class into

four groups, and assign one of the following to each group: (1) drivers (inputs- what drives it),

(2) dimensions (processes- what is it) and – (3) societal consequences (outputs-results) and

(4) firm-level consequences (outputs-results). You may want to help them a bit by sharing

some of the points under Key Themes (above). Allocate 10 minutes for each group to

understand what their component means and how it fits into the overall model. Then, a

designated group member from each group must share their findings with the class.

Commentary on the Opening Vignette:

THE EMERGENCE OF BORN GLOBAL FIRMS

Key message

■ Globalization and recent technological advances have now made venturing abroad much less

expensive for SMEs, which comprise a majority of the firms in a typical country.

■ This is illustrated by firms that address a universal demand, such as Instagram and Geo

Search, born global firms, internationalizing almost at inception.

■ Instagram’s advanced technology coincides with a global shift to a more visual style of

communication. People want to share photos to depict their life experiences.

■ Geo Search (www.geosearch.co.jp), a Japanese company that develops high-technology

equipment to help engineers survey ground surfaces for cavities and build safe roads, airports,

and underground utility lines.

Uniqueness of the situation described

■ One of the largest social networks on the Internet, Instagram:

(1) Was founded in 2010.

(2) Is an online photo-sharing service used with smartphones.

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(3) Only has a few dozen employees.

(4) Has millions of consumers and businesses worldwide as its customers.

(5) Only about 12% of users live in North America, the rest are all over the world.

(6) Virtual “InstaMeets” connects users from Singapore to Seattle to take and to share

photos.

■ Social feed, paired with easy-to-use editing tools, allows anyone to create and share

distinctive pictures.

■ Geo Search developed a land-mine detector used to find buried bombs and found a ready

market in countries like Afghanistan, Cambodia, and Libya.

Classroom discussion

■ Almost everyone in the class will have a personal experience to share regarding Instagram,

so capitalize on this and make it personal.

■ Instagram is one of a growing number of small and medium-sized enterprises (SMEs) active

in international business.

■ Born globals target a dozen or more countries within the first few years of their unveiling. Their

agility and flexibility help them better serve both foreign and domestic customers.

■ Although they often account for more than 50% of national economic activity, most SMEs

have far fewer financial and human resources than large multinational enterprises (MNEs).

■ This introduction serves to underscore the delicate balance for born globals as they consider

internationalization:

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