1,

- Globalization: trend toward greater economic, political, technological

interdependence among nation institutions and economies.
- Force driving globalization:
- Falling barriers to trade and investment: WTO, IMF, World Bank, NAFTA,.
- Technological innovation: email, internet,…
- Increasing competition
- Pros:
- Generates labor market flexibility in developed nations
- Increase wealth and efficiency in all nations
- Advances economies of developing nations
- Cons
- Eliminates jobs in developed countries
- Low wages in developed nations
- Exploits worker in developing nations
2, reasons for expansion
- Become a global brand: international presence can enhance strong brand image,
reputation
- Access new resources: company can access cheaper raw materials, labor,
technology
- Increase market share: can access new customer
- Diversify risk: can reduce dependence on single market
- Coca-cola: Located in US and was establish in 1892. Now this brand has 700
facilities and offices in over 200 countries such as: China, Japan, Mexico,
Malaysia, Thailand, Poland… Popular brands under the Coca umbrella include;
Fanta, sprite,…The company has become one of the most recognized and
loved brand in the world.
3, Economic development, measure
- Refers to improvements in a country’s living standards, economic well being
- Improve human development
- Increasing GDP per capita
- Technology advances
- Infrastructure development
- Measure
- Human Development index
- Purchasing power parity
- Gross domestic product
- Gross national product
- Foreign direct investment
4, Drawbacks of GDP & GNP
- Uncounted transactions: unpaid household work, volunteer work, illegal such
as: black market transaction underground, unreported transaction conducted
in cash
- Question of growth: gross products figure do not tell us whether a nation’s
economy are growing or shrinking – they are simply a snapshot of 1 year’s
economic output
5, Political risk and management
- Political risk:
- Terrorism and kidnapping
- Violence and conflict
- Local contents requirements
- Expropriation, nationalization, confiscation
- Policy changes
- Management:
- Adapting: partnership helps company leverage expansion plans, localization
entails modifying operations, development assistance to improve living
standards, insurance against political risk
- Information gathering: helps predict and management political risk
- Political influence
6, important management
- Control
- Purchasing and building decision
- Customer knowledge
- Following rivals
- Following clients
- Production costs
7, reasons for government
- Control balance of payments
- Obtain resources and benefits
- Discouraging outward FDI
- Promoting outgoing FDI
8. policy instruments
- host country:
- FDI promotion: tax incentive, low-interest rates, loans, infrastructure
improvements
- FDI restriction: ownership restriction, performance demand
- home country:
- FDI promotion: tax breaks, loans, insurance, political pressure
- FDI restriction: difference tax rates, sanctions
9. Multinational strategy and global strategy
- Multinational strategy: adapts products and their marketing strategy in each
national market to suit local preferences
- benefits: cultural sensitivity, risk diversification, competitive advantage
- drawbacks: higher costs, complex management
- Global strategy: offering the same products using the same marketing strategy in
all national markets.
- benefits: rapid expansion, efficiency, economics of scale
- drawbacks: cultural insensitivity, lack of local responsiveness, regulatory and
compliance issues
10, exporting, importing and countertrade
- Exporting: selling goods and services produced domestically to foreign buyers
- Achieve economic of scales, diversify sale, gain international business
experience
- Importing: buying g&s produced abroad for domestic consumption
- Access raw materials, products diversity, cost reduction
- Countertrade: barter-like agreements where exports are partially or fully paid
for with import from the receiving country
- Entering restriction markets, risk management, balancing trade
- Barter, counter purchase, offset, switch trading, buyback
11. contractual entry modes
- licensing: a company owning intangible property grants other firms the right to
use that property period of time
- benefits: reduce risk, reduce counterfeits, upgrade technologies, finance
expansion
- drawbacks: restrict licensor’s activities, reduce global consistency, lend strategic
property
- coca- cola licensing its bottling operations, spotify, Microsoft offices
- franchising: a company supplies another intangible property and other
assistance over an extended period
- benefits: low cost, low risk, rapid expansion
- drawback: cumbersome, lost flexibility
- ex: mc donald’s franchises, subway, dunki donuts
- turnkey (bot) projects: practice by which one company designs, constructs, and
tests a production facility for a client firm
- pros: firm specialize in competency, nations obtain infrastructure
- cons: create competitor, politicized process
- ex: school: the contractor will be responsible for designing, constructing the
school: classrooms, libraries, playground,… hospital, apartment, ..
- management contracts: practice by which one company supplies another with
managerial expertise for a specific period of time
- pros: few assets risked, develop local workforce, nation fianace projects
- cons: personel at risk, created competitor
12. Investment Entry Modes (Pros & Cons - Examples):
 Joint Ventures: seperate compay that is created and jointly owned by two
or more independent entities to achieve a common business objective.
Pros: reduce risk level, access channels, penetrate markets
Cons: partner conflict, lose control
Example: GM-SAIC joint venture in China, Sony Ericsson, Cereal Partners
Worldwide (CPW)
 Wholly Owned Subsidiaries: Facility entirely owned and controlled by a
single parent company.
Pros: day-to-day control, cordinate subsidiaries
Cons: expensive, high risk
Example: Apple establishing a manufacturing subsidiary in India, Toyota Motor
Manufacturing in the USA, YouTube
 Strategic alliance: relationship whereby two or more entities cooperate to
achieve the strategic goals of each
Pros: Share project cost, gain channel access, tap competiors' strength
Cons: Partner conflict, create competitor
Exam: Stabucks, Barnes & Noble