Einheit 5

• Globalization


  Unprecedented international connectivity of the post Cold War World involving goods, services, data, technology and economic resources of capital
• Drivers of globalization


  • Technology
  • Economics
  • Politics
  • Social
  • Cultural
  • Ecological
• Technology


  • Innovations: telephones, telegraphs; Advancements in transportation (cargo containers, airplanes, ships)
• Economics


  • Liberalization of world trade through agreements like GATT, WTO+ Uruguay round; market deregulation allowed companies to be efficiently operate on a global scale

  
• Politics


  • Increased mobility of companies +international business activities heightened competition among countries to create favorable business environments; competition constrained countries in regulating business activities, limiting their sovereignty +affecting their ability to persue national interests
• Social


  • Debate on impact of globalization on overall wealth and divergence between industrialized and developing countries; Income per capita disparities increased, leading to social divergence within countries, prompting protectionism, as seen in Brexit
• Cultural


  • Cultural convergence toward a global culture driven by increased worldwide mobility of people, information, and products; While national traditions still matter, factors like age, job, and lifestyle gained prominence, sparking discussions on the emergence of a unified global culture
• Ecological


  • Contributed to challenges including pollution, ozone depletion, and the greenhouse effect; Rising demand for fossil fuels has led to environmental disruptions, necessitating global initiatives like the Earth Summit, Kyoto Protocol, and Paris Agreement to address climate change
• The German Hanse gained tremendous wealth by means of trade in the Baltic Sea area in the 12th-17th century
• The Hanse had no constitution, register of members, mutual finances, or officials
• Success of German Hanse


  Based on deeply rooted common norms and values (first example of a successful corporate culture)
• Reasons for the rise of MNEs

  • Technological innovations
  • Liberalization
  • Stock Corporation Law
• Consequences of the rise of MNEs was a sharp rise in FDI (Foreign Direct Investment) FDI Stock
• Bretton Woods Agreement


  Fixed Exchange Rates (1944); IMF and World Bank were founded; System of fixed exchange rates with the US Dollar as a leading currency was established; 35 USD per fine ounce gold (1 US-$ = 26 Schilling = 3,67 DM) was defined; Fed was obliged to exchange USD into gold at any time
• 1973: Obligation to exchange gold was canceled → Collapse of Bretton Woods System; Exchange rate dropped to 1 US-$ = 2 DM
• GATT


  General Agreement on Tariffs and Trade; Multilateral agreement with the aim to promote international trade by reducing or eliminating trade barriers; Established in 1947 (1948 effectively in power), after World War II; Emerged from the Bretton Woods Conference; Aim: Prevent trade wars and contribute to global economic stability; Criticism: Exclusion of certain issues, such as services and intellectual property; Transitioned to the World Trade Organization (WTO) in 1995 with the Uruguay Round negotiations

  
• GATS


  General Agreement on Trade in Services; Facilitates the expansion of trade in services while respecting the regulatory autonomy of member countries; Covers a wide range of services, including financial services, telecommunications, tourism, and professional services; Established as part of the Uruguay Round negotiations that led to the creation of the WTO in 1995; Aim: Create a framework for the liberalization of international trade in services by establishing rules and commitments among WTO member countries; Criticism: Balance between liberalization and the need for regulatory autonomy in sensitive service sectors, potential negative impact on public services and cultural diversity

  
• TRIPS


  Trade Related Aspects of Intellectual Property Rights; Established as part of the Uruguay Round negotiations that led to the creation of the WTO in 1995; Harmonises intellectual property standards internationally; Covers a wide range of intellectual property rights such as patents, copyrights, trademarks, trade secrets, and industrial designs; Aim: Balance between promoting innovation and ensuring access to intellectual property for the broader public while establishing a framework for fair and equitable international trade; Criticism: Access to essential medicines, impact on public health & issues related to cultural and traditional knowledge
• Trade Agreements


  International trade deals between two or more countries designed to enhance economic cooperation and reduce trade barriers through cost-effective trade (reduction or elimination of tariffs) and measures beyond trade (e.g. intellectual property rights, environmental standards, industry cooperation)
• CETA

  Comprehensive Economic and Trade Agreement; Bilateral trade agreement between the EU and Canada; Aims to liberalize trade by reducing or eliminating tariffs and other barriers, provides increased market access, promotes regulatory cooperation, and includes investment protection provisions; Negotiations were initiated in 2009 and the agreement was concluded in 2014; Provisionally applied since 2017
• EU-MERCOSUR Association Agreement


  Bilateral trade agreement between the EU and MERCOSUR members (Argentina, Brazil, Paraguay and Uruguay); Aims to establish a comprehensive partnership and free trade area; Includes reduction or elimination of tariffs and trade barriers, improved market access, and encouragement of alignment and mutual recognition of standards and regulations; Negotiations concluded in June 2019 but still needs to undergo approval processes
• NAFTA


  North American Free Trade Agreement; Multilateral trade agreement between Canada, USA & Mexico which came into effect in 1994; Aimed to eliminate barriers to trade and investment between the three North American nations; Included trade liberalization, enhanced market access, investment protection, dispute resolution, intellectual property, energy cooperation and other aspects; Superseded by the United States-Mexico-Canada Agreement (USMCA) in 2020
• Key historical periods in European international business

  • Since 500 BC: Cross-border Economic Activities develop
  • Age of Exploration (15th to 18th Century): Global explorations and colonization
  • Industrial Revolution(18th to 19th Century): Technological advancement and surge in international trade
  • World Wars Impact (20th Century): Economic shifts and restructuring post-World Wars
  • European Integration(Mid-20th Century-): Formation and evolution of the European Union
  • Era of Globalization (Late 20th to Early 21st Century): European businesses play central role in global interconnectedness
• Key aspects of Europe's present and future in international business

  • EU Influence: Central role of the Single Market and trade policies
  • Digital Shift: Europe embraces digital transformation
  • Green Transition: Initiatives under the European Green Deal for sustainability
  • Political polarization and tensions: Brexit, right-wing parties, geopolitical dynamics
  • Economic Recovery: Focus on digital and green investments
  • Sustainability Drive: Emphasis on renewable energy, circular economy, and sustainable finance
  • Supply Chain Strategy: Reconfiguration of supply chains for resilience
  • Trade Agreements: Strengthening and expanding for global access and setting standards
  • Innovation Focus: Leveraging technology and sustainability for competitiveness
• Key aspects of South America's present and future in international business

  • Present: Growing integration into global economy, diverse sectors attracting MNCs, persistent challenges
  • Future: Continued expansion of regional economic integration, emphasis on sustainable development and responsible investment, opportunities for innovation and diversification

  
• Key aspects of Asia's present and future in international business

  • Present: Technological Leadership, Trade Integration, Sustainability Focus
  • Future: Enhanced Regional Integration, Digital Economy Expansion, Innovation Drive, High-Value Manufacturing, Geopolitical and Environmental Challenges

  
• Key aspects of Oceania's history and present/future in international business

  • History: Pre-Colonial Trade, European Arrival, Expansion of Colonial Economies, Post-WWII Decolonization, Late 20th Century Globalization
  • Present: Economic Powerhouses (Australia, New Zealand), Pacific Islands Challenges, Sustainability Focus
  • Future: Diversification, Trade and Integration, Climate Resilience
• Key aspects of Africa's present and future in international business

  • Present: China as major trade partner and investor, Foreign Direct Investment, Regional Integration, Challenges
  • Future: Infrastructure Investment, Diversification beyond natural resources, Strengthening Global Partnerships
• Law of Distance

  Trade and economic exchange are more likely and stronger between actors that are located close to each other; Largest FDI-spenders are the largest FDI-receivers at the same time

  
• Emerging Operational Locations


  Markets that have characteristics of a developed markets, but do not fully meet standards of developed markets; International firms consider investing in foreign factories or facilities for efficiency, low cost manufacturing
• Challenges of Emerging Operational Locations

  • Corruption, local currency mismanagement, regulatory uncertainty (e.g., IP), Strong government interference
  • High infrastructure, legal system risks
  • Cumbersome administrative processes
• Emerging Consumer Locations


  Firms look to sell their products in foreign emerging markets with economic growth and increasing spending potential
• Opportunities and Challenges of Emerging Consumer Locations

  • Opportunities: Tap into new consumer markets
  • Challenges: Adapting to local market conditions, infrastructure, regulations
• Ten largest emerging economies by nominal GDP

  • Russia
  • Brazil
  • India
  • China
  • Saudi Arabia
  • Indonesia
  • Mexico
  • Poland
  • South Korea
  • Turkey
• Opportunities for global businesses

  • Increase operations' efficiency
  • Low cost manufacturing
• Challenges for global businesses

  • Corruption
  • Local currency mismanagement
  • Regulatory uncertainty (e.g., IP)
  • Strong government interference
  • High infrastructure, legal system risks
  • Cumbersome administrative processes
• International firms sell their products in foreign emerging markets
• Economic growth leads to more spending potential in emerging regions
• Emerging consumer locations


  • Construction sector due to population growth
  • Rising energy demand due to manufacturing, and lifestyle changes
• Opportunities for global businesses in emerging markets

  • Opportunity to tap into new consumer markets if local markets are saturated
  • Changes required: Products need to be established differently in emerging markets