Summary: International Strategy

Read the summary and the most important questions on International Strategy

• Chapter 1

• What is globalization? And what are its drivers?

  The shift towards a more integrated and interdependent world economy
  
  Drivers:
  1. Decline in barriers to the free flow of goods, services, and capital.
  2.Technological change: communication, information processing, and transportation technologies.

• Name two types of globalization:

  Globalization of markets: merging two historically distant and separate, national markets into one global market place - due to falling tradebarriers 
   
  Globalization of products: The sourcing of goods and services from places around the globe to take advantage of national differences in the cost and quality of factors of productions (labor, entrepreneurship, land, capital)

• Global institutions and their functions:

  General agreements on tariffs and trade -> facilitate international trade.
  
  World Bank - maintains order in the international monetary system
  IMF - International Monetary Fund - lends money to troubled nation states
  WTO - World Trade Organization
  GATT - Responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in the treaties signed by WTO members.
  UN - Maintain international peace and security, develop friendly relations among nations, cooperate in solving international problems and in promoting respect for human rights, and be a center for harmonizing the actions of nations.    

• Chapter 2

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• Political systems analysis 1

  Individualism vs collectivism
  
  Individualism = Individual freedom in his economic pursuits. Interests of individual over interests of state. Individual freedom and self-expression, welfare of state is best served by letting people pursue their own economic self-interest as opposed to a collective body.
  
  Collectivism = Primacy of collective goals over individual goals. Needs for society as a whole are considered more important than individual freedoms.
  
  - Socialism (Marxism) = Benefits society as a whole rather than individual capitalists
  - Communism = Achieve socialism through Totalitarianism and violent revolutions
  - Social Democrats = Achieve socialism by democratic means.

• Political systems analysis 2

  Democratic vs Totalitarianism
  
  Democracy = Government is elected by the people
  Totalitarianism = Government in which one individual or party exercises control over all spheres of human life and prohibits other parties.
  
  - Representative democracy = citizens periodically elect individuals to represent them. Elected representatives form a government.
  - Communist Totalitarianism  
  - Theocratic Totalitarianism à political power is monopolized by a person or party: focusing on religious principles. E.g. Islam in Iran and Saudi Arabia
  - Tribal Totalitarianism = Political party represents the interests of a particular tribe (African countries).
  - Right-Wing Totalitarianism = some economic individual freedom, but no political economic freedom

• Name three different legal systems?

  Comman Law - England and US. Law is based on customs, traditions, and earlier/similar cases.    
  Civil Law - Based on written regulations. The system is organized in codes, which are interpreted in court.
  Theocratic Law - based on religious teachings

• What is contract law?

  Contract law is the body of law that regulates contract enforcements. Contract = document that specifies the conditions under which an exchange is to occur (obligations and rights etc).

• Chapter 13

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• What is a firm's strategy and how can its success be measured?

  Strategy is the actions take to attain the firm's goal.
  
  It can be measured by:
  1. profitability: Net profits /(Return on Invest Capital (ROIC)  
  2. Profit growth: increase in net profits over time
  
  Higher rates of these two lead to value creation

• What is the value chain of a firm?

  The firm's value chain is a chain composed of a series of distinct value creation activities: production, marketing and sales, materials management, R&D (primary activities), and human resources, IS, and the firm's infrastructure (support activities).
  
  Primary activities = have to do with the design, creation, and delivery of a product (also marketing and after-sales services).
  
  Support activities = provide inputs to let the primary activities occur.

• What are firms operating internationally able to?

  1. Expand the market for their domestic products by offering them internationally. (MNEs)
  2. Realize location economies by dispersing individual value creation activities to those locations around the globe where they can be performed most efficiently and effectively.
  3. Realize greater cost economies from experience effects by serving an expanded global market from a central location, thereby reducing the costs of value creation
  4. Earn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firm's global network of operations.