Professional Documents
Culture Documents
Ib Final
Ib Final
Chapter 1: GLOBALIZATION
1. What is globalization?
Globalization – the shift toward a more integrated and interdependent world
economy.
The world is moving away from self-contained national economies toward an
interdependent, intergrated global economic system.
Example:
Vietnam supports globalization)
Since 2007, Vietnam became a member of the WTO (World Trade Organization),
in the following years, continuously signed free trade agreements with major
partners (Korea, India, Chile, Japan, China, Australia, New Zealand, Europe, ...).
o Vietnam actively integrates into and opens its markets to exchange, trade
and do business.
o The Vietnamese government and the Vietnamese community are very
supportive of globalization.
The United States of America does not support globalization
From 2016, Trump became president, making the decisions: tightening
immigration policy, building a border fence against Mexico; calling for, negotiating
and signing a 2018 North American free trade agreement (US, Canada and Mexico)
with terms that are favorable to the US; launching a trade war with China (imposing
high tariffs on Chinese goods imported into the US); threatened not to join the WTO.
o Isolating the US economy from the world.
o Oppose globalization.
2. What is globalization of markets?
Historically distinct and separate national markets are merging. (slide 9-chap1)
Falling trade barriers make it easier to sell globally
Consumers’ tastes and preferences are converging on some global norm
Firms promote the trend by offering the same basic products worldwide
1
lOMoARcPSD| 13006637
2
lOMoARcPSD| 13006637
3
lOMoARcPSD| 13006637
trading system; ensure that developing countries and especially the least
developed countries enjoy the real benefits of the growth of international trade,
consistent with their economic development needs and encourage these
countries to increasingly integrate more deeply into the world economy.
- Improve living standards, create jobs and jobs for the people of the member
countries, ensure that the rights and minimum labor standards are respected.
Tổ chức Ngân hàng Thế giới (World Bank)
WB is inclined to economy, business, trade, import-export which means the
physical flow, making physical flows between countries convenient.
Physical flow includes:
- Flow of goods and services
- Flow of capital
- Flow of humans and labors
- Flow of technology
WB helps sustainable development (3Ps):
- Profit - economic growth (GDP);
- People - quality of life, health, social security, infrastructure, health, education,
career;
- Planet - the environment.
To make the globalization process easier, reduce conflicts, reduce
environmental negativity and inequality, the World Bank will stand out to funding
and financing projects for sustainable development. for the integration capacity of
developing countries.
The role of the World Bank:
- Towards sustainable development, strengthening the integration capacity of
countries in a more comprehensive manner, not inclined towards trade like the WTO.
- Although it is the World Bank, it does not perform the function of a normal
commercial bank that is lending, but will support the finances to help developing
countries to integrate better, to take advantage of the process. that globalization
brings, is not left behind.
4
lOMoARcPSD| 13006637
5
lOMoARcPSD| 13006637
Technological change
- Microprocessors and telecommunications
- Internet: information backbone of the global economy
- Transportation technology
5. What does globalization mean for firms?
Lower barriers to trade and investment mean firms can:
- view the world, rather than a single country, as their market
- base production in the optimal location for that activity
Technological change means
- lower transportation costs: help create global markets and allow firms to
disperse production to economical, geographically separate locations
- low-cost information processing and communication: firms can create and
manage globally dispersed production
- low-cost global communications network: help create an electronic global
marketplace
- global communication networks and global media: create a worldwide culture
and a global consumer product market
6. The changing demographics of the global economy
Four trends are important:
The changing world output and world trade picture
Example:
In developed countries, the percentage contribution to the world economy is reduced.
In 1960, the U.S. accounted for almost 40% of world economic activity, but by 2012,
the U.S. accounted for just 23% (a similar trend occurred in other developed
countries).
In contrast, in developing countries, the share of world production tends to increase.
6
lOMoARcPSD| 13006637
The share of world output accounted for by developing nations is rising (expected to
account for more than 60% of world economic activity by 2020).
The changing foreign direct investment picture
Example:
- In developed countries, the proportion of FDI is decreasing
In the 1960s, U.S. firms accounted for about two-thirds of worldwide FDI flows.
Today, the United States accounts for less than one-fifth of worldwide FDI flow.
Other developed countries have followed a similar pattern
- In contrast, the share of FDI in developing countries is increasing.
Developing countries, especially China, have also become popular destinations for
FDI.
The changing nature of the multinational enterprise
Multinational enterprise (MNE) - any business that has productive activities in
two or more countries
Since the 1960s
- The number of non-U.S. multinationals has risen
- The number of mini-multinationals has risen
The changing world order
- Many former Communist nations in Europe and Asia are now committed
to democratic politics and free market economies. Creates new
opportunities for international businesses. But, there are signs of growing
unrest and totalitarian tendencies in some countries
- China and Latin America are also moving toward greater free-market
reforms: Between 1983 and 2010, FDI in China increased from less than
$2 billion to $100 billion annually. But, China also has many new strong
companies that could threaten Western firms
7
lOMoARcPSD| 13006637
7. Advantages of globalization
- Lower prices for goods and services
- Greater economic growth
- Higher consumer income, and more jobs
8. Disadvantages of globalization
- Job losses
- Environmental degradation
- The cultural imperialism of global media and MNEs
- Global economic crisis
8
lOMoARcPSD| 13006637
9
lOMoARcPSD| 13006637
10
lOMoARcPSD| 13006637
11
lOMoARcPSD| 13006637
1. Understand how the political systems of countries differ from each other
Definition:
Political economy of a nation - how the political, economic, and legal systems of a country
are interdependent.
Political system - the system of government in a nation
This systems is assessed according to (đánh giá theo)
- the degree to which the country emphasizes collectivism as opposed (trái ngược) to
individualism
- the degree to which the country is democratic or totalitarian
** Collectivism stresses the primacy of collective goals over individual goals. Today,
collectivism is equated with socialist.
VD: advocate state ownership of the basic means of production, distribution, and
exchange / manage to benefit society as a whole, rather than individual capitalists
** Individualism refers to philosophy that an individual should have freedom in his own
economic and political pursuits. Individual economic and political freedoms are the
ground rules on which a society should be based.
** Democracy is based on the belief that citizens should be directly involved in decision
making - a political system in which government is by the people, exercised either directly
or through elected representatives. Democracy usually associated with individualism.
** Totalitarianism - form of government in which one person or political party exercises
absolute control over all spheres of human life and prohibits opposing political parties.
Today, totalitarianism exists 4 major forms.
NGẮN GỌN: The political systems.
Democracy Related to Individualism.
Totalitarianism (socialism and communism) is Related to Collectivism.
Individualism, which emphasizes the individual's freedom of action, is associated with
democratic countries that emphasize the power of the people. Often democracies also have
market economies.
Countries that have totalitarianism as a political system on the other hand are related to
collectivism, since it concentrates on a central authority entity that chooses what is best for
the people and focuses on collective goals, goals that are "equally important to everyone".
Because they select what to sell and buy, this political system frequently features a
command economy.
12
lOMoARcPSD| 13006637
2. Understand how the economic systems of countries differ from each other
Political ideology and economic systems are connected.
There are 3 types of economic systems: Market economy, Command economies, Mixed
economies.
Market economies - all productive activities are privately owned and production is
determined by the interaction of supply and demand
*government encourages free and fair competition between private producers
Command economies - government plans the goods and services that a country produces,
the quantity that is produced, and the prices as which they are sold
* all businesses are state-owned, and governments allocate resources for “the good of
society”
Mixed economies - certain sectors of the economy are left to private ownership and free
market mechanisms while other sectors have significant state ownership and government
planning
* governments tend to own firms that are considered important to national security
NGẮN GỌN: The economic systems.
Market economy (demand and pricing determined by individuals, not government)
Command economy (government determines production and pricing)
Mixed economy (protects private property, but government interference for social aims)
3. Understand how the legal systems of countries differ
Legal system - the rules that regulate behavior along with the processes by which the laws
are enforced and through which redress for grievances is obtained. Legal systems are
important for business because they
- define how business transactions are executed
- identify the rights and obligations of parties involved in business transactionsThere are
3 types of legal systems: Common law, Civil law, Theocratic law.
4. Explain the implications for management practice of national differences in political
economy
What managers must consider when dealing with national variances in political
economy is that, depending on the country's political system, some may be more beneficial
to invest in than others.
Generally, countries with democracy come with an individualistic mentality and a
market economy, which obviously encourages international trade. Totalitarianism and
command economies fight against free trade and can also lack the protection of intellectual
property.
13
lOMoARcPSD| 13006637
Finally, the different law systems can have varied consequences on management
practice; Common Law is costly owing to extensive contracts, Civil law is less flexible,
and Theocratic law is dependent on religious views and might be difficult to understand.
Chapter 3: Political economy and Economic development
Gross National Income (GNI): The value of the output of goods and services produced
in a country in a year, including money that leaves and enters the country (slide 1 chap 3)
Human Development Index (HDI) is based on three measures: life expectancy at birth,
educational attainment, and whether average incomes are sufficient to meet the basic needs
of life in a country (slide 6 chap 3)
Q1: How Does Political Economy Influence Economic Progress? (slide 8-12 chap 3)
Innovation and entrepreneurship are the engines oflong- run economic growth
Innovation and entrepreneurship require a market economy
Innovation and entrepreneurship require strong property rights
It seems likely that democratic regimes are more conducive to long-term economic growth
than a dictatorship (Có vẻ như các chế độ dân chủ có lợi hơn cho tăng trưởng kinh tế dài
hạn hơn là một chế độ độc tài)
Q2: What are the implications of a country's political economy on its level of economic
development and its environment for doing business? (slide 23-27)
A country's political economy influences its level of economic development and higher
levels of economic development create a more favorable environment for international
business
A country's level of economic development can affects its attractiveness as a possible
market or production location for firms
1. Gross national income (GNI) is a common measure. To account for cost of
livingdifferences between countries, GNI can be adjusted by purchasing power.
2. Purchasing power parity (PPP) adjustment provides a more direct comparison
ofliving standards in different countries
→ A drawback of both GNI and PPP data is that they provide only a static picture of
development.
NOTE: Expansion of freedom is the primary end and the principal means of development.
(Mở rộng tự do là mục đích chính và là phương tiện chính của sự phát triển.)
Human Development Index based on life expectancy, education attainment, and whether
average incomes are sufficient to meet the basic needs of life in a country
14
lOMoARcPSD| 13006637
Q3: What is the relationship between political economy and economic progress?
Economic freedom in a market economy creates greater incentives (động lực) for
innovation and entrepreneurship than in either a planned or mixed economy
- Innovation
new products, new processes, new organizations, new management practices, and new
strategies
- Entrepreneurs first recognize and commercialize innovative new products
and processes
Q4: For a country to sustain long term economic growth?
The business environment needs to be conducive to innovation and entrepreneurial activity
Innovation and entrepreneurship require: strong property rights (quyền sở hữu mạnh)
Democratic regimes (chế độ dân chủ) tend to be more conducive to long-term economic
growth than dictatorships (chế độ độc tài) - even the benevolent kind
Q5: Limiting human freedom also suppresses (ngăn chặn)? human development and
therefore limits progress
Other factors influencing a country's rate of economic development include:
1. Geography: influences economic policy, and thus economic development
2. Education: Investment in education promotes faster economic development transition
economy is one that is changing from central planning to free markets. Countries that
invest in education have higher growthrates because the workforce is more productive
(Các quốc gia đầu tư vào giáo dục có tốc độ tăng trưởng cao hơn vì lực lượng lao động
có năng suất cao hơn)
The shift toward a market-based economic system involves (Sự chuyển dịch sang hệ thống
kinh tế dựa trên thị trường bao gồm):
• Deregulation (Bãi bỏ quy định)
• Privatization (Tư nhân hóa)
• The creation of a legal system to safeguard property rights
Examples of deregulations?
1. Removing price controls
2. Abolishing laws limiting private enterprise (Bãi bỏ luật hạn chế doanh nghiệp tư nhân)
3. Removing restrictions on foreign investment and trade (Xóa bỏ các hạn chế đối với đầu
tư và thương mại nước ngoài) Examples of Privatization?
- Because private investors are motivated by potential profits to increase productivity,
privatization should increase economic efficiency
15
lOMoARcPSD| 13006637
- Privatization efforts are more successful when they are accompanied by more
general deregulation and opening of the economy (Các nỗ lực tư nhân hóa thành công
hơn khi chúng đi kèm với việc bãi bỏ quy định chung và mở cửa nền kinh tế)
Q6: Market economies require? A well-functioning legal system. Examples of well-
functioning legal systems?
It should protect property rights and the machinery to enforce that system
Many countries have made significant strides toward creating a strong legal system, but
more work is necessary
The costs of doing business in foreign markets:
1. Political Costs (include the cost of paying bribes or lobbying for favorable or fair
treatment)
2. Economic Costs
3. Legal Costs
Q7: What Are The Implications Of Political Economy Differences For Managers?
(Hàm ý của sự khác biệt về kinh tế chính trị đối với các nhà quản lý là gì?)
The risks of doing business in a country are a function of
• Political risk - the likelihood that political forces will cause drastic changes in a
country's business environment that adversely affects the profit and other goals of
a business enterprise
• Economic risk - the likelihood that economic mismanagement will cause drastic
changes in a country's business environment that adversely affects the profit and
other goals of a business enterprise.
Ex: the currency is devalued (đồng tiền bị mất giá)
• Legal risk - the likelihood that a trading partner will opportunistically break a
contract or expropriate property rights (khả năng một đối tác thương mại có cơ
hội phá vỡ hợp đồng hoặc chiếm đoạt quyền sở hữu trí tuệ)
•
CHAPTER 4: DIFFERENCES IN CULTURE
16
lOMoARcPSD| 13006637
• A relationship may exist between culture and the costs of doing business in a country
or region
• MNEs can be agents of cultural change – McDonald’s
17
lOMoARcPSD| 13006637
18
lOMoARcPSD| 13006637
2. Ethical systems - a set of moral principles, or values, that are used to guide and shape
behavior.
Religion and ethics are often closely intertwined
Example: Christian or Islamic ethics
19
lOMoARcPSD| 13006637
20
lOMoARcPSD| 13006637
-Countries should specialize in the production of goods for which they have an absolute
advantage and then trade these goods for goods produced by other
-Example: slide p11-p17/Chapter5
2.2.2 David Ricardo’s Theory of Comparative Advantage (slide 18)
-The theory of comparative advantage (1817)—countries should specialize in the
production of those goods they produce most efficiently and buy goods that they produce
less efficiently from other countries (Even if this means buying goods from other countries
that they could produce more efficiently at home)
-Example: slide p19-p23/Chapter5
2.2.3 Heckscher Ohlin Theory
-Eli Heckscher (1919) and Bertil Ohlin (1933) - comparative advantage arises from
differences in national factor endowments is the extent to which a country is endowed with
resources like land, labor, and capital, the more abundant a factor, the lower its costs
-Heckscher and Ohlin predict that countries will
+export goods that make intensive use of locally abundant factors
+import goods that make intensive use of factors that are locally scarce
-Example, Viet Nam has mostly plain and midland terrain, which is favorable for wet rice
cultivation, so fertile alluvial soil is Viet Nam’s national factor endowments.
2.2.4 The product life-cycle theory
-Products mature both the location of sales and the optimal production location will change
affecting the flow and direction of the trade (proposed by Ray Vernon in the mid1960s)
(Tự đọc thêm trong slide p30-p34/Chap5)
2.3 New trade theory and Porter’s theory (slide 38)
2.3.1 New Trade Theory
-New trade theory (emerged in the 1980s) suggests that the ability of firms to gain
economies of scale (unit cost reductions associated with a large scale of output) can have
important implications for international trade
-Example, New York City is the apparel capital of the United States, because of the volume
of fabric available here, and the potential for customers. So they always produce garments
in large quantities, so the cost per unit of output is lower than in other countries
=>Through New Trade Theory, it impacts on economies of scale:
+Trade can increase the variety of goods available to consumers and decrease the average
cost of those goods
21
lOMoARcPSD| 13006637
+ Without trade, nations might not be able to produce those products where economies of
scale are important
+ With trade, markets are large enough to support the production necessary to achieve
economies of scale
+ Trade is mutually beneficial because it allows for the specialization of production, the
realization of scale economies, and the production of a greater variety of products at lower
prices
2.3.2 Porter’s theory
-Michael Porter (1990) identified four attributes that promote or impede the creation of
competitive advantages:
1.Factor endowments - a nation’s position in factors of production necessary to
compete in a given industry
-can lead to competitive advantage
-can be either basic (natural resources, climate, location) or advanced (skilled labor,
infrastructure, technological know-how
2.Demand conditions - the nature of home demand for the industry’s product or
service
-influences the development of capabilities
-sophisticated and demanding customers pressure firms to be competitive
3. Relating and supporting industries - the presence or absence of supplier industries
and related industries that are internationally competitive
-can spill over and contribute to other industries
-successful industries tend to be grouped in clusters in countries
4. Firm strategy, structure, and rivalry - the conditions governing how companies are
created, organized, and managed, and the nature of the domestic rivalry
-different management ideologies affect the development of national competitive
advantage
-vigorous domestic rivalry creates pressures to innovate, improve quality, reduce costs, and
invest in upgrading advanced features
=> Tự đọc thêm: Balance of Payment P50-p54/Chap5.
22
lOMoARcPSD| 13006637
23
lOMoARcPSD| 13006637
For example Wine (tax on the unit "bottle," regardless of the type of wine,
regardless of the contract price for the bottle of wine, etc.);
Car (For example, 1 car has a specific tax of $ 5000, regardless of the worth of the
car or the brand)
Ad valorem tariffs: levied as a proportion of the value of the imported goods
Example: If the CIF price of a car to Cat Lai port is $100,000 and the ad valorem
tariff is 70%, the payable import tax is $700,000.
Ad valorem tariffs thường gặp hơn Specific tariffs. (are more common than)
Đa phần thuế quan là thuế nhập khẩu
24
lOMoARcPSD| 13006637
Forms of subsidies
Lending to domestic enterprises with preferential interest rates, long periods,
or easy conditions for investment in research and development.
Support through the Agriculture and Fisheries Extension programs, and
projects to support export capacity.
For example, in agriculture, the state supports businesses, and farmers deploy
production according to GlobalGAP, and VietGAP standards to meet demanding
markets such as Japan, Australia, EU,... to have better export capacity.
Effects of subsidies: Help domestic enterprises improve production capacity and
product quality to compete better with foreign goods. Subsidies help domestic
producers
- Compete against low-cost foreign imports
- Gain export markets
However, domestic consumers will suffer. When subsidizing, the State must use the
budget (the budget is from taxes of businesses and individuals) -> reduces the State
budget.
Consumers typically absorb the costs of subsidies.
Import Quotas (Hạn ngạch nhập khẩu)
What is import quotas? (slide 10)
Import quotas - restrict the quantity of some good that may be imported into a
country.
Tariff rate quotas - A hybrid of a quota and a tariff where a lower tariff is applied
to imports within the quota than to those over the quota.
VD: Import sugar. The quota is set at 10,000 tons. The tax from the first ton to the
10,000th is 10%, while beyond the quota, the tax is 50% from the 10,000th to the
15,000th ton, and 90% from the 15,001st to the 20,000th ton -> the tax in the quota
will be substantially lower than the tax outside the quota. Import restrictions are
intended. (import restriction)
25
lOMoARcPSD| 13006637
26
lOMoARcPSD| 13006637
27
lOMoARcPSD| 13006637
Các lý do mà chính phủ các nước đưa ra để biện hộ cho việc họ can thiệp vào
thương mại quốc tế (slide 15-19)
3.1.Protecting jobs (Bảo hộ việc làm) - The most common political reason for
trade restrictions.
Results from political pressures by unions or industries that are "threatened"
by more efficient foreign producers, and have more political clout than consumers.
3.2. Protecting industries deemed important for national security
Industries are often protected because they are deemed important for national
security..
For example: aerospac, semiconductors, steel industry,…
3.3. Retaliation for unfair foreign competition (Trả đũa thương mại)
When governments take, or threaten to take, specific actions, other countries may
remove trade barriers.
- If threatened governments do not back down, tensions can escalate and new
trade barriers may be enacted
- Risky strategy
3.4. Protecting consumers from “dangerous” products - This reason is often
applied to plant and animal quarantine barriers. However, countries are currently
abusing this issue to limit imports.
For example, 1 imported mango has a pesticide residual limit of 0.01mg per
fruit. However, countries take advantage of this issue to reduce it, for example,
to 0.005mg / left. Imported items will face difficulties as a result of this.
3.5. Furthering the goals of foreign policy
Preferential trade terms can be granted to countries where a government wants to
build strong relations with partners.
Trade policy can also be used to punish rogue states
For example: the US administration, dealing with illegal immigration on the
Mexican border, threatens to impose a 5% import tax on Mexican goods entering the
US if Mexico cannot help the US stop the influx of illegal immigrants.
28
lOMoARcPSD| 13006637
29
lOMoARcPSD| 13006637
• Manufacturing industry because it must follow the standards of the investor in the
facilities.
Example: SAMSUNG
+ Acquisitions or mergers (M&A) with existing firms in the foreign country.
• Acquired, mergers
• Using money, and capital to buy back a company in another country.
• Changing the management board, and working process to help the company do
more stably.
• Often in the areas of retail, FMCG, entertainment, fashion, etc.
• Make use of local brands, prime locations.
Example: CJ acquired Cau Tre
- The flow of FDI – the amount of FDI undertaken over a given time period.
+ Outflows of FDI are the flows of FDI out of a country.
+ Inflows of FDI are the flows of FDI into a country.
Example: With SAMSUNG, South Korean (FDI Outflow) – Vietnam (FDI Inflow)
- The stock of FDI – the total accumulated value of foreign – owned assets at a given
time.
(Measure at a time and include the previous accumulation)
2.The growth of FDI is a result of: (slides 11-12)
+ A fear of protectionism
Want to circumvent trade barriers
+ Political and economic changes
Deregulation, privatization, fewer restrictions on FDI
+ New bilateral investment treaties
Designed to facilitate investment
+ The globalization of the world economy
Many companies now view the world as their market
Need to be closer to their customers
30
lOMoARcPSD| 13006637
31
lOMoARcPSD| 13006637
32
lOMoARcPSD| 13006637
33
lOMoARcPSD| 13006637
34
lOMoARcPSD| 13006637
• trade diversion occurs when higher cost suppliers within the free trade area replace
lower cost external suppliers
Vd: Nước Anh rút khỏi EU vì bất đồng sâu sắc
4. Economic Integration Mean For Managers
Lợi ích:
• Opens new markets (mở ra thị trường mới cho doanh nghiệp)
• Allows firms to realize cost economies by centralizing production in those locations
where the mix of factor costs and skills is optimal
Vd: HQ đặt các máy móc thiết bị sản xuất ở VN
Bất lợi:
• Business environment becomes competitive
• There is a risk of being shut out of the single market by the creation of a “trade
fortress”
Vd: doanh nghiệp nội địa VN vào thị trường TQ khi nền kinh tế TQ bị vấn đề -> cửa
khẩu bị tắt nghẽn dẫn đến các mặt hàng cần được giải cứu
35
lOMoARcPSD| 13006637
Unattractive
- There may be lower-cost manufacturing locations.
- High transport costs and tariffs can make it
-nAgents in a foreign country may not act in exporter’s best interest.
Licensing: a licensor grants the rights to intangible property to the licensee for a
specified time period (Nhượng quyền thương mại dược phẩm, bằng sáng chế,…)
Vd: Starbuck và Việt Nam. Starbuck là licensor kí hợp đồng với licensing là Việt
Nam, sẽ nhường mọi quyền sử dụng hình ảnh của Starbuck ở Việt Nam với điều
kiện là đảm bảo chất lượng hình ảnh và Việt Nam phải đóng một khoản phí nhượng
quyền hằng năm.
Why choose Licensing?
Attractive
- The firm avoids development costs and risks associated with opening a foreign
market.
- The firm avoids barriers to investment.
-The firm can capitalize on market opportunities without developing those
applications itself.
Unatractive
The firm doesn’t have the tight control required for realizing experience curve and
location economies.
The firm's ability to coordinate strategic moves across countries is limited
Proprietary assets could be lost
→ To reduce this risk, use cross-licensing agreements
Franchising: a specialized form of licensing in which the franchisor not only sells
intangible property to the franchisee (nhượng quyền thương mại dịch vụ, chuỗi
cửa hàng,…)
Why choose franchising?
Attractive
36
lOMoARcPSD| 13006637
- The firm avoids development costs and risks associated with opening a foreign
market.
- Firms can quickly build a global presences
Unattractive
- It inhibits the firm's ability to take profits out of one country to support competitive
attacks in another
- The geographic distance of the firm from its franchisees can make it difficult to
detect poor quality.
Joint Ventures: a firm that is jointly owned by two or more otherwise independent
firms (Liên doanh)
Why choose Joint Ventures?
Attractive:
- Firms benefit from a local partner’s knowledge of local market, culture, language,
political systems and business systems.
- The costs and risks of opening a foregin market are shared
- The satisfy political considerations for market entry.
Unattractive:
The firms risks giving control of its technology to its partner.
The firm may not have the tight control to realize experience curve or location
economies.
Shared ownership can lead to conflicts and battles for control if goals and objectives
differ or change over time.
Wholly owned Subsisdiary: the firm owns 100 percent of the stock (đầu tư mới)
Why choose wholly owned Subsisdiary?
Attractive:
They reduce the risk of losing control over core competencies.
They give a firm the tight control in different countries necessary for global strategic
coordination.
37
lOMoARcPSD| 13006637
They may be required in order to realize location and experience curve economies.
Unattractive:
The firm bears the full cost and risk of setting up overseas operations.
Turnkey projects ( Hợp đồng chìa khóa trao tay): the contractor handles every
detail of the project for a foreign client, including the training of operating
personnel.
Attractive
They are a way of earning economic returns from the know-how required to
assemble and run a technologically complex process.
They can be less risky than conventional FDI
Unattractive
The firm has no long-term interest in the foreign country.
The firm may create a competitor
If the firm's process technology is a source of competitive advantage, then selling
this technology through a turnkey project is also selling competitive advantage to
potential and/or actual competitors.
What Influences the Choice of Entry Mode?
Transport costs Economic Risks
Trade barriers Costs
Political Risks Firm Strategy
Which Foreign Markets Should firms Enter?
The choice of foreign markets will depend on their long-run profit potential
Favorable markets
Are politically stable Have relatively low inflation rates
Have free market systems Have low private sector debt
Markets are also more attractive when the product in question is not widely available
and satisfies an unmet need
38
lOMoARcPSD| 13006637
2
lOMoARcPSD| 13006637
- The risk of losing control over the management skills is not high, and the benefits
from getting greater use of brand names is significant.
Which Is Better – Greenfield or Acquisition?
A greenfield strategy - build a subsidiary from the ground up
A greenfield venture may be better when the firm needs to transfer organizationally
embedded competencies, skills, routines, and culture
An acquisition strategy – acquire an existing company ( mua lại)
Acquisition may be better when there are well-established competitors or global
competitors interested in expandingThe volume of cross-border acquisitions has
been rising for the last two decades
Why choose Acquisition?
Acquisitions are attractive because
They are quick to execute
They enable firms to preempt their competitors.
They may be less risky than greenfield ventures
Acquisitions can fail when
The acquiring firm overpays for the acquired firm.
The cultures of the acquiring and acquired firm clash
Anticipated synergies are slow and difficult to achieve.
There is inadequate pre-acquisition screening.
To avoid these problems, firms should
Carefully screen the firm to be acquired
Move rapidly to implement an integration plan
Why choose greenfield?
The main advantage of a greenfield venture is that it gives the firm a greater ability
to build the kind of subsidiary company that it wants But, greenfield ventures are
slower to establish
Greenfield ventures are also risky