Video Title: the New Global Challengers

Video Title: The New Global Challengers

Run Time: 10:37

Classroom Application: Instructors will find this video helpful in discussing the current realities of the global marketplace, as well as the challenges and advantages associated with this rapidly expanding platform for trade. The themes discussed in the video could also be used as a starting point for a discussion on various elements of internationalization, including global sourcing, international marketing, international management and foreign investment.

Synopsis

This video gives an overview of the expanding global marketplace, as well as some of the benefits and challenges companies face while operating within it. Themes discussed include the specific characteristics of market globalization, integration blocks, national currency, global sourcing and competitive advantage.

Discussion Questions

1. How do changes in lifestyles in countries around the world affect the pace of globalization?

As time passes, consumers seem to have interests in the same things: music, entertainment, consumer electronics, fashion, food, and sports. These common interests promote increasing similarity in lifestyles in cultures around the world. People in Argentina, for example, listen to the same kind of music, have the same kinds of cell phones, and like the same kinds of foods as people in the Netherlands. This convergence of lifestyles makes it more possible for companies to see the entire world as a single market. Indeed, products such as Apple’s iPhone are sold to people in every corner of the world using the same basic advertising approach.

2. Which kind of company would be most likely to see globalization as primarily having only a down-side? Which type of company tends to see globalization as having no down side? Give an example of each kind of company.

A well-established company with a large market share in an traditional industry would tend to see globalization as a negative trend. An example might be a U.S. tire company that currently commands a large share of the tire market. With globalization, competition for tires will increase, prices will drop, and the company will find itself trying to survive in an increasingly difficult business environment in which other companies have tires that are just as high in quality as the U.S. company, but are manufactured at much lower cost due to low labor costs and a computer-controlled value chain that maximizes efficiency.

A company that might see globalization as having only an up-side might be a start-up golf club company that has a new design for clubs that it thinks is superior to the clubs that are currently on the market. Rather than struggle for years trying to get attention and build sales locally, the company can use such things a social media to gain attention for its products immediately, and then sell those products to customers around the world without spending years cultivating individual pro shops and sporting goods stores as sales outlets. If the club design is truly superior, the company can find itself being an industry leader in a fraction of the time it might have taken 20 years ago, before the advent of true globalization.

3. How are the concepts of emerging markets and new global challengers related?

Historically, most international business was conducted by the advanced economies of Europe, North America, Japan, Australia, New Zealand, Hong Kong and Singapore. However, in recent years, emerging markets such as Brazil, China, India, Mexico and Turkey have begun to play a larger role in international trade. Emerging markets are appealing to companies because they are attractive target markets, low-cost manufacturing bases and home to high-quality labor and knowledge workers. In contrast to advanced economies, emerging markets are experiencing rapid economic growth. Emerging markets have given birth to a new category of international firms called the new global challengers, top companies from rapidly developing emerging markets that are fast becoming key contenders in the global marketplace.

Quiz

1. Which of the following statements related to the globalization of economic markets is FALSE?

a. In the process of conducting international transactions, firms and governments undertake massive buying and selling of national currencies.

b. Free movement of capital is extending economic activities and increasing globalization around the world.

c. Approximately $4.0 trillion in foreign exchange is traded every day.

d. The euro is the most widely traded currency in the world.

Answer: d

Explanation: The dollar is the most widely traded currency in the world. It is on one side of 84.9 percent of all financial transactions.

2. Which of the following is NOT a driver of market globalization?

a. International consumer tastes have become increasingly sophisticated.

b. Tariffs and barriers to international trade have been reduced.

c. More nations worldwide have become industrialized and modernized.

d. World financial markets have become more integrated.

Answer: a

Explanation: Reduction in tariffs and non-tariff barriers to international trade and investment, the industrialization and modernization of nations worldwide, the growing integration of world financial markets and advances in technology have all contributed to the expansion of market globalization. Consumer tastes have become increasingly similar rather than increasingly sophisticated. This similarity, if anything, is a result not a driver of market globalization.

3. What is one of the challenges of market globalization for companies?

a. increased tariffs and barriers to international trade

b. greater possibility for Internet marketing

c. more demanding buyers who source from suppliers worldwide

d. greater internationalization of firms’ value chains

Answer: c

Explanation: Along with the advantages of market globalization (including countless new business opportunities for international firms and the internationalization of firms’ value chains) come challenges such as more demanding buyers who source from suppliers worldwide.

4. Which of the following is not a realistic prediction for the future of international currencies?

a. The Chinese yuan will become more of an international currency.

b. Internet trade will increase currency price transparency.

c. The dollar will continue to be the currency of choice for most international transactions.

d. Currency trading costs will increase as more businesses will be interested in international transactions.

Answer: d

Explanation: Significant improvements will continue to be made in the foreign-exchange markets. There will be greater efficiencies and more opportunities in foreign-exchange trading, due to the speed at which transactions can be processed and information can be transmitted globally. The impact this will have for companies is that trading costs should decrease and companies should have faster access to more currencies. Internet trade will increase currency price transparency and improve the ease of trading, allowing more investors into the market.

5. Which of the following statements is true of both advanced economies and emerging markets?

a. They are both experiencing rapid economic growth.

b. They are both low-cost manufacturing bases for international companies.

c. They are both rapidly transitioning to capitalism.

d. They both are interested in increasing exports to other countries.

Answer: d

Explanation: Both advanced economies and emerging markets are interested in exporting to other countries. While advanced economies have been operating under capitalism for some time, emerging markets are rapidly transitioning to capitalism. Emerging economies are experiencing rapid economic growth, but most established economies are not growing at a high rate. Advanced economies are generally high-cost, not low-cost manufacturing bases.