The Internationalisation of the Firm

International investment progresses into further categories which we will meet again in question five. It's all well and good knowing that more trade equals more money (in the most part) but what makes that so? The nature of international trade and investment directly relates to growth in the world economy (Oh and Seller et al. 2013, up. 732-735).

In his textbook, Cassavas provides two graphs showing the relation between world economic growth in relation to International trade and international investment. The first graph, sourced from the World investment report in 2009, maps world exports against world gross domestic reduce (GAP).It shows that as exports Increase, so does GAP. Thus, with thirty-nine years of data, this shows that international trade has transformed and Increased the world's GAP almost twenty-fold. The second graph shows the Increase of International Investment Into world religions from 1980 to 2006.

It shows that as more countries invest, the quality of life Increases for billions as they have the opportunity to Integrate with a wider selection of nations' products and services. This then Increases International trade and as we saw before, an Increase In International trade Increases the world's GAP (Cassavas, 2012).The world economy has been transformed due to international business as It Increases the variety of trade and allows nations to specialist in certain aspects of production. The transformation of borders hundreds of years ago to now where there is a minimal expense to transport goods, services and capital around the world.

Through this, countries have become more interconnected and as a result we operate in a global economy through which any nation could be affected by an economic downturn or rise in another nation.International business refers to the variety of commercial activity and trade occurring teen firms across national borders and has transformed the world economy by changing the way countries produce capital and has integrated the entire world on an economic scale. Question 2: In a short essay, explain how market globalization both responds to and promotes the convergence of consumer lifestyles around the world. Provide examples to illustrate your answer.

Market globalization is "the gradual integration and growing interdependence of national economies" (Cassavas, 2012).As national economies are becoming more interconnected and buyers, producers, suppliers and governments are becoming more interdependent, it is seen, wrought use of advertising studies, that consumers are converging and showing the spread of market globalization. Just by analyzing studies conducted in the late asses on advertising and market globalization compared to more recent studies it is eye- opening how earth's citizens are converging with consumer preferences. Dry Micro Kaka, a theoretical physicist describes how the human race is evolving.

He has a four- point scale for grading a planet's inhabitants.Currently we are a type zero race, however with the internet and "huge planetary trading blocs", Dry Kaka describes to he audience how we are becoming planetary, or completely globalizes which is seen in market globalization. I want you, the reader, to think Just how many items you could potentially purchase on the internet. In a 1998 paper which talks about the prospects for consumer purchasing on the internet, they discussed how the majority of internet transactions were as a result of business to business deals (Butler and Prepared 1998, up. 600-610).

Just by reading this article I can see the exponential progression of market globalization in the last fifteen years Just by 'Goggling "cheap T-shirts". As I landed in the foreign nation of Japan in 2011 1 thought that I was going to be shocked at the different lifestyle that is experienced so far from home. Needless to say, I walked into the food-court and saw a McDonald's, Subway and KEF. Through simple observation market globalization is converging consumer lifestyles on an international scale however the best way to see this is to target studies which relate directly to the subject matter; international advertising. Market globalization is manifested by the production and marketing of branded products and services worldwide" (Cassavas, 2012). Two studies on global standardization of advertising were conducted in 1996 by Greg Harris which both found a number of issues which accompanied the obvious reduce in advertising costs which accompanied this (Harris 1996, up.

551-560) (Harris 1996, up. 5-11). As I showed earlier, the prospects of market globalization and the convergence of consumers at this time wasn't too prominent as the internet hadn't really kicked off yet.In more recent studies, it is widely acknowledged that advertising to a global market is an extremely viable option as "the global integration of markets has spurred a convergence in consumer references" (Amanda and Ewing 2013, up. 5-12) (Townsend and Wintrier et al.

2009, up. 539-558). Standardizing advertising as a result of consumer convergence is "worldwide competitive positions" (Wang and Wee et al. 2008, up. 305-316). If you have not traveled abroad recently, it is hard to grasp Just how similar we are, or how converged us simple consumers have become with foreign nations.

Through the use of studies it is shown how the convergence of consumers has been promoted by market globalization especially with the internet. Perhaps we are heading towards Dry Auk's predictions (see video section of sources). Question 3: In a short essay, explain the meaning of the term international collaborative venture. How do these arrangements benefit focal firms? International collaborative ventures are aimed at combining and closing gaps in technology, resources and knowledge which allows internal efficiency therefore creating prospects for gaining a competitive advantage (Spence and Manning et al. 008, up.

412-428). Cassavas defines it as a "form of coordination between two or more firms" (Cassavas, 2012). International collaborative ventures do indeed benefit focal firms which will be hon. through by first discussing theory and then applying case studies.

International collaboration between two firms can occur horizontally or vertically. Horizontal collaboration occurs with partners within the same level of the value chain (egg. Manufacturer and manufacturer). Vertical collaboration occurs when partners at different levels of the value chain Join (egg.

Manufacturer and distributor) (Cassavas, 2012).From here, collaboration can be further split between either Joint ventures or strategic alliances. Joint ventures are equity based and result in the formation of an entirely new entity (Lou 2007, up. 39-60). Strategic alliances are simply a cooperation between firms with no equitable investment needed (Gomez and Robinson et al. 2013, up.

655-670). Through entering into international collaborations, firms gain the ability to gain competitive advantages from pooling resources or acquiring capabilities that may not be available to them within their own organization (Gout, up. 19-332) (Cassavas, 2012). Organizations enter into international collaborations in order to pursue growth opportunities (Robinson and Mcdougall 1998, up. 1079-1100).

The need to collaborate in order to achieve internationally and have any sort of real resent has become a necessity (Spence and Manning et al. 2008, up. 412-428). A study done on the effectiveness of international collaborations studied 16 different organizations entering into eight different agreements to excel in eight different areas (Spence and Manning et al. 2008, up. 412-428).

These companies varied in great extent.For example, one organization collaborated with Nikkei to receive the rubber from the top of their discarded shoes in order to use to make tires. Another company allowed an external organization to use its technology for knowledge gains in the application of the technology. All eight collaborations ended up in a positive allowing them to have increases in innovation, creativity, exchange programs, and technological increases. International collaborative ventures have become increasingly popular and are said to be needed in order to succeed financially.

They offer a number of mutually beneficial rewards whether they are financial or environmental in the case of Nikkei and the rubber company. They benefit focal firms by increasing technological advancements, efficiency, creativity and of course profit. Question 4: What is a code of ethics, and what role does it serve for businesses? Han actual rules. Welcome aboard the Black Pearl, Miss Turner" said Lee Arranger in the film Pirates of the Caribbean: The Curse of the Black Pearl.Ethics are "moral principles and values that govern the behavior of people, firms or government regarding what is right and wrong" (Cassavas, 2012).

A code of ethics enforces trust amongst colleagues, and gives all organizations a fair and realistic ability to succeed. The roles that ethics provide to organizations are challenges as they may have ethical dilemmas with the procurement of resources or set up unethical methods to create products. A code of ethics serves a role of protecting organizations and its members from having engaging in a moral wrongdoing or ethical dilemma.An ethical dilemma is "a predicament with major conflicts between different interests, where determining the most appropriate course of action is confounded by a set of solutions that are equally Justifiable and perhaps equally imperfect" (Cassavas, 2012). These moral wrongdoings can range from global sourcing, using third world sweatshops, deceptive marketing practices and cheap and harmful packaging. The ethical dilemmas involved may be learning that if you stopped acquiring your products from sweatshop the child workers may go homeless and result to prostitution.

These situations pose serious ethical dilemmas and cause of problems for businesses. Having to abide by a code of ethics adds an extra element of complexity to an organization's operations. Organizations face ethical decisions on a regular basis. In a world where organizations can conduct business in a variety of countries at once, it may be tempting to take the cheap option and make some unethical decisions. The role of ethics in businesses attempts to solidify the positions of organizations to ensure no moral wrongdoings occur. This adds an extra element of complexity in the conduct of business however is needed in our modern, moral world.

.Question 5: According to Dining's eclectic paradigm, an MEN must meet three conditions before successfully entering a foreign market via foreign direct investment (FAD). Explain these conditions in a short essay. John Dunning published the eclectic paradigm in 1980 "as a framework for determining the extent and pattern of the value-chain operations that companies own abroad" (Cassavas, 2012). Dunning created the eclectic paradigm by expanding on a variety of other existing theories such as the "comparative advantage and the factor proportions, monopolistic advantage and internationalist advantage theories" (Cassavas, 2012).

The eclectic paradigm states that a Multinational Enterprise (MEN) must meet three conditions before successfully entering a foreign market via foreign direct investment (FAD): ownership-specific advantages, location specific advantages and internationalist advantages (Dunning 2000, up. 163-190). To firstly enter and conduct business successfully internationally, a MEN must have unique advantages different from competing firms already in the market. This is an ownership-specific advantage (Dunning 2000, up.

163-190).This strategy is through FAD which is an "an internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant and equipment" (Cassavas, 2012). Some characteristics of ownership- specific advantages are having ownership of intangible assets in the form of capabilities in order to "control and coordinate international transactions" (Buckley and Hashes 2009, up. 58-70). Location specific advantages are country specific.

These advantages can be viewed similarly to having competitive advantage.Having a location specific advantage meaner having the best "comparative costs of country- specific inputs" which includes things such as labor, natural resources and materials which are accessible by the organization operating within that nation (Buckley and Hashes 2009, up. 58-70). As well as this, these advantages may include costs regarding trade barriers, transportation costs, and tariffs.

Internationalist advantages are gained through internalizing manufacturing in foreign nations as well as its distribution or other stages in its value chain (Cassavas, 2012).This comes about from firms exploiting its ownership advantages internally instead of receiving 'help' from foreign organizations in an attempt to minimize transaction costs (Buckley and Hashes 2009, up. 58-70). Civilians textbook, "International Business: the new realities" provides a perfect case study to illustrate a real life application of the eclectic paradigm. This firm is the Aluminum Corporation of America (Alcoa). This company has more than 130 000 employees spanning 43 countries.

It specializes in aluminum, provides products for mining companies, the car industry and beverage cans.The primary ownership-specific advantage Alcoa has is its superior technology which it has acquired from research and development. As well as this they dominate the scene by being able to finance expensive projects giving them the advantages needed to perform well in an international market (Cassavas, 2012). Alcoa has succeeded in gaining location-specific advantages by having refineries in Brazil which poses a geographical advantage when it comes to mining bauxite, a mineral rare to other locations and one that is needed in their business. This location also grants them access to relatively well educated workers at a low cost.

Alcoa has done well with internalizing a lot of its operations. Alcoa has internationalist advantages as they minimize dissemination of knowledge, save money by using familiar techniques, having control over its distribution chains and to maintain their private quality control measures. By doing this Alcoa has succeeded and has dominated its market (Cassavas, 2012). Through the successful implementation of the eclectic paradigm an organization can successfully compete in an international market by applying their own ownership-specific advantages, location specific advantages and internationalist advantages.