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FINAL TAKE HOME EXAM !1
Final Take Home Exam
Bus 420 International Business 2015
Colton Goertzen (#300092858) — Ken Blawatt — Bus 420 — June 19, 2015
2. 1. Globalization has opened up the world to nations as never
before.
A) Develop your view as to the merits of globalization taking into
account the effects on culture, political goals and impact of MNCs on
other smaller economies.
B) What is the major problem with globalization on smaller nations?
C) How will the five major problems facing the world affect the
globalization process?
All countries need to be aware that an increase in globalization means an increase in
cultural effects from outside nations. What this means is that if your country imports american
hollywood television and movies, the greater american stereotypes and propaganda influence the
citizens of your country. Thus as a result what becomes acceptable in other countries becomes
the norm in yours (Lecture 1, How Cultures Form and Change).
Companies should be aware of the multitude of subcultures that exist within nations, and
be able to identify similarities between groups from different countries. They also need to focus
on only the relevant groups within a country so as to not waste resources on off target customers.
(Lecture 1, Culture and the Nation-State). As a preliminary guide companies should look at
individualism, power distance, uncertainty avoidance and masculinity as indicators of how
cultures will receive a new offering (Lecture 1, Hofstede’s Culture Dimensions). Religion and
language also play extremely important roles as cultural stabilizers which can facilitate or hinder
company interactions worldwide. As a result understanding the dominant religion can allow
companies to understand the strong values present in a foreign country (Lecture 1, Religion:
Cultural Stabilizer). For example when McDonald's entered India they took into account the
Hindu faiths reverence for cows and vegetarian lifestyle they changed their usual offerings of
burgers and chicken to mutton, potato and paneer alternatives. By accepting a more geocentric
attitude and integrating home and host practices they were able to be one of the first companies
to capture marketshare within the fast food industry in India (Lecture 1, Dealing with Cultural
Differences).
Political goals become increasingly difficult to attain when being influenced by numerous
organizations who all have a stake in a country, and who attempt to define the cultural norms
FINAL TAKE HOME EXAM !2
3. that govern political activities in said country (Lecture 2, The Political Environment). This is
understandable from the point of view of the corporation. If a county your company trades in
chooses to switch from communism to democracy, certain trade networks you have in place with
upper level communist officials instantly could be abandoned. Thus leaving your company with
no trade relationships, and without the materials needed to keep your company functioning. For
this reason having a vested interest into the political policies of countries that company’s trade in
is extremely important (Lecture 1, Physical and Social Factors). As a result companies should try
to understand the political ideologies that stipulate how a foreign society functions, and by what
methods they do so (Lecture 2, Political Ideology). One company that failed to take into account
the political risks which negatively affected the profitability of an investment was Nexen Inc,
which was pushed out of Yemen in 2012 as the country was in a time of political upheaval and
ended up losing out on a large oil deal because of it.
When an MNC enters a small nation they should look at the cultural and environmental
impacts they contribute to their host countries. When Walmart enters a new small nation they
may offer the locals products that they previously had no way of reaching, but Walmart needs to
look at the impact they have on the economy. As locals buy products from Walmart, the company
withdrawals money from the economy, shrinking the GDP of the nation and perpetuating a
national struggle to be competitive in the global economy. Governments need to put in place
safeguards against this by set up tariffs and non tariff trade barriers which offset their
disadvantaged local companies. What it boils down to is that governments need to work towards
managed trade within their economies; helping their local business’ become global competitors.
This means that they will have the ability to compete on a level playing field with the giant
MNCs within their own country. (Lecture 6, Trade Theory). However many nations are
pressured by the MNC’s and as a result grant them a quasi-monopoly on the market (chapter
One Intro to Small Business, Competition).
Understanding this we see that a fully integrated global economy complete with culture,
political goals and out of country MNCs is an increasingly difficult issue. The costs of
globalization are particularly hard on smaller, less developed nations with the loss of the freedom
to act locally within their own country and take care of their own citizens as the leadership sees
fit (Lecture 1, Costs of Globalization). Even if the smaller nation’s companies succeed in the
global marketplace the increased environmental damage they cause due to the increased
production and depletion of nonrenewable resources are a delicate balance each nation needs to
carefully weigh when wading into the world of globalization (Lecture 1, Costs of Globalization).
For these reasons countries planning on moving into the arena need to be sure they can compete
even prior to entering. As an example prior to Brazil getting involved in international competition
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4. for lumber it would've been prudent for them to think of the ramifications of depleting the
planets natural rain forest. However now Brazil needs to stay competitive in the marketplace and
therefore must continue to destroy acres and acres of rainforest each year just to continue
functioning as a nation.
The five issues affecting the world economy make globalization increasingly difficult in
terms of financing out of country ventures, global trade, tariffs and non tariff barriers, not to
mention the repercussions in the stock market. For this reason understanding how globalization
will be affected by each of the five issues, and how they interconnect with each other will
determine what opportunities exist for entrepreneurial activities in the future (Five issues that will
make–or break–the world economy in 2015). For example if your company exports to Russia the
sanctions that have been put on Russia may hinder or even stop your products from getting there.
We see then that even though your company is attempting to increase globalization and grow the
nations economy, Russia's activities have severely crippled your ability to do so. As far as foreign
direct investment (FDI) goes, if we say for example General Motors has invested heavily into
Greek Government issued bonds and Greece were about to declare bankruptcy. Shareholders
would seek to sell shares in General Motors anticipating that they would lose their investment in
Greece, hence the company would be worth less and as a result share prices would drop even
though Greece has not declared bankruptcy and the investment was still safe. Therefore the mere
mention of an issue of this magnitude has disastrous ramifications in the investment industry.
This problem is extremely important to the entrepreneur because it means FDI for his new
venture is much more difficult to acquire if investment institutions are holding on to their capital.
Considering how oil price factors into almost all five issues (see appendix A) in some form or
another we see that how the world deals with the low oil price is going to determine who the
major economies are in 2015, especially since China will be compounding the low price of oil
with their slow economy. This however allows the rest of the world to grow their economies since
business’ will have cheaper overhead costs, which is good for consumers, business’, and most
governments around the world (Five issues that will make–or break–the world economy in 2015).
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5. 3. Entrepreneurship creates an economy. It creates jobs and
stimulate economic activity.
A) How does entrepreneurship encourage international business and
assist nations, particularly smaller nations to compete?
B) What is the potential for improvements to the balance of trade and
adding to national income?
C) Who owns an economy and how does this figure into your discussion?
D) How might international finance assist smaller firms to become
entrepreneurial and compete in the international arena?
(Governments, WTO, IMF, etc.)
Within economy's around the world the entrepreneur is beginning to be seen as the
driving force for economic growth. They contribute to a nation's wealth buy creating new
technologies or methods, leading to the establishment of new companies, which in turn produces
new employment opportunities and leads to the accumulation of capital within the nation,
growing the economy (Chapter One Intro to Small Business, Importance of entrepreneurship).
This is particularly important two small nations who have a strong need to develop their
economies and encourage FDI. The reason for this is if an entrepreneur produces goods at a
cheaper price compared to the rest of the world, demand for those goods goes up, therefore
profits go up, investors begin to notice and seek to encourage this continued action by investing in
the entrepreneurs company. Thus perpetuating growth of the host country's economy. This is
exactly what happened in China with Deng Xiaoping when he encouraged FDI in China's
industrial sector leading China to the global superpower that it is today (chapter One Intro to
Small Business, China’s Township Village Enterprises).
If small nations seek to be globally competitive with more developed nations, encouraging
entrepreneurship is the first step. By encouraging the local people to be creative and innovative
with solutions which can take the form of scientific invention, or a new technology, or just
general innovation to a manufacturing process, countries have a direct impact on employment,
self-employment, standards of living, social responsibility and sustainable industry (chapter One
Intro to Small Business, Importance of entrepreneurship). This table shows that simply by the US
encouraging entrepreneurial activities the nation's standard of living was nearly four times that of
the USSR during the 1980s.
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6. Table 1.1 Comparative Standards of Living.*
Commodity. U.S.A. England U.S.S.R.
Hamburger (1kg) 43 minutes 57 minutes 128 minutes
Sugar (1kg) 5 minutes 11 minutes 59 minutes
Weekly food basket 12.5 hours 21.4 hours 42.3 hours
Colour TV Set (59cm) 86 hours 177 hours 713 hours
* Source: Adapted from Baumback's Guide to Entrepreneurship, (5, p.p7), and based on 1979 prices levels. Indicates
amount of time one must work to acquire the product.
(chapter One Intro to Small Business, Importance of entrepreneurship).
A British study of the role that entrepreneurial firms fulfil in society lists six economic and
sociological contributions made by these firms.
1.They are competition to larger firms that would otherwise dominate an industry.
2.They are the major sources for new jobs.
3. They provide a harmonious environment where the owner and workers strive together, shoulder
to shoulder, for mutual benefit.
4.They can alleviate some of the core city social problems, a direct result
of the local employment that they provide.
5.They are creators of innovation where innovation is essential for survival and,
6.They are the seed acorns from which larger corporations grow.
(chapter One Intro to Small Business, Societal Factors)
We see in this British study that entrepreneurial activity decreases the problems societies have
to deal with around the world and allows for a much more harmonious atmosphere within the
nation. Emotions and gut level values have an increasingly important influence on decisions being
made within these organizations. Therefore they allow for stronger relationships between employers
and workers, as the employers rely on the input from those around them (Lecture 2, Morris Massey
what you are is what you were…when!). The result is as employees feel engaged in the company
they are more likely to feel valued and that their voices are heard by the owner and therefore are far
less likely to leave the organization. Hence, entrepreneurship promotes a more harmonious
environment, but it also encourages competition where the company with the greatest efficiency,
customer loyalty, marketing and social accountability is the winner. Unlike huge corporations this
allows for a better standard of living for citizens and ensures that the true victor in the end is the
society. On the other hand as huge organizations are able to pressure governments to protect their
markets they're granted a quasi-monopolistic position within the market (chapter One Intro to Small
Business, Competition). Which detracts from a society and decreases the standard of living at the
expense of the people.
When looking at the balance of trade between the nation's exports and imports
manufacturing becomes increasingly important. Entrepreneurship has a direct impact on a nation's
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7. exports because entrepreneurs have an uncanny ability to recognize inefficiencies in conventional
manufacturing processes and can therefore exploit them ahead of competitors. As result the nation
has higher levels of output, exports increase and as we know income for the nation directly
correlates to the level of exports, thus the result is growth for the economy. However an important
thing to notice is that nations do not trade companies do not trade only people trade. Which means
that if trade is not encourage by the government people will not see the need to engage in
international business, therefore growth in the economy will be extremely slow. For example the
culture in Japan makes it very difficult for entrepreneurial activity to take place and as a result their
economy is shrinking. There is very little that the Japanese government does to encourage
entrepreneurial activities which means that the people do not understand the need for the balance
of trade within the nation.
An economy consist of production, trade, and consumption of goods and services.
Therefore understanding what an economy is we can begin to determine who the true owners of it
are. As leaders in business we are encouraged to put the needs of the company ahead of our own,
however the company is not led by itself, it is run by the people in charge. The economy is much the
same as this, it is not led by itself, is not even led by the government, it is led by the people in charge,
whether that's in the government, or in an MNC, or even in the public. The people are who decides
what is acceptable, and what is unacceptable in the economy. At this moment Greece faces a strong
problem because the people in that country demand a certain standard of living that realistically the
economy can't afford. There will have to be certain cut backs if Greece is to stay a part of the
European Union and the economy will need to be revitalized by the people of the country, not the
MNC’s within Greece, not the government, the people.
One of the many issues that face the entrepreneur is how they're going to finance their new
business venture. Around the world there are many banks and financial institutions that are willing
to give the entrepreneur the startup capital that he needs, but there are also organizations around
the world such as the World Trade Organization (WTO) and the International Monetary Fund
(IMF) which help facilitate trade agreements and finance around the world. The WTO does this by
monitoring the trade agreements around the world, ensuring that payments are made properly. The
IMF seeks to control the international monetary system by ensuring it remains relatively stable by
manipulating, if need be, exchange rates around the world (lecture 5, the international monetary
fund). What this means for entrepreneurs is that they are held to a certain standard when conducting
international business and that they're required to conduct their business appropriately. In exchange
the IMF will monitor currency levels so that global trade remains relatively unaffected and the
WTO will work to ensure businesses around the world behave in the same way, in a holistic fashion
so that trade becomes easy for everyone involved (lecture 5, the international monetary fund).
FINAL TAKE HOME EXAM !7
