BMA181 Tutorial One - Globalisation

1. “The study of international business is fine if you are going to work

in a large multinational enterprise, but it has no relevance for
individuals who are going to work in small firms.” Evaluate this
statement.
• How might the Internet and the associated World Wide Web affect
international business activity and the globalisation of the world
economy?
• How did outsourcing work to Wipro improve General Electric’s
ability to compete in the global economy? Does outsourcing harm
or benefit the American economy?
• If India’s information technology companies continue to prosper,
over time what do you think will happen to the income differential
between software programmers in the United States and India?
What are the implications for the American economy?
• What does the rise of Wipro teach you about the nature of the
global economy in the first decade of the 21st century?
1. “The study of international business is fine if you are going to work in a
large multinational enterprise, but it has no relevance for individuals
who are going to work in small firms.” Evaluate this statement.

• This statement has a very narrow view on the global economy. It shows the
lack of foresight in that it misses the many opportunities that are available to
small businesses in the international environment
• Individuals and companies believe in this view may find that they do not
achieve their full potential (abilities – what they can do) and may ultimately
fail to success.
• As the two main drivers of globalisation ( decline in trade barriers and
technological advancement) continue to drive towards a greater global
economy, access to new opportunities and threats increases. The rise of
the mini-multinationals suggests there are global opportunities for even
small firms.
• Paying attention to international markets can be critical for long-term
competitive survival – why and how?
• Foreign firms may be entering domestic market, which could seriously
impact on local competition.
• Small firms could source best foreign suppliers to improve its cost structure
and its competitive advantage.
2 How might the Internet and the associated World Wide Web affect
international business activity and the globalisation of the world
economy?

• The ability of firms and individuals to market their products and services and
to know about new products and services worldwide is increased by the
World Wide Web.
• Imagine by using WWW as an initial point of contact to initiate new flows of
trade and investment – how much more effective than using paper mail or
personal contact.
• Consumers can find new products of interest that are not available in local
retail outlets and then order them over the internet – Strawberrynet.com and
Ebay
• Sellers and buyers are geographically connected by the internet
• This increased connection may require economies, better distribution
systems, reduction in the traditional trade-off between price and quality.
• Through the Internet and WWW even small firms can conduct business
internationally
3 How did outsourcing work to Wipro improve General Electric’s ability to
compete in the global economy? Does outsourcing harm or benefit the
American economy?

• By outsourcing GE was able to reduce the labor cost of its total operation
cost. This increased their ability to be competitive in the global market
place.
• In short-term, yes, such outsourcing did hurt American workers whose jobs
were outsourced, but in a longer-term. It improved the economy through job
growth
4 If India’s information technology companies continue to prosper, over
time what do you think will happen to the income differential between
software programmers in the United States and India? What are the
implications for the American economy?

• If India’s IT companies continue to prosper, and demand continue to

increase, wage rates will equalize between the US and India. The
population differentials, it is likely that the new US programmers will be paid
less than formerly.
• The implications for the American economy are a downward pressure on
wages and the price of software will decline.
• If routine programming is done in India, U S programmers can improve their
situation by focusing on more innovative work, higher skilled activity –
designing and engineering.
5 What does the rise of Wipro teach you about the nature of the global
economy in the first decade of the 21st century?

• Wipro has a competitive advantage in terms of cost, but it needs to reinvest

some of its gain into closer relationships with the client.
• Global trade and global production can increase firm’s competitive
advantage.
• Make sure the focus is on the customers – locally or globally.
• Face-to-face still matters. Wipro has discovered that it needs a local
presence.