Introductory description

In Global Business Environment we explore how international markets impact on price, cost and investment decisions of businesses with a global reach. We investigate how firms may formulate responses which preserve and bolster their competitiveness. We aim to develop students’ understanding of globalisation, and how the forces sustaining it impact on a firm’s production, sourcing and investment decisions and ultimately its profitable existence. We take a critical approach towards globalisation; highlighting both the many economic and social advances that have occurred as a result, but also some drawbacks, such as increasing income disparities, environmental concerns, and the creation of a fertile environment for the emergence of giant corporations with dominant market shares.The focus is how international markets impact on price, cost and investment decisions of international businesses. We also develop insights into how future business leaders active in global value chains, can formulate responses to a changing environment which serve to preserve and bolster their organisations' competitiveness .

Module aims

Outline syllabus

This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.

A The advance and retreat of economic globalisation as barriers to trade rise and fall. Discussion of barriers including definition and key indicators.
Explanations of Globalisation including:

• Definition and key indicators
• Households as a driving force of globalisation via their taste for diversity and appetite for lower prices and better quality.
• Shifting relative income shares around the world
• Tariffs on goods
• Non-tariff barriers and technical standards
• Trade in services and the role of regulation
• Capital market liberalisation
• Falling communication costs and the new era of globalisation. Baldwin's 3 cascading constraints
• The great divergence and then convergence of manufacturing expertise around the world
• Markets that are global and others which are not; how to tell the difference and how this affects the decisions of firms
  B. Role of Global and Local Governance and International Institutions, including:
• Rationale and role of World Trade Organisation, IMF and World Bank
• Dispute settlement via the WTO.
• Interaction of government regulation and trade.
• Setting standards; conformity assessments; harmonisation of standards; mutual recognition agreements
• Anti-dumping measures
  C. The Gains from Trade
• Comparative advantage as the bedrock of trade
• Contrast with gravity models
• Price patterns follow comparative advantage
• Why tariffs have little effect on trade balances, and country deficits and surpluses are not indications of where country gains from trade accrue
• How countries can flourish economically while importing manufacturing goods that are cheaper than it would have cost to produce the same items at home
  D The Cross border operation of firms, including the formation of MNEs; the Location of
  Investment; and Technology Transfer
• Sources of a global firms’ advantages (ownership, location, internalisation)
• Technology transfer and IP protection
• Clustering of firms engaged in similar activities
• Location of investment
• Direction of technology flows versus direction of money flows; in what circumstances are they in the same direction and under what circumstances are they in the opposite direction?
• What factors motivate firms to become active in foreign markets via trade, mergers and acquisitions, and greenfield investments?
  E Prices, Quality, and ICT
• How opening up global markets lowers prices, but not always
• A case study of the law of one price in the euro zone
• Commodity markets vs firms that can achieve price discrimination.
• Prices of scarce resources under globalisation
• The market for talent, the value of quality
• Do we care about quality and does it matter?
• The Kano model and how businesses delight a customer
• Now that ICT is so ubiquitous – all businesses have IT systems – can IT confer an individual firm with a competitive advantage?
• Global reach of communications versus richness of communication.•
• Trade in tasks (trade at the level of units of work), global competition at the level of
  stages of production
• Disintegration of global supply chains in the electronics sector
• Contractual relations between different business entities involved in supply chains. Formal vs Informal contracts, bilateral investment treaties, the force majure clause
  F. Financial Crises, Fluctuating Exchange Rates, and how businesses and individuals respond
• Leverage and financial instability
• A Minsky Moment – The US 2007-2009 crisis
• Recurrent crisis are inevitable; when to be adventurous and when to be cautious
• Crises in Emerging Markets; Argentina, Turkey, et al
• The unpredictability of exchange rate fluctuations
• Exchange rate volatility; a source of business profit and also of loss
• Covid-19 and global business
  G. Climate Change, Climate Policy, and Energy Markets
• Sustainability, sustainable business models, and the circular economy
• The economic costs of climate change, global and regional. Regional Impact
• Market failure, the internalisation of an externality, and global policy to address climate change; the 2016 Paris Accord
• The projected demand for energy through to 2040
• Fossil fuels are not the same, but differ in important respects
• The “Peak Oil” fallacy
• Global investment in renewable energy
• Fixed and variable costs of renewable energy; can renewable energy be cost competitive with fossil fuels?

Learning outcomes

By the end of the module, students should be able to:

• Critically discuss how economic globalisation has created the context in which global and local businesses operate.
• Review the influence of Governments in affecting the endeavours of firms to operate in global markets.
• Evaluate the mechanisms by which gains arise from international trade as broadly defined across goods, services, technology and finance.
• Analyse how the commercial decisions of a business in one country are influenced by the actions of businesses in another country.
• Analyse and identify where profit is generated in the global value chain.
• Explain the levers firms have to optimise the global value chain.
• Review how the advance of globalisation impacts on crucial prices and costs.

Indicative reading list

Pre-Reading

A more extensive reading list, including pre-readings, is available with library links on Moodle.

Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.

Days 1&2

Husted, S., Melvin, M. and Rakshit, A. (2013). International economics. Harlow: Pearson Education.
Baldwin R. (2016). The Great Convergence: Information Technology and the New Globalization. Harvard University Press,

Days 3&4
Robert J. Barbera (2009) The Cost of Capitalism: Understanding Market Mayhem and Stabilizing Our Economic Future McGraw-Hill
The Economist Magazine. The Sticky Superpower – The World Economy.3 October 2015
The Economist Magazine. What is the Impossible Trinity? The Economist Magazine explains Economics. 10 September 2016
Peter Marsh (2012) The New Industrial Revolution: Consumers, Globalization and the End of Mass Production. Yale University Press
Peter J. Neary (2009). Foreign Direct Investment: The OLI Framework. Oxford University Online.

Day 5

William D. Nordhaus (2013). The Climate Casino. Risk, Uncertainty, and Economics for a Warming World. Yale University Press
Richard S.J. Tol (2009). The Economic Effects of Climate Change. Journal of Economic Perspectives. Spring 2009. Pages 29 –51. And subsequent updates.

View reading list on Talis Aspire

Research element

In writing their PMAs students research topics in greater depth than taught during the module. They draw on sources of secondary data and use these to contextualise points made in the essay.

Interdisciplinary

Economics, international trade, theory, regulatory policy and the impact on business, business economics models of the operation of MNEs, relationship between finance and production via the behaviour stock markets, forecasting exchange rates, technological and business aspects of renewable energy.

International

The module's entire focus is on globalisation and the interdependence of countries, including the various ways in which the principle economic agents of households, firms, and governments shape and interact within this environment

Subject specific skills

Correct use of data in business presentations and documents.
Leadership and business communication skills.
Identify profitable trading opportunities.
The correct usage of key concepts from economics.
Contextualise micro level developments in relation to global trends.

Transferable skills

Writing a business and academic essay that merges the use of secondary data and the creation of analytical charts with analytical perspectives. How to weave empirical perspectives into an analytical framework.
Group work.
Presentation skills,