Final IB
.pdf
School
Foreign Trade University**We aren't endorsed by this school
Course
ACCOUNTING 58
Subject
Economics
Date
Dec 20, 2024
Pages
72
Uploaded by BarristerHippopotamusPerson1297
Entry mode trong slide dài5I. Globalization51. 5 type of business & company52. Debate52. Vietnam Market in Globalization63. Two International Business Models of a Nation74. General information81. The History of International Business (IB)82. Global GDP Status93. Why Do Countries Trade?94. Comparison of GDP vs. Revenue, and the Position of Major Corporations => giống6. GF95. Globality106. Globalization Drivers111. DRIVERS THAT LEAD FIRMS TO INTERNATIONALISE THEIR OPERATIONS 112. The Impact of Globalization on Corporations and National Economies123. Large Corporations Leading International Competition137. Environment & Forces131. External environment135. External forces/Uncontrollable156. Internal forces16II. National Differences171. Political systems171. Legal systems181. Economic systems192. Xếp loại nhóm nước theo nền kinh tế213. Bẫy thu nhập trung bình234.Renewable energy policy24III. Tốc độ hội nhập - Các “game” tài chính quốc tế251.Regional Institutions Economic Integration252. International Monetary Fund (IMF): Current Exchange Rate Arrangements273. Balance of Payments284. Purchasing Power Parity30IV. Chỉ tiêu đánh giá nền kinh tế (Developed or Developing)311. Xếp loại nhóm nước theo nền kinh tế312. Important Indicators for categorizing countries33V. International Theory341. Absolute Advantage (Adam Smith)342. Comparative Advantage (David Ricardo)36Khoán 1037Tham khảo38Absolute Advantage381
Example:38Comparative Advantage38Example:38Example of Vietnam – Contract 10 (Khoán 10):393. Heckscher–Ohlin model394. Overlapping demand - Stefan Linder405. International Product Life-cycle theory417. National competitive advantage: Porter’s Diamond428. First mover advantage (WHEN & WHAT SCALE TO MARKET ENTRY)449. MONOPOLISTIC ADVANTAGE THEORY (THEORIES OF INTERNATIONALINVESTMENT)4510. Internalization theory (THEORIES OF INTERNATIONAL INVESTMENT)4611. Eclectic theory of International Production (OLI Model) (THEORIES OFINTERNATIONAL INVESTMENT)47VI. Finance481. Offshore Financial Centres (OFCs):482. Fronting loans & Transfer pricing: Way to Move funds and achieve Cash flowmanagement492.1.Fronting Loan512.2. Transfer Pricing513. Definitions and Functions of CFC and IFC523.1. Hedging533.2. Multilateral Netting543.3. Leading and Lagging554. 3 types of Foreign exchange risk & Hedging (another Hedge)564. 1. Leading or Lagging574.2. Exposure Netting584.3. Forward Market Hedge584.4. Currency Option Hedge594.5. Money Market Hedge604.6. Swap Contract605. TAXATION - INTERNATIONAL FINANCIAL FORCE:615.1. Inversion615.2. Branch615.3. Subsidiary62VII. Strategy, Organization Structure & Staffing policy621. Organizational Structure and Strategy Fit622. Staffing Policy and Strategy Fit67Caterpillar Inc. Strategy, Organizational Structure, and Staffing Policy69VIII. Logistics711. Offshoring712. Outsourcing723. Difference Between Offshoring and Outsourcing732
Entry mode trong slide dàiI. Globalization1. 5 type of business & companyInternational Business:A company that conducts business activities across national borders. Example: Acompany exporting goods from Vietnam to the United States.Foreign Business:Business activities within a country other than the home country. Example: A branch ofVinamilk in Cambodia that conducts production and distribution activities in the Cambodian market.Multidomestic Company:An organization with multiple branches in various countries, each adapting itsproducts/services to fit the local market. Example: Unilever produces OMO with a specific formula suitablefor the needs of each country.Global Company:A company that aims to standardize its operations worldwide for maximum efficiency,instead of customizing products for each country. Example: Apple uses the same design and productionstandards for iPhones globally.International Company:A company with significant operations in multiple countries, which can include bothmultidomestic and global companies. Example: Toyota has production and sales activities in many countries,from the U.S., Japan to Europe.2. DebateSupporters of Globalization:1.International Organizations and Governments○World Trade Organization (WTO):Promotes trade liberalization, arguing that globalizationcreates a more competitive market and boosts global economic growth.○Governments of the US and EU:Benefit from free trade and cross-border investments,stimulating domestic economies through exports and international cooperation.2.Multinational Corporations (MNCs):○Examples: Apple, Amazon, Unilever.These corporations expand into international markets to reduce production costs, reachglobal customers, and optimize supply chains.3.Economists Supporting Free Trade:○Thomas Friedman (author ofThe World is Flat):Argues that globalization enhanceseconomic cooperation and reduces international conflicts.Opponents of Globalization:3
1.Social Activists and Non-Governmental Organizations (NGOs):○Greenpeace:Opposes globalization as it often drives overexploitation of resources andenvironmental degradation.○Oxfam:Concerns about globalization increasing income inequality, as benefits areconcentrated in developed countries.2.Workers and Local Labor Groups:○Example:Workers in the US and UKin traditional manufacturing industries (e.g., steel,textiles) have lost jobs due to companies relocating factories to lower-cost countries(outsourcing).3.Protectionist Thinkers and Politicians:○Donald Trump:During his presidency, he criticized globalization and implementedprotectionist policies, such as higher tariffs, to safeguard domestic industries.○Naomi Klein (author ofNo Logo):Opposes globalization, arguing that it exploits labor indeveloping countries and weakens workers’ rights.2.Vietnam Market in GlobalizationHow Vietnam Opposed Globalization in the Past●Pre-Renovation Period (1975-1986):After reunification, Vietnam adopted a centralized, self-sufficient economic model, limitinginternational trade, especially with Western countries. Reasons:1.Ideology:The socialist economic policy viewed capitalism and globalization asmanifestations of neo-colonialism.2.International embargo:Vietnam faced economic sanctions from the US and Westerncountries, leading to economic isolation.3.Reliance on aid:Mainly depended on aid from socialist bloc countries (Soviet Union,Eastern Europe).●Consequences:1.Economic stagnation:Low growth, poor labor productivity, and basic goods shortages.2.Widespread poverty:By 1980, Vietnam faced a severe food crisis, having to import ricedespite being an agricultural country.3.International isolation:Failed to attract foreign investment, limiting access to technologyand global markets.Khoán 10 Policy and Adam Smith's Theory of Comparative Advantage●Khoán 10 Policy (1981, formalized in 1988):This landmark policy gave production and profit control to farming households instead ofcollectivized management. Farmers could decide on surplus production to sell in the market.●Connection to Adam Smith’s Theory of Comparative Advantage:Khoán 10 applied the theory by:1.Efficient resource allocation:Farmers produced what they were most efficient at (leveragingstrengths in land and expertise).2.Boosting productivity:When allowed to keep profits, workers became more motivated tomaximize their personal gains.4
3.Market integration:Surplus products were sold in markets, fostering trade and exchange.●Results:1.By 1989, Vietnam transitioned from a rice importer to the world’s third-largest rice exporter.2.It laid the foundation for subsequent market-oriented economic reforms.Does Vietnam Currently Oppose or Support Globalization?●Currently:Vietnamstrongly supports globalization, as evidenced by:1.Participation in Free Trade Agreements (FTAs):Like CPTPP, EVFTA, and RCEP, boosting tradeand international investments.2.Attracting FDI:Vietnam has become a leading destination for multinational corporationsdue to low labor costs and an improving investment environment.3.Open-door policy:The government actively promotes economic integration andinternational cooperation for sustainable growth.●However:Vietnam maintains some control, such as protecting strategic industries (agriculture,national defense) and focusing on developing domestic enterprises to reduce dependency.3.Two International Business Models of a Nation1. South Korea Model: Supporting Multinational Corporations (Chaebol)●Explanation:South Korea focuses on developing large conglomerates (Chaebol) like Samsung, Hyundai, and LG.The government supports these corporations through financial, technological, and export marketincentives. These conglomerates play a leading role in driving the national economy, aiming forglobal competitiveness and high export values.●Pros:1.Enhanced global competitiveness:Chaebol’s strong financial and technological capabilitiesmake it easier to penetrate and dominate international markets.2.Rapid economic growth:These conglomerates significantly contribute to GDP and exports.3.Attraction of foreign investment:Large corporations are attractive destinations forinternational investors.●Cons:1.Dependence on a few corporations:The economy becomes vulnerable if Chaebol facedifficulties.2.Economic inequality:SMEs often receive less support, leading to a significant disparity.3.Risk of corruption and cronyism:Concentrated power can facilitate corruption orfavoritism.2. Taiwan Model: Supporting Small and Medium Enterprises (SMEs)●Explanation:Taiwan emphasizes creating a robust ecosystem for SMEs, particularly in technology and componentmanufacturing. The government provides support through credit policies, research funding, andinnovation incentives.5
●Pros:1.Economic diversification:SMEs offer flexibility and stability, reducing reliance on a fewlarge corporations.2.Encourages innovation: This model fosters entrepreneurial spirit and technologicaladvancements.3.Increased employment:SMEs generate more job opportunities, particularly for youngworkers.●Cons:1.Limited global competitiveness:SMEs often lack resources to scale or build global brands.2.Dependency on global supply chains:Many SMEs are suppliers and are vulnerable todisruptions in supply chains.3.Growth constraints:SMEs may struggle to evolve into large enterprises due to limitedcapital and networks.Vietnam's Approach: Past and Present●In the Past:Vietnam leaned towards the South Korea model, focusing on large corporations like VinGroup,Viettel, and PetroVietnam to lead the economy. Policies prioritized financial and land support forthese major players.●Currently:Vietnam is gradually shifting to a hybrid model, with increasing support for SMEs, especially insupporting industries and technology sectors. However, large corporations still play a crucial role asthe backbone of the economy.4.General information1. The History of International Business (IB)●Ancient Times:International business originated from ancient trade routes such as the Silk Road, where goods likesilk, spices, and salt were exchanged between Asia, Europe, and Africa.●Colonial Era (15th-18th Century):European empires such as Britain, Portugal, and Spain exploited resources and developed globaltrade, leading to the establishment of companies like the British East India Company.●Industrial Revolution (19th-20th Century):○Growth in manufacturing and transportation innovations (steamships, railways) expandedinternational trade.○Emergence of the first multinational companies, such as Singer and General Electric.●Modern Era:○Post-WWII:International organizations like the IMF and WTO were formed to promote tradeliberalization.6
○Digital Age (21st Century):The internet and modern logistics enabled borderless commerce,allowing companies like Amazon and Alibaba to dominate global markets.2. Global GDP Status●World GDP (2024):Estimated at around $105-110 trillion.○Major Economies:■USA:Accounts for approximately 25% of global GDP (~$26 trillion).■China:Represents 18% of global GDP ($19-20 trillion).■EU:Contributes about 15-17% of global GDP (~$17-18 trillion).●Trends:○A shift from developed countries (USA, EU) to emerging markets (China, India, SoutheastAsia).○Developing nations are contributing more to global GDP due to large populations and lowerproduction costs.3. Why Do Countries Trade?1.Comparative Advantage:○Each country specializes in producing certain goods at a lower cost. For example:■Vietnam exports textiles due to low labor costs.■Germany exports cars due to advanced technology.2.Demand Differences:○Countries trade to meet demands they cannot fulfill domestically.○For instance, the USA imports oil from the Middle East due to limited domestic supply.3.Economic Efficiency:○International trade allows countries to focus on specialization and reduce costs, thusincreasing profits.4. Comparison of GDP vs. Revenue, and the Position of Major Corporations => giống 6. GF●GDP vs. Revenue:○GDP (Gross Domestic Product):Measures the total value of goods and services produced bya country in one year.○Revenue:The total income a company earns from its business activities.○Key Differences:■GDP reflects the size of a national economy.■Revenue measures the financial performance of a specific company.●Position of Major Corporations:○Revenue of some major corporations exceeds the GDP of small countries:■Walmart:Revenue of $611 billion (2023), larger than Norway's GDP (~$500 billion).■Apple:Revenue of $400 billion, comparable to Thailand's GDP ($500 billion).●Significance:○Multinational corporations (MNCs) have increasing influence over the global economy.○Companies like Apple and Microsoft also lead in technology, market capitalization, andglobal political influence.7
5.Globality1. Định nghĩa "Globality"Globality is the inevitable result of the process of economic globalization.It emphasizes that no event on the planet is confined to a local scope.Inventions, victories, or disasters anywhere in the world have a global impact.And this affects all areas (economy - of course, the starting point, politics, and society).=> In the context of "Globality," countries are more interconnected than ever before. For example:●Consumer demand in the U.S. can drive production in China, while China needs raw materials fromAfrica or South America to manufacture goods.●Small countries (such as Singapore or Belgium) become important intermediaries, increasing thislevel of connection and dependency.Example 2:●A financial crisis in one country (like the 2008 banking crisis) can deeply affect the global economy.●The development of technology (such as the Internet) rapidly changes how people around the worldconnect and work.2. Vai trò kết nối của các quốc gia có mức độ toàn cầu hóa cao (Tại sao nhận được rank cao trên toàn cầu)Global Economic Network:Countries with high globalization indices, such as Singapore, Belgium, and Austria,are often hubs for trade, investment, and finance. For example:●Singapore is a major trading and financial hub in Asia, with the world's largest port, connectinggoods and services from East to West.●Belgium, with its strategic location in Europe, is a key center for goods and services distribution,thanks to its developed transport infrastructure.●These countries not only connect with neighboring nations but also become crucial links in theglobal supply chain. When a country faces issues (e.g., a port strike in Belgium or an exportdisruption in Singapore), the entire global economic system is affected.Global Social and Cultural Networks:Countries with high social globalization levels act as bridges forspreading culture, lifestyles, and global values. For example:●Singapore, with its diverse international community, is a cultural crossroads between East and West.●Countries like Belgium or Austria, with cities like Brussels or Vienna, host international events inmusic, arts, and culture, contributing to the dissemination of global values.●These social and cultural interactions not only enrich local identities but also promoteunderstanding and cooperation on a global scale.Global Political Networks:These countries often play a critical role in international organizations, such asthe United Nations, WTO, or the EU. For example:8
●Belgium, as the headquarters of the European Union (EU) and NATO, influences the common policiesof Europe and the world.●Political decisions made here, such as the EU's trade policies, directly impact many countries, eventhose outside the European region.6. Globalization Drivers1. DRIVERS THAT LEAD FIRMS TO INTERNATIONALISE THEIR OPERATIONSPolitical Drivers1.Unification and socialization of the global community: A trend towards closer integration andinteraction among nations.2.Reduction of trade and foreign investment barriers: Governments are progressively eliminatingbarriers, enabling international firms to export and establish production facilities in new markets.3.Privatization of industries in formerly communist nations: These countries are opening theireconomies to global competition.Technological Drivers1.Advances in computer and communication technology: Facilitate the sharing of ideas andinformation across borders, allowing customers to access foreign goods and services.2.The Internet and network computing: Enable even small companies to compete globally byproviding access to information regardless of geographic location.3.Internet videoconferencing: Allows sellers to showcase products to potential buyers worldwidewithout traveling. It also enables international companies to hold meetings between headquartersand overseas subsidiaries without incurring high travel costs.4.Communication via email: Faster and more reliable than traditional postal mail.5.Computer-based communication improvements: Enable virtual integration, helping firms sourcelow-cost inputs globally.Market Drivers1.Seeking new markets: Expanding beyond the home country to boost sales and profits.2.Entering economies with rising GDP per capita and population growth: Starting operations inrapidly developing markets.3.Targeting economies with higher business growth rates: Focusing on markets growing faster thanthe firm's domestic market.4.Global firms becoming global customers: A reciprocal trend where globalization of firms aligns withthat of their customers.5.Protecting the home market: Ensuring competitiveness against foreign firms entering their domesticmarket.Cost Drivers9
1.Globalization of production: Reduces costs by achieving economies of scale and cutting researchand development expenses.2.Globalizing product lines: Minimizes development, production, and inventory costs.3.Shifting production to lower-cost countries: Optimizing the value chain by relocating operations tocost-effective regions.Competitive Drivers1.Entering competitors’ home markets: Defending their home markets from competitive threats.2.Investing in developing countries: Securing untapped resources to ensure a steady supply andmaintain competitiveness.3.Investing in downstream markets: Leveraging growth in downstream sectors to strengthen marketpositioning.2.The Impact of Globalization on Corporations and National Economiesa. Globalization Blurs the Boundaries Between Nations and Corporations●Multinational corporations such asExxonMobil,Wal-Mart, andRoyal Dutch Shellhave annualrevenues equivalent to or exceeding theGross National Income (GNI)of many small ormedium-sized countries.●This illustrates that in the era of globalization, corporations are no longer just a part of nationaleconomies but have evolved into"global economic entities."●These large corporations wield influence comparable to, or even greater than, that of many nations,shaping global economic and political trends.b. Globalization Forces Drive the Rise of Large Corporations●Technological Forces: The Internet and computers enable companies to easily scale their operationsglobally, connecting customers, suppliers, and partners worldwide.●Cost Forces: The need for production optimization drives businesses to seek cheaper labor and rawmaterials abroad, increasing profits and operational scale.●Market Forces: Saturation in domestic markets motivates companies to expand internationally totap into new revenue streams.These factors collectively contribute to the rapid growth of large corporations, enabling them to generatesubstantial revenue and establish themselves as"economic powerhouses"in the global economy.c. Economic Power Shifts from Nations to Corporations●In the globalized economy, economic power is no longer concentrated solely in nations but also inlarge corporations with the ability to operate transnational supply chains.●Companies likeExxonMobilandWal-Martinfluence economic policies across multiple countries bycontrolling supply chains, hiring labor, and shaping markets.10
●This dynamic fosters interdependence between nations and corporations, creating a tightlyinterconnectedglobal economic network, albeit with inherent challenges.3. Large Corporations Leading International CompetitionMultinational Corporations Driving Global Competition●Large multinational corporations not only compete domestically but also expand into internationalmarkets to secure a leading position.●This accelerates the process of globalization, forcing smaller businesses and developing nations tojoin the"global race."●Example: Companies likeExxonMobilandRoyal Dutch Shellcompete not only in oil and gas but alsodominate the global energy supply chain.Nations Adjust Policies to Attract Businesses●Governments are compelled to lower trade barriers, enhance infrastructure, or offer incentives toattract large corporations to establish production bases or invest in their countries.●This allows nations to benefit from the economic spillover effects of globalization.7. Environment & Forces1.External environmentDomestic Environment (Môi Trường Nội Địa)The domestic environment includes all uncontrollable factors originating from the home country of thebusiness. These factors surround and influence the survival and development of the company within itshome country.Example:Factors affecting NIKE in South Africa:●Economy:The economic situation in South Africa, such as high unemployment rates or average income levels,affects the purchasing power of consumers.If the economy faces a downturn, NIKE may need to adjust its pricing strategy or focus on moreaffordable products to attract a broader customer base.●Culture - Society:The South African market has a strong passion for sports, particularly football, rugby, and cricket.This creates opportunities for NIKE to sponsor sporting events or develop specific sports products11
to dominate the market.However, the significant wealth gap poses a challenge, as only a portion of the population can affordNIKE’s premium products.●Politics - Law:The South African government encourages foreign investment but also requires companies tocomply with local labor laws, such as policies prioritizing employment for local workers (BEE –Broad-Based Black Economic Empowerment).This may impact NIKE’s recruitment and production strategies, requiring them to meet specificregulations to maintain good relations with the government and the community.Foreign Environment (Môi Trường Nước Ngoài)The foreign environment refers to all uncontrollable factors originating from outside the home country of thebusiness. These factors directly influence the company’s operations in international markets.Example:Why Angola affects NIKE in South Africa:●Supply Chain:Angola is a major exporter of raw materials such as oil or rubber, which could be a source of supplyfor NIKE’s production. If the price of oil or raw materials in Angola increases, operational costs inSouth Africa will also rise.This could increase production costs and impact NIKE's pricing strategy in South Africa.●Economy:If Angola’s economy grows, it could expand the market for NIKE products through exports fromSouth Africa to Angola. A growing middle class in Angola may also create more demand for NIKEproducts.●Politics:Political instability or conflict in Angola could disrupt the supply of raw materials, raise productioncosts, or reduce business opportunities for NIKE in the region. If the political situation in Angola isunstable, NIKE may need to adjust its business operations to minimize risks.International Environment (Môi Trường Quốc Tế)The international environment is a combination of:a) Interactions between the domestic and foreign environments.b) Interactions between the foreign environments of two or more countries.Example:Interaction between South Africa and Angola:2.Economic Interaction:NIKE in South Africa may depend on raw materials or products from Angola, creating a strongeconomic link between the two countries.If Angola signs free trade agreements with South Africa (as part of the SADC - Southern African12
Development Community), NIKE could benefit from reduced tariffs, helping to lower productioncosts and increase profits.3.Political - Legal Interaction:If the South African government implements policies that promote investment in Angola (or viceversa), NIKE can leverage this to expand its market.However, if there is trade tension between South Africa and Angola, NIKE may be affected due todisruptions in the supply chain or loss of markets.4.Cultural - Social Interaction:NIKE could sponsor inter-regional sports events between South Africa and Angola to increase brandrecognition. However, they must also understand cultural differences and consumer habits to tailormarketing strategies suitable for each country. For example, while football is popular in South Africa,Angola has a preference for basketball, so NIKE may need to adjust their campaigns to meet theunique interests of each market.5.External forces/UncontrollableType of External ForceDescriptionExampleCompetitiveThe number and types ofcompetitors, their locations, andwhat they do in the market.In the smartphone market, Appleand Samsung are majorcompetitors. If one releases a new,innovative product, it forces theother to adapt.DistributiveNational and internationalorganizations that distribute goodsand services.A company like Amazon dependson delivery services like FedEx orDHL to get products to customersworldwide.EconomicFactors like inflation, interest rates,and overall economic conditionsthat affect a company’s ability todo business.If inflation rises in a country,people may spend less, whichaffects sales for companies likeNike.SocioeconomicCharacteristics of the populationsuch as income levels, agedistribution, and social class.In a country with an agingpopulation, healthcare companiesmay see increased demand forproducts like senior careequipment.FinancialFactors like interest rates, taxes,and inflation that impact financialcosts and decisions.High interest rates can make itmore expensive for companies toborrow money, affecting theirability to invest in growth.LegalLaws and regulations that affecthow businesses can operate, bothIn the European Union, the GeneralData Protection Regulation (GDPR)13
domestically and internationally.affects how companies like Googlehandle personal data.PhysicalNatural elements like theenvironment, climate, andavailability of natural resources.A company in a region prone tonatural disasters, like earthquakes,may need to create disasterrecovery plans for businesscontinuity.PoliticalThe political environment,including government policies,stability, and internationalrelations.A trade war between the U.S. andChina could impact theimport/export businesses thatdepend on global trade.SocioculturalCultural values, attitudes, andbeliefs that influence consumerbehavior and business operations.McDonald’s adapts its menu tolocal tastes. In India, they offervegetarian options, while in theU.S., they focus on beef burgers.LaborThe skills, attitudes, andavailability of the workforce.A tech company might relocate itsoperations to an area with a higherconcentration of skilled softwareengineers, like Silicon Valley.TechnologicalAdvances in technology that affecthow products are made ordelivered.The rise of e-commerce platformslike Shopify has allowed smallbusinesses to easily set up onlinestores, disrupting traditional retail.6.Internal forcesType of Internal ForceDescriptionExampleHuman ResourcesThe management and developmentof employees, includingrecruitment, training, andemployee satisfaction.A company may offer trainingprograms to improve employeeskills, or improve workplaceculture to retain talent.FinanceThe management of the company'sfinances, including budgeting,funding, and financial planning.A company can decide to take out aloan to fund expansion or invest innew technology.ProductionThe processes involved inproducing goods and services,including efficiency, qualitycontrol, and supply chainmanagement.A company can improve productionefficiency by adopting automationin its manufacturing process,reducing costs and increasingoutput.MarketingThe strategies and activities usedA company might launch a targeted14
to promote and sell products, suchas advertising, pricing, andcustomer outreach.marketing campaign to attract aspecific demographic or adjustpricing strategies to remaincompetitive.Research & Development (R&D)The process of developing newproducts or improving existingones through innovation andexperimentation.A company like Apple invests inR&D to create new versions of theiPhone with better features,keeping it competitive in themarket.OperationsThe day-to-day management ofbusiness activities and theoptimization of internal processesfor efficiency.A company can streamline itslogistics to reduce delivery times,ensuring customers receiveproducts faster.II. National Differences1. Political systemsDefinition:A political system is the system of government in a nation. It includes the structures, processes,and activities by which a nation governs itself. Political systems can vary widely, but they generally fall intotwo main categories: totalitarianism and democracy.TotalitarianismCharacteristics:●Individuals govern without the support of the people.●The government tightly controls people's lives.●There is no tolerance for opposing viewpoints.Examples:●Countries with a totalitarian system often have a single ruling party and limit political freedoms.●North Korea is an example of a totalitarian regime.Implications for Business:●Control and Regulation:Businesses may face strict government controls and regulations. Thegovernment can heavily influence business operations, and companies might need to navigatecomplex bureaucratic procedures.●Lack of Transparency:There may be less transparency and predictability in government policies,which can create an uncertain business environment.15
●Limited Market Freedom:The government may restrict market activities, limiting competition andinnovation.DemocracyCharacteristics:●Government leaders are elected directly by the wide participation of the people or by theirrepresentatives.●There is a higher degree of political freedom and participation.Examples:●Countries with democratic systems often have multiple political parties and protect individual rightsand freedoms.●The United States and many European countries are examples of democracies.Implications for Business:●Market Freedom:Businesses generally enjoy more freedom to operate in a competitive marketenvironment. There is often a higher level of innovation and entrepreneurship.●Transparency and Stability:Democratic governments tend to have more transparent and stablepolicies, providing a predictable environment for business operations.●Regulations and Protections:There may be regulations to protect workers, consumers, and theenvironment, which businesses need to comply with.Doing Business in Totalitarian vs. Democratic NationsTotalitarian Nations:●Challenges:Businesses may face challenges such as heavy government control, lack of transparency,and limited market freedom. There might be risks associated with political instability and suddenchanges in government policies.●Opportunities:In some cases, government support and protection can benefit certain industries,especially if the government prioritizes specific economic sectors.Democratic Nations:●Challenges:Companies may need to navigate complex regulatory environments and comply withvarious laws protecting workers, consumers, and the environment.●Opportunities:The competitive market environment, transparency, and stability can create a fertileground for innovation, growth, and international expansion. Businesses can benefit from a morepredictable legal and economic framework.1. Legal systemsCommon Law/Anglo-American Legal System (Thông luật/Luật Anh Mỹ):16
●Basis:This system is based on a country's legal history (tradition), past cases that have come beforeits courts (precedent), and how laws are applied in specific situations (custom).●Characteristics:○Emphasis on judicial decisions and precedents.○Flexible interpretation of laws based on previous rulings.○Examples: United States, United Kingdom, Canada, Australia.Civil Law/Continental Legal System (Luật dân sự/Luật lục địa):●Basis:This system is based on a detailed set of laws organized into codes, providing less flexibilityto interpret the law.●Characteristics:○Laws are codified and written down in an organized manner.○Judges apply the laws strictly according to these codes.○Examples: France, Germany, Japan, South Korea.Theocratic Law/Religious Legal System (Luật thần quyền):●Basis:This system is based on religious teachings and principles.●Characteristics:○Laws are derived from religious texts and beliefs.○Legal and moral guidelines are often intertwined.○Examples: Islamic law (Sharia), Hindu law, Jewish law (Halakha)1. Economic systemsCommand Economy / Centrally Planned EconomyDefinition:A command economy is a system where the government owns the nation’s land, factories, andother economic resources. The government makes almost all economic decisions, including who produces,what they produce, and at what prices, as well as decisions about labor and capital.Characteristics:1.Government Ownership:○The government owns all economic resources such as land and factories.2.Economic Decisions:○The government decides who produces goods, what goods are produced, and the prices ofthese goods. It also controls labor and capital.Historical Context and Decline:●1970s Dominance:During the 1970s, central planning was the economic system in many parts ofCentral and Eastern Europe, Asia, Africa, and Latin America.●Reasons for Decline:17
○Failure to Create Economic Value:Central planning failed to generate sustainable economicvalue.○Failure to Provide Incentives:It did not motivate workers and businesses to improve.○Failure to Achieve Rapid Growth:The system struggled to achieve fast and sustainableeconomic growth.○Failure to Satisfy Consumer Needs:It was unable to meet the needs and desires ofconsumers effectively.Example:●North Korea:○Agriculture:While farming is high-tech in advanced nations, it remains labor-intensive andinefficient in North Korea. The government's failed communist policies hinder development,causing chronic food shortages and reducing life expectancy.Market EconomyDefinition:A market economy is a system where most of the nation’s land, factories, and economic resourcesare privately owned.Key Features:1.Supply:○The quantity of a good or service that producers are willing to provide at a specific price.2.Demand:○The quantity of a good or service that consumers are willing to purchase at a specific price.Demand and Supply Observation:●Interaction:The interaction between supply and demand determines market prices and allocatesresources efficiently, ensuring that goods and services are produced based on consumer preferencesand willingness to pay.Important Aspects:1.Free Choice:○Consumers have the freedom to choose the goods and services they want to buy.2.Free Enterprise:○Businesses have the freedom to operate, deciding what goods and services to produce andin what quantities.3.Price Flexibility:○Prices of goods and services are determined by supply and demand, allowing flexibility andresponsiveness to market changes.Role of Government:18
1.Enforcing Antitrust Laws:○The government enforces laws to prevent monopolies and promote competition.2.Preserving Property Rights:○The government protects private property rights, ensuring legal ownership and use ofresources.3.Providing a Stable Fiscal and Monetary Environment:○The government ensures a stable economic environment, supporting business operations.4.Preserving Political Stability:○The government maintains political stability to create a favorable environment for businessand investment.Mixed EconomyDefinition:A mixed economy is a system where land, factories, and other economic resources are splitbetween private and government ownership.Key Features:1.Ownership:○Private Ownership:Certain sectors are left to private ownership and operate through freemarket mechanisms.○Government Ownership:Other sectors are owned and planned by the government,especially those considered important for national security and long-term stability.2.Government-Controlled Sectors:○Examples:■Iron and steel manufacturing■Oil and gas production■Automobile manufacturingGoals of a Mixed Economy:●Low Unemployment:Aim to maintain a high employment rate.●Low Poverty:Reduce the poverty level among citizens.●Steady Economic Growth:Achieve consistent economic development.●Equitable Distribution:Ensure fair distribution of wealth and resources.A mixed economy combines elements of both private and public ownership to balance efficiency with socialwelfare. This system leverages the strengths of both market and planned economies to achieve broadereconomic goals and stability.2. Xếp loại nhóm nước theo nền kinh tế1. Low-Income CountriesCharacteristics:19
●GDP per capita: Below $1,000/year.●Economy mainly relies on agriculture and resource extraction.●Weak infrastructure, underdeveloped education and healthcare systems.●Very high poverty rates.●Examples:Somalia, Afghanistan, Chad.2. Developing Countries:a. Lower-Middle-Income CountriesCharacteristics:●GDP per capita: $1,000 - $4,000/year.●Transitioning from agriculture to basic industries and services.●Primarily export semi-processed goods or outsourced manufacturing, relying on low-cost labor.●Examples:India, Bangladesh, Kenya.b. Middle-Middle-Income CountriesCharacteristics:●GDP per capita: $4,000 - $7,000/year.●Moderate industrialization with expanding heavy industries and services.●Strong investments in infrastructure and education to boost labor productivity.●Examples:Vietnam, the Philippines, Laos.c. Upper-Middle-Income CountriesCharacteristics:●GDP per capita: $7,000 - $12,000/year.●Diversified economy with significant growth in high-tech industries and advanced services.●Higher social development indices (HDI) and notably improved living standards.●Examples:Malaysia, Thailand, China.3. Industrialized CountriesCharacteristics:●GDP per capita: Above $12,000/year.●Comprehensive industrialization, focusing on high-tech and high-value production.●Modern infrastructure and a highly skilled workforce.●Examples:Poland, Chile, Hungary.20
4. Developed CountriesIndustrialized countries that also meet the following criteria:●Human Development Index (HDI):High (above 0.8, with many countries achieving over 0.9).●Urbanization rate:Above 70%, with modern and efficiently managed urban areas.●Happiness Index:High (usually above 6.5/10).●Examples:The United States, Germany, Japan.3. Bẫy thu nhập trung bìnhMiddle Income Trapis an economic concept that refers to the situation where a country reachesmiddle-income levels but struggles to continue growing to become a high-income country. This often occurswhen initial advantages, such as cheap labor or natural resources, are no longer sufficient to drive growth.Meanwhile, the country fails to transition to more sustainable growth factors, such as technologicalinnovation, labor productivity improvement, or upgrading its value chain.Causes of the Middle Income Trap:●Lack of technological innovation: These countries lack the ability or resources to develop high-techindustries.●Limited education and labor skills: The education system does not meet the needs for economicdevelopment at higher stages.●Low investment in infrastructure and research: There is insufficient financial resources or policies toupgrade infrastructure or encourage research and development.●Weak institutions: Corruption, poor governance, or failure to improve the legal framework.●Dependence on raw commodity exports: Failing to move towards higher value-added products.Example of Thailand:Thailand is a typical example of the middle-income trap. In the 1980s-1990s, Thailand experienced impressiveeconomic growth due to:●Exports of agricultural products and light industrial goods.●Cheap labor that attracted foreign investment.However, since 1997 (after the Asian financial crisis), Thailand's economy has stagnated and has remainedstuck at middle-income levels. The main reasons include:●Low labor productivity: Industries still rely heavily on cheap labor, while investment in automationand technology is limited.●Lack of education reform: The education system does not meet the needs for developing ahigh-skilled labor force.●Low public and private investment: Investment in research and development (R&D) is a smallportion of GDP.●Political instability: Frequent changes in government and political tensions affect the investmentenvironment.21
4.Renewable energy policy1.Hydroelectric Power: Hydropower remains the largest source of renewable electricity globally,contributing about 50% of all renewable energy generation. However, wind and solar have shownthe fastest growth and are expected to surpass hydropower in the coming years .2.Wind and Solar Energy: Solar energy, the fastest-growing renewable technology, is projected to driveglobal renewable capacity along with wind. By 2025, renewable sources, led by these technologies,will surpass coal as the largest electricity source Observations on the U.S. vs. EU Approach.3.Kyoto Protocol and Climate Commitments: While the Kyoto Protocol established frameworks toreduce greenhouse gas emissions, the U.S. and Kazakhstan have signed but not ratified it. The U.S.lacks a nationwide regulation for carbon dioxide emissions, which undermines global mitigationefforts .4.U.S. Emissions and Global Standing: The U.S. remains one of the largest contributors to carbonemissions, with states like Texas alone ranking highly in global emissions. Despite the InflationReduction Act incentivizing renewable energy, the U.S.'s overall transition lags behind regions likethe EU, which have stricter regulations and higher renewable energy shares The U.S. prioritizes economic and industrial concerns over aggressive climate action compared to the EU. Forexample:●The EU imposes carbon pricing and stricter emissions limits, contributing to its higher share ofrenewable energy.●The U.S., while making some progress with renewable energy incentives, continues to heavily rely onfossil fuels and lacks a unified federal approach to emissions regulation.This divergence highlights the EU's stronger commitment to environmental sustainability, contrasting withthe U.S.'s focus on economic growth even at environmental costs22
III. Tốc độ hội nhập - Các “game” tài chính quốc tế1.Regional Institutions Economic IntegrationFree Trade Area (FTA) – Free Trade Area:This is a region where member countries agree to completelyeliminate tariffs and trade barriers within the region (between member countries). However, each membercountry still maintains its own tariff policy towards countries outside the bloc.For example, the Vietnam-EU Free Trade Agreement (EVFTA). Under EVFTA, goods exported between Vietnamand the EU enjoy preferential tariffs, but each party still applies different tariffs to countries outside the EUor ASEAN.Customs Union – Customs Union:This is a higher level than FTA, in which, in addition to eliminating internaltariffs, member countries also agree to apply a common tariff rate towards countries outside the bloc.For example, the Eurasian Economic Union (EAEU) between Russia, Belarus, and Kazakhstan, where thesecountries apply the same import tariff schedule to countries outside the bloc.Common Market – Common Market:It is the next development of the Customs Union. In addition to applyinga common tariff, member countries also commit to the free movement of services, labor, capital, and goodswithin the bloc.For example, the European Single Market, where people, goods, and services can move freely between EUcountries.Economic Union – Economic Union:This is the highest level, where member countries not only merge in tradebut also coordinate economic, monetary, and financial policies, potentially moving towards the use of acommon currency (such as the Eurozone in the EU).For example, the European Union (EU) with the Euro is an example of an economic union, where membercountries closely coordinate financial policies.Benefits of Economic Integration●Trade Creation: Low-cost producers in free trade areas replace high-cost domestic producers.●New Employment Opportunities: Increased job availability.●New Investment Opportunities: Enhanced avenues for investment.●Closer Political Cooperation: Greater collective influence in dealing with other nations.23
●Greater Consensus: Lower risk of violent conflicts.Drawbacks of Economic Integration●Trade Diversion: High-cost suppliers within free trade areas replace low-cost external suppliers.●Shifts in Employment: Changes in job distribution across regions.●Loss of National Sovereignty: Reduced control over national economic policies.Real-World Connection for Vietnam:FTA and Vietnam's Role:Vietnam has participated in many FTAs, including EVFTA, CPTPP, and RCEP, helpingreduce import tariffs on Vietnamese goods to large markets (such as the EU, Japan, and China).Thanks to FTAs, products like textiles, agricultural products, and seafood from Vietnam are more competitivedue to lower tax costs.Not participating in a Customs Union but with Similar Cooperation:ASEAN is not a Customs Union but has amechanism called the ASEAN Economic Community (AEC), where countries reduce intra-bloc tariffs andcommit to harmonizing trade regulations, although there is no common tariff rate for countries outside thebloc.Limitations:Vietnam has not yet reached the level of a Common Market or Economic Union, as factors suchas the free movement of labor and economic policy integration require a higher level of trust anddevelopment.Importance for Vietnam:●Economic Growth:FTAs help Vietnam expand export markets and increase GDP.●Challenges:They require Vietnam to improve its production and management capabilities to meetinternational standards.●Opportunities:Participating in global supply chains with an increasingly significant role.24
2. International Monetary Fund (IMF): Current Exchange Rate Arrangements–Monetary Union, with a shared currency, such as the Eurozone;–No separate legal tender, where the use of the currency of another country takes place;–Currency Board, an explicit agreement on a fixed exchange rate between two or more currencies;–Target zone arrangement, where the exchange rate is allowed to fluctuate within certain bands;–Crawling Peg, with a periodically adjusted exchange rate;–Managed (dirty) float, a flexible exchange rate regime with some government intervention;–Free (clean) float, the exchange rate is market determinedDưới đây là sự tương đồng giữa 8 cách thức đầu tiên và 7 hệ thống thứ hai:1.Exchange arrangements with no separate legal tender→No separate legal tender(Sử dụng đồng tiền của quốc gia khác làm phương tiện thanh toán chính thức.)2.Currency board arrangements→Currency Board(Thỏa thuận cố định tỷ giá hối đoái giữa hai hoặc nhiều loại tiền tệ, với cam kết đảm bảo dự trữngoại hối.)25
3.Other conventional fixed peg arrangements→Monetary Union(Không có hệ thống tương đương trực tiếp, nhưng có thể hiểu tương tự là một loại hệ thống tỷ giá cốđịnh.)4.Pegged exchange rates within horizontal bands: Tỷ giá được cố định với một đồng tiền khác nhưngcho phép dao động trong một khoảng nhất định.→Target zone arrangement(Tỷ giá hối đoái được phép dao động trong một biên độ nhất định.)5.Crawling pegs→Crawling Peg(Tỷ giá được điều chỉnh định kỳ theo một con đường hoặc mục tiêu nhất định.)6.Exchange rates within crawling bands: Tỷ giá được phép dao động trong một biên độ nhất định vàbiên độ này có thể thay đổi dần theo thời gian, kết hợp yếu tố của Crawling pegs và horizontalbands.→Target zone arrangement(Một dạng khác của tỷ giá dao động trong biên độ, nhưng kết hợp với điều chỉnh định kỳ.)7.Managed float with no preannounced path for the exchange rate→Managed (dirty) float(Tỷ giá linh hoạt nhưng có sự can thiệp không công khai từ chính phủ hoặc ngân hàng trung ương.)8.Independently floating exchange rates→Free (clean) float(Tỷ giá hoàn toàn được quyết định bởi thị trường, không có sự can thiệp từ chính phủ.)3. Balance of Payments1. Cách chia Current Account, Capital Account, Official Reserves Account (truyền thống):Đây là cách phân loại được sử dụng trong các hệ thống báo cáo cán cân thanh toán trước đây. Các thành phầnbao gồm:●Current Account (Tài khoản vãng lai):○Gồm các giao dịch liên quan đến hàng hóa (xuất khẩu, nhập khẩu), dịch vụ, thu nhập (từ đầutư hoặc lao động), và chuyển giao một chiều (ví dụ viện trợ, kiều hối).●Capital Account (Tài khoản vốn):○Bao gồm các giao dịch chuyển nhượng tài sản cố định hoặc các quyền sở hữu phi tài chính(như đất đai, tài sản văn hóa).●Official Reserves Account (Tài khoản dự trữ chính thức):○Ghi lại sự thay đổi dự trữ ngoại tệ, vàng, hoặc các tài sản quốc tế khác do ngân hàng trungương nắm giữ để ổn định tỷ giá hối đoái và thanh khoản quốc gia.Điểm nổi bật: Trong cách phân loại này, Official Reserves Account được xem như một phần riêng, không nằmtrong Financial Account.26
2. Cách chia Current Account, Capital Account, Financial Account (theo chuẩn IMF hiện đại):Hiện nay, cách phân loại này được áp dụng rộng rãi theo chuẩn mực báo cáo của Quỹ Tiền tệ Quốc tế (IMF),đặc biệt là trong Sổ tay về Cán cân Thanh toán (BPM6). Các thành phần chính:●Current Account (Tài khoản vãng lai):○Không thay đổi, tương tự cách truyền thống.●Capital Account (Tài khoản vốn):○Thu hẹp hơn, chỉ bao gồm chuyển giao vốn và việc mua bán tài sản phi tài chính vô hình (vídụ: quyền phát sóng, giấy phép).●Financial Account (Tài khoản tài chính):○Thay thế và mở rộng nội dung của Official Reserves Account, bao gồm:■Đầu tư trực tiếp (FDI).■Đầu tư gián tiếp (portfolios như cổ phiếu, trái phiếu).■Giao dịch các tài sản tài chính khác (loans, deposits).■Official Reserves: Vẫn được ghi nhận, nhưng là một phần trong Financial Account,không phải mục riêng biệt.Điểm nổi bật:●Cách phân loại này phản ánh rõ hơn các dòng vốn toàn cầu và các yếu tố tài chính hiện đại.●Official Reserves được xem là một loại tài sản tài chính, vì vậy nằm trong Financial Account.Theo cách phân loại truyền thống,Balance of Payments (BOP)được chia thành ba tài khoản chính:1.Current Account (Tài khoản vãng lai):Ghi lại các giao dịch hàng hóa, dịch vụ, thu nhập và chuyểngiao một chiều.2.Capital Account (Tài khoản vốn):Ghi nhận các giao dịch chuyển nhượng tài sản cố định và phi tàichính.3.Official Reserves Account (Tài khoản dự trữ chính thức):Ghi nhận các thay đổi trong dự trữ ngoạihối, vàng và tài sản quốc tế của ngân hàng trung ương.Khi BOP rơi vào thâm hụt (deficit):●Thâm hụt thường xảy ra khi chi tiêu ngoại tệ vượt quá thu nhập ngoại tệ, đặc biệt là ởCurrentAccount.●Chính phủ sẽ phải hành động để khôi phục sự cân bằng, sử dụng các biện pháp sau:Các biện pháp được giải thích trong ngữ cảnh BOP truyền thống:1.Currency Devaluation (Phá giá đồng tiền):○Giảm giá trị đồng nội tệ so với ngoại tệ nhằm:■Làm tăng xuất khẩu (giá rẻ hơn trên thị trường quốc tế).■Giảm nhập khẩu (hàng hóa ngoại đắt hơn).○Tác động này sẽ giúp cải thiện cán cân vãng lai (Current Account).2.Restrictive Monetary or Fiscal Policies (Chính sách tiền tệ hoặc tài khóa thắt chặt):27
○Chính sách tiền tệ:Tăng lãi suất hoặc giảm cung tiền để giảm nhu cầu nhập khẩu và kiểmsoát lạm phát.○Chính sách tài khóa:Cắt giảm chi tiêu chính phủ hoặc tăng thuế để giảm tổng cầu.○Cả hai biện pháp này đều nhằm tạo ra sựdeflation(giảm áp lực giá cả), giúp cải thiện cáncân thanh toán.3.Currency or Trade Controls (Kiểm soát tiền tệ hoặc thương mại):○Áp dụng hạn ngạch hoặc thuế quan để giảm nhập khẩu.○Kiểm soát dòng chảy ngoại tệ để hạn chế việc sử dụng dự trữ ngoại hối từOfficial ReservesAccount.Áp dụng vào BOP hiện đại (theo chuẩn IMF):Trong chuẩn BOP hiện đại (IMF), BOP được chia thành:●Current Account (Tài khoản vãng lai)●Capital Account (Tài khoản vốn)– thu hẹp hơn.●Financial Account (Tài khoản tài chính)– thay thế Official Reserves Account và mở rộng để bao gồmcác giao dịch tài chính.Các biện pháp trên áp dụng trong bối cảnh hiện đại:1.Currency Devaluation:○Phá giá đồng tiền vẫn tác động trực tiếp đếnCurrent Account, giúp tăng xuất khẩu và giảmnhập khẩu.○Đồng thời, phá giá đồng tiền cũng có thể ảnh hưởng đếnFinancial Account, bởi nhà đầu tưnước ngoài có thể ngần ngại hơn khi đầu tư vào quốc gia đó do rủi ro tỷ giá.2.Restrictive Monetary or Fiscal Policies:○Chính sách tiền tệ và tài khóa thắt chặtvẫn đóng vai trò quan trọng để kiểm soát thâm hụt.○Ngoài ra, các dòng vốn trongFinancial Account(như đầu tư gián tiếp hoặc vay nước ngoài)có thể bị ảnh hưởng khi chi phí vốn tăng hoặc khả năng trả nợ giảm.3.Currency or Trade Controls:○Các biện pháp kiểm soát ngoại tệ sẽ hạn chế dòng vốn trongFinancial Account.○Các biện pháp kiểm soát thương mại sẽ tác động trực tiếp đếnCurrent Account, giảm thâmhụt do hạn chế nhập khẩu.4. Purchasing Power ParityVởChú ý, phải dùng GDP/người tính theo Real Exchange rate để so sánh Sức mua giữa các quốc gia, ko phảiNominal Exchange rate28
IV. Chỉ tiêu đánh giá nền kinh tế (Developed or Developing)1. Xếp loại nhóm nước theo nền kinh tế1. Low-Income CountriesCharacteristics:●GDP per capita: Below $1,000/year.●Economy mainly relies on agriculture and resource extraction.●Weak infrastructure, underdeveloped education and healthcare systems.●Very high poverty rates.●Examples:Somalia, Afghanistan, Chad.2. Developing Countries:a. Lower-Middle-Income CountriesCharacteristics:●GDP per capita: $1,000 - $4,000/year.●Transitioning from agriculture to basic industries and services.●Primarily export semi-processed goods or outsourced manufacturing, relying on low-cost labor.●Examples:India, Bangladesh, Kenya.b. Middle-Middle-Income CountriesCharacteristics:●GDP per capita: $4,000 - $7,000/year.●Moderate industrialization with expanding heavy industries and services.●Strong investments in infrastructure and education to boost labor productivity.●Examples:Vietnam, the Philippines, Laos.c. Upper-Middle-Income CountriesCharacteristics:●GDP per capita: $7,000 - $12,000/year.●Diversified economy with significant growth in high-tech industries and advanced services.●Higher social development indices (HDI) and notably improved living standards.●Examples:Malaysia, Thailand, China.3. Industrialized CountriesCharacteristics:●GDP per capita: Above $12,000/year.●Comprehensive industrialization, focusing on high-tech and high-value production.29
●Modern infrastructure and a highly skilled workforce.●Examples:Poland, Chile, Hungary.4. Developed CountriesIndustrialized countries that also meet the following criteria:●Human Development Index (HDI):High (above 0.8, with many countries achieving over 0.9).●Urbanization rate:Above 70%, with modern and efficiently managed urban areas.●Happiness Index:High (usually above 6.5/10).●Examples:The United States, Germany, Japan.Một số nhóm nước:1. BRIC (Brazil, Russia, India, China):●Ý nghĩa: Nhóm các quốc gia lớn và có tốc độ tăng trưởng kinh tế nhanh, được kỳ vọng trở thành cácsiêu cường kinh tế trong tương lai.●Phân loại:○India: Lower-Middle-Income Country (2a).○Brazil, China: Upper-Middle-Income Countries (2c).○Russia: Industrialized Country (3).2. NIE (Newly Industrialized Economies):Nhóm này gồm các quốc gia đã vượt qua giai đoạn phát triển ban đầu và có nền kinh tế tăng trưởng mạnhdựa trên công nghiệp hóa.●Các nước NIE phổ biến: Hàn Quốc, Singapore, Hong Kong, Đài Loan, Malaysia, Thái Lan.●Phân loại:○Hàn Quốc, Singapore, Hong Kong, Đài Loan: Developed Countries (4).○Malaysia, Thái Lan: Upper-Middle-Income Countries (2c).3. NIC (Newly Industrialized Countries):Tương tự như NIE, nhưng NIC thường bao gồm cả các quốc gia đang trong quá trình công nghiệp hóa nhanhchóng, nhưng chưa đạt mức phát triển cao.●Các nước NIC phổ biến: Mexico, Turkey, South Africa, Indonesia, Vietnam.●Phân loại:○Vietnam: Middle-Middle-Income Country (2b).○Mexico, Turkey, South Africa, Indonesia: Upper-Middle-Income Countries (2c).4. Các nhóm tương tự khác:●MINT (Mexico, Indonesia, Nigeria, Turkey):○Ý nghĩa: Các quốc gia có tiềm năng tăng trưởng kinh tế lớn sau BRIC.○Phân loại:30
■Nigeria: Lower-Middle-Income Country (2a).■Mexico, Indonesia, Turkey: Upper-Middle-Income Countries (2c).●G7 (Group of Seven):○Ý nghĩa: Nhóm các nước phát triển hàng đầu thế giới.○Phân loại: Developed Countries (4) (Mỹ, Nhật Bản, Đức, Anh, Pháp, Ý, Canada).●G20:○Ý nghĩa: Nhóm các quốc gia có nền kinh tế lớn nhất thế giới, bao gồm cả các nước phát triểnvà đang phát triển.○Phân loại:■Phát triển: Mỹ, Đức, Nhật Bản (4).■Công nghiệp hóa: Nga, Argentina, Brazil (3).■Đang phát triển: Ấn Độ, Nam Phi (2a-2c).Tóm tắt các nhóm có nhiều quốc gia thuộc hơn 1 phân loại:●BRIC: Trải dài từ Lower-Middle-Income đến Industrialized Countries.●NIE: Từ Upper-Middle-Income đến Developed Countries.●NIC: Từ Middle-Middle-Income đến Upper-Middle-Income.●G20: Bao gồm cả Developed, Industrialized, và Developing Countries.2. Important Indicators for categorizing countries1. Important Economic IndicatorsCác chỉ số kinh tế quan trọng (GDP, GDP per capita, tốc độ tăng trưởng kinh tế, tỷ lệ thất nghiệp, tỷ lệ lạmphát) cung cấp cái nhìn tổng quát về tình trạng kinh tế của một quốc gia.●Liên quan:○GDP per capita (tổng thu nhập bình quân đầu người) là một tiêu chí chính trong việc phânloại các mức độ phát triển kinh tế nhưLow-Income,Middle-Income, hayHigh-IncomeCountries.○Tăng trưởng kinh tế bền vững thể hiện sự tiến triển từ một quốc gia đang phát triển(Developing) sang một quốc gia công nghiệp hóa (Industrialized).2. Socioeconomic DimensionsCác khía cạnh kinh tế - xã hội như giáo dục, y tế, bất bình đẳng thu nhập, và mức độ nghèo đói phản ánh chấtlượng cuộc sống và khả năng phát triển con người.●Liên quan:○Quốc gia có nền kinh tế phát triển thường đạt các chỉ số giáo dục và y tế cao hơn, với cơ sởhạ tầng xã hội mạnh mẽ.○Những yếu tố này góp phần xác định mức độ phát triển (ví dụ:Developed Countriescó hệthống y tế toàn diện và tỷ lệ mù chữ thấp).3. Purchasing Power Parity (PPP)31
PPP là thước đo điều chỉnh GDP hoặc GDP per capita để phản ánh giá cả và chi phí sinh hoạt tại mỗi quốc gia,cung cấp một so sánh chính xác hơn về sức mua và mức sống.●Liên quan:○Quốc gia cóPPP caothường có mức sống tốt hơn và có thể được phân loại vào nhómUpper-Middle-IncomehoặcHigh-Income.○Sử dụng PPP, chúng ta có thể đánh giá chính xác hơn sự phát triển kinh tế giữa các quốc giacó cơ cấu giá cả khác nhau.4. Human Development Index (HDI)HDI là chỉ số tổng hợp đo lường phát triển con người dựa trêntuổi thọ,giáo dục, vàthu nhập. Đây là mộttrong những công cụ quan trọng để đánh giá mức độ phát triển kinh tế-xã hội của một quốc gia.●Liên quan:○HDI cao (trên 0.8) là đặc điểm của các quốc gia phát triển (Developed Countries).○HDI trung bình thường thấy ở các nước đang phát triển hoặc công nghiệp hóa (DevelopinghoặcIndustrialized Countries).Sự Kết Nối Giữa Các Yếu Tố và Levels of Economic Development:Level of EconomicDevelopmentEconomic IndicatorsSocioeconomicDimensionsPPPHDILow-Income CountriesGDP per capita < $1,000Y tế, giáo dục yếu, nghèocaoPPP thấpHDI thấp (<0.55)Lower-Middle-IncomeGDP per capita$1,000-$4,000Giáo dục cơ bản, tăngtrưởng chậmPPPtrungbìnhHDI trungbình (0.55-0.7)Upper-Middle-IncomeGDP per capita$7,000-$12,000Cơ sở hạ tầng và côngnghiệp mạnhPPP caoHDI cao (> 0.7)IndustrializedCountriesGDP per capita >$12,000Kinh tế đa dạng, HDI tốtPPP rấtcaoHDI rất cao (>0.8)Developed CountriesGDP, HDI, PPP vượt trộiChất lượng sống toàndiệnPPP caonhấtHDI cao nhất(> 0.9)V. International Theory1. Absolute Advantage (Adam Smith)TheTheory of Absolute Advantagerefers to a country's ability to produce more of a good or service with thesame amount of resources (e.g., land, labor, and capital) compared to another country. If each country32
specializes in the production of the good at which it has an absolute advantage, it can trade the surplus forgoods it cannot produce as efficiently. This specialization and trade lead to overall economic efficiency andbenefits for all participating countries.Example Explanation Based on the Provided Table:1.Given Table:COMMODITYSOUTH AFRICANEW ZEALANDTOTAL OUTPUTBOTTLES OF WINE314NUMBER OF KIWI FRUIT2040602.Analysis of Production:○South Africa (SA)can produce:■3 bottles of wineor20 kiwi fruits per unit of input.○New Zealand (NZ)can produce:■1 bottle of wineor40 kiwi fruits per unit of input.3.Determining Absolute Advantage:○Wine: South Africa has the absolute advantage because it can produce3 bottles of wineperunit of input compared to New Zealand's1 bottle.○Kiwi Fruit: New Zealand has the absolute advantage because it can produce40 kiwi fruitsper unit of input compared to South Africa's20 kiwi fruits.4.Specialization and Trade:○South Africa should specialize inproducing winebecause it is more efficient at producingwine.○New Zealand should specialize inproducing kiwi fruitsbecause it is more efficient atproducing kiwi fruits.○After specialization:■South Africa produces6 bottles of wineusing 2 units of input.■New Zealand produces80 kiwi fruitsusing 2 units of input.5.Trade Surplus:○South Africa trades 3 surplus bottles of wine to New Zealand in exchange for 40 kiwi fruits.○Both countries benefit:■South Africagains20 additional kiwi fruits.■New Zealandgains2 additional bottles of wine.Conclusion:By specializing in their absolute advantages (wine for South Africa and kiwi fruits for New Zealand) andtrading the surplus, both countries achieve greater overall efficiency and consumption. This exampleperfectly illustrates theTheory of Absolute Advantage.33
2. Comparative Advantage (David Ricardo)Theory of Comparative AdvantageDefinition:The Theory of Comparative Advantage states that even if one country is less efficient than another country inproducingallgoods, trade can still benefit both countries. The less efficient country has a comparativeadvantage in producing the good for which its opportunity cost is lowest relative to the other country.Key Concept:●Opportunity Cost: The cost of not producing one good when resources are used to produce anothergood.●A country should specialize in the production of the good where it has a lower opportunity cost andtrade for the other good.Example:Suppose we have South Africa (SA) and New Zealand (NZ) producing wine and kiwi fruit:CommoditySouth Africa (SA)New Zealand (NZ)Bottles of Wine31Kiwi Fruits20401.Opportunity Cost Analysis:○South Africa:■Producing 1 bottle of wine costs SA 20/3 = 6.67 kiwi fruits.■Producing 1 kiwi fruit costs SA 3/20 = 0.15 bottles of wine.○New Zealand:■Producing 1 bottle of wine costs NZ 40/1 = 40 kiwi fruits.■Producing 1 kiwi fruit costs NZ 1/40 = 0.025 bottles of wine.2.Comparative Advantage:○South Africa has a lower opportunity cost in producing wine (6.67 kiwi fruits vs. NZ’s 40 kiwifruits). → SA specializes in wine.○New Zealand has a lower opportunity cost in producing kiwi fruit (0.025 bottles of wine vs.SA’s 0.15 bottles). → NZ specializes in kiwi fruit.3.Specialization and Trade:○If both countries specialize and trade, overall production increases.■South Africa produces only wine.■New Zealand produces only kiwi fruits.○They trade their surpluses to get the other good at a lower opportunity cost.34
4.Benefit:○South Africa gains kiwi fruits at a cost lower than if it produced them itself.○New Zealand gains wine at a cost lower than if it produced it itself.Conclusion:The Theory of Comparative Advantage shows that even when one country is less efficient in producing allgoods, specialization based on opportunity costs allows both countries to trade and benefit. This conceptunderpins the importance of global trade and economic cooperation.Khoán 101. Socio-Economic Conditions Before "Khoán 10"Before 1988, Vietnam's agriculture followed a collective farming model, where farmers worked togetherunder cooperatives. However, this system faced major challenges:●Low productivity: Farmers lacked incentives because of the "equal sharing" system, which resultedin inefficiency.●Severe food shortages: Vietnam frequently faced hunger and had to import food to meet basicneeds.●Poverty: Farmers lived in extreme hardship with little hope of improvement.This dire situation required urgent reforms to unlock agricultural potential and achieve food security.2. How Khoán 10 Helped FarmersKhoán 10 (Resolution 10, 1988) was a policy that allocated land to households, giving them autonomy overproduction and trade. Major reforms included:●Land allocation to families: Farmers could work their own land and benefit from their labor.●Production autonomy: Farmers decided what to grow and how to manage resources.●Focus on rice production: Many farmers chose to specialize in rice cultivation, which suitedVietnam's natural conditions.This reflectedComparative Advantage Theory, which suggests that countries should specialize in goods withthe lowest opportunity cost. Vietnam, with its fertile deltas and favorable climate, excelled in riceproduction, leading to higher output and efficiency.3. Improved Farmers’ LivesKhoán 10 brought about transformative changes:●Increased rice production: Vietnam became one of the world’s largest rice exporters.●Higher incomes: Farmers could retain profits, improving their standard of living.●Improved social conditions: Poverty decreased, and rural life became more dynamic.Example:35
●Before Khoán 10, rice production was only about 17 million tons (1988).●After Khoán 10, production rose to nearly 25 million tons (1990), enabling exports.4. Lessons Learned for VietnamFrom the success of Khoán 10, Vietnam learned important lessons:●Empowerment leads to growth: Giving individuals autonomy unlocks creativity and productivity.●Focus on comparative advantage: Leveraging natural strengths, like rice production, leads tonational success.●Flexible and practical reforms: Policies must be grounded in reality and encourage economicgrowth.ConclusionKhoán 10 marked a turning point for Vietnam's agriculture, solving food shortages and laying the foundationfor sustainable growth. By applyingComparative Advantage Theoryand empowering farmers, Vietnamemerged as a leading rice exporter and improved rural livelihoods. This success offers valuable lessons forongoing economic development.Tham khảoAbsolute AdvantageA country has anabsolute advantageif it can produce a good using fewer resources or with higherproductivity than another country. This concept, introduced by Adam Smith, focuses on raw efficiency.Example:The United States has an absolute advantage in producing commercial aircraft compared to many othercountries because it has advanced technology, skilled labor, and established companies like Boeing andAirbus (Airbus partially operates in the U.S.). The U.S. can produce more airplanes at a lower cost per unitthan most other nations.Comparative AdvantageA country has acomparative advantagewhen it can produce a good at alower opportunity costthananother country, even if it does not have an absolute advantage. This principle, introduced by David Ricardo,explains how trade benefits both parties when they specialize in what they produce most efficiently relativeto other goods.Example:Consider two countries, Japan and Brazil, producing cars and coffee:●Japan:36
○Produces 1 car = gives up 2 tons of coffee.○Produces 1 ton of coffee = gives up 0.5 cars.●Brazil:○Produces 1 car = gives up 5 tons of coffee.○Produces 1 ton of coffee = gives up 0.2 cars.Analysis:●Japan has a comparative advantage in producing cars (lower opportunity cost: 2 tons vs. 5 tons).●Brazil has a comparative advantage in producing coffee (lower opportunity cost: 0.2 cars vs. 0.5cars).By specializing in their comparative advantages and trading, both countries benefit.Example of Vietnam – Contract 10 (Khoán 10):During Vietnam's economic reforms in the 1980s, particularly under theKhoán 10 policy(1988), farmland wasallocated to individual households for self-directed agricultural production. By leveraging its comparativeadvantage inrice production—with fertile land, favorable climate, and a skilled agriculturalworkforce—Vietnam transformed from a rice-importing country into one of the world’s largest rice exporters.Before Khoán 10, collective farming resulted in inefficiencies and low productivity. Post-reform, individualfarmers optimized their use of resources, specialized in rice cultivation, and dramatically increased output.This demonstrates Vietnam’s comparative advantage in rice production compared to other countries, whererice production might involve higher costs or less suitable conditions.Global Trade Impact:Today, Vietnam competes with countries like Thailand and India in the global rice market. Although Vietnammight not have an absolute advantage (e.g., India produces more rice overall), its opportunity cost ofproducing rice remains lower compared to producing other crops, sustaining its role as a top exporter.3. Heckscher–Ohlin modelBasic Concept:The Heckscher-Ohlin (H-O) theory is an international economics theory that explainsinternational trade based on the availability and cost of production factors (such as labor, land, and capital).The theory posits that:●Countries will export products that require large amounts of their abundant production factors.●Countries will import products that require large amounts of production factors that they are scarcein.Key Points of the Theory1.Exporting Products Requiring Abundant Production Factors:○Countries will export products that require abundant production factors. For example, acountry with a lot of land will export agricultural products.2.Lower Production Costs; More Attractive Abroad:37
○Because production factors are abundant, the cost to produce these products is lower,making them more attractive in international markets.3.Imported Products Have Relatively Lower Costs:○Products that require scarce production factors in the importing country will have highproduction costs if produced locally. Hence, importing them is cheaper.Factors Not Considered in the Theory1.Government Influence on Factor Prices:○The theory assumes a perfect market without government intervention. However, in reality,factor prices can be influenced by taxes, subsidies, and other government interventions.2.Transportation Costs:○The theory does not consider the transportation costs of products between countries,which can affect trade benefits.3.Differences in Tastes:○The theory does not account for differences in consumer tastes and preferences betweencountries, which can affect product demand.4.Differences in Climates:○Different climatic conditions can affect the production capabilities and efficiency ofproducts.5.Population Diversity and Income Levels:○Differences in population density and income levels between countries are also notconsidered, although they can impact production and consumption.Illustrative ExampleCountry A:●Abundant in labor, scarce in capital.●Export Products:Products requiring a lot of labor, such as textiles.●Import Products:Products requiring a lot of capital, such as industrial machinery.Country B:●Abundant in capital, scarce in labor.●Export Products:Products requiring a lot of capital, such as electronic devices.●Import Products:Products requiring a lot of labor, such as clothing.4. Overlapping demand - Stefan LinderBasic Concept:The Overlapping Demand Theory, introduced by Swedish economist Stefan Linder, suggeststhat consumer preferences are greatly influenced by income levels. Thus, a country's average income leveldetermines the types of goods its citizens demand. Entrepreneurs produce goods to meet this demand, andthese goods will reflect the country's average income level. The goods produced for domestic consumptionare eventually exported to countries with similar income levels and, therefore, similar demand.38
Key Points of the Theory1.Export Goods Based on Domestic Income and Demand:○Entrepreneurs produce goods based on the domestic market demand, which reflects theaverage income level.○When domestic income levels and demand align with those in other countries, these goodswill also be exported to those countries.2.Stronger International Trade Between Countries with Similar Income Levels:○The theory suggests that international trade in manufactured goods will be greaterbetween countries with similar per capita income levels than between countries withdifferent income levels.○For example, developed countries may have strong trade with each other because theyhave similar income levels and demand.3.Unlike Comparative Advantage Theory:○The Overlapping Demand Theory does not specify the direction of a particular good.Intra-industry trade occurs due to product differentiation.○For instance, Apple exports its mobile phones to Europe and Japan, and Sony-Ericssonexports its mobile phones to the United States because consumers in these marketsperceive differences in the brands.Illustrative ExampleCountry A:●High per capita income.●Produced goods: Advanced technological devices.●Exports: Advanced technological devices to Country B with similar income levels.Country B:●High per capita income.●Produced goods: Advanced technological devices.●Exports: Advanced technological devices to Country A with similar income levels.Specific Example:If a US company like Apple invents a sophisticated mobile phone with advanced featuresfor the domestic market, the best export opportunities for this phone would be in other developed countriessuch as Japan and Western European nations, where income levels and demand are similar. Although thesecountries may have their domestic mobile phone manufacturers, product and brand differentiation creates amarket for international trade.5. International Product Life-cycle theoryCombine of original PLC & International tradeBasic Concept:The International Product Life Cycle (IPLC) theory explains how a new product progressesthrough different stages of its life cycle and how the production and consumption of the product change overtime and locations.39
Stages of IPLC:1.Introduction Stage:○Development and Production:Most new products in the 20th century were initiallyconceived and produced in the U.S.○Production Close to Market:U.S. firms kept production close to the market to facilitatedecision-making and minimize risks of new product introductions.○Demand Not Based on Price:At this stage, demand for the new product is not based onprice, so low production cost is not a concern.○Limited Initial Demand in Other Advanced Countries:Initial demand in other advancedcountries is limited, making exports to these markets more attractive than local production.2.Growth Stage:○Increased Demand in Advanced Countries:As demand increases in advanced countries,production expands from the U.S. to these countries.○Exports:Products are produced in the U.S. and exported to advanced countries.3.Maturity Stage:○Product Standardization:The product becomes standardized, and production begins toshift to lower-cost production areas.○Expanded Production:With demand expanding to other regions, production moves to areaswith lower production costs.○Imports:The product is now imported back to the U.S. and advanced countries.Illustrative Example:●Introduction Stage:An American company invents a new electronic device and starts production inthe U.S. These products are primarily sold domestically or exported to other developed countrieslike Western Europe and Japan.●Growth Stage:As demand increases in Western Europe and Japan, the American company begins toexpand production to these countries to meet demand.●Maturity Stage:The product becomes standardized, and production shifts to countries with lowerproduction costs such as China and Vietnam. The product is then imported back into the U.S. andother developed countries.7. National competitive advantage: Porter’s DiamondFour Variables Impacting Competitive Advantage:Factor Endowments:●Land:Abundant and high-quality land contributes to efficient agricultural and industrial production.●Labor:A skilled and highly productive labor force enhances production efficiency.●Capital:Large amounts of capital and easy access to financial resources promote investment andbusiness development.●Workforce:Availability of a skilled and highly educated workforce.●Infrastructure:Modern and efficient systems of transportation, telecommunications, and energyimprove production and distribution.40
Demand Conditions:●Large and Sophisticated Domestic Consumer Base:A large and sophisticated domestic customerbase provides a favorable environment for innovation and a testing ground for new products.Related and Supporting Industries:●Local Suppliers Cluster:The presence of local suppliers creates a competitive environment andencourages innovation.Firm Strategy, Structure, and Rivalry:●Competition:Strong domestic competition drives companies to improve and develop.●Government:National governments can create conditions that facilitate and nurture suchenvironments through economic policies and reasonable regulations.Japan and the Automotive Industry1. Factor Endowments:●Labor:Japan has a skilled and highly productive workforce. Japanese engineers and workers arerenowned for their skills and meticulousness.●Capital:Japan has a strong financial system, providing easy access to capital for automotive researchand development.●Infrastructure:Japan has modern transportation and telecommunications systems, supportingefficient production and distribution.2. Demand Conditions:●Large and Sophisticated Domestic Consumer Base:Japanese consumers have high demands forquality and performance in automobiles, driving companies to continuously innovate and improve.3. Related and Supporting Industries:●Local Suppliers Cluster:Japan has a network of high-quality parts and material suppliers clusteredaround major automotive manufacturers like Toyota, Honda, and Nissan, fostering innovation andcollaboration.4. Firm Strategy, Structure, and Rivalry:●Strong Competition:Intense domestic competition among automakers such as Toyota, Honda, andNissan drives these companies to innovate and enhance production efficiency.●Government:The Japanese government supports the automotive industry through economicpolicies, research and development funding, and building necessary infrastructure.Result:41
Japan has become one of the world's leading nations in the automotive industry. Japanese products areknown for their high quality, superior features, and durability. Names like Toyota, Honda, and Nissan are notonly popular in Japan but also globally, showcasing Japan's strong competitive advantage in this field.8. First mover advantage (WHEN & WHAT SCALE TO MARKET ENTRY)When to Enter the MarketEarly vs. Late Entry: First-Mover Advantages and DisadvantagesAdvantages of Early Entry:1.Pre-emption of Rivals:○Explanation:Being the first to enter a market allows a company to establish a strongpresence and gain significant market share before competitors arrive.○Example:A company that launches a new technology product first can set industrystandards and create brand loyalty, making it harder for rivals to catch up.2.Ability to Build Sales Volume:○Explanation:Early entrants have the opportunity to build sales volume early, which canlead to economies of scale and reduced costs per unit.○Example:Early market entry can help a company establish a loyal customer base andoptimize production processes, reducing overall costs.3.Buyer Switching Costs:○Explanation:Once customers are accustomed to a particular product or service, switchingto a competitor can be costly or inconvenient for them.○Example:A software company that gains early adoption can create high switching costs forusers who would need to migrate their data and learn new systems if they switch to acompetitor.Disadvantages of Early Entry:1.Pioneering Costs:○Explanation:Early entrants often face high costs related to market development, education,and initial marketing efforts.○Example:Launching a new product in an untested market can involve significant spendingon educating consumers about the product's benefits.2.Shifts in Technology or Customer Needs:○Explanation:Early entrants might invest heavily in a technology or product that becomesobsolete or no longer meets customer needs due to rapid advancements.○Example:A company that invested in early mobile phone technology might have facedobsolescence with the advent of smartphones.3.Incumbent Inertia:○Explanation:Established companies may have difficulty adapting to changes in the marketor leveraging new opportunities quickly.○Example:An early entrant that dominates the market might become complacent, missingout on innovations and emerging trends.42
What Scale of EntryStrategic Commitment and Strategic Flexibility1.Level of Resources Firm Can Afford to Commit:○Explanation:The amount of resources (capital, time, personnel) a firm can allocate affectsits entry strategy.○Example:A company with substantial financial resources might opt for a large-scale entry,while a smaller firm might prefer a cautious approach.2.How Much Resource to Invest and Commit to:○Explanation:Deciding the level of investment and commitment is crucial to balancepotential rewards and risks.○Example:Investing heavily in a new market can lead to significant returns but also poseshigh risks if the market fails.Large-Scale Entry and First-Mover Advantages:1.Large-Scale Entry:○Explanation:Entering a market with significant investment and resources can establish astrong foothold and deter competitors.○Example:A large-scale entry can involve building extensive distribution networks, heavymarketing campaigns, and significant production capacity.2.First-Mover Advantages:○Explanation:Combining large-scale entry with first-mover advantages can amplify thebenefits of being an early entrant.○Example:A company that enters a new market aggressively can quickly capture a largemarket share and create high barriers for subsequent entrants.Risks Associated with Significant Commitments:1.Explanation:High resource commitments can lead to substantial losses if the market does notperform as expected.○Example:Investing heavily in a market that fails to grow can strain the company’s financesand divert resources from other profitable ventures.Small-Scale Entry: Learning Process:1.Explanation:Starting with a smaller scale allows a company to test the market, learn from initialexperiences, and adjust strategies accordingly.○Example:A small-scale entry can involve limited production, targeted marketing, and afocus on a specific customer segment to minimize risk while gaining market insights.9. MONOPOLISTIC ADVANTAGE THEORY(THEORIES OF INTERNATIONAL INVESTMENT)Basic Concept:The Monopolistic Advantage Theory suggests that multinational enterprises (MNEs) canoperate more profitably in foreign markets than local competitors due to certain advantages. Theseadvantages include economies of scale, superior technology, and advanced knowledge in areas likemarketing, management, or finance.43
Key Factors of Monopolistic Advantage:1.Economies of Scale:○Explanation:Multinational enterprises are often large, allowing them to produce goods at alower cost per unit by producing in large quantities.○Example:A multinational car manufacturer can buy materials in bulk at lower prices anduse advanced factories to produce cars more cheaply than local manufacturers.2.Superior Technology:○Explanation:Multinational enterprises often have access to advanced technology, whichenables them to produce high-quality products more efficiently.○Example:An international electronics company uses the latest automated productionequipment to create cutting-edge electronic devices that are more competitive in themarket.3.Superior Knowledge in Marketing, Management, or Finance:○Explanation:Multinational enterprises may possess extensive knowledge aboutinternational markets, advanced management strategies, and strong financial capabilities,giving them an edge over local competitors.○Example:A global consumer goods company uses effective global marketing strategies,detailed customer data analysis, and advanced management techniques to expand itsmarket share and increase profits.Specific Benefits of Monopolistic Advantage Theory:●Increased Competitiveness:Multinational enterprises can compete more effectively due to theirscale, technology, and knowledge advantages.●Market Expansion:These advantages make it easier for multinationals to enter and dominateforeign markets.●Cost Optimization:By leveraging economies of scale and superior technology, multinationals canreduce costs and improve production efficiency.Illustrative Examples:●Apple Inc.:With its superior technology, global marketing strategies, and strong financial resources,Apple can compete more effectively in international markets than many local competitors.●Toyota Motor Corporation:Thanks to its large scale, advanced production technology, and efficientmanagement strategies, Toyota can produce high-quality cars at lower costs, leading to higherprofits in foreign markets.10. Internalization theory(THEORIES OF INTERNATIONAL INVESTMENT)Basic Concept:The Internalisation Theory states that to obtain a higher return on its investments, a firm willtransfer its superior knowledge to a foreign subsidiary that it controls, rather than selling it in the openmarket.Key Elements of Internalisation Theory:1.Transfer of Superior Knowledge:44
○Explanation:Multinational enterprises often possess advanced knowledge, technology, andmanagement processes that they have developed and optimized through their operations.○Example:An advanced technology company may have unique manufacturing secrets orefficient management methods unknown to competitors.2.Establishing Foreign Subsidiaries:○Explanation:Instead of selling this knowledge in the open market, the parent companyestablishes or acquires a foreign subsidiary to fully control and apply this knowledge.○Example:A pharmaceutical company may establish a manufacturing plant in anothercountry to use its proprietary production technology and research processes, rather thanselling them to local companies.3.Benefits of Full Control:○Explanation:By setting up a controlled subsidiary, the parent company ensures that itssuperior knowledge is applied correctly and securely.○Example:An automobile manufacturer can maintain high quality standards and strictproduction processes through its subsidiary abroad.Benefits of Internalisation Theory:●Increased Profits:When superior knowledge is effectively applied within the subsidiary, profits canbe higher than selling that knowledge in the open market.●Knowledge Security:Keeping knowledge in-house helps protect intellectual property and preventscompetitors from copying it.●Quality Control:The parent company can maintain and oversee product and service quality betterwhen knowledge and management processes are applied within a controlled subsidiary.Illustrative Examples:●IBM:IBM establishes subsidiaries in various countries to use its advanced technology andmanagement practices rather than licensing or selling them to other companies. This helps IBMmaintain quality standards and protect its intellectual property.●Samsung:Samsung opens electronics manufacturing plants in multiple countries to apply itsproduction technology and management processes. This way, Samsung can control the entireproduction process and ensure product quality.11. Eclectic theory of International Production (OLI Model)(THEORIES OF INTERNATIONALINVESTMENT)This theory explains why foreign direct investment (FDI) is more advantageous than other modes of marketentry, such as exporting. It proposes that for a firm to invest in overseas facilities, it must have three kinds ofadvantages.Three Kinds of Advantages a Firm Must Have1.Ownership-Specific Advantage:45
○Explanation:This advantage involves the ownership of assets that are not available toother firms, including:■Knowledge or Technology:Firms may possess advanced technology or specializedknowledge that competitors do not have.■Economies of Scale or Scope:The ability to produce on a large scale or acrossdifferent areas helps reduce costs.■Monopolistic Advantages:Such as unique access to critical inputs or markets.○Example:A pharmaceutical company may own proprietary drug manufacturing technologyor unique research expertise that competitors cannot replicate.2.Location-Specific Advantage:○Explanation:The foreign market must have specific characteristics (social or political) thatallow the firm to profitably exploit it.■Example:A country with low labor costs, favorable tax policies, or a largeconsumer market can be an attractive destination for investment.○Example:The biotech industry in Singapore thrives due to a strong education system,government support policies, and strategic geographic location.3.Internalisation Advantage:○Explanation:It must be less costly to produce overseas than to outsource.■Example:When in-house production in a foreign subsidiary reduces operationaland management costs compared to outsourcing production.○Example:An electronics company may build its own manufacturing plant in a country whereproduction costs are lower than outsourcing to local firms.VI. Finance1.Offshore Financial Centres (OFCs):Definition: OFCs are locations that specialize in providing financial services to non-residents, typically withlow taxes and few banking regulations.Purpose: These centres attract companies and individuals from around the world, seeking tax advantagesand regulatory flexibility.Characteristics of Offshore Financial Centres:Low Taxes:●Advantage: OFCs often apply low or no taxes on financial transactions, helping companies andindividuals optimize their financial benefits by reducing tax liabilities.●Example: Financial centres like the Cayman Islands or the Bahamas are known for their low taxpolicies, attracting international companies.Few Banking Regulations:●Advantage: Flexibility in regulations helps companies easily conduct financial transactions andmanage assets without facing many legal barriers.●Example: Switzerland and Hong Kong are financial centres with relatively flexible bankingregulations, attracting global investors.Financing Non-residents:46
●Advantage: OFCs primarily serve international clients who are not residents of the country where thefinancial centre is located, allowing companies and individuals to utilize financial services acrossborders.●Example: OFCs like Singapore offer a variety of financial services to non-resident companies andindividuals, helping them manage their finances efficiently.Source of Debt Financing:●OFCs provide financial services, including debt financing, to international companies. Due to lowtaxes and few banking regulations, companies can borrow funds at lower costs compared todomestic financial markets.●This helps companies optimize borrowing costs and enhance their financial capabilities, especiallywhen they need to raise capital quickly and flexibly.Examples of Offshore Financial Centres:●Cayman Islands: Known for very low taxes and flexible banking regulations, attracting manyinvestment funds and financial companies.●Hong Kong: A global financial centre with diverse financial services and relatively flexible bankingregulations.●Switzerland: Offers favorable tax policies and high banking secrecy, attracting many internationalinvestors.●Bahamas: Provides a financial environment with few regulations and low taxes, appealing tocompanies and individuals seeking to optimize financial benefits.2. Fronting loans & Transfer pricing: Way to Move funds and achieve Cash flow management-Reasons for Moving FundsPayment of Dividends, Royalties, and Fees from Subsidiary to Parent Company:Explanation:●Dividends:These are the profits that the parent company receives from the subsidiary based on itsequity ownership.●Royalties and Fees:These are payments for the use of the parent company’s intellectual property orservices, such as trade names, technology, consulting, and management systems.Examples:●Dividends:Coca-Cola’s subsidiary in Brazil sends dividends to the parent company in the U.S. basedon profits earned from its business operations in Brazil.●Royalties and Fees:McDonald's subsidiary in India pays royalties to the parent company in the U.S.for using the McDonald's brand and management system.Payment of Loans from Parent Company to Subsidiary or Among Subsidiaries:Explanation:●These loans are used to provide financial support between different units within the same group,ensuring stable business operations.47
Example:●Samsung's parent company in South Korea provides a loan to its subsidiary in Vietnam to expandthe manufacturing plant.Execution of Transfer Pricing in Sales Transactions between Subsidiaries and Parent Company:Explanation:●Transfer pricing is the price set for transactions between members of the same enterprise tooptimize profits and manage taxes.Example:●Apple’s subsidiary in China sells electronic components to the parent company in the U.S. at apredetermined transfer price.-Cash Flow Management ObjectivesHandling Funds Whose Repatriation is Blocked:Explanation:●When legal regulations in a country prevent funds from being repatriated, the company must findways to effectively manage these funds within that country.Example:●A multinational company in Argentina must reinvest profits earned in Argentina into local projectsdue to regulations restricting capital outflow.Achieving Tax Management Objectives by Locating Profits in Low-Tax Environments:Explanation:●Moving profits to countries with lower tax rates to minimize tax burdens and optimize financialbenefits.Example:●A technology company shifts profits from its operations in the U.S. to a subsidiary in Ireland, wherethe tax rate is lower.Reducing Foreign Exchange Risk by Moving Away from Areas with High Devaluation Risk:Explanation:48
●Protecting the company from currency devaluation risks by moving funds out of countries withunstable exchange rates.Example:●An automobile company transfers profits from its subsidiary in Venezuela back to the parentcompany in Japan due to the risk of devaluation of the Venezuelan bolívar.2.1.Fronting LoanDetailed Explanation:Definition:A fronting loan is a loan made through a financial intermediary, usually a bank, from the parentcompany to a subsidiary.The purpose of a fronting loan is to minimize credit risk and manage finances efficiently between companieswithin the same group.Process:1.The parent company provides funds to a large bank or financial intermediary.2.The bank then loans that money to the subsidiary as a formal loan.3.The subsidiary pays interest to the bank, and the bank transfers this interest back to the parentcompany after deducting its service fees.Benefits:●Managing credit risk:Reduces credit risk for the parent company, as the bank guarantees the loan.●Financial optimization:The parent company can lend to the subsidiary at a more favorable interestrate than the market.●Tax minimization:In some cases, using a bank as an intermediary can help optimize the tax burdenfor both parties.Example:●Parent company:Toyota Motor Corporation in Japan.●Financial intermediary:HSBC Bank.●Subsidiary:Toyota Motor Thailand Co., Ltd in Thailand.Toyota Japan transfers a sum of money to HSBC. HSBC then loans this amount to Toyota Thailand as afronting loan. Toyota Thailand uses this capital to expand its production operations. Toyota Thailand paysinterest to HSBC, and HSBC transfers the interest back to Toyota Japan after retaining its service fee.2.2. Transfer PricingDefinition:Transfer pricing is the price set for transactions between subsidiary companies within the samemultinational group.The goal of transfer pricing is to optimize the global profitability of the group and manage taxes effectively.49
Process:1.Companies within the same group conduct internal transactions, such as providing goods, services,or intangible assets (such as technology or intellectual property rights).2.The value of these transactions is determined based on international tax authorities’ rules andguidelines, ensuring that transfer prices are equivalent to market prices (the "arm's length"principle).Benefits:●Tax Optimization:Minimizes tax burden by shifting profits to countries with lower tax rates.●Profit Optimization:Maximizes the global profits of the group by adjusting internal prices.●Financial Management:Helps manage finances efficiently among subsidiaries within the samegroup.Example:●Parent Company:Apple Inc. in the USA.●Subsidiary:Apple Ireland in Ireland.Apple Inc. in the USA sells intellectual property and technology rights to Apple Ireland at a predeterminedtransfer price. Apple Ireland manufactures and sells products based on this technology and records theprofits. Since Ireland has a lower tax rate than the USA, Apple can optimize its profits and reduce its globaltax burden through these transfer pricing transactions.3. Definitions and Functions of CFC and IFCCentralized Finance Center (CFC)●Definition: CFC is a financial management hub set up by multinational corporations (MNCs) toconsolidate and centralize financial operations across their subsidiaries.●Functions:○Cash Management: Optimize cash flows within the group, ensuring idle cash generatesreturns.○Risk Management: Hedging internal risks like exchange rate fluctuations or inflation.○Internal Invoicing: Facilitate netting of receivables and payables within the company.○Support Weak Subsidiaries: Manage funding and support subsidiaries facing financialdifficulties.○Cost Reduction: Reduce transaction and operational costs through centralization.○Balance Currency Exposure: Mitigate foreign exchange risks by centralizing financialoperations.International Finance Center (IFC)●Definition: IFC refers to a global financial hub facilitating international trade, capital flows, and riskmanagement for corporations, financial institutions, and governments.●Functions:○Access to Global Markets: Provide access to international FX markets and capital markets.50
○Hedging and Risk Management: Offer tools like derivatives, forwards, and swaps to managefinancial risks.○Liquidity Management: Efficient allocation of liquidity across multiple countries.○Inflation Risk Management: Use financial instruments to mitigate inflation rate risks acrosseconomies.○Cost Optimization: Centralize settlement processes and leverage global financial expertise.Hedging→ Tránh rủi ro (risk management), không liên quan nhiều đến việc "di chuyển dòng tiền" mà tậptrung vào bảo vệ giá trị tài sản.Multilateral Netting→ Quản lý dòng tiền và giảm chi phí giao dịch.Leading and Lagging→ Di chuyển dòng tiềnđúng thời điểmvà tránh rủi ro tỷ giá.3.1. HedgingCác công cụ Hedging phổ biến1.Hợp đồng kỳ hạn (Forward): Thỏa thuận mua/bán tài sản ở mức giá xác định trong tương lai.○Ví dụ: Khóa tỷ giá USD để tránh rủi ro khi thanh toán sau 3 tháng.2.Hợp đồng tương lai (Futures): Tương tự Forward nhưng được giao dịch công khai trên sàn.○Ví dụ: Mua hợp đồng tương lai xăng dầu để khóa giá xăng.3.Quyền chọn (Options): Mua quyền mua/bán một tài sản với giá xác định mà không bắt buộc thựchiện.○Ví dụ: Mua quyền bán USD để bảo vệ lợi nhuận khi USD mất giá.4.Hợp đồng hoán đổi (Swaps): Thỏa thuận trao đổi dòng tiền hoặc nghĩa vụ tài chính.○Ví dụ: Hoán đổi tiền tệ để giảm rủi ro tỷ giá khi vay bằng USD.DefinitionHedging is a financial technique used toprotect against riskscaused by price fluctuations, such as exchangerates, interest rates, or commodity prices. It works by taking anopposite positionin the market to reducepotential losses.Tools for Hedging1.Forward Contracts○What it is: A private agreement to buy or sell an asset at a fixed price on a specific futuredate.○How it works: This locks in the price today, protecting against future price changes.○Example:A company needs to pay $1 million to a supplier in the US in 3 months. If they are worriedthe USD will increase in value (causing them to pay more in their currency), they canlock intoday’s exchange ratewith a forward contract. This ensures they know exactly how muchthey’ll pay in 3 months, regardless of how the exchange rate changes.2.Futures Contracts51
○What it is: A standardized version of a forward contract, traded on regulated exchanges.○How it works: Commonly used to hedge risks in commodities (like oil) or currencies.○Example:An airline expects to buy fuel in 6 months. To hedge against rising fuel prices, they buy afutures contract to fix today’s price. If fuel prices go up, they are protected.3.Options○What it is: Financial contracts giving the buyer theright, but not the obligation, to buy (call)or sell (put) an asset at a predetermined price before a certain date.○How it works: Options provide flexibility. You pay a premium to “reserve” a price.○Example:A company that will receive USD in 3 months buys aput optionto sell USD at today’s rate. Ifthe USD weakens, they use the option. If the USD strengthens, theydon’t usethe optionand sell at the better market rate.4.Swaps○What it is: Agreements to exchange cash flows, such as interest rates (interest rate swaps)or currencies (currency swaps).○How it works: Two parties agree to "swap" financial obligations to benefit from better rates.○Example:A company in Japan borrows in USD but wants to avoid exchange rate risks. It enters acurrency swapwith another company that needs USD. They exchange loan payments, so theJapanese company pays in its local currency (JPY), reducing risk.3.2.Multilateral NettingDefinitionMultilateral nettingis a payment mechanism where accountsreceivableandpayableamong three or moreentities (counterparties) are offset. The goal is tominimize the number of transactionsand streamline thepayment process.Benefits of Multilateral Netting1.Reduces the Number of Payments: Instead of each entity paying every counterpart individually,payments are consolidated into a single net transaction for each party.2.Simplifies Settlement: Fewer payments mean reduced complexity in managing cash flows.3.Lowers Transaction Costs: Fewer transactions mean lower banking fees and administrative efforts.Given ExampleSUBSIDIARYRECEIVABLESPAYABLESNETChinese350450(100)German250300(50)Indian150300(150)52
Mexican450150300Analysis of the Example1.Mexican subsidiaryhas apositive net balance of 300, meaning it is owed funds. Therefore, it is anet receiver.2.Chinese, German, and Indian subsidiarieshavenegative net balances:○Chinese: -100 (net payer)○German: -50 (net payer)○Indian: -150 (net payer)3.Offsetting process:○Instead of having each subsidiary make or receive multiple payments, all payables andreceivables are consolidated.○For example:■Mexican subsidiary receives a total of300from Chinese (-100), German (-50), andIndian (-150).○This eliminates unnecessary transactions. Instead of 6 separate transactions (2 percounterpart), onlyone net payment per subsidiaryis made.Conclusion●Multilateral netting consolidates all obligations into a single net position for each entity.●In this example:○Mexican subsidiaryis thenet receiverof 300.○Chinese (-100), German (-50), and Indian (-150)subsidiaries arenet payers.●Instead of 6 transactions, the process is simplified to just 3 payments, saving time and costs3.3.Leading and LaggingTiming payments early (lead) or late (lag), depending on anticipated currency movements, so that they havethe most favourable impact for the company.4 THLead Approach: Collect Receivables Early When the Foreign Currency is Expected to WeakenExplanation:●When a company anticipates that the foreign currency will weaken against the domestic currency, itwill collect receivables early to avoid devaluation.Example:●Scenario:A US company has customers in Europe. The company forecasts that the Euro will weakenagainst the USD in the coming months.●Action:The company collects receivables from European customers early to receive more USD beforethe Euro devalues.53
Lead Approach: Fund Payables Early When the Foreign Currency is Expected to StrengthenExplanation:●When a company anticipates that the foreign currency will strengthen against the domestic currency,it will pay payables early to avoid paying more when the foreign currency appreciates.Example:●Scenario:A Japanese company buys raw materials from the US. The company forecasts that the USDwill strengthen against the JPY in the coming months.●Action:The company pays its US supplier early to avoid paying more JPY when the USD appreciates.Lag Approach: Collect Receivables Late When the Currency is Expected to StrengthenExplanation:●When a company anticipates that the foreign currency will strengthen against the domestic currency,it will delay collecting receivables to gain more value when the foreign currency appreciates.Example:●Scenario:A UK company has customers in the US. The company forecasts that the USD willstrengthen against the GBP in the coming months.●Action:The company delays collecting receivables from US customers to receive more GBP when theUSD appreciates.Lag Approach: Fund Payables Late When the Foreign Currency is Expected to WeakenExplanation:●When a company anticipates that the foreign currency will weaken against the domestic currency, itwill delay paying payables to pay less when the foreign currency depreciates.Example:●Scenario:An Indian company buys goods from Europe. The company forecasts that the Euro willweaken against the INR in the coming months.●Action:The company delays paying its European supplier to pay less INR when the Euro depreciates.4. 3 types of Foreign exchange risk & Hedging (another Hedge)tiếng ANH ở bản khácTransaction Exposure (Rủi ro giao dịch)●Giải thích:Xảy ra khi công ty có các giao dịch bằng ngoại tệ và tỷ giá hối đoái thay đổi giữa thời điểmcam kết và thời điểm thanh toán.●Ví dụ:Một công ty Mỹ đồng ý mua sản phẩm từ một công ty Ấn Độ và thanh toán bằng đồng RupeeẤn Độ. Nếu trong thời gian từ khi ký hợp đồng đến khi thanh toán, đồng Rupee tăng giá, công ty Mỹsẽ phải trả nhiều USD hơn. Ngược lại, nếu đồng Rupee giảm giá, công ty Mỹ sẽ có lợi.54
Translation Exposure (Rủi ro chuyển đổi)●Giải thích:Rủi ro này xảy ra khi giá trị của cổ phiếu, tài sản, nợ hoặc thu nhập của một công ty thayđổi do thay đổi tỷ giá hối đoái. Rủi ro chuyển đổi có thể dẫn đến những gì có vẻ là lãi hoặc lỗ tàichính do thay đổi giá trị hiện tại của tài sản dựa trên biến động tỷ giá hối đoái.●Ví dụ:Một công ty con của Mỹ tại Áo mua một tòa nhà trị giá €100,000 vào ngày 1 tháng 9 năm 2019khi tỷ giá là €1 = $1.20, giá trị chuyển đổi thành $120,000. Vào ngày 31 tháng 3 năm 2020, công tyquyết định chuyển đổi toàn bộ tài sản ngoại tệ sang USD để lập báo cáo tài chính hợp nhất. Khi đó,tỷ giá thay đổi thành €1 = $1.15, giá trị của tòa nhà giảm xuống còn $115,000.Economic Exposure (Rủi ro kinh tế)●Giải thích:Là loại rủi ro tỷ giá hối đoái do ảnh hưởng của biến động tỷ giá không mong đợi đến dòngtiền, đầu tư nước ngoài và thu nhập tương lai của công ty. Rủi ro kinh tế tăng lên khi biến động tỷ giáhối đoái tăng và giảm khi nó giảm.●Ví dụ:Một công ty lớn của Mỹ, với khoảng 50% doanh thu từ thị trường nước ngoài, dự báo rằng đồngUSD sẽ giảm giá dần dần khoảng 2% mỗi năm so với các đồng tiền chủ chốt khác. Nếu đồng USD tănggiá thay vì giảm dần, công ty sẽ phải đối mặt với rủi ro kinh tế vì doanh thu và dòng tiền từ nướcngoài sẽ thấp hơn khi chuyển đổi về USD, ảnh hưởng tiêu cực đến lợi nhuận và định giá của công ty.Ways to hedge against transaction exposure:4. 1. Leading or LaggingĐịnh nghĩa:●Điều chỉnh thời điểm thu và thanh toán vốn dựa trên dự đoán về biến động tỷ giá hối đoái để tối ưuhóa lợi ích tài chính.Quy trình:●Leading:Thu sớm các khoản phải thu khi dự đoán rằng đồng ngoại tệ sẽ suy yếu và thanh toán sớmcác khoản phải trả khi dự đoán rằng đồng ngoại tệ sẽ mạnh lên.●Lagging:Trì hoãn thu các khoản phải thu khi dự đoán rằng đồng ngoại tệ sẽ mạnh lên và trì hoãnthanh toán các khoản phải trả khi dự đoán rằng đồng ngoại tệ sẽ suy yếu.Ví dụ:●Lead:Một công ty Mỹ thu sớm các khoản phải thu từ khách hàng Châu Âu khi dự đoán rằng đồngEuro sẽ suy yếu so với USD.●Lag:Một công ty Nhật Bản trì hoãn thanh toán các khoản phải trả cho nhà cung cấp Mỹ khi dự đoánrằng USD sẽ suy yếu so với Yên Nhật.Definition:●Adjusting the timing of collecting receivables and making payments based on anticipated currencyfluctuations to optimize financial benefits.55
Process:●Leading:Collect receivables early when the foreign currency is expected to weaken and makepayments early when the foreign currency is expected to strengthen.●Lagging:Delay collecting receivables when the foreign currency is expected to strengthen and delaymaking payments when the foreign currency is expected to weaken.Examples:●Lead:A US company collects receivables early from European customers when it anticipates the Eurowill weaken against the USD.●Lag:A Japanese company delays paying its US suppliers when it anticipates the USD will weakenagainst the Yen.4.2. Exposure NettingĐịnh nghĩa:●Đối chiếu rủi ro giữa các loại tiền tệ có biến động ngược chiều nhau để giảm thiểu rủi ro tổng thể.Quy trình:●Xác định các khoản thu và chi bằng các loại tiền tệ khác nhau có biến động ngược chiều nhau.●Điều chỉnh các khoản thu và chi để tối ưu hóa rủi ro tổng thể.Ví dụ:●Một công ty có các khoản thu bằng đồng Euro và các khoản chi bằng đồng USD có thể đối chiếu rủi rogiữa hai loại tiền tệ này nếu Euro và USD có biến động ngược chiều nhau.Definition:●Offsetting risks between currencies that move in opposite directions to minimize overall risk.Process:●Identify receivables and payables in different currencies that move in opposite directions.●Adjust the receivables and payables to optimize the overall risk exposure.Example:●A company with receivables in Euros and payables in USD can net the exposure between these twocurrencies if the Euro and USD move in opposite directions.4.3. Forward Market HedgeĐịnh nghĩa:56
●Sử dụng hợp đồng kỳ hạn để mua hoặc bán ngoại tệ nhằm khóa tỷ giá hối đoái và bảo vệ khỏi biếnđộng tỷ giá.Quy trình:●Ký hợp đồng kỳ hạn mua hoặc bán ngoại tệ với một tỷ giá cố định cho một ngày trong tương lai.Ví dụ:●Một công ty Mỹ ký hợp đồng kỳ hạn mua 1 triệu Euro với tỷ giá $1.10/€ cho kỳ hạn 6 tháng để bảo vệkhỏi biến động tỷ giá Euro/USD.Definition:●Using forward contracts to buy or sell foreign currency to lock in exchange rates and protect againstcurrency fluctuations.Process:●Enter into a forward contract to buy or sell foreign currency at a fixed exchange rate for a futuredate.Example:●A US company enters into a forward contract to buy 1 million Euros at an exchange rate of $1.10/€ forsix months to protect against Euro/USD exchange rate fluctuations4.4. Currency Option HedgeĐịnh nghĩa:●Mua quyền chọn để mua hoặc bán một lượng ngoại tệ cụ thể tại một thời điểm cụ thể nhằm bảo vệkhỏi rủi ro tỷ giá.Quy trình:●Mua quyền chọn mua (call option) hoặc quyền chọn bán (put option) ngoại tệ với tỷ giá cố định chomột ngày trong tương lai.Ví dụ:●Một công ty Nhật Bản mua quyền chọn mua USD với tỷ giá ¥110/USD để bảo vệ khỏi rủi ro tỷ giá nếuUSD tăng giá so với Yên Nhật.Definition:●Purchasing options to buy or sell a specific amount of foreign currency at a specific time to protectagainst currency risk.57
Process:●Purchase call options (to buy) or put options (to sell) foreign currency at a fixed exchange rate for afuture date.Example:●A Japanese company purchases a call option to buy USD at an exchange rate of ¥110/USD to protectagainst currency risk if the USD appreciates against the Yen.4.5. Money Market HedgeĐịnh nghĩa:●Tránh rủi ro ngoại tệ bằng cách vay và cho vay trong thị trường tiền tệ trong nước và ngoại tệ.Quy trình:●Vay tiền tệ này và đầu tư vào tiền tệ khác để tạo ra một vị trí phòng ngừa rủi ro.Ví dụ:●Một công ty Châu Âu có các khoản phải thu bằng USD sau 6 tháng sẽ vay USD và đầu tư vào Euro đểbảo vệ khỏi rủi ro tỷ giá hối đoái.Definition:●Avoiding foreign currency risk by borrowing and lending in domestic and foreign money markets.Process:●Borrow in one currency and invest in another to create a hedged position.Example:●A European company with receivables in USD in six months borrows USD and invests in Euros toprotect against foreign exchange risk.4.6. Swap ContractĐịnh nghĩa:●Thỏa thuận hoán đổi tiền tệ tại các tỷ giá và ngày xác định để giảm thiểu rủi ro tỷ giá.Quy trình:58
●Ký hợp đồng hoán đổi với đối tác để trao đổi các dòng tiền với tỷ giá và ngày xác định trước.Ví dụ:●Một công ty Mỹ ký hợp đồng hoán đổi với một công ty Châu Âu để hoán đổi dòng tiền USD và Eurotrong 2 năm với tỷ giá cố định.Definition:●An agreement to exchange currencies at specified rates and on specified dates to minimize exchangerate risk.Process:●Enter into a swap agreement with a counterparty to exchange cash flows at predetermined exchangerates and dates.Example:●A US company enters into a swap agreement with a European company to exchange USD and Eurocash flows over two years at fixed exchange rates.5. TAXATION - INTERNATIONAL FINANCIAL FORCE:Taxation is an external financial force that affects decisions international managers make because it affectsrevenues.5.1. InversionInversion is a financial strategy where a company acquires a foreign company in order to move its legalheadquarters abroad to reduce taxes. This allows the company to take advantage of the lower tax regulationsof the new country, thereby saving on tax costs.Ví dụ:Một công ty dược phẩm lớn của Mỹ,Pfizer Inc., quyết định mua lại công ty dược phẩm Ireland,AllerganPlc, để chuyển trụ sở pháp lý từ Mỹ sang Ireland. Lý do chính là để tận dụng mức thuế doanh nghiệp thấp hơntại Ireland, giúp tiết kiệm chi phí thuế và tăng lợi nhuận cho công ty.5.2. BranchBranchA branch is an extension of the parent company and not a separate legal entity incorporated in theforeign country. This means that:●Legal Status:A branch does not have a separate legal status from the parent company. The branch'sactivities are considered part of the parent company.●Tax:The parent company can deduct the branch's losses from its taxable income.Example:59
●Parent Company:A manufacturing company in the USA opens a branch in Mexico.●Branch:Operates as an extension of the US company, and all income or losses are reported in thefinancial statements of the parent company in the USA.5.3. SubsidiarySubsidiaryA subsidiary is a separate legal entity incorporated in the foreign country and owned by theinternational company. This means that:●Legal Status:The subsidiary has a separate legal status from the parent company. It operates as anindependent company in the eyes of the law of the country where it is incorporated.●Tax:The tax regulations can vary depending on the ownership percentage of the parent company.○Minority share:If the parent company owns less than 50% of the shares, the subsidiary'sprofits are only taxed when they are remitted to the parent company.○Majority share:If the parent company owns more than 50% of the shares, the subsidiary'sactive income is taxed when remitted to the parent company, but its passive income(royalties, licensing fees, dividends, service fees, etc.) is taxed as it occurs.Example:●Parent Company:A technology company in the USA establishes a subsidiary in India.●Subsidiary:Operates as a separate legal entity in India, and its income or losses are reportedseparately from the parent company in the USA. If the parent company owns 60% of the shares, thesubsidiary's income is taxed when remitted to the USA, while its passive income is taxedimmediately in India.VII. Strategy, Organization Structure & Staffing policy1.Organizational Structure and Strategy FitStrategyKey InformationExampleAdvantagesDisadvantagesHome Replication- Productdevelopment in thehome country.- Microsoft developsWindows softwarein the US with theoriginal languagebeing English.- Low initialproduction costs.- Lack of ability tomeet localdemands. Forexample, softwarewithout locallanguages likeVietnamese.- Exporting productsabroad.- A sports shoecompany inGermany exportsproducts to Asiawithout changing- Utilizes existingresources withoutadditionalinvestment.- Products may notsuit local weather orcultural preferences.60
the design or color.- Controlled byheadquarters.- Toyota’sheadquarters inJapan decides ondesign and technicalstandards for carsexported to Europe.- Headquarters hasfull control,ensuring productquality consistency.- Lack of flexibilityfor foreign markets.For example, carsnot suited fornarrow roads insome countries.- Leverage homecountry capabilities.- Samsung leveragesmanufacturingcapabilities in SouthKorea to produceand exporttelevisionsworldwide.- Takes advantage oftechnology andexpertise from amanufacturingstronghold.- Difficult todifferentiate inmarkets withspecific demands.Multidomestic- Adapt products foreach local market.- Coca-Colaproduceslower-sugarversions for theJapanese marketdue to consumerpreference formilder taste.- Well-suited tomeet localdemands.- Expensive todevelop multipleversions of theproduct.- Decentralizeddecision-making.- Nestlé’ssubsidiaries in eachcountry decide onthe flavor of Milomilk to suit localtastes.- Allows quickresponse to marketneeds and trends.- Lack ofconsistency inproducts acrossmarkets.- Increasedstructural costs.- Each countryrequires its ownresearch team,leading to higherpersonnel anddevelopment costs.- Accurately meetslocal needs.- High operationaland research costs.- Too muchadaptation candilute productuniqueness.- Too many differentPepsi flavors mayreduce global brandrecognition.- Builds closenesswith localcustomers.- Brand recognitionmay be affected.Global- Strong cost-cuttingpressure.- IKEA producesmass furniture withoptimized costs andexports worldwide.- Significant costreduction throughlarge-scaleproduction.- Difficult to adaptto specific localneeds.61
- Focused strategyanddecision-making.- Nike’sheadquarters in theUS decides on thedesign of shoes andapplies globalstandards.- Uniform product,easy to manage.- Smaller marketsmay feel neglected.- Offeringstandardizedproducts andservices.- Apple sells thesame iPhoneversion globallywith minimaladjustments (onlychanging thecharger).- Savings inproduction and R&Dcosts.- Does not meetdistinct local tastes.- Value chainactivities centralizedin one or a fewareas.- Foxconn focuseson producingelectroniccomponents formajor techcompanies in China.- Maximizeseconomicadvantages throughcentralizedproduction.- High risk if theproduction areafaces problems (e.g.,natural disasters,trade wars).Transnational- Pressure for bothcost efficiency andlocal adaptation.- Unilever producesLifebuoy soap with astandard formulabut changespackaging and scentto suit each country.- Balances costreduction with localneeds.- High coordinationand developmentcosts.- Operates in themost advantageouslocations.- Intel sets up chipmanufacturingplants in countrieswith low labor costs,like Vietnam, to saveon costs.- Takes advantage oflow labor costs andexistinginfrastructure.- Dependent onmany markets,vulnerable todisruptions in oneregion.- More centralizedinput value chainactivities.- Adidasmanufactures rawmaterials in Chinaand distributes thefinished productworldwide.- Optimizes theinput supply chainto reduce costs.- Susceptible todisruptions if supplysources face issues.- More localizedoutput value chainactivities.- Honda’smotorcycle range inAsia includessmaller modelssuited for navigatingtight urban areas.- Meets the exactneeds of eachmarket.- Requiressignificant resourcesto implementchanges in outputmarkets.62
- Achieving anoptimal balance is achallenge.- McDonald’s mustkeep global staples(like the Big Mac)while addingcountry-specificdishes.- Balancesstandardization andlocal adaptation.- Difficult toprioritize cost andadaptation.- Strategic,structural, andsystem decisionsbecome complex.- Amazon buildsnumerous datacenters and logisticshubs globally toserve each marketwhile maintainingcost efficiency.- Flexibility indecisions based onmarket needs whilemaintaining globalconnectivity.- Requires asophisticated andcomplexmanagementsystem.OrganizationalStructureKey InformationExampleAdvantagesDisadvantagesInternationalDivisionCreate anindependentinternationaldepartment tomanage all overseasactivities.A pharmaceuticalcompany sets up an"InternationalBusiness"department tomanage exports toAsia and Europe.- Simplifiesmanagement ofinternationaloperations.- Reduces theburden on theheadquarters.- Inflexible whenexpanding rapidly.- May lackadaptation to localmarkets.International AreaStructureOrganized bygeographic regions(America, Asia,Europe), each regionmanages its owndecisions.PepsiCo divides intoregions: Asia, NorthAmerica, andEurope, each withits own strategytailored to the localmarket.- Flexible, bettermeeting local needs.- Suitable for amulti-domesticstrategy.- High costs due tothe need forseparatemanagement teamsin each region.- Lack of globalcoherence.Global ProductStructureOrganized byproduct lines on aglobal scale.Sony divides itsoperations intogroups: ConsumerElectronics,PlayStation, andDigital Imaging,each managingglobally.- Focuses onproducts, optimizingthe global valuechain.- Easy to controlcosts.- Difficult to meetlocal demands.- Potential conflictsbetween productgroups in the sameregion.Global MatrixStructureCombines bothfunction/Unilever combinesproduct- Optimizes globalefficiency and- Complex andcostly to manage.63
geographicregions/productdivision, sharingmanagementauthority.management (e.g.,Personal Care, Food)and geographicalregions (Asia,Europe).adapts to localneeds.- Clear division ofauthority.- Can lead to powerconflicts betweendepartments andregions.StrategySuitable OrganizationalStructureReasoningHome ReplicationStrategyInternational DivisionStructureHeadquarters still controls core operations. Theinternational department handles adjustments andmanages foreign markets.MultidomesticStrategyInternational AreaStructureMeets the need to adapt to local demands. Allowseach region to have decision-making authority toaddress local markets.Global StrategyGlobal Product StructureFocuses on product standardization globally. Enablescost control and enhanced economies of scale.TransnationalStrategyGlobal Matrix StructureBalances cost efficiency and local adaptation.Combines both regional and product-basedmanagement.Explanation of Each Structure in Relation to Strategy:Home Replication Strategy↔International Division StructureThis structure allows the company tomaintain its original business model while adding a department to manage export activities or foreignmarkets. Example: A U.S. software company adds an international division to coordinate sales activitiesabroad.Multidomestic Strategy↔International Area StructureThe multidomestic strategy requires highadaptation, so a geographical area structure is the most optimal. Example: McDonald's allows branches inIndia and the Middle East to adjust their menus to align with local culinary cultures.Global Strategy↔Global Product StructureFocusing on global product standardization, the product-basedstructure helps optimize production and quality control. Example: Apple focuses on a standardized iPhoneproduct line for all global markets.Transnational Strategy↔Global Matrix StructureAs the transnational strategy needs a balance betweencost efficiency and local flexibility, the matrix structure combines product and geographical management.64
Example: Unilever must standardize its Lifebuoy soap globally but adjusts packaging and fragrance for eachspecific market.2.Staffing Policy and Strategy FitPolicyKey InformationExampleAdvantagesDisadvantagesEthnocentric PolicyKey managementpositions are heldby parent-countrynationals.Honda selectsJapanese nationalsto be the CEOs of itsbranches in the USand Europe.- Overcomes theshortage of capablemanagers in thehost country.- Unified culture.- Helps transfer corecapabilities.- Can causeresistance in thehost country.- Leads to narrowcultural thinking,unsuitable for localspecifics.Polycentric PolicyHost-countrynationals managesubsidiaries, whileparent-countrynationals hold keyMcDonald's usesIndian nationals tomanage its branchin India, while keypositions at- Reduces narrowcultural thinking.- Lowerimplementationcosts.- Limitsopportunities forhost-countrynationals to developoutside their own65
positions atheadquarters.headquarters areheld by Americans.- Supports thetransfer of corecapabilities.country.- May create a gapbetween operationsat headquarters andin the host country.Geocentric PolicySeeks the besttalent, regardless ofnationality,prioritizing the mostsuitable candidates.Unilever and Shellrecruit talent fromaround the worldfor internationalmanagementpositions.- Maximizes globalhuman resources.- Helps leaders workeffectively acrossdiverse cultures.- Builds a strongunified culture.- Nationalimmigration policiesmay limitimplementation.- Expensive in termsof training andrelocation.- Compensationstructures may facechallenges.StrategySuitable HR PolicyExplanationHome Replication StrategyEthnocentric Policy- Home Replication focuses ontransferring products from thehome country to foreign markets.- Tight control from theheadquarters is necessary, soEthnocentric policy fits asparent-country nationals hold keyroles in international branches.Multidomestic StrategyPolycentric Policy- Multidomestic requires highadaptation to local markets.- Polycentric policy allows localsubsidiaries to manage, reducingcultural myopia and better meetinglocal needs.Global StrategyEthnocentric Policy or GeocentricPolicy- Ethnocentric: Suitable when acompany wants to maintain strongcontrol from the headquarters andimplement a unified globalstrategy.- Geocentric: When a companywants to optimize the use of globaltalent and develop aninternational leadership team.66
Transnational StrategyGeocentric Policy- Transnational requires both costefficiency and local adaptation.- Geocentric policy allows thecompany to use global talent,providing flexibility in managingleadership across various culturalregions.Home Replication Strategy↔Ethnocentric Policy●Reason for fit: Home Replication Strategy focuses on maintaining the values and processes from thehome country. Ethnocentric policy ensures that strategic decisions and management are madeaccording to the values and standards of the home country, maintaining consistency in internationaloperations.Multidomestic Strategy↔Polycentric Policy●Reason for fit: Multidomestic Strategy requires the company to adapt to the needs and cultures ofeach local market. Polycentric policy allows subsidiaries in host countries to have decision-makingpower, which fits the local needs, reducing cultural myopia and improving customer satisfaction inthose markets.Global Strategy↔Ethnocentric Policy or Geocentric Policy●Ethnocentric: In companies following a Global Strategy, the company may want to maintain controland standardization from headquarters. Ethnocentric policy ensures that global processes andproducts are implemented in the same way.●Geocentric: When the company needs to optimize resources from multiple countries and manageglobally, Geocentric is a good choice. This policy ensures diversity and international talentinvolvement in implementing the global strategy.Transnational Strategy↔Geocentric Policy●Reason for fit: Transnational Strategy requires the company not only to optimize cost efficiency butalso to adapt to local demands. Geocentric policy supports this by recruiting and utilizing globaltalent, ensuring the company has leadership capable of working in diverse cultural environments,while maintaining global cooperation and effective management.Caterpillar Inc. Strategy, Organizational Structure, and Staffing PolicyCaterpillar Inc. is an American firm specializing in manufacturing construction machinery. Allkinds of machines need to meet standardized requirements. However, under cost pressures,Caterpillar manufactures these machines in a few centralized plants with high capacity andthen assembles them in other countries where the products are required.67
Question:Do you know the strategy name of Caterpillar? What about their organizationalstructure and staffing policy? Is it a suitable strategy or not? Please show some advantagesand disadvantages of this strategy, organizational structure, and staffing policy.Caterpillar's StrategyCaterpillar Inc. employs atransnational strategy, which combines global efficiency withlocal responsiveness. It manufactures standardized machinery in a few centralized plants forcost efficiency and assembles products locally to meet regional needs. This approach suitsthe construction machinery industry, as it ensures consistent quality while addressingspecific market demands.Advantages of the Strategy:1.Cost Savings:Centralized production reduces costs through economies of scale.2.Flexibility:Local assembly allows for customization to meet regional demands.3.Global Market Reach:The strategy enables Caterpillar to serve markets effectivelyworldwide.Disadvantages of the Strategy:1.Operational Complexity:Managing production and assembly across globallocations is challenging.2.Higher Coordination Costs:Significant resources are required to coordinatebetween centralized production and local assembly.3.Risk of Over-Reliance on Centralized Plants:Any disruption in these plants canseverely impact operations.Despite these challenges, the strategy effectively balances efficiency and adaptability,making it well-suited to Caterpillar’s operations.Organizational StructureCaterpillar employs amatrix organizational structure, combining elements of bothgeographic and product-based divisions. This structure ensures global coordination ofstandardized products while allowing flexibility to address the unique needs of individualmarkets. For instance, while machinery production remains globally standardized, assemblyand sales are tailored to local markets.Advantages of the Matrix Structure:1.Consistent Quality:Standardized production ensures high-quality products acrossall regions.2.Global and Local Collaboration:Facilitates coordination between global teams andlocal operations to address logistical and operational challenges.68
3.Supply Chain Management:Supports management of a complex global supplychain effectively.Disadvantages of the Matrix Structure:1.Complex Management:Overlapping responsibilities may cause confusion andinefficiency.2.Conflicts:Tensions may arise between global standardization goals and localautonomy.Staffing PolicyCaterpillar appears to follow ageocentric staffing policy, selecting the best talent for keypositions regardless of nationality. This approach combines local expertise for assembly andmarket operations with global management practices.Advantages of the Geocentric Staffing Policy:1.Local Knowledge:Leverages local expertise to navigate regulatory, cultural, andmarket-specific challenges.2.Diversity and Innovation:Promotes a diverse workforce, fostering innovation andglobal collaboration.3.High Standards:Supports the company’s commitment to maintaining quality acrossall markets.Disadvantages of the Geocentric Staffing Policy:1.High Costs:Relocating employees globally and providing extensive training can beexpensive.2.Cultural Challenges:Managing diverse teams may lead to communication andcultural barriers.VIII. Logistics1. OffshoringDefinition:Offshoring refers to the practice of relocating a business process or operation (such as manufacturing,customer service, or IT services) to a foreign country, often to take advantage of lower labor costs, taxincentives, or other economic factors.When Should It Be Done?●When a company wants to reduce operational costs, particularly labor or production costs.●When the company seeks to expand into international markets or establish a presence in othercountries.69
●If the company needs access to specialized skills or resources that are unavailable locally.●To take advantage of favorable regulatory environments or tax benefits in other countries.Advantages:●Cost Savings:Significant reductions in labor and operational costs by moving production or servicesto countries with cheaper wages.●Access to New Markets:Expanding into new countries can help a company increase its globalpresence and access new customer bases.●Increased Efficiency:By offshoring, a company can focus on its core activities while delegatingcertain tasks to countries where they can be performed more efficiently or cost-effectively.●Tax Benefits:Some countries offer lower tax rates, which can be beneficial for large corporations.Disadvantages:●Cultural and Language Barriers:Operating in different countries can lead to communication issues,misunderstandings, and a lack of cultural compatibility.●Quality Control Issues:Maintaining consistent product or service quality can be difficult whenoperations are abroad.●Legal and Regulatory Risks:Different countries have varying laws and regulations, which can createcompliance challenges.●Public Backlash:Consumers may react negatively if they perceive offshoring as a means ofoutsourcing jobs from their own country.2. OutsourcingDefinition:Outsourcing involves contracting specific business functions or services (such as customer service, IT, orpayroll) to an external company, often located in another country or region. The external company isresponsible for performing the work or service.When Should It Be Done?●When a company lacks the resources or expertise to handle certain tasks internally.●If the company wants to focus on core business areas and delegate non-core tasks to specializedthird-party service providers.●When the company needs to reduce costs related to certain business functions or activities.●To quickly scale operations or access services without the need to hire full-time employees.Advantages:●Cost Efficiency:Outsourcing certain tasks or functions to third-party providers, often in countrieswith lower labor costs, can significantly reduce operational expenses.●Expertise and Specialization:Outsourcing enables companies to leverage external expertise,ensuring high-quality services from providers who specialize in specific functions.70
●Focus on Core Activities:By outsourcing non-core functions, companies can focus on their mainbusiness goals and operations.●Scalability:Outsourcing can provide flexibility in scaling up or down based on demand, without theneed for large investments in infrastructure or workforce.Disadvantages:●Quality Concerns:Outsourcing can lead to concerns over the quality of work, especially when thereis little oversight of the third-party provider.●Communication Barriers:Working with external providers, especially those in different time zonesor cultures, can create communication challenges.●Dependence on External Providers:Companies may become reliant on third-party providers, whichcan be risky if the provider fails to meet expectations or goes out of business.●Job Losses:Outsourcing can lead to job losses in the home country, resulting in negative publicperception or backlash.3. Difference Between Offshoring and OutsourcingAspectOffshoringOutsourcingDefinitionRelocating business processes oroperations to a foreign country toreduce costs.Contracting third-party companies (eitherdomestically or internationally) to handlespecific functions or services.Nature ofActivityInvolves moving operations orproduction to a different country.Involves contracting services to an externalprovider, whether domestic or international.ControlThe company often maintains controlover the operations, but they aremanaged in another country.The company delegates specific functions to athird-party provider, losing direct control overthe process.PrimaryObjectiveReduce operational or production costsby leveraging cheaper labor andresources abroad.Focus on reducing costs and increasingefficiency by outsourcing non-core functionsto specialized service providers.ExampleA U.S. company opening amanufacturing plant in China to takeadvantage of lower labor costs.A company outsourcing its customer supportservices to a third-party call center in India.In summary,offshoringis about moving business operations or processes to a foreign country to lower costs,whileoutsourcingis about hiring an external company (domestic or foreign) to handle certain tasks orservices.71
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