how internationalization affects different firms in a different way ?
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How internationalization affects different firms in a different way ? Quentin CharraudeauTRANSCRIPT
How internationalization affects different firms in a different way ?
FIRM PERFORMANCE
Let’s focus on Europe
25.8% World’s GDP
Free market
739 Millions Hbts
Triad’s member
Agenda
What is Internationalization
Productivity
Competitiveness
Winners and losers
Internationalization...
shares of exports
imports
Foreign Direct Investment(FDI)
...an elusive concept
generate value
international operations
Internationalization
An international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.
Definition of World Trade Organization - WTO:
Productivity=
technological progress
Capital investment
labour volume and quality
labour intensity
social cohesion...
Ratio of volume of output to a volume of input use
Increasing productivity
Good management
Education and training
Infrastructure
Investing in R&D
Innovation
What is competitiveness?M Porter’s diamond
Relatedand supporting
industries
Factorconditions
Firm strategy,structure
and rivalry
Demandconditions
Government
Chance
How to boost competitiveness
Inputs
Wages
Providing subsidies
Tax incentives
Reducing costs:
And
Increasing the productivity
Root causes of competitiveness gap
Exchange rates
Inflation
Taxes
Wages
Relative costs =
Global competitiveness =Labor Costs + Productivity
Unit Labor Cost = Labor compensation/ Output per employee = labor productivity
ULC depends on both labor compensation gap and productivity gap
comparing relative levels of labor compensation per employee with relative levels of labor productivity within Europe and EMCs
The key is:
Relative hourly labour costs
Bangladesh: $0,25
Vietnam: $1
China: $3
Poland: $10
Germany: $36
France: $41 Source: US Bureau of Labor Statistics
Labour productivity
Productivity is the driving force of competitiveness
Both wages and productivity are lower in the emerging economy
If the productivity gap is as large as labor compensation gap= no comparative advantage
But
Winners: Top exporters
Firms which exports more than 10 products to more than 10 markets: 75% of total export
Only firms that are large enough and have a rich enough portfolio can withstand international competition
Happy few
Characteristics
• FDI-markers perform better than exporters and exporters perform better than non-exporters >
• Exporters are generally: - Bigger- More profitable- More capital intensive- Pay higher wages than non-exporter
Bilateral trade
• Trade flows are:
• Trade impediments increase with the distance between countries
• positively affected by countries’ sizes
• negatively affected by trade impediments
Distance affects
number of exporters
average exports per exporter
number of product exported
average export per firm of each product
export price
export quantities
Keys of success
Number of exporter matters the most
Number of exported product matters too
Firm’s average exports per product matter less
Price & quantities defy the distances
What does affect trade?Sharing a language:
GATT / WTO membership & colonial links increase:
reduce fixed costs
increase the number of exporters
does not affect the average amount exported
the number of exporters
reduce the average amount exported
To conclude...
Promote intra-industry competition
Increase the number of exporters
Forget the incumbent superstars
Nurture the superstars of the future
Keep up the fight against small trade costs
access the export and FDI potential of industries
...some proposals