Task06.

How much did you think the world was globalized before you listened to Professor Ghemawat's lectures on globaloney in Week 1? Below is the lecture:

For Week 1, the required reading focuses on providing some basic data about the extent of globalization. Of the optional readings, chapter 2 from my book World 3.0 (The laws of globalization and business applications) provides deeper discussion of most of the topics covered in the videos: if you read this chapter, you don't need to do the "required" reading. The other two optional readings are best seen as a pair: the note on "The Globalization of Markets" provides more data on globalization than any of the other readings and the note on the "The Globalization of Firms in Historical Perspective" (with Geoffrey Jones of the Harvard Business School) adds more of a longitudinal dimension as well as shifting the primary focus from markets to firmsa focus carried forward in the sessions that follow.

Having talked about some of the reasons why being accurately calibrated about globalization levels is helpful from a social perspective. Let's also think about why being accurately calibrated might be helpful from the standpoint of a company that's thinking about how to conduct its global strategy. The argument I'll make, is that if you have inflated perceptions of how globalized the world is, you're much, much more likely to agree with exaggerated statements about global strategy involving competing the same way everywhere. Not being rooted in any particular country at all, unlike the BMW example. Competing all around the world, even though we saw that the typical US multinational just competes in three countries. Focusing on concentration, and being big as the way to win. Thinking about the world out there as a virtually limitless set of growth opportunities. And finally, treating global expansion as something that's an imperative, rather than subject to cost benefit analysis. It does turn out, from analyzing the data from previous batches of Coursera students, that inflated notions of how globalized the world is, tend to be correlated with beliefs along these lines.

And to see how dysfunctional beliefs like this can be, lets actually turn to an example of a company that at one point in time accepted all of these as planks of its global strategy. And ran into a great deal of trouble as a result. So the company is Coca Cola. And let's start off by looking at a video that Roberto Goizueta recorded when he was chairman of Coca Cola back in the 1980s. At this point in time in the United States, people consume more soft drinks than any other liquid, including ordinary tap water. If we take full advantage of our opportunities, someday, not too many years into our second century, we will see the same wave catching on in market after market. Until eventually, the number one beverage on earth will not be tea, or coffee, or wine, or beer. It will be soft drinks, our soft drinks. Talk about a plan for world domination. So under Goizueta, Coke was pursuing an extremely standardized strategy that involved competing in uniform ways around the world.

One system, one way, as he put it. That involved pretending that it wasn't from the US, but was just an international company that happened to be headquartered in Atlanta. Thinking that they had to compete everywhere around the world, and believing that with four of the top five soft drink brands, they were fated to be the winners in soft drink competition. This strategy led Coke into huge amounts of trouble in the latter part of the 1990s, the early part of the 2000s. And so it was really after 2005 that Neville Isdell, as the new chairman and CEO of Coca Cola, switched all these practices as a way of putting Coke back on solid ground.

So Isdell at Coca Cola, realized that uniformity had been carried too far. And that if the company was serious about growing its business in emerging markets, it needed to do more than wait for customers to come to it. It needed to very aggressively reposition by indigenizing packaging, reducing package sizes, cutting prices, and investing in rural distribution infrastructure. Second, Isdell rejected the notion of Coke being a company that was from nowhere in particular. And on the 10th anniversary of Goizueda officially dissolving the distinction between domestic and international led Coke, Isdell reinstated it. Because as he pointed out, the marketing challenges in the US, where Coke sold an average of 30 gallons per US citizen and elsewhere in the world where Coke averaged more like 3.5 gallons, were quite different. And no clarity was going to be gained by mushing them together.

Third, under Isdell, there did seem to be some attempts are more nuanced resource allocation at Coca Cola. And then finally, and perhaps most interestingly, instead of just stressing the four big mega brands, Isdell actually stressed learning from Japan. And why Japan? Well, turns out that Japan's market in which Coke offers two hundred products, most of which are unique just to Japan. Its leading seller there isn't even Coca Cola. It's something called Georgia Coffee, which was developed by Japanese bottlers, and named Georgia Coffee as a tribute to headquarters in Atlanta, Georgia, for not blocking the rollout. Other interesting drinks in the Coke lineup in Japan, are drinks like Real Gold, which is supposed to be a great hangover remedy. And Love Body, which is supposed to change your body in ways not normally associated with the consumption of lots of Coke products. So there are a lot of very different products in Japan. And although this might seem like a recipe for very poor profitability, it turns out that Japan is Coke's single most profitable major market. Whereas, the United States is the US's single least profitable major market. So the thought that Isdell had was, at a time when the soft drinks market was fragmenting into waters, fruit juices, sports drinks, new age drinks, etc, there was a lot to be learned by Coke in the US and elsewhere. From Japan's ability to actually compete in a very granular, very differentiated way, and generate huge profits for the company. So I stress this point to you because, again, when one looked at previous Coursera's respondents' degree of agreement with these dubious to semi-dubious propositions about globalization, close to half agreed that a truly global company should compete everywhere. And that concentration or economies of scale, are the way to win. More than 60% thought that globalization represented an avenue for limitless growth. And close to 80% thought that globalization was something that you should just do s an imperative, rather than analyzing. And this course, most broadly, is going to be about staying away from the just do it approach to globalization, and thinking hard about the costs and benefits of globalization moves

ii.

1)If a perfectly competitive industry is monopolized, consumer surplus: A. becomes equal to producer surplus. B. can be expected to decrease. C. usually remains constant. D. becomes double of producer surplus.

2)If a monopolistically competitive firm is in long-run equilibrium and average cost equals $150, then the market price must be $150. True or False

3)The term "monopolistic competition": A. denotes an industry characterized by one seller of many differentiated products. B. denotes an industry characterized by many sellers of differentiated products. C. is used to describe perfect competition that has strong entry barriers. D. denotes an industry characterized by many sellers of homogeneous products.

4)A monopolistic competitor's demand curve is A. less elastic than a monopolist's or oligopolist's but more elastic than a perfect competitor's demand curve. B. as elastic as an oligopolist's demand curve. C. more elastic than a monopolist's or oligopolist's but less elastic than a perfect competitor's demand curve. D. perfectly elastic.

5)Monopolistic competition is different from perfect competition because monopolistic competitors: A. are price takers. B. produce differentiated products C. have high barriers to entry. D. produce homogeneous products.

6)Monopolistically competitive firms: A. may earn short-run economic profit, but long-run economic profit is typically zero. B. may earn economic profit both in the short run and in the long run. C. are guaranteed to earn short-run economic profit. D. earn zero economic profit both in the short run and in the long run.

7)Which of the following characteristics distinguishes oligopoly from other market structures? A. Interdependence among firms in the industry B. The production of homogeneous products C. A downward-sloping demand curve D. A horizontal demand curve

8)Interdependent decision making on price, quality, or advertising is a characteristic of: A. monopolistic competition. B. perfect competition. C. oligopolies. D. monopolies.

9)During certain periods in the past few decades, if one of the three major breakfast cereal producers in the United States announced a price increase, the other two announced a similar price increase. This implies that the market for breakfast cereals is a good example of _____. A. the price-leadership model of oligopoly B. a cartel. C. a pure monopoly. D. monopolistic competition

10)The principal advantage of the game theory approach is that it allows to: A. better understand decision making when one person's choices affect another person's choices. B. take all possible information into consideration before developing a theory. C. better understand why firms in a competitive industry avoid games. D. better understand how the government should regulate a natural monopoly.

11)Differentiate between perfect competition and an oligopoly? A. Firms in an oligopoly face horizontal demand curves, whereas firms in a perfectly competitive market face downward-sloping demand curves. B. Firms in an oligopoly charge a lower price than firms in a perfectly competitive market. C. Firms in an oligopoly earn economic profit in the long run, whereas firms in perfectly competitive market earn zero economic profit in the long run. D. An oligopoly is characterized with low barriers to entry, whereas a perfectly competitive market is characterized with high barriers to entry.