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Answer: The most direct implication of market globalization is on the firm's value chain. Marketglobalization compels firms to organize their sourcing, manufacturing, marketing, and other value-adding activities on a global scale. In a typical value chain, the firm conducts research and product development (R&D), purchases production inputs, and assembles or manufactures a product or service. Next, the firm performs marketing activities such as pricing, promotion, and selling, followed by distribution of the product in targeted markets and after-sales service. The value-chain concept is useful in international business because it helps clarify what activitiesare performed where in the world. For instance, exporting firms perform most "upstream" value-chain activities (R&D and production) in the home market and most "downstream" activities (marketing and after-sales service) abroad. Each value-adding activity in the firm's value chain issubject to internationalization; that is, it can be performed abroad instead of at home. Companies have considerable latitude regarding where in the world they locate or configure key value-adding activities. The most typical reasons for locating value-chain activities in particular countries are to reduce the costs of R&D and production or to gain closer access to customers. Through offshoring, the firm relocates a major value-chain activity by establishing a factory or other subsidiary abroad. A related trend is global outsourcing, in which the firm delegates performance of a value-adding activity to an external supplier or contractor located abroad. Globalization allows firms to relocate key value-adding activities to the most advantageous locations around the world.While globalization makes internationalization imperative, technological advances provide the means for it to happen. Firms interact more efficiently with foreign partners and value-chain members than ever before. They transmit all kinds of data, information, and vital communications that help ensure the smooth running of their operations worldwide. They use information technology to improve the productivity of their operations, which provides substantial competitive advantages. For example, information technology allows firms to more efficiently adapt products for international markets or produce goods in smaller lots to target international niche markets.Difficulty: EasySkill: SynthesisObjective: 2-5, 2-7AACSB: Dynamics of the global economy29