342 Chapter 1
Terms in this set (21)
-Very large, family-held Korean conglomerates that have considerable political and economic power.
-Many key managers in these huge firms have attended universities in the West, where in addition to their academic programs they learned western culture, customs, and language.
-Now they are able to use this information to help formulate competitive international strategies for their firms.
European Eunion (EU)
-The ultimate objective of the EU is to eliminate all trade barriers among member countries
-Have adopted a unified currency called the euro. As a result, it is now possible for customers to compare prices between most countries and for business firms to lower their costs by conducting business in one, uniform currency.
-Since 2007, 27 countries comprise the EU, with 13 having adopted the euro.
-The challenge for the future of the EU is to absorb its eastern neighbors, the former communist-bloc countries. This could result in a giant, single European market. In fact, a unified Europe could become the largest economic market in terms of purchasing power in the world.
-With access to the entire pan-European market, large MNCs can now achieve the operational scale and scope necessary to reduce costs and increase efficiencies.
-Financial crises in Greece and Ireland putting pressure on the euro
Foreign Direct Investments
-The amount invested in property, plant, and equipment in another country
-The drop in inflows and outflows in 2009 due to the global recession is striking. In nearly every major world region, _ fell substantially, with some regions, such as North America, experiencing even greater drops.
Free Trade Agreement of the Americas (FTAA)
-A proposed free-trade agreement among the 34 democratically governed countries of the Western Hemisphere.
-These negotiations have stalled due to differences between developing countries, like Brazil, and developed nations, like the United States.
Association of Southeast Asian Nations (ASEAN)
-Made up of Indonesia, Malaysia, the Philippines, Singapore, Brunei, Thailand, and in recent years Cambodia, Myanmar, and Vietnam, is advancing trade and economic integration and now poses challenges to China as a region of relatively low cost production and export.
-The process of Social, Economic, Political, Technological, and Cultural integration among countries around the world with a vision of a single market entity.
-Combining individual international markets into one market
-minimize cost maximize profits
-increasing reliance of economies on each other
-Applying management concepts and techniques in a multinational environment;
-Adapting management practices to different economic, political, and cultural environments.
-International management is distinct from other forms of management in that knowledge and insights about global issues and specific cultures are a requisite for success.
-An organizational arrangement in Japan in which a large group of vertically integrated companies bound together by cross-ownership, interlocking directorates, and social ties provide goods and services to end users.
-Being able to draw from the resources of the other parts of the keiretsu, a Japanese MNC often can get things done more quickly and profitably than its international competitors.
-Factory, mostly located
in Mexican border towns, that imports materials and equipment on a duty- and tariff-free basis for assembly or manufacturing and re-export.
-Mexican firms, taking advantage of a new arrangement that the government has negotiated with the EU, can also now export goods into the European community without having to pay a tariff.
-Mexico as it wants to reduce its overreliance on the U.S. market.
Multinational Corporation (MNC)
-Operations in more than one country
-Do not just export their products abroad but actually produce their products in other countries.
-Managers and owners are of different nationalities, diverse workforce
- Chevron, McDonald's and Xerox have all earned more annual revenue in the international arena than they have stateside in recent years.
• Avoid tariff or quota restrictions on foreign trade
• Spread risk of operation
North American Free Trade Agreement (NAFTA)
-Trade bloc between the US, Canada and Mexico
-in essence has removed all barriers to trade among these countries and created a huge North American market
-Some of the more important developments include (1) the elimination of tariffs as well as import and export quotas; (2) the opening of government procurement markets to companies in the other two nations; (3) an increase in the opportunity to make investments in each other's country; (4) an increase in the ease of travel between countries; and (5) the removal of restrictions on agricultural products, auto parts, and energy goods.
performing business activities outside the country where the resulting goods or services are sold.
Contracting to buy goods or services that your company produced in the past. When the work is done outside your own country, offshore outsourcing occurs.
World Trade Organizations (WTO)
The WTO is the global organization of countries that oversees rules and regulations for international trade and investment, including agriculture, intellectual property, services, competition, and subsidies. -In 1999 representatives of developing countries who felt their views were being left out of the discussion succeeded in ending the discussions early and postponing a new round of trade talks. -In 2001 Brazil and India, united to press developed countries such as the United States, the Euro- pean Union (EU), and Japan to reduce barriers to agricultural imports. Failure to reach agreement resulted in another setback,
Proponents view to globalization
-Proponents believe that everyone benefits from globalization, as evidenced in lower prices, greater availability of goods, better jobs, and access to technology.
-Individuals in established markets will strive for better education and training to be prepared for future positions, while citizens in emerging markets and underdeveloped countries will reap the benefits of large amounts of capital flowing into those countries which will stimulate growth and development.
-job losses are a natural consequence of economic and technological change and offshoring actually improves the competitiveness of American companies and increases the size of the overall economic pie.
Critics view of globalization
-the main winners of globalization are the company executives.
-off-shoring of business service jobs to lower-wage countries creates a "race to the bottom" in which companies and countries place downward pressure on wages and working conditions
-growing trade deficits and slow wage growth are damaging economies
-environmental and social impacts
-companies can leverage systems from gov. that are in their best interest
-less social responsibility
Characteristics of Less Developed Countries (LCD)
-countries have accumulated heavy foreign debt and experienced severe inflation
-Major development is inter-country trade, including free market policies among South American countries
-South American countries increasingly looking to do business with U.S.
-Brazil Economy is now flourishing and attracting investment from MNCs
Middle East and Central Asia
-Large oil reserves
-Highly unstable geopolitical and religious forces
-Plagued by continuing economic problems
-Considerable natural resources
-Populace divided into 3,000 tribes that speak 1,000 languages and dialects
-African nations remain very poor and undeveloped
-International trade is not a major sources of income
-Major political instability
-Poverty, starvation, illiteracy, corruption, overcrowding among many social problems negatively affecting economic sector
-Exists when private enterprise reserves the right to own property and monitor the production and distribution of goods and services while the state simply supports competition and efficient practices.
-producers/sellers call the shots, a lot like US, companies set the price and decide how much they with produce, a lot of places like US socialist countires have market economy
-This model contains the least restriction as the allocation of resources is roughly determined by the law of demand.
-A general balance between supply and demand sustains prices, while an imbalance creates a price fluctuation.
-Comparable to a monopoly in the sense that the organization, in this case the government, has explicit control over the price and supply of a good or service.
-Gov. calls shots, you can only produce this at this price at this quantity, employees are gov. employees
-communist countries like North Korea and Cuba
-creates an environment where little motivation exists to improve customer service or introduce innovative ideas.
-Management within this model ignores demographic information.
-Gov controls taxes and what can be produced but businesses control quantity and price.
-Regulations concerning minimum wage standards, social security, environmental protection, and the advancement of civil rights may raise the standard of living and ensure that those who are elderly, sick, or have limited skills are taken care of.
-Ownership of organizations seen as critical to the nation may be transferred to the state to subsidize costs and allow the firms to flourish.
-Industrialized countries like China
Drivers of Globalization
• Political Change: fall of communism opened up a lot more markets because communist countries are against free trade. Rise of international Coalitions promote free trade with agreeing countries within that block.
• Technological Change: transportation, communication