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| The trend towards an integrated and interdependent world economy. |
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INDUSTRIES and national MARKETS merging into one global marketplace, tastes and preferences in CONVERGING upon a global norm.
Ex) Sony Playstation, Coca-Cola, McDonald's hamburgers |
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| Globalization of Production |
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| Global SOURCING of goods and services, differences in cost and quality of FACTORS OF PRODUCTION. |
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used to compete effectively.
Ex) land, labor,capital, and energy |
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*manage, regulate, and police global market
*promote multinational treaties to govern global business
Ex) World Trade Organization, International Monetary Fund, World Bank, United Nations(UN) |
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| World Trade Organization(WTO) |
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| polices the trading system and ensures nations follow WTO treaties |
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| International Monetary Fund(IMF) |
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| Maintains order in international monetary system |
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| Promotes economic development |
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| Promotes internationsl peace & security, relationships among nations, human rights, and harmonizes the actions of nations. |
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Declining trade and investment barriers
Technological change |
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| Declining Trade and Investment Barriers |
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*After WWII, began removing barriers for free flow of goods, services, and capital
*GATT, over 100 nations decreased TARIFFS and progressed on non-tariff issues. |
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| Lower trade barriers made globalization of markets and production theoretically possible, technological change made it reality |
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| Microprocessors and Telecommunications |
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| Lowered cost of communication, therefore cost of coordination and control |
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| Internet and World Wide Web |
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| virtually zero in 1994, nearly $7 trillion in 2004 |
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| Transportation Technology |
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| Jet aircraft, super freighters and containerization |
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| Multinational enterprizes |
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| (productive activities in two or more countries) from developing nations expected to increase |
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| (small and medium-sized companies)increasing |
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| Is th shift toward a more integrated and interdependent global economy good? |
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| Globalization:Jobs and Incomes |
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-critics-jobs lost to low wage nations
-supporters-free trade results in specialization in the production and export or goods and services produced most efficiently, and import goods and services - they do not produce as efficiently |
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| Labor Policies and the Environment |
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Critics-firms from advanced nations move manufacturing offshore to less developed countries with lax environment and labor regulations
Supporters-tougher environmental regulation and stricter labor standards come with economic progress, FDI often helps raise standards |
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| Foreign direct investment |
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| Critcs-economic power shifting away from national governments and toward supranational organizations(WTO, EU,and UN |
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| Managing in the Global Marketplace |
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Managing international business(firm that engages in international trade or investment) is different from managing domestic business:
-countries differ
-greater and more complex problems
-limits inposed by governments and global trading system
-converting funds and foreign exchange risk |
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| The political, economic, and legal systems of a country |
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The system of government in a nation
Can be assessed according to:
collectivism vs. individualism
democradic vs. totalitarianism |
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| Primacy of collective goals over induvidual goals, the needs of the society are more important that individual freedoms |
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| Collectivism achieved through revolution and totalitarain dictatorship |
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| Same goals by democratic means |
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| Selling state-owned enterprizes to private investors |
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| Freedom over one's economic pusuits, guaranteeing individual freedom and self-expression, pursue self-interest to achieve the best for society |
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| Government by the people, directly or through elected representatives |
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| One person or political party exercises absolute control, opposing political parties are prohibited |
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| elected representatives vote on behalf of constituents |
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| Major types of Totalitarianism |
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Communist(socialism by dictatorship)
Theocratic(govern according to religious principles)
Tribal(a tribe monopolizes power)
Right wing(individual economic freedom allowed but individual political freedom resticted - it could lead to communism) |
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| Free market economic system |
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| likely to occur where individual goals are given primacy over collective goals |
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| State-owned economic system |
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| enterprizes and restricted markets - where collective goals are dominant |
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| Pure market economy = goods and services produced, and quantity produced, determined by supply and demand |
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| Goods and services produced, quantity produced, and prices planned by government |
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| Includes some elements of both market and command economies |
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| The rules, regulating behavior, processes by which they are enforced and manner of redress for grievances. They regulate business practice, define how business is executed, and set rights and obligations involved. Impact attractiveness for investment |
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| Based on tradition, precedent, and custom |
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| Based on detailed set of laws organized into codes |
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| Based on religious teachings(most widely used system) |
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| Law governing contract enforcement |
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| Document specifying conditions for an exchange and the rights and obligations of the parties involved |
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| United Nations Convention in Contracts for the International Sale of Goods(CIGS) |
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| Rules governing common commercial contracts between sellers and buyers in different nations. Adopting CIGS, signals other nations that the Convention's rules are part of its law. |
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| The legal rights over the use of a resource and over the use of any income derived from that resource. Important for business, but can be violated by either private action or public action |
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| Theft, piracy, blackmail, and the like by private individuals or groups |
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| Public Action and Corruption |
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| When public officials extort resources from property holders useing legal mechanisms including excessive taxation, expensive license or permits, or taking asseets into state ownership without compensation |
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| Public Action and Corruption |
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| When public officials extort resources from property holders useing legal mechanisms including excessive taxation, expensive license or permits, or taking asseets into state ownership without compensation |
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| Foreign Corrupt Practices Act |
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| Makes it a violation of US law to bribe foreign government officials to obtain or maintain business, and requires all publicly traded companies keep detailed records so that it is clear wherther a violation has occurred |
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| Property, such as computer software, screenplay, or chemical formula, that is the product of intellectual activity |
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| Gives inventors exclusive rights to manufacture, use, or sale of invention |
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| Legal rights of authours, composers, playwrites, artists, and publishers to use their work as they see fit |
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| Designs and names by which products are designated and differentiated |
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| Paris Convention for the Protection of Industrial Property |
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| Signed by 96 countries to protect intellectual property rights |
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| Trade Related Aspects of Intellectutal Property Rights(TRIPS) |
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| Requires WTO members to grant and enforce patents least 20 years and copyrights 50 years |
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| Gross International Income(GNI) |
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| Common measure of economic development |
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| Purchasing Power Parity (PPP) |
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| More direct comparison of living standards. Drawback of both GNI and PPP data-static picture |
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| UN developed index based on life expectancy, education, and whether average incomes meet basic needs |
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| Removing restrictions on the free operation of markets |
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| Transferring ownership of state property to private investors |
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| Paying bribes or lobbying for favorable treatment |
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| Sophistication of the economic system, including infrastructure and supporting business |
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| Liklihood that political forces will cause adverse changes |
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| Liklihood that economic mismanagement will cause adverse changes |
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| Liklihood that a trading partner will oppurtunistically break a contract or expropriate property rights |
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| Balancing benefits,costs, and risks associated with doing business in that country |
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| Occurs when a firm exports goods or services to consumers in another country. |
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| Predicts that the power of microprocessor technology doubles and its cost of production falls in half every 18 months. As this happens, the cost of global communications plummets, which lowers the costs of coordinationg and controlling global organization |
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