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BUSI 2701

BUSI 2701 LECTURE TWO GLOBALIZATION/POLOTICAL ECONOMY Interdependent global economy - Retailers going global - Trying to build global brands Globalization of Consumers - Global markets for consumer products o Global brands becoming more of an importance? Country brands becoming of less importance? Or are they both still legitimate? o The erosion of “national identity” with a branded consumer product Global Institutions - Help manage and regulate the global marketplace - Promote the establishment of multinational treaties to govern the global business system - Consensus created and consensus driven International Monetary Fund - Created in 1944 to maintain order in the international monetary system through: o Global monetary cooperation o Secure financial stability through exchange rates o Facilitate international trade o Promote high employment and sustainable economic growth o Reduce poverty - 188 members - Biggest challenges o Loans come with strings attached o In return for loans countries must adopt certain policies (meant to helpy them get back to growth) o “strings” are debateable, cut gov’t social spending World Bank - A group comprised of: o IBRD (International Bank of Reconstruction and Development)  Lends to gov’t of middle income and creditworthy low income o IDA (International Development Association)  Interest free loans – called credits – and grants to the poorest of countries o IFC (International Finance Corporation)  Provides loans, equity and tech assistance to stimulate pvt sector in developing countries o MIGA (Multilateral Investment Guarantee Agency)  Provides guarantees against losses caused by non-commercial risks to investors in developing countries o The international centre for settlement of investment disputes (ICSID)  Provides international facilities for conciliation and abortion of investement disputes - Its effectiveness has been hampered by organizational issues and the competing agendas of members of state World Trade Organization - “polices” the world trading system - Makes sure that nation-states adhere to rules laid down in the trade treaties - Promotes lower barriers to trade and investment - Essentially, the WTO is a place where the members try to sort out trade problems and new agreements - G and M (B5) Jan 14 2013 o Failure of WTO leading to regional arrangements o Biggest problem is agricultural support and protection policies The UN - Establish 1945 o International peace maintenance o Develops friendly relations among nations o Cooperates in solving international problems and in promoting respect for human rights o Is a center for harmonizing the actions of nations or exhibiting the lack of harmony… Structural Evidence of Globalization - A decline in barriers indicates free flowing goods, since WWII o Since 1950 average tariffs have fallen to about 4% o Foreign direct investment Technological Drivers of Globalization - Info processing capability - Telecommunications - Transportation technology - Circa 2020? Additive manufacturing Changing Demographics of the Global Economy - There has been a drastic change in the demographics of the world economy in the last 30 years - Four important trends o The changing world output and world trade picture o “ “ FDI picture o “” nature of the multinational enterprise o “ “ world order How Has World Output and World Trade Changed - In 1960, the US accounted for over 40% of world economic activity - By 2008 the US for just over 20% - A similar trend occurred in other developed countries - The share of world output accounted for by developing nations is rising and is expected to account for more than 60% of world economic activity by 2020 How has FDI changed over time? - 1960s US used to have lots of FDI flows - Now they only account for less than one fifth of FDI flows - Other countries copied the US FDI flows Multinational Enterprise (MNE) - Any business that has productive activities in two or more countries - Since the 1960s there has been a rise in non Us MNE, also growth in mini-multinationals The changing world order - China is moving toward greater free market reforms - Some parts of latin America are moving away from free market reforms Business Implications of Differences In a Political Economy (Political, Legal and Economic Factors) - What is a political economy? o Refers to its political, economic, and legal systems: o How the systems interact with each other, interdependence o How does interaction affect mgmt. practices o How does the interaction of the systems affect the level of economic well-being in the nation - What is a political system? o Refers to the system of gov’t in a nation. It can be evaluated using two continuums:  The degree to which the country emphasizes collectivism as opposed to individualism  The degree to which the country is democratic or totalitarian - What is Collectivism? o Stresses th
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