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GMS200 Chapter 3 Lecture.docx

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Ryerson University
Global Management Studies
GMS 200
Shavin Malhotra

GMS200 Chapter 3: Management and Globalization Global economy – resources, markets and competition worldwide scope Globalization – process of growing interdependence among elements of the global economy Global Management – involves managing operations in more than one country Global manager – culturally aware and informed on international affairs Why companies go global:  Profits -  Customers – offer new markets to sell products  Suppliers – access to needed products and services  Capital – financial resources  Labour – lower labour cost How companies go Global Global business – conducts commercial transactions across national boundaries Global sourcing – materials or services are purchases around the world for local use Exporting (local products are sold abroad to foreign customers) Importing (selling in domestic markets of products acquired abroad) Licensing – local firm pays a fee to a foreign firm for rights to make or sell its products (ex. McCian) Franchising - a fee is paid to a foreign business for rights to locally operate using its name, branding and methods (ex. McDonalds) Foreign direct investment – building, buying all or buying part ownership of a business in another country Insourcing – job creation through foreign direct investment (using existing people to solve problems.) Joint venture- operates in a foreign country through co-ownership by foreign and local partners (ex. SHARP + SONY) Global strategic alliance – is a partnership in which foreign and domestic firms share resources and knowledge for mutual gains Foreign subsidiary – local operation completely owned by a foreign firm Greenfield investment – builds an entirely new operation in a foreign country Global Business Environments Political risk – potential lost in value of a foreign investment due to instability and political changes in the host country Local legal systems – complex and unfamiliar laws can create problems. Political risk analysis – tries to forecast political disruptions that can threaten the value of a foreign investments WTO – World Trade Organization – member nations agree to negotiate and resolve disputes about tariffs and trade restrictions Most favoured nation status – gives a trading partner most favourable treatment for imports/exports Tariffs – are taxes governments levy on imports from abroad Regional Economic Alliances NAFTA – North American Free Trade Agreement between US, CAN and MEX European Union – All the E
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