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ADMS 1000 Chapter 6.docx

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York University
Administrative Studies
ADMS 1000
Eytan Lasry

The Global Context 1 Chapter 6  Defining Globalization o A process involving the integrations of world economics (NAFTA, EU, APEC,…) o A process involving the integrations of world market (Nike, Gap, Sony,…) o  A process that is expanding the degree and forms of cross-border transaction among people, assets, goods, and services o  Refer to the growth in direct foreign investment in regions across the world o Reflects the shift toward increasing economic interdependence: the process of generating one, single, world economic system or a global economy  Channel of global business activity o Exporting and Importing  Exports allow companies to keep generating jobs and remain productive and competitive  Import give consumers choice and reduce cost o Contractual agreements and Strategic Alliances  Outsourcing: hiring external organization  Offshoring  Licensing/ Franchising  Licensing Agreement is an arrangement whereby the owner of a product or process is paid a fee or royalty from another company in return for granting permission to produce or distribute the product or process (Movie)  Franchising Arrangement (Mc Donald’s) o Foreign Direct Investment (FDI)  Involves the purchase of physical assets or an amount of ownership in a company from another country in order to gain a measure of management control  Control of a company can be achieved without necessary owning 100% or even 50% interest o Joint Ventures, Strategy Alliances  Involves an arrangement between two or more companies from different countries to produce a product or service o Merge and Acquisitions  A Canadian-owned company could actually merge with a foreign-owned company and create a new jointly owned enterprise that operate in at least two countries  To obtain new market and new knowledge  company that merge on a global scale in production may also be doing so in order to generate world- scale volume in amore cost effective way o Establishment of subsidiaries  Creation of subsidiaries or branch operations in foreign countries, through which the enterprise can market goods and services  The Multinational corporation o Global business is a business that engages directly in some form of international business activity, including such activities as exporting, importing or international production. And has direct investment in at least two different countries o Multinational corporations are business enterprises that control assets, factories,… operated either as branch offices or affiliates in two or more foreign countries o Most MNCs have headquarters in developed countries.  The Borderless corporation o Borderless corporation refers to the increasing ability of MNCs to ignore international boundaries and set up business just about anywhere o Indicates that the nationality of the organization is unclear o There is no allegiance to a particular country or location  e.g. Nestle, Coca Cola, McDonalds… The Global Context 2 o Financial, technological, human…capital are easily transferred between countries o Ownership & management are international o Firms follow the profits o Benefits  Economic development  Brings management expertise  Introduces new technology and relevant training  Encourages international trade  Unites different countries and cultures o Threats  No allegiance to host country  Mobile profits  Power held in home country  Difficult to control  International Trade o The purchase, sale or exchange of goods or services across countries o The Logic of Trade: : encourages nations to specialize in goods/services in which they are most efficient and trade with other countries for goods/services not produced domestically o Mercantilism (1500-1800)  Encourages trade surpluses where exports of goods or services exceed imports.   More money is entering the country than is leaving the country  Countries implemented this policy in number of ways  Impose tariffs or quota
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