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McGill University
Management Core
MGCR 382
John Saba

UK Power at national not supranational level 17/27 of EU are members of Eurozone In 2002, 12 of EU opted into Euro. Portugal, Ireland, Italy, Greece, Spain, luxemborg, finland, france, belgum, Netherlands, Austria, Germany, + 5 who joined later. Newest EU members:  Part of former soviet: Estonia, Latvia, Lithuania.  Allied with former Soviet politically & economically-> Bulgaria, Czech, Slovakia, hungary, Poland, Romania, Slovenia Regional trading system established by former soviet union broke down in early 1990s. Effects (on former soviet satellite states): 1. They had to restructure economic, polkitical, & legal systems from centrally planned communist systems to decentralized mixed systems. Czech, Estonia, Slovenia are furthest along in this process, already achieving high- income status 2. Blah blah 3. Ablhalbh Objective 5 Eastern Europe (former soviet): constituent republics of former soviet including RUSSIA, Estonia, Latvia, Lithuania, Armenia, Armenia, Belarus, Georgia Commonwealth of independent states 1991: economic & political reforms caused USSR to collapse, its 15 soviet republics declared independence as newly indep. States (NIS) 1992: 12 of NIS formed commonwealth of indep states (CIS), a forum to discuss issues of mutual concern Russia is most important of CIS countries. World’s largest land mass. 6 largest population. Is BOTH a transitional & emerging economy. Moved with difficulty from centrally-planned & globally-isolated economy to MIXED & globally-integrated economy. nd World’s 2 largest oil producer & exporter, benefited from increased prices of oil & other raw materials. Since 2000, GDP growth ~ 5.9% th Positive effects: by end 2012, Russia had accumulated $537.6b in foreign currency reserves, 4 largest after china, japan & Saudi Arabia. Real disposable incomes have doubled & middle class has emerged  Privatization of most industry in 1990 due to economic reforms  Exceptions: energy & defense-related sectors  Rapid privatization process turn over major state-owned to politically connected “oligarchs” & left equity ownership highly concentrated Limitations of Russia market …. Blah blah  Russian industry is divided into 2 main sector nd rd o Globally-competitive commodity producers (2 largest exporter of oil & natural glas, 3 largest exporter of steel & primary aluminium) o Less competitive heavy industries…..?  Index of economic freedom -> mostly not free, below other major European economies  Long-term challenges: o Shrinking workforce o High level of corruption o Poor infrastructure in need of large capital investment Read central Europe & central asia at home Central Asia Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, Kyrgyzstan were part of Soviet. Mainly muslims, languages share Turkic/Persian roots. All suffer from lack of arable land, vast mountains & deserts. Poor per capital income, only has extensive fossil fuel reserves. Objective 6: examine asia as a major mkt place & biz centre in world economy ASIA st nd th Home to more than half the world’s population (china, india, Indonesia 1 , 2 , 4 ) Produces about 25% of world’s GDP, but rapidoy Source of both high&low-quality products and skilled & unskilled labour Is both a major recipient of FDI & major supplier of investment to non=Asian cou Successful Asian firms provide to European & NA firms to improve ther ops East asiah7/200 Japan: 1945s to 1980s: Overview post-world war II period: economy. Top trading partner: China (both import & exports)  Japan developed a tech-advanced economy based on 1. Gov-industry coop 2. advanced tech 3. Small defence expenditure 4. Blah blah 5.  Key exports 1. Motor vehicles 2. Semi-conductors 3. Office machinery 4. Consumer electronics Japan’s public debt is 13.64 tril, 2 only to US’s 16.4 til Mostly free in index of economic freedom, below canada & US, higher than Germany Positives: Japan excels in many of WEF’s rankings, but particularly in the measure of biz sophisticatication e.g. japan leads coz of its superior production capabilities & ability to control international distribution Problems: same as other developed countries (declining GDP growth due to its political & economic systems have not been able to adjust quickly enough to changes in world economy (such as growth of e-biz & emerging markets))  2 key characteristics (both features are now eroding under pressures of global competition & domestic demographic change) 1. Keiretsu  Keiretsus Have controlled Japanese industries since WWII making it difficult for foreign firms to penetrate japan’s markets BUT in the 21 century, they are gradually losing their grip  A keiretsu is a large family of interrelated firms with interlocking shareholdings & biz relationships. Each firm takes a small ownership position in each other the other companies. Members develop strong ties as manufacturers, suppliers, buyers, & distributors for one another. Most keiretsu are centred around a bank (for financing needs) & a trading company  2 types of keiretsu i. Vertically integrated (in same industry): these link suppliers, manufacturers & distributors of one industry. They vertically connect within a firm from raw material & component sourcing to assembly, marketing, distribution etc. e.g. Toyota (also Honda) in auto industry ii. Horizontally integrated among firms in diff industries (with interlocking ownership & biz relationships) e.g. sony & Toshiba, sony pictures & sony music, mitsui real estate & mitsui mutual life, sumitomo, Mitsubishi,  Mitsubishi – oil, electric, motors, chemical, heavy industries, etc  Keiretsus rely on SOGO SHOSHA i. Unique to japan as export trading companies that facilitate exports of keiretsu members in international markets, also act as investment banks e.g. 6 largest (Mitsubishi corp, mitsui & co, ITOCHU, Sumitomo corp, Toyota,) these Japanese trading companies service as intermediaries for 50% of ii. Functions/tasks include:  Minimizing risks involved in transactions through its ability to distribute risk  Reducing transaction costs through its ability to take advantage of EOS  Making efficient use of capital  SPECIFICALLY, sometimes supply large volumes of raw materials & goods from large manufacturers/wholesalers to smaller distributors & retailers  Other times, they act as international sales force for medium & small sized firms who do not have the ability to market & maintain distribution channels overseas iii. Compare canada & US, where “trading companies have had relatively negligible impact on volume of export activity. One deterrent is pref of US firms to pursue international expansion independently of other firms. 2. The guarantee of lifetime employment for most of urban labour force Trade issues  Been internationally criticized for employing both unfair trading practices to market its exports & numerous non-tariff barriers to restrict imports to its domestic markets Demographis: ageing population Compare developed, developing, emerging marketing economies (see textbook exhibit for comparison, see exhibit for TRADE CONDITIONS in 3 categories) 1. Developed (35 countries) a. Evolved from manufacturing -> service-based economies b. High GDP per capita, 14% of world’s pop, but 55+% of world’s GDP *PPP+, including 75% of world trade in services c. Market or mixed economies with developed commercial infrastructure d. E.g. richest countries such as USA, canada, japan, western part of EU 2. Developing (120 countries) a. 25% of world’s pop (1.7+ b people) b. Only produce 4% of world’s GDP *PPP+ c. Lowest GDP & income per capita (17% live on less than $1/day, 40% live on
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