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ADMS 1000: Detailed textbook notes for finals (chap#6-10)

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Department
Administrative Studies
Course
ADMS 1000
Professor
Eytan Lasry
Semester
Fall

Description
Tanya Sivamanoharan Sun, Dec 4/2012 ADMNS- chap#6 notes CHAPTER# 6- THE GLOBAL CONTEXT -global market makes increased stake holders (domestic/foreign competitors, workers, industries, governments, international cultures, economies) -globalization process involving mixing/expanding of world economies, by cross-border transactions  involves direct foreign-investment across globe  shift toward interdependent single economic system, the global economy/market  converging consumer preference around world with minor modif. for local consumers (McDonalds, Nike, Sony) -trade blocs indicates pace at which nations integrate their economies (e.g. NAFTA, free trade agreement b/w Canada, US, Mexico) -production growing into global affair where businesses produce wherever cheapest -going global includes 2 factors (pull factor, push factor) -pull factor reasons a business would gain from entering the international context (potential for sale growth, obtaining needed resources) -potential for sales growth central aim of globalizing is to help businesses expand market for increased sales, a company declining domestically may also benefit from a global sale growth -obtaining needed resources globalizing to obtain unavailable/domestically costly/needed resources (e.g. developing plants in underdeveloped countries for cheaper labour costs) -push factor forces that act upon all businesses to create envir. where competing successfully = competing globally (force of competition, shift towards democracy, reduction in trade barriers, improved tech.) (pp.110) -force of competition firms to grow/under full competition, globalize to open doors for potentially new untapped markets (first mover advantage, or must follow competitors -first mover advantagebenefits of being among 1st to establish in world markets -shift toward democracy reductions in government ownerships creates new market opportunities -reduction in trade barriers general push to freer trade/ reduction in trade and investment reductions leads to globalizing -improved technology creates efficient cross-border transactions, transfer of info./product/services/capital/human resources and e- commerce is free of government control -businesses can turn global in many ways where any connection with foreign country is global business (exporting/importing, outsourcing, licensing/franchising, direct investment in foreign operations, joint ventures/strategic alliances, mergers/acquisitions, establishing subsidiaries) -exporting/importing globalizing mainly involves buying tangible merchandise goods/services for resale/use and selling /exporting for th profit. Canada world’s 5 largest exporter/importer with 70% GDP and 40% economy by exports. Exports create jobs and imports give consumers choice/reduced costs. -outsourcing/offshoring hiring external organizations to work for certain f functions of firm (e.g. payroll, accounting, legal work) (e.g. Nike outsources manufacturing to 3 world countries, while focusing on marketing) -licensing/franchising arrangements where owner of product/process is paid fee/royalty from another company to produce/ distribute product/process. Franchising (e.g. McDonalds) is a contract b/w franchiser (dealer) and franchisee (owner) and is best marketing/expansion method and low-risk form of global business. -direct investment in foreign operations involves purchase of physical assets/ ownership of established/developing foreign company for management control. Vast # of FDIS are from developed countries who have funds to invest overseas. Foreign investment occurred as substitute for trade/obtaining larger markets and needed resources. -joint ventures/strategic alliances arrangement b/w 2 or more firms from diff. countries to produce/market/develop product/service together. Joint ventures share managerial control to extend/enhance business of indiv./ firms and gain new foreign markets/tech. -mergers and acquisitions when merging with foreign company to form jointly owned enterprise that operates in at least 2 countries (e.g. Molson Coors Brewing). Mergers can occur for new markets, new knowledge, and expertise in an industry, cost-effective by larger-scale production. -establishment of subsidiaries branch operations in foreign companies through which firms (e.g. Toyota) can market goods/services for higher source of sales, can be fully owned (more risky) or by purchasing existing firm in other country with well-known products/distribution networks -the multinational corporation type of global business (globally integrated/multi-domestic) that control assets, factories, and has direct investments in branch offices (subsidiaries) and associate in 2 or more foreign countries  eventually break borders across country to make borderless corporations  if company runs in several countries across the world it can be called a global company -MNC are not necessarily corp. and can be enterprise/ -globally integratedbusiness that integrates geographically diverse operations from decisions centralized at head office/head quarters (mostly U.S, France, Germany, Japan) or home country -multi-domestic business that permits its geographically diverse components to operate separately worldwide -borderless corporation refers to increasing MNCs ignoring international boundaries (e.g. integrating financial systems/bringing countries closer)  an enterprise can be a global company with inter. ownership/ management without clear nationality & many headquarters for localized/decentralized decision-making (Coca-Cola) benefits/threats of MNCs (pp.125) -domestic trade involves trade b/w provinces/cities/regions within country -international trade involves the purchase/sales/exchange of goods/services across countries from less barriers and free trade agreements -trade prevents from all goods/services being produced domestically, for cost efficiency for producers/consumers -global efficiency/wealth is improved when countries produce with absolute advantage and trade through FTAs -mercantilism old view that a country’s wealth depended on holdings of gold  economic policy of collecting financial wealth from trade surplus -trade surplus when country’s exports exceed imports/more money enters -governments promote trade surplus from tariffs/quotas/banning some imports/subsidizing domestic firms to improve exports -trade protectionism protecting country’s domestic economy/business through restricted imports for two reasons:  low-priced foreign goods compete with domestically produced goods/reduce domestic sales  more imports than exports will make –ve balance of trade/trade deficit/more money floating out than in -tariff tax placed on goods entering a country to raise price on imported goods so they are not too cheap/discouraging consumers to buy foreign goods -import quota limits amount of product to be imported, so domestic businesses can hold fair share of market demand for product -mercantilism assumes that trade involves a zero-gain sum -zero-gain sumself-defeating assumption that world’s wealth is fixed, so 1 must gain for another to gain (a one-way street) -FTAs eliminate trade barriers/ eliminating tariffs/quotas increasing trade blocs for integrated world economy/more competition/more foreign ownership -regional economic integration bringing diff. countries closer by reducing/eliminating obstacles of inter. movement of capital/labour/goods/service using trade blocs, free trade area, customs union, common market, economic union -trade blocs increase international trade/investment for improving economy/living standards of consumers -free trade area involves removal of tariffs/non-tariff trade barriers (subsidies, quotas) among member countries (e.g. NAFTA and APEC) with great member autonomy on dealing with non-members of agreement -customs union involves removal of trade barriers among member countries with less member autonomy on dealing with non-member countries where members will generate trade policy to deal with non-members -common market integration built on both free trade area and customs unions, by removing trade barriers/having common trade policy for non- members but members also co-operate in economic and labour policy and will also generate a freer flow of labour/capital across border -economic union combined integration of free trade area, customs union, and common market, with greater concern for economic policy among members with harmonized fiscal/monetary/tax policies -most world trade occurs in 3 major trade blocs (European Union (EU), Asian Trading Bloc (ASEAN and APEC), and North American Trading Bloc (NAFTA) -European Union (EU) common market with a single currency (euro)/free flow of money/people/products/services b/w 27 members to create borderless Europe non-members are at a loss by policies that put up tariffs/quotas preventing U.S or Japan from entering or at gain from joint ventures/demand for exports -common marketgroup of countries who remove all tariffs/non-tariff barriers to trade -ASEAN Association of South- East Asian Nations, major trade bloc in Asia for co- operation in industry/trade among members and are protected from non-members by trade-barriers -APEC The Asia-Pacific Economic Co-operation region has 21 integrated countries, including U.S, China, Japan for greater economic cooperation/freer trade -NAFTA North American Free Trade Agreement b/w U.S, Canada, Mexico for eliminating barriers tariff barriers on goods/services and produce common market among members NAFTA affects several aspects of countries (trade, employment, businesses, culture, and consumers) -NAFTA on trade 75% increase in trade b/w Canada and U.S, US being Canada’s major trading partner with 80% trades, transforming economies of members, but Canada is too dependent on U.S for export of raw materials (low tech. exports) and we need to come out of NAFTA and focus on other biggies -NAFTA on employment unclear whether NAFTA creates/destroys jobs, but Canada cannot compete with U.S imports therefore lose jobs and Canadians lose manufacturing jobs to Mexico b/c of low cost labour. Canadians are focusing more on service sectors/low-skill/low-wage jobs, with lower job security -NAFTA on businesses Canadians forced out of business from U.S imports/companies who establish subsidiaries -NAFTA on culture according to Statistics Canada, Canadian cultural exports exceed 4.5 billion and royalty comes in from music than leaving. Some say free trade will destruct unique Canadian culture with increased foreign domination (e.g. American based media/entertainment) -NAFTA on consumers gives Canada goods/services to sell at lower costs by reduction of trade barriers and consumers given more choice/ less expensive alternatives Tanya Sivamanoharan Mon, Dec 3/2012 ADMNS- chap#7 notes CHAPTER# 7- THE POLITICAL CONTEXT -Canadian and most other country’s economies referred as mixed system -mixed system possess as a capitalist economy with government in import. role, a mix of capitalism/communism -business enterprise system systems in all developed countries with governments/businesses/or both that decide 1.what goods/services are produced/distributed to society 2.how goods/service are produced/distributed to society -capitalism allows indiv./businesses responsibility for allocation of resources, based on fundamental principles (rights of individual, rights of private property, competition, role of government) -rights of individual individual has right to pursue self-interest to make profits with government regulations on how businesses can conduct their affairs -rights of private property individuals have right to own land/labour/capital, with gov. taxations/nationalizing products (e.g. health care) for redistribution of wealth -competitioncapitalism provokes competition, where it is the invisible-hand that makes businesses provide goods/services at fair costs -role of government restricted government interference in capitalist business enterprise system -communism opposite of capitalism, placing responsibility on gov. for allocation of society’s resources -governments influence societies in many ways (collecting taxes, acting as business owner, regulating business sectors, safeguarding Canadian interests) (pp. 144) -tax collectorrevenue taxes (indiv. income tax, corporate income tax, sales tax, property tax) collected to fund gov. services/programs. There are also 2 major restrictive/regulatory taxes to control/curb use of specific products -restrictive/regulatory taxes 1. excise taxes to selective goods/services gov. wants to restrict (tobacco) and 2. customs duties/tariffs (exports/imports) -business owner role gov. act as business owners through crown corporations -crown corporations aka public relations is an organization managed by board of directors and accountable through minister/parliament for operations, can be federal (Canada Post)/municipal (LCBO)  established for many reasons (to implement public policies, protect industries vital to economy, provide special services not available to private enterprises, nationalize “natural monopolies”) -implement public policies help facilitate gov. policies concerning Canadian transportation/ domestic oil industry (e.g. Air Canada/Petro-Canada) -protect industries vital to economy to safeguard investments/enhance quality of life for society (Canadian National Railways) -provide special services unavailable to private businesses when no other firm is willing/able to provide product/service (e.g. Air Canada/Bank of Canada) -nationalize “natural monopolies” government took over monopolies like public utilities (e.g. electricity, water, sewage, road construction) -regulating business sectors there is a wide scope of gov. regulation in business activities (pp.147) for consumer (public interests)/environmental (imperfect competition) protection/regulations -imperfect competition opp. of perfect competition, occurs when fewer than optimal # of competitors exist, less competitors=less pressure to make best goods/services at best prices/less efficient use of resources/less efficiency/less innovation/fewer goods/services  gov. will intervene so businesses unable to compete will be replaced by efficient competitors -public interests gov. can protect public by controlling operations of enterprises (e.g. regulation of telephone firms) -governments influence business in many ways (spending on private businesses, assisting private businesses, safeguarding Canadian businesses) (pp.144) -assisting private businesses  gov. gets involved in successful businesses to promote/protect industries (e.g. tariffs/incentive programs for new products/greater export activities) so they operate in ways desired by gov. and to promote new employment  can be direct/indirect assistance (e.g. grants, loans, info., advice, bailouts, subsidies) -bailouts gov. assistance (liquidity as loan/grant) to bankrupt organization/industry to prevent financial collapse/ruptured economy -subsidies gov. assistance (from consumer taxes) as cash payments. low-interest loans, potentially reduced taxes to domestic firms to compete against foreign firms. Can be a form of non-tariff trade barrier/cause unfair competition -government protection in Canadian business in a global context has increased (e.g. nurturing young industries, encouraging direct foreign investment, maintaining favourable balance of trade, protecting against unfair global competition, maintaining adequate levels of domestic employment, offering subsidies to compete globally) -nurturing young industrieshelp young industry grow/develop so industry maintains domestic market share. Can discourage firms from increased competitiveness/innovations and consumers might not want to buy expensive domestic goods -encouraging direct foreign investmentgov. encourage foreign firms to directly invest in country by reducing imports to increase jobs/capital/growth -maintaining favourable balance of trade gov. influence exports/imports (by tariffs/quotas) or subsidizing for increased exports to keep trade surplus/avoid trade deficit -protecting domestic business from unfair competition gov. prevent foreign companies from dumping their goods/services in their country by adding anti-dumping tariffs -dumping pricing products below cost at loss/below target country’s cost -maintaining adequate levels of domestic employmentimports may cause domestic firms to go bankrupt thus loss of jobs, so they grant s subsidies as tariffs/protectionist policies are not too feasible -offering subsidies to compete globally to maintain employment/assist business in global market through cash, low- interest loans, tax breaks is becoming controversial giving domestic businesses unfair advantage -Canadian gov. intervention is high compared to U.S so they are slowly withdrawing from being involved in public businesses -gov. has been regulating almost 1/3 of economy, but since 1980s the trend is deregulation -deregulation involves reduction in # of laws/regulations affecting business activity/ other gov. controls and influences  deregulation benefits consumers by increases competition and lower prices but also increases consumer risks by lesser quality/ higher prices with no gov. limits  studies show deregulation has improved productivity, reduced costs, more innovation, U.S banking went up 300% in productivity  supporters if deregulations say eliminating price/entry restrictions increase competition and consumers will benefit from lower costs/good quality  however deregulation is far from universal and is controversial -privatizationdenationalizing gov. involvement in operation, management, ownership of activities to private sectors. Includes selling crown corps. (e.g. selling Air Canada), contracting gov. jobs to private companies (e.g. managing hospitals).  privatizing occurs b/c the of beliefs in the power of competition as control mech., businesses can operate more efficiently, less public involvement, financial benefits from selling gov. assets  challenges for going private include stakeholders objectives, employees’ objectives, publics’ objectives -power of competition as control mechanisms privatization guided by view that the force of market competition will foster efficiency/innovation in an industry, which would compete against foreign competition and bring consumers best products/services or bring foreign investors into country for financial/tech. resources -businesses operate more efficiently private sectors will increase productivity than public sectors unlike crown corp. that focus on social/political interests and not profit/efficiency -less public involvementwhen gov. is no longer needed to enforce public policy goals, organization can be handed to private sectors (e.g. Air Canada) -financial benefits from selling gov. assets money can be used on other things/gov. deficit reductions/attract foreign investment/maintaining crown corps. are expensive -stakeholder objectives not all parties involved in privatization equally agree, selling crown corps. is difficult as it must comply with most stakeholders -employee objectives employees are at stake of losing jobs/layoffs thus disagree (e.g. hydro), however studies show employment levels are seldom changed after privatization -public objectives public concerned for their “protection” Tanya Sivamanoharan Tues, Dec 4/12 AMDNS- chap#8 notes CHAPTER# 8- THE SOCIETAL CONTEXT -business and the global society anti-globalization critics say uncontrolled international trade causes undesirable outcomes (e.g. low wages, poverty, poor working conditions, abandoned farmers, pollution) known as “race to the bottom” -many anti-globalization protestors aim 2 international organizations (the World Bank/the International Monetary Fund (IMF)) -World Bank made of 2 institutions (the international Bank for Reconstruction and Development (IBRD) focused on reducing poverty in middle- income countries/the International Developmental Agency (IDA)) focused on world’s poorest countries  loan money at low interest/no interest to countries for economic development for sustainable globalization -protestors do not like the World Bank’s hands-off policies for developing countries -hands-off policies for developing countries world bank sets “free market” conditions on loans/assistance to developing countries. -debate whether globalization is good (rising living standards)/evil (poverty) -voluntary trade motivated by self-interest/profits from innovation/mutually beneficial gains -connections to bigger international markets cause new threats/creative destruct/causing winners and losers -sweatshops vs. farms workers being exploited for corporate profits by low pay/poor working conditions but workers in developing countries prefer factories as opposed to working in farms as it is an improved standard of living for them -sweatshops throughout history sweatshops throughout history have had an overall increase in standards of living -there are still indiv. groups within a country who win/lose (e.g. once Jamaica reduced trade barriers for milk, local dairy farmers lost/Jamaica’s dairy production fell, but poor children who got cheaper milk won) -Stiglitz prefers the hand-on approach for gov. and global markets, with important/limited role for the gov. -social safety nets hands-on gov. help maintain social safety by supporting economic welfare of citizens affected by trade/creative destruction (e.g. unemployment funds for the unemployed/health care/employment agencies) opening doors to trouble opportunity costs of allowing the gov. to act hands-on brings the arguments presented for the hands-off approach -the economist magazine prefers the hands-off approach/free markets/globalization, b/c they view that helping firms hands-on for failure in market competition against the same competition is pointless -buried in wool England gov. in 1701 banned import of cotton from India to protect wool industry but entrepreneurs with innovative profit- seeking forces set-up their own cotton factories in England and made the gov. ban look shit -specialization/trade/economic growth cause winner/losers whether in country or across globe with either hands-off/hand-on approach of gov. -competitive forces of creative destruction normally cause higher standards of living but can also cause poverty/unemployment -hands-on approach important/limited gov. involvement is good to maintain social safety nets for citizens affected (unemployment) by trades, economic growth -hands-off approach gov. interference in markets and making tariffs/quotas/ subsidies will harm firms/workers with competing imports/and disadvantage firms/workers in poor countries -compare market failure/gov. failure (pp.194) Tanya Sivamanoharan Tues, Dec 4/12 ADMNS- chap# 9 notes CHAPTER#9- RESPONDING TO THE ENVIR.: DEVELOPING BUSINESS STRATEGY -strategic management consists of analysis (external/internal envir.), decisions (type of strategy), implementations (execute strategy), evaluations (outcomes) a firm undertakes to create/sustain comparative advantage to enhance performance/survival ongoing where managers constantly analyze external/internal environments and take actions to pursue short/long-term goals -strategies plans made/actions taken to help firms obtain intended goal -industry group of organizations/firms that share similar resource requirements (e.g. raw materials, labour, technology, customers) -external environment 5 major groups associated with an industry known as the 5-force model -5-force model 5 forces (threats of new entrants, bargaining power of suppliers, bargaining pow
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