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ADMS1000 Final Exam Review.doc

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York University
Administrative Studies
ADMS 1000
Eytan Lasry

ch6 define globalization: the integration of world economy • • the integration of world markets • the free movement of goods/ services, labor capitals are critical to globalization • increased cross border transaction, FDI, economic independence the strategies of doing business abroad: • exporting goods/ services • contractual agreements and strategic alliances: I. outsourcing II. licensing/ franchising III. marketing/ distribution agreements • FDI: I. joint ventures II. wholly-owned subsidiaries transnational corporations: • the nationality of organization is unclear • there is no allegiance to particular country • financial, technological, human, capital are easily transferred between countries • ownership and management are international • firms follow the profits advantages of MNC’s and TNC’s • economic development: create employment • brings management expertise • introduce new technology and relavent training • encourage international trade • unites different countries and cultures disadvantages of MNC’s and TNC’s • no allegiance to host country • mobile profits • power hold in home country: R&D • difficult to control international trade: the purchase, sale or exchange goods/ services across countries the logic of trade: encourage nations to specialize in goods/ services that they are most efficient and trade with other countries for goods/ services not produce domestically (comparative advantage) mercantilism: encourage trade surpluses where exports of goods and services exceeds imports 1 colonial power: conquered countries gain access to raw materials and markets for finished products trade protectionism: protect domestic economies through import restrictions I. tariffs: tax placed on goods entering a country II. quotas: the limit amount of imports III. subsidies to domestic industries/ firm to encourage exports problems of mercantilism and trade protectionism: • trade retaliation increased costs to customers • • limits competitiveness of domestic firms tariffs: • impact on exporting country: lower production, job losses, economic decline • impact on importing country: I. less competition for domestic firms, risen sales, prices, employment, spending, government revenues II. increased costs to customers, less spending on other industries, economic decline, costs of imposing and collecting tariffs, possible costs of retaliation and trade wars objectives of NAFTA: • reduce/ eliminate tariff barriers on most all goods/ services traded • facilitate cross-country investment • establish rules for government subsidies • establish universal rules for health, safety and environment • provide a common market among members NAFTA impact on trade: Pro: increased trade Cons: • Canada is still a resource-heavy economy with insufficient high-tech exports • too dependent on the US • trade is very sensitive on current fluctuations NAFTA impact on employment and business: Pro: increased competition forces domestic businesses to improve efficiency, innovation and standards and to fouce on core industries where we have a competitive advantage and abort inefficient operations Con: competition may be too strong - forcing bankruptcy and job losses given US firms’ productivity advantage and cheaper Mexican labor NAFTA impact on culture: Pro: does not affect Canadian culture, cultural exports 2 Con: may destroy Canadian culture, become a subsidiary of USA, competition from American Media affects Canadian cultural capital NAFTA impact on Canadian competitiveness and customers: Pro: more exposure to competition, more choice for customers, cheaper inputs, further market opportunities Con: no increased in productivity, unable to match the US productivity, early success based on weak Canadian dollar - cheaper production and valve e.g. film industry case: why is this about globalization/ protectionism? foreign ownership restrictions are protectionist measure and counter to globalization i.e. they prevent free flow of money potential risks/ benefits? • more competition, better prices, selection, innovation foreign competition and greater control by large foreign firms lead to fewer jobs in • Canada, Canadian culture will be lost ch8 the logic of free trade: • specialization, comparative advantage creates wealth and raises living standars for all • removing protectionist policies and subsidies should help developing countries compete with developed economies • beware of implementing free trade too rapidly to allow businesses in developing countries to adapt to foreign competition - ease into free trade gradually the role of governments: • remove barriers to trade - including domestic subsidies to powerful lobby groups like farmers • provide a social safety net for those left behind by free trade and globalization the ethics of globalization: how to ensure that developing countries benefit from free trade and globalization? • allow time for their domestic industries to adapt to multinational competition - do not remove trade barriers too quickly • remove tariffs and subsidies protecting industries in developed countries too - free trade is about reciprocity • ensure government in developing countries to provide a social safety net to its needy citizens ch7 3 the Canadian enterprise system: Canadian economy is a mixed market system: essential capitalist but with a strong government influence in various sectors of the economy and nearly complete control of the health care and education sectors taxation: • collection of revenue taxes (individual, corporation, sales, property) • collection of restrictive/ regulatory taxes (excise & customs duties/ tariffs ) e.g. tobacco, alcohol Crown Corporations: • CCs “natural monopolies” e.g. Hydro, Gas • CCs provide services that private enterprise would not otherwise pursue e.g. Canada Post CCs allow more government control e.g. LCBO • • CCs implement public policy and safeguard national interest e.g. Bank of Canada • CCs protect vital industries e.g. CBC • CCs may be federal or provincial number of CCs has been decreasing along with the number of employees • • LCBO is a successful CC business and a regulatory system on alcohol consumption Regulations: • imposes constraint to modify economic behavior in the private sector e.g. energy, health & safety, labor, food, customers • imperfect competition: intervention ensures appropriate provision of goods/ services • public interest: protect customers through regulation, limitations imposed on business e.g. foreign ownership, advertising, pricing bailouts should the government bail out large corporations that are failing? Pro: • bailouts are occasionally necessary when the ups and downs in the economy become so severe that chaos looms • necessary to protect jobs, if the expenditures stopped the economy would suffer greatly Con: • government should not prop up business that are in trouble, if the company is not doing well it should be allowed to fail • cost Canadian taxpayers a high price to pay for each job • the bailouts in one industry will likely lead companies in other industries to request bailouts • bailout money will ever be repaid subsidies should the government continue to subsidize the company? 4 Pro: • maintaining domestic labor force • keep a trade balance • nurturing young industries • encourage FDI • protecting against unfair trade • subsidizing global business activities Con: • whether in the domestic or global context, business should required to manage their costs without external help or handouts from the government, this is part of the requirement of fair competition • subsidies are not merely harmless forms of assistance to business; rather, constitute a form of trade barrier, just like tariffs, and they create unfair competition • market decisions should be made by investors not by politicians • corporate welfare is not driven by market imperatives • picking market winners and losers is not a job suited for government officials corporate welfare is unfair • • corporate welfare undermines public confidence in our decision-makers • corporate welfare runs contrary to free and open markets • corporate welfare creates a culture of dependency • corporate welfare is not a public good • corporate welfare leads to higher taxes should Canadian government protect Canadian corporations from foreign ownership? Pro: • core assets and industries should be protected • national security, cultural industries, servicing unprofitable and remote communities • head office in Canada will ensure jobs, R&D, spending on suppliers and related services and remains Con: • corporations are driven by profits not nationalistic motives • protected firms are less efficient, productive, innovative, competitive and costs to customers are likely increased • violates spirit and letter in free trade laws and agreements and may invite retaliation deregulation: • regulation: though still prominent, is decreasing in transport, energy, communications and financial services • regulation: heath and safety, environmental and employment issues are increasing pro: more competition, better prices, selection for customers con: lower quality, exploiting to customers priva
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