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Midterm

GEO 334 Study Guide - Midterm Guide: Economic Stability, International Trade Administration, Offshoring


Department
Geography
Course Code
GEO 334
Professor
michael lecky
Study Guide
Midterm

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Chapter 1: Assessing the Environment- Political, Economic, Legal, Technological
Globalization
I. Globalization is due to use of technology, and accompanying uses in
international business, political developments that enable cross-border trade
agreements, and global competition for the growing numbers of consumers
around the world
II. 5 key global trends that provide challenges and opportunities
1. The changing balance of growth toward emerging markets compared
with developed ones, along with the growing number of middle-class
consumers in those areas
• The need for increased productivity and consumption in developed
countries to stimulate
their economies
• The increasing global interconnectivity—technologically and otherwise,
as previously
discussed—and in particular the phenomenon of an “electronically
flattened earth” that
gives rise to increased opportunity and fast-developing competition
• The increasing gap between demand and supply of natural resources, in
particular to
supply developing economies, along with the push for environmental
protection
• The challenge facing governments to develop policies for economic
growth and financial
Stability
Challenges to Globalization
-Backlash against capitalism and nations have strong nationalism
-Increased protectionism of high demand resources
-Need to make sure that your managers have international understanding and
experience
-Increasing pressure and publicity for companies to consider the social responsibility of
their actions

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-Companies now have increased pressure and publicity for their companies to do good
social responsibilities
Effects of Institutions on Global Trade
Two major groups supranational and national
Supranational- WTO World Trade Organization and ILO- International
Labor Organization
They promote the convergence of how international activities
should be conducted
National institutions, in contrast, play a role in creating favorable conditions for domestic firms
and may make it more difficult for foreign firms to compete in those countries. For example,
the stringent drug testing rules the U.S. Food and Drug Administration (FDA) require and the
anti-dumping rules the U.S. Department of Commerce’s International Trade Administration (ITA)
enforce act as entry barriers for foreign firms
SME’s are also affected by globalization ( Small and Medium Sized Enterprises)
They play a vital role in contributing to their national economiesthrough
employment, new job creation, development of new products and services, and
international operations, typically exporting
Offshoring- companies have been offshoring for cheaper labor, but now minimum wages
are increasing (ex. China)
U.S. manufacturing firms with more than $1billion sales are actively reshoring
European Union (EU) has 28 nations, unified, borderless market of approx 500 million
people
Four Tigers- Singapore, Hong Kong, Taiwan, and South Korea
NAFTA- United States, Canada, and Mexico- was to bring faster growth, more jobs,
better working conditions, and a cleaner environment for all as a result of
increased exports and trade
MERCOSUR- the 4th largest trading bloc after EU, NAFTA, ASEAN
-Brazil, Argentina, Paraguay, Uruguay, and Venezuela
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India- world’s largest democracy and the third largest economy- high level of skilled
workers- known as world’s services supplier- providing highly skilled and educated
workers to foriegn companies
Hard to do Business in China because
-China’s legal and regulatory system is arbitrary, protection of intellectual property rights
is critical
-China leans towards protecting its local firms- esp state owned ones, from imports and
promotes its exports
-Political goals and agendas often are valued more than commercially based decisions
-
The Legal Environment
-Consists of the local laws and legal systems of the countries in which an
international company operates
-And of international law, which governs relationships between sovereign
countries
-Political risks are any governmental action or politically motivated event
that could adversely affect the long-run profitability or value of a firm. The Middle East, as
we have seen, has traditionally been an unstable area where political risk heavily influences
business decisions.
-nationalization refers to the forced sale of equity/ MNC’s assets to local buyers, with some
compensation to the firm, perhaps leaving a minority ownership with the MNC
-Expropriation occurs when a local government seizes and provides inadequate com-
pensation for the foreign-owned assets of an MNC; when no compensation is provided, it is
confiscation.
-An event that affects all foreign firms doing business in a
country or region is called a macropolitical risk event. In many regions, terrorism poses a
severe and random political risk to company personnel and assets and can, obviously, inter-
rupt the conduct of business.
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