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GMS 200 (566)
Chapter 5

Chapter 5 Notes

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Global Management Studies
GMS 200
Shavin Malhotra

Chapter 5: Global Dimensions of Management International Management and Globalization • Global Economy: resources, markets, and competition are worldwide in scope • Globalization: the process of growing interdependence among elements of the global economy • International Management: Involves managing operations in more than one country • Global Manager: Culturally aware and informed about international affairs Europe • European Union: a political and economic alliance of European countries • Euro: the common European currency The Americas • NAFTA: The North American Free Trade Agreement linking Canada, the United States, and Mexico in an economic alliance • Maquiladora: foreign manufacturing plants that operate in Mexico with special privileges Asia and the Pacific Rim • China and India becoming powerhouses • Similarities: economies that are growing at more than three times the average rate of other industrialized countries, big populations, • Asian countries represent a third of the global marketplace Africa • Experiencing economic recovery • Good resources • Outsourcing www.notesolution.com International Business Challenges • International Business: conducts commercial transactions across national boundaries Why Companies go International 1. Profits 2. Customers 3. Suppliers 4. Captial 5. Labour Forms of International Business • Market entry strategies: involve the sale of goods or services to foreign markets but do not require expensive capital investments • Direct investment strategies: require major capital commitments but create rights of ownership and control over operations to the foreign country Market Entry Strategies • Global Sourcing: materials or services are purchased around the world for local use • Exporting: local products are sold abroad • Importing: process of acquiring products abroad and selling them in domestic markets • Licensing agreement: one firm pas a fee for rights to make or sell another company’s products • Franchising: a fee is paid for rights to use another firm’s name and operating methods Direct Investment Strategies • Joint ventures: operates in a foreign country through co-ownership with local partners www.notesolution.com o Equity purchases and/or direct investments by a foreign partner o Joining together to make an entirely new business o Strategic alliances that help partners gain things through co-operation that otherwise would be difficult to achieve independently • Foreign subsidiary: is a local operation completely owned by a foreign firm • Greenfield ventures: formed through direct investment in start-up operations Complications in the Global Business Environment • Competitive • Different legal environments • World Trade Organization: member nations agree to negotiate and resolve disputes about tariffs and trade restrictions • Most favoured nation status: gives a trading partner most favourable treatement for imports and exports • Protectionism: is a call for tariffs and favourable treatments to protect domestic firms from foreign competition Multinational Corporations • Multinational corporation: a business with extensive international operations in more than one foreign country Types of Multinational Corporations • Transnational corporation: is an MNC that operates worldwide on a borderless basis Pros and Cons of Multinational Corporations Host Country Issues • Potential host-country benefits: o Larger tax bases o Increased employment opportunities www.notesolution.com o Technology transfers o Introduction of new industries o Development of local resources • Potential host-country costs: o Complaints that MNCs extract excessive profits o Dominate the local economy o Interfere with the local government o Do not respect local customs o Fail to help domestic firms develop o Hire the most talented of local personnel o Do not transfer their most advanced technologies Home Country Issues • Outsourcing, cut backs, closes domestic operations to shift work to lower-cost international destinations Ethical Issues for Multinational Corporations • Corruption: involves illegal practices to further one’s business interests • Sweatshops: employ workers at very low wages for long hours, and in poor working conditions • Child Labour: is the full-time employment of children for work otherwise done by adults • Sustainable development: meets the needs of the present without hurting
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