GMS Chapter 3
Global economy: resources, markets and competition are worldwide in
Globalization: is the process of growing interdependence among elements of
the global economy.
Global Management: involves managing operations in more then one
Global manager: is culturally aware and informed on international affairs.
Global business: conducts commercial transactions across national
Global sourcing: Materials or services are purchased around the world for
Exporting: local products are sold abroad foreign customers
Importing: involves the selling in domestic markets of products acquired
Licensing agreement: A local firm pays a foreign firm for rights to make or
sell its products
Franchising: A fee is paid to a foreign business for rights to locally operate
using its name, branding and methods
Foreign direct investments: building, buying all, or buying part ownership of
a business in another country.
Insourcing: A job creation through foreign directs investment.
A joint venture: operates in a foreign country through co-ownership by
foreign and local partners.
Global strategic alliance: is a partnership in which foreign and domestic firms
share resources and knowledge for mutual gains.
Foreign subsidiary: is a local operation completely owed by a foreign firm.
Greenfield investments: Builds an entirely new operation in a foreign
Political risk: is the potential loss in value of a foreign investment due to
instability and political changes in the host country.
Political risk analysis: Tries to forecast political distributions that can
threaten the value of a foreign investment.
World Trade Organization: member nations agree to negotiate and resolve
disputes about tariffs and trade restrictions. Sharpen competition, motivate
innovation, and breed success.
Most favored nation status: Gives a trading partner most favorable treatment
for imports and exports
Tariffs: Taxes government levy on imports for abroad.
Protectionism: is a call for tariffs and favorable treatment to protect domestic
firms from foreign competition.
NAFTA: is the North American Free Trade Agreement linking Canada, United
States and Mexico in an economic alliance. European Union: a political and economic alliance of European countries.
The Euro: is the common European currency.
Global Corporations: or MNC is a multinational business with extensive
operations in more then one country.
A transnational corporation: is a MNC that operates worldwide on a
Sustainable development: meets the needs for the present without hurting
Culture: is a shared set of beliefs, values and patterns of behavior common in
a group of people.
Culture shock: is the confusion and discomfort a person experiences when is
an unfamiliar culture.
Ethnocentrism: is the tendency to consider ones culture superior to others.
Culture intelligence: is the ability to accept and adapt to new cultures.
Comparative management: studies how management practices differ among
countries and cultures.
Why companies go global:
Profits: Global operations offer greater profit potential.