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Chapter 3

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Ryerson University
Global Management Studies
GMS 200
Shavin Malhotra

GMS200 Chapter 3: Global Dimensions of Management Global economy – resources, markets and competition are worldwide in scope Globalization – process of growing interdependence among element of the global economy Reasons to go global = more profit, customers, suppliers, capital and labour Global Management – involves managing operations in more than one country Global manager – culturally aware and informed on international affairs Global business – conducts commercial transactions across national boundaries Types of market entry strategies : Global sourcing – material or services are purchase around the world for local use Exporting – local products are sold aboard to foreign customers Importing – involves the selling in domestic markets of products acquired aboard Licensing agreement – local firm pays a fee to foreign firm for rights to make or sell its products Franchising - a fee is paid to foreign business for rights to locally operate using its name, branding and methods Foreign direct investment – building, buying all, or buying part ownership of a business in another country Insourcing – job creation through foreign direct investment Joint venture – operates in foreign country through co-ownership by foreign and local partners (eg. Sharp and Sony) Global strategic alliance – partnership in which foreign and domestic firms share resources and knowledge for mutual gains (eg. Nokia + Microsoft) Foreign subsidiary – local operation completely owned by a foreign firm Greenfield investment – builds an entirely new operation in foreign country Political risk – potential loss in value of a foreign investment due to instability and political changes in hose country Political-risk analysis – tries to forecast political disruptions that can threaten the value of a foreign investment Trade Agreements: World Trade Organization (WTO) – member nations agree to negotiate and resolve disputes about tariffs and trade restrictions Most favoured nation status – gives a trading partner most favourable treatment for imports and exports Tariffs – taxes governments levy off imports from aboard Protectionism – call for tariffs and favourable treatments to protect domestic firms from foreign competition Regional Economic Alliances: North American Free Trade Agreement (NAFTA) – linking Canada, USA and Mexico in an economic alliance European Union – political and economic alliance of European countries GMS200 Chapter 3: Global Dimensions of Management Types of global business: Global corporation – MNC multinational business with extensive operation
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