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GMS 200 (566)
Chapter 3


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Global Management Studies
GMS 200
Peter Rambert

CHAPTER 3 GLOBAL DIMENSIONS OF MANAGEMENT MANAGEMENT & GLOBALIZATION • Global economy: resources, markets and competition are worldwide in scope not national or local • Globalization: growing interdependence among elements of the global economy Global Management • Involves managing operations in more than one country • Global manager: culturally aware and informed on international affairs Why Companies go Global • Profits- greater profit potential • Customers- nerw markets to sell products • Suppliers- access to needed products and services • Capital- access to financial resources • Labour- access to lower labour costs How Companies go Global • Market entry strategies: involve sale of G&S to foreign markets without expensive investments ie. Global sourcing, exporing and importing, licensing and franchising • Direct investment strategies: require major capital commitments but alos create rights of ownership and control over operations in foreign country ie. Joint ventures and foreign subsidiaries Global Sourcing • Materials or services are purchased around the world for local use Licensing and Franchising • Licensing agreement: local firm pays a fee to a foreign firm for rights to make or sell its products • Franchising: a fees paid to a foreign business for rights ot locally operate using its name, branding and methods Joint Ventures and Strategic Alliances • Foreign direct investment: building, buying all or buying part ownership of a business in another country • Insourcing: job creation from FDI • Joint venture: operates in a foreign country through co-ownership by foreign and local partners agree to pool resources, share risks • type of global strategic alliance: partnership in which foreign and domestic firms share resources and knowledge for mutual gains Foreign Subsidiaries • risks and problems with strategic alliances and joint ventures solution full ownership of foreign operation  foreign subsidiary • local operation completely owned by a foreign firm • set up by Greenfield investments: builds an entirely new operation • set up by acquisition: outside firm purchases a local operation entirely GLOBAL BUSINESS ENVIRONMENTS Legal & Political Systems • note the differences in legal and political systems • political risks: potential loss in value of a foreign investment due to instability and political changes in the host country • political risks can’t be prevented but they can be anticipated political risk analysis • Global managers should be ready to deal with difference between home country and hsot country laws and politics occupational health and safety, employement equity, sexual harassement • Common legal problems: incorporation practices and business ownership, negotiating and implementing contracts with foreign parties, handling foreign exchange, intellectual property rights Trade Agreements and Trade Barriers • When intl businesses feel they are being mistreated in foreign country or local companies feel foreiegn competitors are disadvantaging them they might take their case to WTO – World Trade Organization • WTO: organization whose member nations agree to negotiate and resolve disputes about tariffs and trade restrictions. • Promotes free trade and open markets around the world • Controversies can still develop between member countries within the WTO framework • Members supposed to give each other most favoured nation status- the most favourable treatment for imports and expors  trade barriers still exist Regional Economic Alliances • NAFTA – North American Free Trade Agreement • EU- European Union – 27 countries • APEC – Asia Pacific Economic Cooperation – promote free trade and investment in the Pacific region • ASEAN – Association of Southeast Asian Nations – 10 nations of SE Asia- promote economic growth and progress • SADC – South Africa Development Community – 14 countries of South Africa linked in trade and economic development efforts. Objectives include harmonizing and rationalizing strategies for sustainable development among member countries GLOBAL BUSINESS PG 82 • Global corporations: aka Multinational corporations (MNCs) is a multinational business with extensive operations in more than one foreign country (walmart, BMW, nestle) Types of Global Businesses • Transnational corporations: operate as borderless firms with worldwide presences and without being identified with one national home • Seek total integration of global operations • Operate across borders without home based prejudices • Make major decisions from a global perspective • Distribute work among world wide points of excellence • Employ senior executives from many different countries Pros and Cons of Global Cor
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