GMS 200 Chapter Notes - Chapter 3: Asia-Pacific Economic Cooperation, Joint Venture, Global Sourcing

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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
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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
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