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Week 7 & 8 - The Global Context (Part 1 & 2).docx

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York University
Administrative Studies
ADMS 1000
Eytan Lasry

ADMS 1000 October 15 & 22, 2013 WEEK 7 & 8: THE GLOBAL CONTEXT Globalization • What is globalization o A process involving the integration of world economies – facilitated by bodies such as NAFTA, EU, APEC, ASEAN etc. o The integration of world markets o Free movement of goods/services, capital and labour is critical to globalization o Increased cross border transactions, FDI & economic interdependence • What strategies can firms use to do business abroad? o Exporting goods/services o Contractual agreements and Strategic Alliances:  Outsourcing  Licensing/Franchising  Marketing/distribution agreements o Foreign Direct Investment:  Joint ventures  Wholly-owned subsidiaries (greenfield ventures or acquisitions) • Transnational Corporations o Indicates that the nationality of the organization is unclear o There is no allegiance to a particular country or location  e.g. Nestle, Coca Cola, McDonalds… o Financial, technological, human…capital are easily transferred between countries o Ownership & management are international o Firms follow the profits!! ADMS 1000 October 15 & 22, 2013 BENEFITS THREATS Economic development No allegiance to host country e.g. creates employment Brings management expertise Mobile profits Introduces new technology Power held in home country e.g. R & D investments & relevant training Encourages international trade Difficult to control Unites different countries and cultures International Trade • International Trade: The purchase, sale or exchange of goods or services across countries. o The Logic of Trade: encourages nations to specialize in goods/services in which they are most efficient and trade with other countries for goods/services not produced domestically.  Specialize in what we’re good at because we can’t do everything domestically  comparative advantage • History of Int’l Trade o Mercantilism (1500-1800)  Encourages trade surpluses where exports of goods or services exceed imports. o Trade Protectionism  Protects domestic economies through import restrictions (ex: tariff, quota, subsidies) o What’s the problem with mercantilism and protectionism?  Trade retaliation  Increased costs to consumers  Limits competitiveness of domestic firms o Impact on exporting country: ADMS 1000 October 15 & 22
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