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Chapter 6-10

ADMS 1000 - Chapter 6-10

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Administrative Studies
ADMS 1000
Eytan Lasry

CHPATER 6 What is Integration of markets and economies Also known as Globalization Integration of world economies is the presence of trade blocs reflects the accelerating pace with which nations are integrating their economies For example NAFTA is a freetrade bloc consisting of Canada the United States and Mexico The EU groups 25 countries while APEC Asian Pacific Economic Cooperation consists of 21 nations forming a freetrade zone around the pacificIntegration of world markets is the notion that consumer preferences are converging around the world Organizations are increasingly marketing their goods and services worldwide Though local modifications may be made to tailor the product to the local consumer there is a push toward global products On the other side production is increasingly becoming a global affair Businesses will set up operations wherever it is least costly to do soGlobalization can be considered a process that is expanding the degree and forms of crossborder transactions among people assets goods and services Globalization refers to the growth in direct foreign investment in regions across the worldGlobalization reflects the shift toward increasing economic interdependence the process of generating one single world economic system or a global economyWhat is free flow of goodsservices capital and labour Free flow of goodsservices capital and labour refers to the removal of trade barriers Trade barriers are governmentinduced restrictions on international trade For example tariffs taxes importexport licenses subsidies embargo etc When these are remove which they have been in some parts of the world ie NAFTA this is refers to as free flow of goodsservices capital and labour This is done to increase foreign countries to do business easier with the country without trade barriers Free trade is based on the objective of open markets where a level playing field is created for businesses in one country to compete fairly against businesses in other countries for the sale of their products or services What is a Multinational Corporations A multinational corporation is a type of global business which engages directly in some form of international business activity including such activities as exporting importing or international production A business that has direct investments whether in the form of marketing or manufacturing facilities in a least two different countries is specifically referred to as a multinational corporation In other words MNCs are business enterprises that control assets factories etc operated either as branch offices or affiliates in two or more foreign countries An MNC generates products or services through its affiliates in several countries and it maintains control over the operations of those affiliates and manages from a global perspectiveWhat are some benefits and threats BenefitsEncourages economic developmentOffers management expertiseIntroduces new technologies Provides financial support to underdeveloped regions of the worldCreates employmentEncourages international trade through a companys access to different markets it is relatively easy to produce goods in one country and distribute them in another country through a subsidiary or foreign affiliateBrings different countries closer together Facilitates global cooperation and worldwide economic developmentThreatsMNCs do not have any particular allegiance or commitment to their host countryProfits made by an MNC do not necessarily remain within the host country but may be transferred out to other locations depending on where the MNC feels the funds are most neededDecision making and other key functions of MNCs may be highly centralized in the home country so that even though other operations are performed in the host country they do not necessarily include things like research and development and strategic planning Difficulty in the ability to control and hold MNCs accountable can create serious ethical concerns for the host country What is International TradeInternational trade essentially involves the purchase sale or exchange of goods or services across countries This can be distinguished from domestic trade which involves trade between provinces cities or regions within a country What is Mercantilism The trade theory underlying economic thinking from the period ranging from about 1500 to 1800 is referred to as mercantilism Mercantilism essentially is the economic policy of accumulating this financial wealth through trade surpluses Trade surpluses come when a countrys exports exceed its imports which lead to more money entering the country than leaving
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