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The Global Context I (Session 7).docx

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York University
Administrative Studies
ADMS 1000
Peter Modir

The Global Context I What is Globalization? -One that involves many more players than a local business and its domestic market. -Involves many stakeholders, including domestic and foreign competitors, workers industries, governments, national cultures and economies. -Globalization is… -A process involving integration and interdependence of world economies. -A process involving integration and interdependence of world markets- consumer preferences are converging around the world, marketing their goods and services worldwide, Businesses will set up operations wherever it is least costly to do so.  Globalization can be considered a process that is expanding the degree and forms of cross border transactions among people, assets, goods and services.  Refers to the growth of in direct foreign investment in regions across the world.  Reflects the shift toward increasing economic interdependence: the process of generating one, single, world economic system or global economy. Sources Encouraging Global Business Activity -Pull Factors- the reasons a business would gain from entering the international context. (What is happening in other countries) -Push Factors- are forces that act upon all businesses to create an environment where competing successfully means competing globally.(What is happening in Canada.) Pull Factors: -Potential for sales growth. -Obtaining needed resources. (people, materials, technology) -Reduce Trade barriers. -Increased Democracy -Help business expand its market and increase sales. -Large portion of sales among the worlds largest firms generated from outside the home country. Ex; Starbucks Corp. -Having the world as your market offers almost limitless potential beyond domestic consumers. -Access to foreign consumers also may soften the negative effects of domestic downturns in demand for the businesses’ product of service. -Businesses may choose to engage in global businesses to obtain resources that are unavailable, too costly with in domestic borders. -Acquiring foreign imports is a case of obtaining needed resources. -Locating your businesses in developed or undeveloped nations means to access cheap labour. Push Factors: -The force of competition: -Domestic economies are increasingly being filled with foreign competitors in many industries. -Businesses must compete against foreign and domestic competitors. -Business may be pushed into a global business because it forced to compete with a foreign competitor. -First mover advantage- benefit of being the first to establish positions in world markets. -Later entries into foreign markets may have difficulties establishing them selves. -Shift toward Democracy (Cross cultural Business Talent): -Reduction is Trade Barriers: -Growth in businesses due to the reduction in trade and investment restrictions. -Improvements in Technology: -Have efficiently facilitated cross-border transaction. -Innovations, Transportation have made it easier to transfer information, products, services, capital and human resources around the world. Channels of Globalization: -at lower level of interconnectedness, a business can export or import goods/services to or from other countries. -at higher level, may choose to outsource some aspect of business operations, may choose to license some aspect, arrange for franchise operations into foreign territory . Global Business Channels. ( Exporting/Importing, Outsourcing, Licensing/Franchising, Direct Investments in Foreign Operations, Joint Ventures/Strategic Alliances, Mergers/Acquisitions, Establishing Subsidiaries.) Exporting And Importing: -Likely to be involved in importing and exporting then any other business activity. -Merchandise exports: Physical goods transferred out of country -Merchandise imports: Goods brought into country. -Service exports or imports: banking, insurance or management services can be preformed at international level, use of company assets, things like patents, trademarks, copyrights or expertise, arranged through licensing agreements. -Canada exports over 40% of production, (major trading nation) -Canada is 5 largest exporter/importer which means they keep generating jobs. -Largest trading partners with U.S, sending more raw commodities then manufactured goods to U.S. Outsourcing/Offshoring: -Involves hiring external organizations to conduct work in certain functions of the company. Ex; Payroll, accounting, and legal work can be assigned to outsourced staff. -Going global- the fear that higher-paying North American jobs will be lost if business decides to outsource manufacturing functions to cheaply paid labour in third worlds countries. -May be profit making but there is also a great amount of jobs that would be lost, even if there loyal employees, anti-offshoring claiming that all they care about is profit. Licensing and Franchising Arrangements: -Arrangement where by owner of product or process is paid a fee or royalty from another company for granting permission to produce or distribute the product or process. -Fees paid to foreign firms in return for the performance of a service would result in a service import. -Fees earned by businesses would result in serv
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