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Political Science
110
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2. How these concepts affect managers as they make decisions, develop strategies. Business and trade are the lifeblood of the global economy. The future of any successful economy depends on the skill, imagination and the training of its own people the entrepreneurs who make business grow. Global trade is growing at unprecedented speed and is affecting all businesses, even those focused on the domestic market. To be successful, managers must be aware of the importance of regional trade agreements and supra-national organizations, and the effect of foreign exchange systems and the effect of fluctuations in foreign exchange. Students who major in international business develop an understanding of these important issues along with knowledge of the strategies used by multinational corporations and how to manage in a cross-cultural environment. 3. What are the fundamental mechanics and ingredients of the global economy? How they affect people, business and industries?
It is inseparable from the geography and ecology of Earth, and is therefore somewhat of a misnomer, since, while definitions and representations of the "world economy" vary widely, they must at a minimum exclude any consideration of resources or value based outside of the Earth. For example, while attempts could be made to calculate the value of currently unexploited mining opportunities in unclaimed territory in Antarctica, the same opportunities on Mars would not be considered a part of the world economyeven if currently exploited in some wayand could be considered of latent value only in the same way as uncreated intellectual property, such as a previously un conceived invention. 4. Explain the evolution of the economy and the complex commercial and political relationships among Asia, Europe, North America and the rest of the world. Evolution The carried limited World national The business on to War across since the If times international period into of the borders immemorial. trade witnessed international has until an or given International of But, the the the countries business past. had had The Business been been post of
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The economic benefits that greater openness to international trade or business bring are: Faster growth: economies that have in the past been open to foreign direct investments have developed at a much quicker pace than those economies closed to such investment. Cheaper imports: this is down to the simple fact that if we reduce the barriers imposed on imports (e.g. tariffs, quota, etc) then the imports will fall in price
New technologies: by having an open economy we can bring in new technology as it happens rather than trying to develop it internally
Spur of foreign competition: foreign competition will encourage domestic producers to increase efficiency. Carbaugh (1998) states that global competitiveness is a bit like golf, you get better by playing against people who are better than you.
Increase consumer income: multination will bring up average wage levels because if the multinationals were not there the domestic companies would pay less. Increased investment opportunities: with globalisation companies can move capital to whatever country offers the most attractive investment opportunity. This prevents capital being trapped in domestic economies earning poor returns. While the failing drivers of International business are: Increased costs: There are increased operating expenses including the establishment of facilities abroad, the hiring of additional staff, travelling of personnel, specialized transport networks, information and communication technology. Foreign regulations and standards: The firm may need to conform to new standards. This may require changes such as in the production process, inputs and packaging, incurring additional costs.
Delays in payments: International trade may cause delays in payments, adversely affecting the firm's cash flow. Complex organizational structure: International business usually requires changes to the firms operating structure. Training/retraining of management may be necessary to facilitate restructuring.
The negative drivers of globalisation included culture which is a major hold back of globalisation. An example of how culture can negatively affect globalisation can be seen in the French film industry. The French are very protective of this part of their culture and provide huge grants to help its development. As well as government barriers market barriers and cultural barriers still exist.
Also a negative aspect to a countries development is war e.g. tourism in Israel fell by 40% due to the latest violence. as Corporate strategy may try can to also locate be in a negative one driver of
globalization
corporation
particular
area.
Another negative driver of globalisation is local focus or localisation as it is termed in Richard Douthwaites book Short Circuit. Douthwaite (1996) believes that globalisation can and should be reversed. He also believes that localisation is the way to do this. He defines localisation as not meaning everything being produced locally but it means a better a balance between local, regional, national and international markets and thus bring less control to multinational corporations. Another step to reverse globalisation would be for governments to club together to curb the power of multinational by negotiating new trade and treaties that would remove the subsidies powering globalisation and give local production a chance. Douthwaite also states that the global economy is itself nothing less than a system of structural
exploitation that creates hidden slaves on the other side of the world and also that the North should allow the South to produce for itself and not just for us (North). So it can be seen that Douthwaite is very opposed to globalisation especially that part of it exploited by multinational corporations.
Further arguments put forward against globalisation by Mr. Lawton include that it actually destroys jobs in wealthy advanced countries. This is due to the lower costs of wages in developing countries. Multinationals will move to areas of lower wage levels at the drop of a hat e.g. Fruit of the Loom. Also this ability to relocate has meant that wage levels of unskilled workers in developed countries has actually fallen relatively speaking. This is down to the fact that one now needs skill and knowledge in developed economies to survive.
Also there is the loss of sovereignty that globalisation brings. Many anti-globalisation believers state that nations are losing their identity and selling their soul.
Then there are environmental factors of globalisation as described earlier. These are becoming more and more controversial.
Technology, though usually viewed as a positive aspect of globalisation, also has some negative points. Jeffry Sachs (The Economist, June 24th 2000) argues that technology is now what divides the world. Sachs states that 15% of the worlds population account for nearly all the worlds technological advances. This has to be a concern if developing economies are ever going to catch up. Many countries, almost 30% of the worlds population, are technologically excluded (this means not only that they do not innovate but also that they cannot adopt new technologies). In recent years some countries, such as Taiwan, South Korea and Israel, have become top rank innovators and with this their economies have flourished. This would indicate that perhaps the best way to tackle world poverty is to provide aid through education and technology.