APIL,XYLERINE ANTOINETTE D.

-PCU-MBA

Global Business Environment

1. How do internet and the associated World Wide Web, affect Global Business

Activity and the globalization of the World Economy?

The Internet and the associated World Wide Web affects international business and

the globalization of the world economy because they have made it easier for firms,

large and small, to conduct international business.It is now easier for people to

communicate therefore, it is easier to conduct business.The technological revolution

has reached around the world, with important consequences for business, government,

and the labor market. Computer-aided design, telecommunications, and other

developments are allowing small players to compete with traditional giants in

manufacturing and other fields.

The internet has a major role in the movement of Open stock market whether it is

in PSE or FOREX. This investment platforms that plays major role in the world

economy are being bought and sold online. Internet connection and gadgets that can

be easily accessed anywhere are the major tools now whether its for communication,

paying bills, bank transactions, buying and selling goods, booking tickets and hotels,

etc. This is being adapted around the world. It is being globalized. You may or may

not use internet on the transactions that I have mentioned but you cannot deny that

internet have made our lives easier. Without the internet, bank transactions will be

interrupted as well as the economy because majority of economic activities relies on

the bank.

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APIL,XYLERINE ANTOINETTE D. -PCU-MBA

2. Provide three examples why companies would import materials.

(a) Companies import materials because the materials are not readily available in their

country or there is no sufficient amount available. Thus, importing helps them meet

the demand.A country normally imports products when they cannot be self-sufficient.

Meaning, if the domestic demand for product X is 100 units, but a country can only

self-produce 60 units, the country has to source remaining 40 units elsewhere. In this

case, demand is high, but supply is short.

If the domestic demand is keep growing and the domestic supply is cutting short, then

the country will most likely to find every possible seller.

What would happen to the price then? Domestic sellers of product X will price their

products high, because they know the buyers have no other choice but to purchase

their products. But what if buyers can source cheaper sellers from another country

where product X is abundant? Your neighboring country has more than enough to

meet the domestic demand, so wants to make some profit through exporting product

X with cheaper price. This makes a company import materials form other neighboring

countries. Also there are different product specialization of different countries so this

applies give and take again.

(b) Companies import because cost of importing is lower than the cost of

manufacturing. It is cheaper and generates the company more income.In addition

there are also companies that designs their products in their country but buy their raw

materials and manufacture them in other countries because of the cheaper cost. An

example of this is Apple Inc. Majority of their products are made in China because of

the cheaper raw materials and labor.

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APIL,XYLERINE ANTOINETTE D. -PCU-MBA

(c) Companies import for better quality of products. An example of this is a wine

company called Kataoka which imports raw materials from different countries in the

world. Their reason is to achieve the greatest results.According to them they are

constantly looking for high quality food materials from all over the world and

developing import schemes based on their own know-how.For example, they have

achieved the greatest results in Japan with concentrated grape must, the material for

wine making, and have also built up a long lasting partnership with the major

domestic users for brewing materials such as malt and hops.Having accurately

grasped the requirement today from the industry, namely to procure raw materials

from overseas, they are now working to further reinforce their global network.

3. How does Foreign Direct Investment benefits the host country?

Foreign direct investment offers advantages to both the investor and the foreign host

country. These incentives encourage both parties to engage in and allow FDI. Some of

the benefits for the host country economic stimulation, development of human capital,

increase in employment, access to management expertise, skills, and technology.For

host countries, the benefits are mainly economic.

FDI has also become an important source of private external finance for

developing countries. It is different from other major types of external private capital

flows in that it is motivated largely by the investors' long-term prospects for making

profits in production activities that they directly control.While FDI represents

investment in production facilities, its significance for developing countries is much

greater. Not only can FDI add to suggestible resources and capital formation, but,

perhaps more important, it is also a means of transferring production technology,

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APIL,XYLERINE ANTOINETTE D. -PCU-MBA

skills, innovative capacity, and organizational and managerial practices between

locations, as well as of accessing international marketing networks. The first to

benefit are enterprises that are part of transnational systems (consisting of parent firms

and affiliates) or that are directly linked to such systems through equity arrangements,

but these assets can also be transferred to domestic firms and the wider economies of

host countries if the environment is conducive. The greater the supply and distribution

links between foreign affiliates and domestic firms, and the stronger the capabilities

of domestic firms to capture spillovers (that is, indirect effects) from the presence of

and competition from foreign firms, the more likely it is that the attributes of FDI that

enhance productivity and competitiveness will spread. In these respects, as well as in

inducing transnational corporations to locate their activities in a particular country in

the first place, policies matter.

Developing counties, emerging economies and countries in transition, due to

advantages related to FDI have liberalized their FDI regime and followed best policies

to attract investment. It has been recognized that the maximizing benefits of FDI for

the host country can be significant, including technology spillovers, human capital

formation support, enhancement of competitive business environment, contribution to

international trade integration and improvement of enterprise development. Moreover,

further than economic benefits FDI can help the improvement of environment and

social condition in the host country by relocating ‘cleaner’ technology and guiding to

more socially responsible corporate policies. All of these benefits contribute to higher

economic growth, which is the main instrument for alleviating poverty in those

economies.

4. Five Weak Points of Foreign Direct Investment.

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APIL,XYLERINE ANTOINETTE D. -PCU-MBA

(a) Hindrance to Domestic Investment.

As it focuses its resources elsewhere other than the investor’s home country, foreign

direct investment can sometimes hinder domestic investment.Countries should not

allow foreign ownership of companies in strategically important industries. That

could lower the comparative advantage of the nation, according to an IMF report.

Second, foreign investors might strip the business of its value without adding any.

They could sell unprofitable portions of the company to local, less sophisticated

investors. They can use the company's collateral to get low-cost, local loans. Instead

of reinvesting it, they lend the funds back to the parent company.

(b) Negative Influence on Exchange Rates.

Foreign direct investments can occasionally affect exchange rates to the advantage of

one country and the detriment of another.

(c)Higher Costs.

If you invest in some foreign countries, you might notice that it is more expensive

than when you export goods. So, it is very imperative to prepare sufficient money to

set up your operations.

(d)Modern-Day Economic Colonialism.

Many third-world countries, or at least those with history of colonialism, worry that

foreign direct investment would result in some kind of modern day economic

colonialism, which exposes host countries and leave them vulnerable to foreign

companies’ exploitation. A proven example of this is during the (second) colonial era

between 1870 and 1938, the metropolitan countries had the power to control and

direct the flow of investments in to the countries. Some colonial countries used this

power to restrict more or less, investment from other countries. Now, if majority of

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APIL,XYLERINE ANTOINETTE D. -PCU-MBA

the businesses in your country came from one major country they might monopolize

the investments because oligarchs usually have the upper hand.

(e) Negative Impact on the Country’s Investment.

The rules that govern foreign exchange rates and direct investments might negatively

have an impact on the investing country. Investment may be banned in some foreign

markets, which means that it is impossible to pursue an inviting opportunity.

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