Chapter 4 - Managing in the Global Economy

1. Explain verbally to a friend how the reduction of trade barriers around the world
has speed up the process of globalization 

There is wide consensus that liberalization of trade and FDI can lead to improved resourse
allocation across firms and sectors, boosting productivity and output. For instance, existing
evidence suggests that more-productive firms tend to gain market share at the expense of less-
productive firms. But two specific effects of liberalization additionally enhance productivity:
-Increased competition: Lower trade and FDI barriers on final goods can strengthen competition
in the liberalized sectors. This can help firms exploit economies of scale, improve efficency,
absorb foreign technology, and innovate.
-Enhanced variety and quality of available inputs: Trade liberalization can also boost
productivity by increasing the quality and variety of intermediate inputs used in final goods
production.
2. If you were offered a foreign assignment for two years in VIETNAM, discuss on the
possible challenges that you should expect to face as a manager in that country. 
Legal–Political challenges
Differing laws and regulations make doing business a challenge for international firms. Host
governments have myriad laws concerning libel statutes, consumer protection, information and
labeling, employment and safety, and wages. International managers must learn these rules and
regulations and abide by them. In addition, managers must deal with unfamiliar political systems
when they go interna- tional, as well as with more government supervision and regulation.
Government officials and the general public often view foreign companies as outsiders (or even
intruders) and are suspicious of their impact on economic independence and political
sovereignty. Political risk is defined as the risk of loss of assets, earning power, or managerial
control due to politically based events or actions by host governments. Although many
developing countries today welcome and support foreign firms, political risk is a major concern
for in- ternational companies, which face a broader and more complex array of threats than ever.
Sociocultural challenges
A nation’s culture includes the shared knowledge, beliefs, and values, as well as the com- mon
modes of behavior and ways of thinking, among members of a society. Cultural fac- tors
sometimes can be more perplexing than political and economic factors when working or living in
a foreign country.
Communitcation Challenges
We all know that miscommunication can occur even among close friends, coworkers, or family
members, so it is no wonder that the potential for miscommunication dramatically increases
when managers are interacting with people from different countries and varied cultural
backgrounds. In organizations where everyone shares the same culture, a great deal of successful
communication can take place implicitly. Implicit communication means that people send and
receive unspoken cues, such as tone of voice or body language, in addition to the explicit spoken
words when talking with others.