business+environment (1)
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GLOBALIZATION
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GLOBALIZATION
It can be defined as a process ofeconomic integration of the entire world
through the removal of barriers to freetrade and capital mobility as well asthrough
diffusion of knowledge and information
It would mainly consist of Globalisation of Production
Globalisation of Markets (Theodare Lewitt
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DRIVING FORCES
Market Needs
Technology
Cost Quality
Communications & Transportation
Leverage- Experience Transfer,Systems Transfers, ResourceUtilization, Global Strategy
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RESTRAINING FORCES
Market Differences
History
Management Myopia
Organisational Culture
National Controls/ Barriers to Entry
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UNDERLYING FORCES
Orientations of Management (EPRG)
International Monetary Framework
World Trading System Regional Trade Agreement
Global Peace
Domestic Economic Growth
Communications & TransportationTechnology
Global/ Transnational Corporations
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World Economies
Beginning of 1990s saw growth of US asa major Economy followed by Japan andGermany
It could be attributed to ,willingness of USbusiness to cut their workforce,reorganizetheir operations, invest heavily in R & D
OECD; organization for economic andCooperation Development (OECD); Agroup of 30 wealthy members countriesthat facilitates a forum for the discussionof economic, social and governanceissues across the world.
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International Traderegulations
International Business has seen theemergence of trade and investmentliberalization
GATT ; General agreement on Tariffs andTrade; was established to negotiate tradeconcession among member countries. Itgave way to WTO
WTO; World Trade Organisation; dealswith the rules of trade among membercountries. One of the most importantfunction is to act as a dispute settlementmechanism
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The TRIAD
The 3 major trading and investment blocs inthe international arena: the US, EU andJapan
US has the largest economy of the worldwith GDP of over 10$ trillion
NAFTA ;North American Free tradeagreement between the Canada, the US andMexico
EU; today there are 15 members and largenumber are applicants
The collective GDP of EU is greater than USor Ja an
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Technology
Communication technology
Technology for production of Goods
and Services Quality standards and technology
inputs
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Reasons For EnteringInternational Business
Growth
Profitability
Achieving Economics of Scale Risk Spread
Access to Imported Inputs
Uniqueness of Product or Service Business Opportunities due to life cycle
Spreading R & D Costs
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Evolutionary process ofGlobal Business
Domestic Business
Export Business
International Business
Multinational Business
Global Business / TransnationalBusiness
Glocal Business
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Domestic Business Guided by titanic syndrome
Export Business Extending to similar market
International Business Extends Business, manufacturing and other
activities in other countries
Ethnocentric approach
It normally has an international division
Focus is on home country market
Business strategy is extension
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Multinational Business
Adaptation of Business mix
Multidomestic strategy,each subsidy is anindependent entity
Polycentric approach
Global Business
Will either have a global Business strategy ora global sourcing strategy but not both
Key assets are in home country
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Transnational Business Works in integration, linking global resources
with global markets at a profit
Geocentric in approach Recognizes similarities and differences and
adopts a world view to add value
Key assets are dispersed interdependent and
specialized Experience and knowledge are shared globally
Glocal Business
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EPRG Framework
Ethnocentric orientation
Polycentric orientation
Regiocentric orientation
Geocentric orientation
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ETHNOCENTRIC; home country issuperior,sees similarities in foreigncountries
POLYCENTRIC; Each host country is
unique, sees differences in foreigncountries
REGIOCENTRIC; sees similarities anddifferences in world region; is
ethnocentric or regiocentric in its view ofthe rest of the world
GEOCENTRIC; world view,sees similaritiesand differences in home and host
countries
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GLOBALIZATION INDEX
It is a ranking of globalised countriescarried out by A T Kearnery
It has following key components Economic Integration;trade,
portfolio,FDI,investment income
Personal Integration;telephone, travel,remittances, personal transfers
Technology Integration;Internet users,Internet hosts, secure Internet services
Political Integration;internationalorganisations, UN peacekeeping, treaties andgovernment transfers
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International Economic
Environment
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An Overview
Capital rather than trade movement isdriving world economy
Production has become uncoupled fromemployment
Primary products have become uncoupledfrom industrial products
The contest between capitalism andsocialism is over.This has led to collapseof communism as a model fororganisation of economic activity and asan ideology.
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Economic Systems
Market allocation; US Japan, WEurope
Command allocation; formerUSSR,China,Cuba
Mixed Systems;moving towards
privatisation
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Stages of MarketDevelopment
Low Income Countries; income less than400$ per capita, third worlds Limited industralisation and high percentage
of population engaged in agriculture andsubsistence farming
High birth rate
Low literacy rate
Heavy reliance on foreign aid Political instability and unrest
Concentration in Africa south of Sahara
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Lower Middle Income countries;income between 400$- 2000$ per
capita, countries in early stage ofindustralisation
Consumer markets are expanding
Cheap and motivated labor force Upper Middle Income countries;
income between 2000$- 12000$ per
capita