CHAPTER 17, 17-4 A Global Economy "Shift Happens".

CHAPTER 17 , 17 -4

A Global Economy

"Shift Happens"

Multinational Company

(MNC)

Does business in several countries (home and host countries)

MNC Employment MNC Technology

Lower labor costs reduce production expenses, lowering the price for consumers

Inventions can give a company a competitive advantage (ex. Steve jobs and Apple products)

MNC provide way for technology to be shared immediately (multiple countries working for same company)

MNC continued…

Global Market Entry Modes

Licensing

Little involvement by the parent company. Sells the right to someone else. Refers to name or production process.

Ex. When you see a sports team emblem on clothing or other products.

Typically used with manufacturing processes.

Franchising

When a company sells the right to use its name and more importantly its business process.

Caveats include the fact that it must look and run like the parent company.

Typically used when selling a product or service (like a fast food company)

Fund Flow

Businesses compete for investors across borders

Consumers can shop for the best rates worldwide

This means banks compete across many countries for deposits and borrowers

Knowledge Flow

Electronic communication (ie. Internet) has sped up the transfer of information in today’s world

Allows business decisions to be made quickly, making them more effective

This efficiency can lower the cost of doing business, a savings passed on to the consumer

A Global Environment

Environmental issues like global warming and CO2 emissions affect everyone.

Countries now work together to find ways to alleviate these issues without injuring the economy

Ex. 40% CO2 reduction for U.S.

Mmmhh, prosperity pie!

Trade creates wealth

Bringing other countries into a global economy does not mean your share of the economic pie gets smaller.

Instead, we grow ever more prosperous through the innovation of new products, lower prices and higher quality goods through competition, increased income through increased demand, job creation through increased demand.

Everybody still gets one slice, but now that slice is BIGGER.