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CHAPTER 4 STUDY NOTES I. A BORDERLESS WORLD Exhibit 4.1 How important is international business to the study of management? If you are not thinking international, you are not thinking business management. Globalization provides a competitive edge at all stages of developing, manufacturing, and marketing products, and domestic markets are saturated for many firms. The reality of today’s borderless companies means consumers can no longer tell from which country they’re buying (e.g., U.S.-based Ford owns Sweden’s Volvo). The process of globalization typically passes through four distinct stages: Domestic . Market potential is limited to the home country with all production and marketing facilities located at home. International . Exports increase and the company adopts a multidomestic approach with marketing in several countries individually. Multinational . Company has marketing and production facilities located in many countries, with more than one-third of its sales outside the home country. Global (or stateless) . International development transcends any single home country. The worldwide expansion of cable and satellite television has combined with movies and the Internet to create global kids. Mattel found that Barbies sold well worldwide. The need for global managers is intense; young managers should recognize the importance of global experience II. THE INTERNATIONAL BUSINESS ENVIRONMENT Exhibit 4.2 International management is the management of business operations in more than one country. The fundamental tasks of business management do not change in any substantive way when a firm is transacting business across international borders. The basic management functions of planning, organizing, leading, and controlling are the same whether a company operates domestically or internationally. Managers will experience greater difficulties and risks when performing these management functions on an international scale. What should managers of emerging global companies look for to avoid obvious international mistakes? Key factors to understand in the international market are economic, legal-political, and sociocultural. 1
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III. THE ECONOMIC ENVIRONMENT The economic environment represents the economic conditions in the country where the international organization operates and includes: A. Economic Development Economic development differs widely among the countries and regions of the world, and countries can be categorized as developing or developed countries. The developing countries are referred to as less-developed countries (LDCs). The criterion traditionally used to classify countries is per capita income, which is the income generated by the nation’s production of goods and services divided by total population. Developing countries have low per capita incomes and are generally located in Asia,
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