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international business management

international business management - Notes From Chapter One...

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Notes From Chapter One Globalism – more commonly referred to as globalization – is global competition that is characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global economy. Small and medium-sized enterprises are known as SMEs. Much of today's world trade takes place within three regional free-trade blocs (Western Europe, Asia, and the Americas) grouped around the three dominant currencies (the dollar, the euro, and the yen.) The two major tasks that global managers face are cultural and strategic. CAFTA's – the U.S.- Central America Free Trade Agreement – goal was to promote trade liberalization between the U.S. and five Central American countries. These countries are: Costa Rica El Salvador Guatemala Honduras Nicaragua CAFTA was renamed the DR-CAFTA after the Dominican Republic joined in 2004. CAFTA is considered to be a stepping-stone to the larger Free Trade Area of the Americas – or FTAA – that would encompass 34 economies, but which has been met with considerable resistance. Multi-National Corporations are known as MNCs. Political risks are any governmental actions or politically motivated events that could adversely affect the long-run profitability or value of a firm. Nationalization refers to the forced sale of an MNC's assets to local buyers, with some compensation to the firm. Expropriation occurs when a local government seizes and provides inadequate compensation for the foreign-owned assets of a MNC. A macropolitical risk event is an event that affects all foreign firms doing business in a country or region. A micropolitical risk event is an event that affects one industry or company or only a few companies.
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There are seven types of political risk events that can occur. These events are: Expropriation of corporate assets without prompt and adequate compensation Forced sale of equity to host-country nationals, usually at or below depreciated book value Discriminatory treatment against foreign firms in the application of regulations or laws Barriers to repatriation of funds (profits or equity) Loss of technology or other intellectual property (such as patents, trademarks, or trade names) Interference in managerial decision making Dishonesty by government officials, including canceling or altering contractual agreements, extortion demands, and so forth Repatriation is the process of reintegration of expatriates into the headquarters organization and career ladder as well as into the social environment. Risk assessment by MNCs usually takes places in one of two forms: the use of experts or consultants familiar with the country or region under consideration the development of internal staff and in-house capabilities An additional technique is to use computer modeling in order to determine political risk in a country. In addition to this method, companies also use an early-warning system to determine political risk in a country.
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