MIDTERM

1)      What is globalization? Explain, with examples, how global companies can facilitate the creation of a global market.

 

The globalization of markets is related to the merging of distinct and separate national markets into one large global marketplace. This market crossed barriers and made it possible to sell internationally. Furthermore, some trends are becoming global which are creating global market for these globally made sales. Consumer products such as Mastercard, IKEA, Zara, Subway, and Dunkin Donuts became a great examples as well as facilitators of this global market trend. Their offerings persist in many countries and they became known worldwide. Thus, they help to create a global market.  

 

2)   what are the implications of changing the political economy? Do you see an impact of the spread of democracy on the economies of some these developing countries in Asia, Africa, and South America?

 

There are various implications that come as a result from changing the political economy. Markets that were previously prohibited to Western business are now open to them. This creates major investment and export opportunities for firms within and outside these regions. As a result, the consumer has more options and the market is more open to competition. Additionally, there has been significant cost economies benefits from the Free movement of goods across borders, harmonized product standards, and simplified tax regimes. Therefore, firms smartly choose a centralized product that increase the overall attractiveness of a country depends upon opening the business in that country against the costs and risks involved. I certainly see an impact of the spread of democracy on the economies of developing countries because democracy allows the majority to vote and choose. In economy, this applies to firms to open up businesses at these developing countries and offer jobs and boost the economy of those countries.

 

3)   What are the various types of risks that a business enterprise could face in doing business in a particular country? Further, you may select a country of your choice that you are familiar with to elaborate on.

 

Among the types of risks are the Political risk which is the likelihood that political forces will cause extreme changes in a country’s business environment that harmfully affect the profit of a business enterprise. Dependent to political risks, they are the economic risks which are the likelihood that economic mismanagement will lead to negative consequences in the business environment that hurt the profit of the enterprise. Also, the legal risk can be risky where a trading partner will break a contract or confiscate property rights. This deter businesses from entering into a long-term contract with businesses in that country. For example, in India, the government made a law forcing foreign investors to enter into joint ventures with Indian companies. the Indian legal system did not provide protection for intellectual property rights. This creates the risk that Indian partners could expropriate the intellectual property of the American companies so IBM closed their investment in India in 1970s.

 

4)     Compare and contrast cultural relativism and righteous moralism. Also, cite examples from your own experience.

Cultural relativism is the belief that ethics are nothing more than the reflection of a culture. So all ethics are culturally determined. Therefore, a firm should adopt the ethics of the culture where its operations are held. For example, when I practiced yoga and meditation at the yoga club, everyone was bowing to the teacher. While I never thought I would bow down to other people, it is a sign of respect in the Asian culture and I learned to bow down in class.

A righteous moralism is the notion that the home-country standards of ethics are the suitable ones for companies to follow and practice in the foreign countries. I was raised and taught to call all teachers in school by their last name. While, in USA many students call the professor by his/her first name, I still call the professor by his last name based on my cultural tradition.

 

5)     What are the roles of the International Monetary Fund (IMF) and the World Bank? Which of these institutions is more controversial? Why?

 

The International Monetary Fund (IMF) was established in order to maintain the order in the international monetary system. The World Bank was set up to promote economic development and its role is the responsibility for policing the world trading system and making sure nation-states follow the rules made in trade treaties.

The IMF is the more controversial of the two sister institutions because it serves as the lender of last resort to states that have bad economies and losing value-currencies. the IMF is dominating the nations and requires them to implement specific economic policies which is made to retain and regain the stability and growth of their economy. Some of the IMF’s policy recommendations are not appropriate. To the contrary, the World Bank makes low-interest loans to poor nations that want to make infrastructure investments.