the emerging global economy
Post on 13-Nov-2014
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The Emerging Global Economy
Barriers to trade are coming down Allowing free flow of goods,
services & capital The volume of cross country trade
is increasing Making the economies more
interdependent More countries are joining the
ranks of developed world
List of developed countries
Andorra• FaroeIslands• Ireland• Monaco• Spain• Australia• Finland• Israel• Netherlands• Sweden• Austria• France• Italy• New Zealand• Switzerland• Belgium• Germany• Japan• Norway• Turkey• Bermuda Greece• Liechtenstein• Portugal• United Kingdom• Canada• HolySee• Luxembourg• SanMarino• UnitedStates• Denmark• Iceland• Malta• South Africa
High income Upper-middle income Lower-middle income Low income
Strengthening of Global Economy Adoption of liberal economic
policies State-owned business privatized Deregulation adopted Markets opened to more
competition Commitment increased to
removing barriers to cross-border trade and investment
Powerful Market-oriented economies Czech republic Poland Brazil India China South Africa
INDICATION
Favorable world for the practice of International
business
Other side of the coin…..
Countries may pull back from the current liberal economic ideology if their experiences do not match their expectations
LESSON TO LEARN FROM THE ASIAN CRISIS OF 1997-98
Asian financial Crisis
Trigger for the Asian crisis – 2nd July 1997
Started with the Thai govt. announcement
Reached to Philippines and Malaysian Govt.
Soon other economies become involved – Taiwan, Hong Kong, Singapore
Oct 1997 – crisis roll all over the world
1998 – Russia and Brazil Also threatened the economies of
developed world including US Risks associated with global
financial contagion are also greater
Modes of IB
Merchandise Exports & Imports Service Exports & Imports
Tourism & Transportation Performance of services banking,
insurance) Use of assets (trademarks, patents,
copyrights, licensing agreements) Franchising
Investments Direct Investment Portfolio Investment
Entry Modes
Which Markets to enter When to enter What scale
How ??
Entry Modes
Exporting Licensing Franchising Joint-ventures Wholly-owned subsidiary Turnkey Projects
Exporting
Advantages Ability to realize location and
experience curve economies
Disadvantages High Transport costs Trade barriers Problems with local marketing agents
Licensing
Advantages Low development costs and risks
Disadvantages Lack of control over technology Inability to realize location and
experience curve economies Inability to engage in global strategic
coordination
Franchising
Advantages Low development costs and risks
Disadvantages Lack of control over quality Inability to engage in global strategic
coordination
Joint ventures
Advantages Access to local partner’s knowledge Sharing development costs and risks Politically acceptable
Disadvantages Lack of control over technology Inability to engage in global strategic
coordination Inability to realize location and
experience economies
Wholly owned subsidiaries
Advantages Protection of technology Ability to engage in global strategic
coordination Ability to realize location and
experience economies Disadvantages
High costs and risks
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