Three Pillars of the Global Economy
- 1. Trade - Good and Services (WTO)
- 2. Monetary - Exchange rates, (Central Bank, IMF)
- 3. Development Finance - World Bank
Political / Ecnonmic Context
1980s vs. 2010
- 1. Launch of WWW
- 2. Global Expansion of English Language
- 1. Rise of the BRCs
- 2. US no longer the dominant global leader
What are the Industry Risks + Opportunities according to Porter?
- 1. Market Potential (expanding or declining)
- 2. Strengths / Weaknesses of your firm vs. competitors
- 3. Barginning power of supplier
- 4. Barginning power of buyer
The best interest of all society is served by individual choices. The invisible hand
No longer successful strategy to be a jack of all trades.
Instead focus on core competencies
What do a pair of jeans represent?
Sovereignty at Bay
The strategic advantage one business entity has over its rivals within a competitive industry.
Theory: proposed by Michael Porter
Perpetual Tension occures between which concepts?
Political - Economic
State - Market
Government - Business
Define Political Economy
Provides the context for the political and economic interaction between states and the market
What is Globalization?
The integration of regional economies, societies and cultures through a global network which includes communication, transportation and trade.
Defined by David Ricaro
Free trade increases efficiency and has the potential to make everyone better off. Focusing on one product to maintain a comparative advantage (price, quality, etc.)
Sovereignty at Bay
When a nation states independence and autonomy is eclipsed by the growth of international economies.
Not as self-contained as they once were.
Role of the MNC in Advancing Globalization and Diminishing National Sovereignty
- 1. Driving force of globalization
- 2. Increase profits
- 3. Access human and natural resources
- 4. Economices of Scale
- 5. Bypass increasing government ristrictions
- 6. Investment incentives and competitions
- 7. Exploit what is in the air (clustering)
- 8. 24 hour capacity (Follow the Sun)
- 9. Manufacture at peak capacity
Hegemonic Stability Theory
The idea/theory that the international system is more stable with a hegemon
What is a hegemon?
Dominance and leadership of one nation over others.
- Stability / Diplomacy
- Regime of free trade
- Global organizations (IMF, WTO)
- Currency for trade
- Lender of last resort
- Military overstretched
espouses free trade, free access to markets and laissey-faire economics
Thinkers: Adam Smith and David Ricardo
nations are best off when the state and market are joined in a partnership. The state protects domister firms which become richer and in turn increase state power.
Nations act in their own interest.
What is the "Invisable Hand"?
A natural phenomenon that guides free markets and capitalism through competition for scarce resouces.
Example of Nationalist impact on everyday business
- 1. Entry control and foreign direct investment
- 2. Ownership and equity restrictions
- 3. Local content requirements
- 4. Export performance requirements
- 5. Import controls
- 6. Builing and land ownership considerations
- 7. Intellectual property protection
- 8. Use of indeginous labor
A phrase that represents a hallowed out economy.
- 1. No industrial base
- 2. A service economy
- 1. Import quotas
- 2. Marketing and ad restrictions
- 3. Import licensing requirements
- 4. Customs procedures
- 5. Product quality standards
- 6. Safety and health requirements
The "lens of Nationalist"
Hightech = high value, high profit
lowtech = low value, and low profit margins
The stages of the Marxist though process
- Class consciousness
- Social Revolution
Focus on structualism and class awareness
Economics drives eveything
- Actors = classes
- Dynamics = exploitation
Power comes from the bourgoise owning the means of production.
What is the role of the World Bank?
Functions as an international organization that fights poverty by offering advice and training, loans / devlopment assistance.
Economies of Scale
Considered the most elegant theory in economics.
Increase in production efficiency, lowers the coste per unit produced.
Gives companies access to larger markets, more geographical reach.
What is the role of the IMF?
Oversees the IM System, monitors financial and economic policies of its members
Provides loans to hel countries restore macroeconomic stability.
Hegemonic Cycle Theory
- 1. War
- 2. Hegemon
- 3. Multipolar
- 4. Begin again
Whe two arties are in an agreement but each party could gain from acting contrary to the agreement.
Strategies of Trade Policy
Strategies to create comparative advantage.
It is the governmets job to smooth out the bumps of the business cycle.
- Internention would include:
- 1) Government spending and tax breaks in order to stimulate the economy.
2) Government spending cuts and tax hikes in good times to curb inflation.
Bretton Woods System
a meeting / conference held at the height of WWII where 44 allied nations met.
- 1) Formation of the IMF
- 2) Formation of the International bank for reconstruction and development
- 3) Introducition of an adjustable pegged foreign exchange rate system.
What is the Central Bank?
Oversees the monetary system for a nation.