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M04 rugm 6563_05_ppw_ch04
1.
Slide 4.1 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 International politics Chapter 4
2.
Slide 4.2 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 International politics • Objectives • Introduction • Economic integration • The European Union (EU) • Other examples of economic integration • Economic integration and strategic management.
3.
Slide 4.3 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Objectives • Compare and contrast major political and economic systems and note the linkage among them. • Examine the primary reasons for the current privatization movement and the economic impact that this movement is having on selected countries. • Describe the five major levels of economic integration and how each works. • Discuss how MNEs are using strategic planning to benefit from current worldwide economic integration efforts. • Discuss the impact of NGOs on international business.
4.
Slide 4.4 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Introduction • Over the last two decades there has been a dramatic change in the political systems of many countries. • In particular, there has been a move towards market-driven economies in Eastern Europe and China.
5.
Slide 4.5 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Political ideologies and economics • Political systems – Democracy: A system of government in which the people directly or through their elected officials, decide what is to be done. – Totalitarianism: A system of government in which one individual or party maintains complete control and either refuses to recognize other parties or suppresses them.
6.
Slide 4.6 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 • Economic systems – Market-driven economy: An economy in which goods and services are allocated on the basis of consumer demand. – Centrally determined economy: An economy in which goods and services are allocated based on a plan formulated by a committee that decided what is to be offered. – Mixed economies: Economic systems characterized by a combination of market-and centrally-driven planning. Political ideologies and economics (Continued)
7.
Slide 4.7 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Government control of assets • Privatization: The process of selling government assets to private buyers. – Divestiture: A process by which a government or business sells assets. – Contract Management: A process by which an organization (such as the government) transfers operating responsibility of an industry without transferring the legal title and ownership. • Nationalization: A process by which the government takes control of business assets, with or without remuneration of the owner.
8.
Slide 4.8 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Government – business cooperation • Although governments are privatizing assets, this does not mean that they are not involved in business. • Business-government cooperation continues to be beneficial, particularly in the EU and Japan.
9.
Slide 4.9 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Economic integration • The establishment of transnational rules and regulations that enhance economic trade and cooperation among countries.
10.
Slide 4.10 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Trade creation and diversion • Trade creation: A process in which members of an economic integration group begin to focus their efforts on those goods and services for which they have a comparative advantage and start trading more extensively with each other. • Trade diversion: A process in which members of an economic integration group decreases trade with non-member countries in favor of trade with each other.
11.
Slide 4.11 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Levels of economic integration • Free Trade Area: barriers to trade (such as tariffs) among member countries are removed (e.g. NAFTA). • Customs Union: tariff between member countries are eliminated and a common trade policy toward nonmember countries is established. • Common Market: elimination of trade barriers among member countries, a common external trade policy and mobility of factors of production among member countries.
12.
Slide 4.12 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 • Economic union: A deep form of integration characterized by free movement of goods services, and factors of production among member countries and full integration of economic policies. • Political union: An economic union in which there is full economic integration, unification of economic policies and a single government. Levels of economic integration (Continued)
13.
Slide 4.13 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Ethics, environment, MNEs and the civil society • The civil society is a group of individuals, organizations and institutions that act outside the government and the market to advance a diverse set of interests, including opposition to global business. • Non-governmental organizations (NGOs) are private-sector groups that act to advance diverse social interests.
14.
Slide 4.14 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 The European Union: formation • European Coal and Steel Community (ECSC): A community formed in 1952 by Belgium, France, Italy, Luxembourg, the Netherlands and West Germany. • European Union (EU): A treaty-based institutional framework that manages economic and political cooperation among its 27 member countries. • European Free Trade Association (EFTA): A free trade area currently consisting of Iceland, Liechtenstein, Norway and Switzerland.
15.
Slide 4.15 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 The European Union: organization • European Council • Council of the European Union • European Commission • European Parliament • Court of Justice • Court of Auditors.
16.
Slide 4.16 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Figure 4.1 The European Union’s institutions
17.
Slide 4.17 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Other examples of economic integration • Andean Community: An economic union that consists of Bolivia, Colombia, Ecuador, Peru and Venezuela. • Mercosur: A free trade group that consists of Argentina, Brazil, Paraguay and Uruguay. • ASEAN: Founded by Indonesia, Malaysia, the Philippines, Singapore and Thailand. • FTAA: A free trade agreement of the Americas that has not yet been implemented.
18.
Slide 4.18 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Economic integration and strategic management • A strategic alliance is a business relationship in which two or more companies work together to achieve a collective advantage. • These alliances can take a number of forms: – research cooperation; – marketing cooperation; – licensing of a product or technology for a specific market region.
19.
Slide 4.19 Alan M
Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Localization of business operations • MNEs must adapt their offering, their expectations and the way in which they do business to each market in which they operate. • These efforts result in the localization of business operations and typically focus on four areas: – Products – Profits – Production – Management.
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