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- The World Economy—An Overview:  In the early 20th century economic integration was at 10%; today it is 50%
EU and NAFTA are very integrate
The world economy, not individual countries, is the dominating factor
- Zeroing in on Economic Systems:  Globalization has made it harder to pigeonhole economies within the four-cell matrix
- Economic Systems:  Market- Command
- Market Capitalism:  Individuals and firms allocate resources. Production resources are privately owned. Driven by consumers. Government’s role is to promote competition among firms and ensure consumer protection.
- Centrally Planned Capitalism: Economic system in which command resource allocation is used extensively in an environment of private resource ownership • Example:
Swedish government controls 2/3s of all spending; a hybrid of CPS and capitalism (Market Socialism)
Swedish government plans move towards privatization
- Economic Freedom: Rankings of economic freedom among countries – “free” “mostly free” “mostly unfree” “repressed”
- Stages of Market Development: The World Bank has defined four categories of development using Gross National Income (GNI) as a base
-  Low-Income Countries: GNI per capita of $1,045 or less
-  Lower-Middle-Income Countries:  GNI per capita: $1,046 to $4,125
- Upper-Middle-Income Countries:  GNP per capita: $4,126 to $12,745
-  Newly Industrializing Economies (NIEs): Lower-middle and upper income economies with the highest sustained rates of economic growth. NIEs include Egypt, Indonesia, the Philippines, (lower-middle income) Mexico, and Turkey (upper-middle income)
-  Mistaken Assumptions about LDCs:  The poor have no money. The poor will not “waste” money on nonessential goods. Entering developing markets is fruitless because goods there are too cheap to make a profit. People in BOP (bottom of the pyramid) countries cannot use technology. Global companies doing business in BOP countries will be seen as exploiting the poor.
-  High-Income Countries:
GNI per capita: $12,476 or more.
Also known as advanced, developed, industrialized, or postindustrial countries Characteristics
-  G-7, the Group of Seven:  Goal of global economic stability and prosperity
-  G-20, Group of Twenty:  Established in 1999. Finance Ministers and central bank governors of 19 countries and the EU. Russia remains a member, unlike in the G-7.
-  OECD, the Organization for Economic Cooperation and Development:
34 nations
Canada, U.S. (1961), Japan (1964)
Post-WW II European origin; based in Paris
-  The Triad:
Represents 75% of world income
Global companies should be equally strong in each part
-  Product Saturation Levels:
The percent of potential buyers or households who own a product
India: 20% of people have telephones
-  Balance of Payments:  Record of all economic transactions between the residents of a country and the rest of the world
-  Overview of International Finance:  Currency market participants include countries’ central banks, companies that convert foreign currency into their home currencies, currency speculators.
- Foreign Exchange Market Dynamics: Supply and Demand interaction
Country sells more goods/services than it buys
There is a greater demand for the currency
The currency will appreciate in value
-  Managing Economic Exposure:
Economic exposure refers to the impact of currency fluctuations on the present value of the company’s financial performance.
- Hedging involves balancing the risk of loss in one currency with a corresponding gain in another currency
– Forward Contracts set the price of the exchange rate at some point in the future to eliminate some risk

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Central American Integration System (SICA) is the economic and political organization of the countries of Central America

benefits that the integration system brings: Moving towards a common market Common External Tariff of 0 to 15%Retains tariffs on goods also produced in importing countryDR-CAFTA  is a free trade agreement. Initially, the agreement included the United States and Central American countries such as Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua 80% of US goods and 50% + of agriculturalgoods are duty free• Paperwork is reduced• Reduced risks mean more direct foreignInvestmentAndean Communityis a free trade area with the goal of creating a customs union that includes South American countries such as Bolivia, Colombia, Ecuador and Peru.•45th anniversary in 2014•Customs Union•Abolished foreign exchange,financial and fiscal incentives, andexport subsidies•Established common external tariffsCommon Market of the South (MERCOSUR) is a free trade agreement established in 1991 between Brazil, Argentina, Uruguay, and Paraguay. In June 2006, Mercosur added Venezuela. Bolivia, Chile, Colombia, Ecuador and Peru are currently Mercosur affiliates.Customs union, seek to become common market– Internal tariffs eliminated– Established common external tariffs up to 20%– In time, factors of production will move freely throughCARICOM is The Caribbean Community and Common MarketFounded in 1973 by 15 members • 17 million population • Stagnant for 20 years • Customs Union in 1991 with common external tariffs • Rejected the idea of a economic union in 1998 as a single currency would not be especially beneficial. •Caribbean Basin Trade Partnership Act exempts textile and apparel exports to the U.S. market access from duties and tariffs. Caribbean Basin Initiative of 20 nations includes CARICOM.there are associations in the world: Africa, Gulf Cooperation Council, The Middle East, The European Union (EU), ASEAN

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GATT: General Agreement on Tariffs and Trade Treaty among nations to promote trade among members established in 1947

The World Trade Organization Forum for trade-related negotiations among 160 members

PTA Preferential Trade Agreement: A trade pact between countries that reduces tariffs for certain products to the countries who sign the agreement. While the tariffs are not necessarily eliminated, they are lower than countries not party to the agreement. It is a form of economic integration. See also Trade and Investment Framework Agreement (TIFA), bilateral investment treaty, free trade area, customs union, common market, monetary union

Hierarchy of PFTS:

Level 1: FTA Abolish Tariff Barriers

Level 2: Customs Union Abolish Tariffs + CET

Level 3: Common Market Abolish Tariffs + CET + Factor Movement

Level 4: Economic Union Abolish Tariffs + CET + Factor Movement+ Economic and Political Harmonization

A free trade area is a region in which a group of countries has signed a free trade agreement and maintain little or no barriers to trade in the form of tariffs or quotas between each other. Free trade areas facilitate international trade and the associated gains from trade along with the international division of labor and specialization.

The North American Free Trade Agreement (NAFTA) was implemented to promote trade between the U.S., Canada, and Mexico. The agreement, which eliminated most tariffs on trade between the three countries, went into effect on Jan. 1, 1994. Numerous tariffs—particularly those related to agricultural products, textiles, and automobiles—were gradually phased out between Jan. 1, 1994, and Jan. 1, 2008.

A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff

Economic union: An economic union is an agreement between two or more nations to allow goods, services, money and workers to move over borders freely. The countries may also coordinate social and financial policies to support this common market.

Latin America :Includes the Caribbean, Central, and South America, History of no growth, inflation, debt, and protectionism has given way to free markets, open economies, and deregulation Some concern for further growth with the rise of left-leaning politicians

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1. Politic
-  Sovereignty:  Supreme and independent political authority
-  Political Risk
-  Taxes
.  Government taxation policies:  High taxation can lead to black market growth and cross-border shopping
.  Corporate taxation:  – Companies attempt to limit tax liability by shifting location of income
-  Seizure of Assets
.  Expropriation:  governmental action to dispossess a foreign company or investor
.  Confiscation:  occurs when no compensation is provided
.  Nationalization:  a government takes control of some or all of the enterprises in an entire industry
.  Creeping expropriation:  –limits economic activities of foreign firms
2. Legal
-  International Law
-  International Court of Justice
-  Common Law vs. Civil Law
-  Islamic Law
-  Sidestepping Legal Issues
-  Jurisdiction
-  Intellectual Property
-  Protecting Intellectual Property
3.  Conflict Resolution
-  Antitrust Rulings
-  Licensing and Trade Secrets
-  Bribery and Corruption
4. Outline the regulatory environment in
the European Union

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Chapter 4 - Social and Cultural Environments

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Chapter 4 - Social and Cultural Environments

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- Culture is both physical -  nonphysical
- Culture can be derived from Family, Education, Religion, Government, Business.
-  Physical Culture and Abstract Culture
-  Global Consumer Culture.
-  Attitudes, Beliefs, and Values =>  Subcultures
- Learn about the aesthetics of each country. The colors of the countries selected to show on the product packaging,...
- Learn about each country's languages ​​to name brands appropriately and avoid confusion
- Learn about food culture so that it can be changed to suit each country.
-  The Adoption Process:  Awareness, Interest, Evaluation, Trial, Adoption.