The Global Economy Section 7.2

What You’ll Learn How NAFTA has increased international trade within North America. How managers decide how to get involved in the global economy. How managers deal with the challenges they face when working in a different culture.

Discussion Question Why do some people believe it is important to “Buy American”? Keep the U.S. less dependent on other countries Keep U.S. labor employed and working

Global Economy An economy in which companies compete actively with businesses from all over the globe

Question How have telecommunications and political changes affected international business? Telecommunications has made communication among nations much easier Political changes have opened countries to foreigners who want to do business

The Rise of the Global Economy Many factors have led to the rise of the global economy. Improvements in Telecommunications Technology Information can now be sent in seconds as opposed to weeks E-commerce Political Changes Less exclusion form certain areas of the world Free Trade Areas = a region where trade restrictions are reduced

NAFTA NAFTA stands for North American Free Trade Agreement. Largest free trade area in the world Businesses in the United States, Mexico, and Canada can sell their products anywhere in North America without facing major trade restrictions. Negatives?? Sara Lee laid off more than a thousand American workers after it moved to Mexico. Other Agreements: http://www.voanews.com/content/us-european-trade-free/1606962.html

Forms of International Operations Working through a foreign intermediary Wholesaler that markets products for companies that want to do business abroad for a commission Signing a licensing agreement with a foreign company Permits one company to sell another company ‘s products abroad for a percentage of revenues Forming a strategic alliance Involves pooling resources and skills to achieve common goals Becoming a multinational corporation Establish manufacturing and distribution facilities in foreign countries

Multinational Companies There are many ways for companies to do business globally. Use imported materials. Produce goods in other countries. Sell products in other countries.

Challenges of Working in an International Environment Managers must learn to: work with customers, producers, suppliers, and employees from different countries become familiar with and show respect for local laws and customs be aware of different cultural attitudes

P.161 P.171 Section 7.1 & 7.2 Assessment Fact and Idea Review #1-4 Critical Thinking #1-2 P.171 Case Analysis