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Three Pillars of the Global Economy
- 1. Trade - Good and Services (WTO)
- 2. Monetary - Exchange rates, (Central Bank, IMF)
- 3. Development Finance - World Bank
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Political / Ecnonmic Context
1980s vs. 2010
- 1980s
- 1. Launch of WWW
- 2. Global Expansion of English Language
- 2010
- 1. Rise of the BRCs
- 2. US no longer the dominant global leader
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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
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Rationalize
The best interest of all society is served by individual choices. The invisible hand
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Meaningful Specific
vs
Wandering Generality
No longer successful strategy to be a jack of all trades.
Instead focus on core competencies
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What do a pair of jeans represent?
Globalization
Cooperation
Sovereignty at Bay
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Competitive Advantage
The strategic advantage one business entity has over its rivals within a competitive industry.
Theory: proposed by Michael Porter
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Perpetual Tension occures between which concepts?
Political - Economic
State - Market
Government - Business
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Define Political Economy
Provides the context for the political and economic interaction between states and the market
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What is Globalization?
The integration of regional economies, societies and cultures through a global network which includes communication, transportation and trade.
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Comparative Advantage
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.)
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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.
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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
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Hegemonic Stability Theory
The idea/theory that the international system is more stable with a hegemon
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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
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Liberalism
espouses free trade, free access to markets and laissey-faire economics
Thinkers: Adam Smith and David Ricardo
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Economic Nationalism
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.
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What is the "Invisable Hand"?
A natural phenomenon that guides free markets and capitalism through competition for scarce resouces.
Adam Smith
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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
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Paper Tiger
A phrase that represents a hallowed out economy.
- 1. No industrial base
- 2. A service economy
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Non-Tariff Barriers
- 1. Import quotas
- 2. Marketing and ad restrictions
- 3. Import licensing requirements
- 4. Customs procedures
- 5. Product quality standards
- 6. Safety and health requirements
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The "lens of Nationalist"
Hightech = high value, high profit
lowtech = low value, and low profit margins
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The stages of the Marxist though process
- Greed
- Exploitation
- Contradictions
- Class consciousness
- Social Revolution
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Marxism
Focus on structualism and class awareness
Economics drives eveything
- Actors = classes
- Dynamics = exploitation
Power comes from the bourgoise owning the means of production.
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What is the role of the World Bank?
Functions as an international organization that fights poverty by offering advice and training, loans / devlopment assistance.
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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.
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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.
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Hegemonic Cycle Theory
- 1. War
- 2. Hegemon
- 3. Multipolar
- 4. Begin again
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Moral Hazard
Whe two arties are in an agreement but each party could gain from acting contrary to the agreement.
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Strategies of Trade Policy
Strategies to create comparative advantage.
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Keynesian Economics
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.
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Bretton Woods System
a meeting / conference held at the height of WWII where 44 allied nations met.
- Outcome:
- 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.
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What is the Central Bank?
Oversees the monetary system for a nation.
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