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26 Cards in this Set

  • Front
  • Back

Usually called Multinational Corporations (MNC’s)


Defined by the United Nations as firms that control assets abroad

•Most global commerce is carried out by a small number of powerful firms

Transnational Corporations (TNC’s
ØEstablished in 1944ØProvides economic development loans to its member nations
ØFundsused mainly for roads, dams, power plants, pipelines, and other infrastructure projects
ØFundingprovided by member countries and international capital markets
ØNegotiates“structuraladjustment plans”with countries it loans to

The World Bank

Ø“Sister” organization to World Bank, created atsame time
ØPurpose is to make currency exchange easier for member countries so that they can participate in global trade
ØLends foreign exchange to member countries
ØAlso imposes conditions on governments that receive its loans§Has begun to offer debt relief to some nations

International Monetary Fund

ØFounded in 1995, successor to GATT (General Agreement on Tariffs and Trade)


ØInternational body that establishes the ground rules for trade among nations


ØIts major objective is to promote free trade; attempts to eliminate barriers to trade (e.g. quotas, duties and tariffs)


ØConducts“rounds” of negotiations on various topics


Ø“Most favored nation” rule means members countries cannot discriminate against foreign products for any reason

World Trade Organization

ØIncreases economic productivity – more is produced with the same effort. Theory of comparative advantage.
ØReduces prices for consumers
ØGives developing countries access to foreign investment funds to support economic development.
Allows for the transfer of technology


The Benefits of Globalization


ØHelps spread democracy and freedom

The nature of economic activity “requires broad access to information, the spread of competence, and the exercise of individual decision-making throughout the workforce – conditions that are more compatible with free societies and democratic forms of government than with authoritarian regimes”

ØCan reduce military conflict.
Globalization binds disparate peoples together on the common ground of business interaction.

ØCauses job insecurity
ØWeakens environmental and labor standards
ØWTO’s most favored nation rules make it difficult for countries to adopt policies promoting environmental or social objectives
ØErodes regional and national cultures
ØUndermines cultural, linguistic and religious diversity
Is compatible with despo


The Costs of Globalization


ØCreate conditions that allow businesses to compete
ØBalance the needs of business and society
ØManage indirect costs of economic activity
ØGrantor refuse permission for all types of business activity


Why is government involved in business?


a plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens

Public policy

Ø–external pressures that shape a government’s policy decisions and strategies to address problems.
ØExamples:§Economic/foreign policy concerns§
Political pressure from constituents or interest groups
§Technical information
§Media attention


Elements of Public Policy


Inputs

Ø–public policy goals can be broad and high-minded or narrow and self-serving.
ØWhatever the goals, government needs to consider “What public goals are being served by this action?”
The policy decision would depend, in part, on whether the benefits of regulation are greater or less than the costs that would be imposed on

Goals

Øpublic policy tools involves combinations of incentives and penalties that government uses to prompt citizens, including business, to act in ways that achieve policy goals.

Tools

Øthe outcomes arising from government regulation. Some outcomes are intended, others are unintended.
Effects
ØTaxation policy
§Raising or lowering taxes on business or individuals
ØIndustrial policy
§Directing economic resources toward the development of specific industries
ØTrade policy
§Encouraging or discouraging trade with other countries


Types of Economic Public Policies


SOCIAL ASSISTANCE POLICIES

ØGovernment programs aimed at improving areas such as health care and education.
ØAdvanced industrial nations have developed elaborate systems of social services for their citizens


Types of Public Policies


ØMarket failure
§The market place fails to adjust prices to reflect the true costs of a firm’s behavior.
ØNegative externalities
§Manufacture or distribution of a product gives rise to unintended costs.
ØNatural monopolies
§Occuring some industries. Government enacts regulation to regulate prices and access (e.g., electric utility
)ØEthical arguments §Utilitarian,fairness and justice arguments are invoked for government to set standards to promote social causes (e.g., safe work environments).

Why Seek Regulation

Aim to modify the normal operation of the free market and the forces of supply anddemand


ØIncludesregulations that


§Controlprices or wages


§Allocatepublic resources


§Establishservice territories


§Setthe number of participants


§Rationresources

ØEconomic regulations

§Prohibit unfair, anti-competitive practices by business§
Prohibit predatory pricing
•Selling below cost to drive rivals out of business§
Two enforcement agencies:•
Antitrust Division of the U.S. Department of Justice•Federal Trade Commission (FTC)•§Penalties
include:•Fines,structural remedy, conduct remedy, intellectual property remedy
ØAnti trust laws

Aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions.
Unlike economic regulations, social regulations are not limited to one type of business or industry

ØSocialregulations

ØRegulation costs consumers and businesses significant sums of money.


Ø


ØRegardless of methods of estimation, benefits of regulations exceed costs.


Ø


ØThere is tremendous redundancy of regulations.


Ø

The Effects of Regulation

§Information strategy•Businesses seek to provide government policy makers with information to influence their actions§
Financial-incentives strategy•Businesses provide incentives to influence government policymakers to act in a certain way§
Constituency-building strategy Businesses seek to gain from other affected organizations to better influence government policymakers to act in away that

ØThreestrategic types
ØLobbying
§Lobbyists communicate with and try to persuade others to support an organization’s interest or stake as they consider a particular law, policy, or regulation
ØDirect communications with policymakers
§Businesses invite officials to participate in activities that will improve government officials’understanding of management and employee concerns
ØExpert witness testimony §Businessesprovide facts, anecdotes, or data to educate or influence government leaders at public forums like congressional hearings


Promoting an Information Strategy


ØPolitical action committees (PACs)


§Independently incorporated organizations that can solicit contributions and then channel those funds to candidates seeking political office.


ØSuper PACs


§Independent,expenditure-only committees that may not contribute to candidate campaigns orpolitical parties, but may advocate fora political viewpoint (e.g., conservative or liberal)


ØLeadership PACs


§Committees that allow politicians to make donations, typically to other members of their party, thereby allowing them to gain more influence within their party.


Ø527 Organizations


§Organizations that use advocacy tactics (e.g., telephone calls, television or radio announcements and social media) to bring attention to a political issue.


Promoting a Financial Incentive Strategy


ØEconomic leverage

Occurs when a business uses its economic power to threaten to leave a city, state, or country unless a desired political action is taken

Ø

Promoting a Financial Incentive Strategy

ØStakeholder coalitions§Businesses try to influence politics by mobilizing various organizational stakeholders to support its political agenda
ØAdvocacy advertising §Advertisements that focus on a company’s views on controversial political issues
ØTrade associations§Coalitions of companies in the same or related industries—to coordinate their grassroots mobilization campaigns
ØLegal challenges§Business seeks to overturn a law after it has been passed

Promoting a Constituency Building Strategy