Whether a business student is studying marketing, finance, accounting, strategy, human relations, or operations management, the differences between countries in which a firm does business will affect decisions that must be made.
A fundamental shift is occurring in the world economy.
The world is getting closer in terms of cross border trade and investment, by distance, time zones, languages and by national differences in government regulation, culture and business systems and toward a world in which national economies are merging into one huge interdependent global economic system.
Globalization is affecting firms that previously operated in a nice, easy, protected national market. It also illustrates the increasing importance of thinking globally.
However the world we live is not perfect. It is characterized by considerable amount of uncertainty regarding the demand, market price, quality and availability of own products and those of suppliers.
There are transaction costs for purchasing or selling goods or securities. Information is costly to obtain and is not equally distributed.
There are spreads between the borrowings and lending rates for investments and financings of equal risks.
Similarly each organization is faced with its own limits on the production capacity and technologies, it can employ there are fixed as well as variable costs associated with production goods. In other words, the markets in which real firm operated are not perfectly competitive.
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