1.Describe how the world economy is becoming more integrated than ever before.
The global economy is becoming more integrated than ever before. The world trade organization (WTO), now has 153 countries involved in more than 95 percent of the world’s trade. The global economy is dominated by countries in three regions: Western Europe, North America, and Asia. Europe is economically to form he biggest market in the world. Under the Maastricht Treaty, which formally established the European Union (EU), the euro was adopted as a common currency among European countries with the goal to strengthen Europe’s position as an economic superpower in the world. Among the Pacific Rim countries, Japan dominated world attention toward the end of the last century and with the world’s largest population and increasing industrialization, China is on its way to becoming the larges producer and consumer of the world’s goods.
Asian countries have joined the United States, Australia, and Russia to form the Asia-Pacific Economic Cooperation (APEC) trade Group. Association of Southeast Asian Nations (ASEAN) brings together 10 developing nations and is aimed at cultural development and political security. The North American Trade Agreement (NAFTA) combined the economies of the United States, Canada and Mexico into one of the world’s largest trading bloc. And, as for the rest of the world with all the important developments, markets and competitors shaping the global environment, India for example with the fast growing economy and huge population has become the world’s second largest online support, software developer and other services.
2.Discuss what integration of the world economy means for individual companies and their managers.
Compared with only a few years ago opportunities are greater because the movement toward free trade has opened up many formerly protected national markets. The potential for export and for making direct investment overseas is greater today than ever before. The environment is more complex because today’s manager often has to deal with the challenges of doing business in countries with radically different cultures and coordinating globally dispersed opportunities.
The environment is more competitive because in addition to domestic competitors the managers must deal with cost efficient overseas competitors. Companies both large and small now view the world rather than a single country as their market and need to identify the best strategy for competing in a global marketplace. Universal needs exist when the tastes and preferences of consumers in different counties with regard to a product are similar, creating strong pressure for a global strategy. Thus, managers need to make sure that their companies are able to adapt to different needs in different locations not just locally but globally.
Irene B. Rosenfeld, the CEO of Kraft and General Foods, understood the importance of globalization and to save the struggling company, aside from its North American market, she also focused on the overseas market. Krafts global expansion strategy targets 10 markets. Also, Kraft will focus on its overseas efforts and research and development for ten best selling brands which accounts for about 40% of Kraft’s international sales and over 60% of its profits.
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