M3 Notes

CAGE “A”: The main point

Each national operation of a company is subject to the national rules of that country - rules that can be altered at any time

Managers must account for the institutional* differences when making decisions about opportunities and risks in global expansion

• *Institutions are the formal and informal rules and norms that organize social, political, and economic relations (North 1990).

It is highly unlikely that a firm can transfer all of its practices and principles ‘as is’ at ‘home’

“A” Administrative (Political/Legal)

• Expropriation and Nationalization

• Trade Policy and Trade Agreements

• Exchange Controls and Capital Controls (transfer and conversion of money)

• Different regulations

• Lack of regulations or lack of enforcement of regulations

• Institutional voids

• Grey Area

A Global Business Problem..

• Planets/Oceans (incinerations CO2; waste travels in oceans)

• Global trade in plastics recycling

  • China Sword

• Producers are multinational (MNEs - fossil fuels, packaging food, etc.)

  • Externalities, don’t pay

  • Extended producer responsibility

• Stage of economic growth

  • Rich
    Growing middle class

  • Low labor cost - export, sorting, etc.

• Solutions are going to have to be global!