Global Managerial Economics in Mexico - Research Paper Example

Global Managerial Economics Globalization is "to make global or worldwide in scope or application", as defined by The American Heritage Dictionary of the English Language (2000). "The tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets" is the definition listed by Investopedia.com (1999-2005). It is a contentious, or controversial, process. A popular view of globalization is the integration of markets, nations/states, and markets in order to reach the globe faster and more efficiently.

(Globalization Debates, 2000-2001). Due to globalization, Mexico faces losses in regards to Acme Automotive. It required the company to purchase a large percentage of the raw materials for manufacturing the vehicles from Mexican-owned suppliers but now that is not the requirement. This means that Mexican-owned suppliers now miss out on the sales and income. Some view this as bad as more powerful countries become more sovereign (there will be an international sovereignty), jobs are reduced in "weaker" countries, and second and third world countries will have less power, income (businesses), etc.

Globalization Debates (2000-2001) reports, "Politicians opposed to America's global influence and activists opposed to the inequities of oppressive global capitalism now portray globalization as dangerous. Globalization has thus become an issue in a wide-ranging global debate." Free trade limits states to operate domestically and protect their domestic welfare. These generous welfare states become less competitive. Culture is also lost. Global norms and practices take over what was originally known as local and authentic.

For example, western influence (such as America's way of doing things) becomes a global spread of what is popular and cultural homogeneity results. Some other losses include increased materialism and environmental problems. Global Managerial Economics 2The gains that Mexico experiences include reduced material and labor costs, people empowerment, improved quality of life, new product availability, global market share, and unity of the world. The gross domestic product (GDP), or "the market value of all final goods and services produced within a country in a given period of time", as Wikipedia (2006) defines the term, will be affected. The U.S.

faces such losses as the issues of being a sovereign country as it will have more responsibilities, doing business and operating under another country's laws, environmental issues, the spread of materialism, loss of jobs for U.S. citizens, and the gross domestic product (GDP), or "the market value of all final goods and services produced within a country in a given period of time", as Wikipedia (2006) defines the term, will be affected. Gains for the U.S. include increasing its position as an international sovereignty, contributing to creating jobs for Mexico, increase profits, increased global market share, having global firm that is a low-cost volume producer of the high-quality vehicles, and increased western (American) influence and culture.

The macroeconomic stability of the host country affects a multinational corporation mainly by the influence of the central government. Jensen (2006) states that "central governments have incentives to renegotiate policies with multinationals, such as taxation rates, after investment takes place, or to change macroeconomic policy without regard to the effects on multinationals. Indeed, a time inconsistency problem of government policy toward multinationals emerges. Governments often promise multinationals the world prior to investment, but once that commitment has been made, the central government has incentives to backtrack on these enticements.

" Global Managerial Economics 3I believe it is it economically efficient for the U.S. to move low-skilled jobs to Mexico because the income level and rate of pay is much less. It will increase profits and increase employment.It is crucial that cross-cultural communication, cooperative decision-making, and collaborative problem-solving be implemented in multinational corporation management. Globalization leads to cultural homogeneity. Interaction and integration, global norms, and ideas or practices all become united.

It is important that the management of a multinational corporation work together to overcome boundaries and differences and to be able to communicate, cooperate, and collaborate in order to effectively work together, communicate, make decisions, and solve problems as a single entity as globalization does simply that.brings the world together. Global Managerial Economics 4ReferencesGlobalization Debates (2000-2001). The Globalization Website. Retrieved May 21, 2000, from http://www.sociology.emory.edu/globalization/debates.

html Investopedia.com (1999-2005). Retrieved May 21, 2000, from http://dictionary.reference.com/searchq=globalization Jensen, N. (2006). Nation-States and the Multinational Corporation: A Political Economy of Foreign Direct Investment. Princeton, N.J.: Princeton University Press. Retrieved May 21, 2000, from http://www.pupress.princeton.edu/chapters/s8207.html Wikipedia (2006). Retrieved May 21, 2000, from http://en.wikipedia.org/wiki/Gross_domestic_product The American Heritage Dictionary of the English Language, Fourth Edition (2000).

Houghton Mifflin Company: 2000. Retrieved May 21, 2000, from http://dictionary.reference.com/searchq=globalization