International Business & Global Logistics
International Business & Global Logistics
This paper deals with the North American Free Trade Agreement, such notions as state capitalism and guarded globalization, functioning of the multinational corporations and the major cultural dimensions.
The North American Free Trade Agreement, established in 1994, created free trade zones that are the largest in the world. The North American Free Trade Agreement was aimed at economic growth of such countries as Mexico, the United States of America and Canada. After the agreement came into effect, the wealth of families, workers, manufacturers and thus the prosperity of countries has been increased greatly (“North American Free Trade Agreement”, 2012, n.p.).
Speaking about the macroeconomic issues, the North American Free Trade Agreement affects the trade flow among the three above-mentioned countries. The real gross domestic product of the USA began to grow from 1992 on, and it coincides with NAFTA implementation. As to the US labor market, the greatest fear of the United States of America concerning NAFTA was the loss of competitiveness by the US workers. Luckily, its fears were not confirmed. It is sometimes difficult to assess the impact, NAFTA had on the United States of America because of the so called Peso Crisis, which originated in Mexico, but negatively affected the United States (Burfisher, Robinson and Thierfelder, 2001, p.126-129).
According to Robert E. Scott’s report, all American states suffered from NAFTA (2001, n.p.). All of them experienced job losses. Because of the North American Free Trade Agreement Georgia lost more than 20,000 jobs, 4,900 of them in apparel industry and in the textiles.
However, Sara J. Fitzgerald states, the fact that the North American Free Trade Agreement caused job losses is a myth (2001, n.p.). She objects to the statement of David Bonior that America has lost a great deal of highly paid jobs and she adds that NAFTA is not the reason for job losses. Great number of people annually lose jobs from labor strikes. Moreover, the analysis data of the Department of Commerce show that with US exports, 600,000 new jobs appeared.
In addition, it should be said that even without the North American Free Trade Agreement, the economies of the United States, Canada and Mexico are closely connected. For instance, Canada is the largest trading partner of the United States of America, while Mexico is also the United States’ trading partner that is ranked as the third largest one (Schoenbaum, 1993, p. 465).
References
Burfisher, M., Robinson, S., & Thierfelder, K. (2001). The Impact of NAFTA on the United States. Journal of Economic Perspectives, 15(1), 125-144. http://dx.doi.org/10.1257/jep.15.1.125
Fitzgerald, S. (2001). The Effects of NAFTA on Exports, Jobs, and the Environment: Myth vs. Reality. The Heritage Foundation. Retrieved 28 May 2016, from http://www.heritage.org/research/reports/2001/08/the-effects-of-nafta-on-exports-jobs
North American Free Trade Agreement | NAFTANow.org. (2012). Naftanow.org. Retrieved 28 May 2016, from http://www.naftanow.org/
Schoenbaum, T. (1993). The North American Free Trade Agreement (NAFTA): Good for Jobs, for the Environment, and for America. Georgia Journal Of International And Comparative Law, 23(3), 461.
Scott, R. (2001). NAFTA’s Impact on the States. Economic Policy Institute. Retrieved 28 May 2016, from http://www.epi.org/publication/briefingpapers_nafta01_impactstates/
The Merriam-Webster Dictionary defines state capitalism, as “an economic system in which private capitalism is modified by a varying degree of government ownership and control”. The Free Dictionary by Felix gives another definition of state capitalism according to which it is “a form of capitalism in which the state owns or controls most of the means of production and other capital: often very similar to state capitalism”.
Until 2008, every world’s company wanted to go global. Because of great demand, western markets became very competitive. The appearance of modern transportations, as well as communication technologies, made going global more simple and approachable. However, after the global recession, globalization became rather slow moving, even selective, with emphasis placed on nationalism. This is mainly because governments protect local interests; they very carefully choose the counties or regions to do business with; pick the sector and companies they would like to promote. This process is called guarded globalization (Bremmer, 2014, n.p.).
When going global, multinational companies face many obstacles; state capitalism plays the main role here. The reason for this is that governments understand the risk of opening industries to international competition. In addition, governments are greatly concerned with national security and multinational companies pose a serious risk for local investors (Leon, 2014, n.p.).
References
Bremmer, I. (2009). State capitalism and the crisis. McKinsey & Company. Retrieved 28 May 2016, from http://www.mckinsey.com/industries/public-sector/our-insights/state-capitalism-and-the-crisis
Bremmer, I. (2014). The New Rules of Globalization. Harvard Business Review. Retrieved 28 May 2016, from https://hbr.org/2014/01/the-new-rules-of-globalization
Definition of STATE CAPITALISM. Merriam-webster.com. Retrieved 28 May 2016, from http://www.merriam-webster.com/dictionary/state%20capitalism
Leon, L. (2014). The new rules of Globalization. prezi.com. Retrieved 28 May 2016, from https://prezi.com/cozggdebqoiw/the-new-rules-of-globalization/
Multinational Firms
Most firms go global, because they believe that globalization is the only way to success and consequently to obtain economic growth. In some countries, firms are born global. These countries are Russia, China, India, and Brazil. While others struggle to go global. Such situation occurs in developed countries, where there is no way for the development, expansion or growth on the domestic markets (Rajagopal, 2016, p.4-5).
Multinational firms employ workers in different world’s countries. Thus, regulations are different in every country due to its unique culture. Therefore, multinational corporations should adopt standards and regulations of the country in which they operate. The simple reason for this is what is considered appropriate in the United States of America may be inappropriate in Japan (Alhuwayshan, 2016, p.680-681).
It may be a serious problem when the regulations in the country of origin of the MNCs differ from regulations in the country of operation. There are four ways to solve this problem. The first solution to this problem is to follow the home country’s regulations. The second way is to follow the host country’s ones. The third way is to follow those norms that are most profitable for the corporation. The last way is to follow the most morally acceptable regulations. The choice among the above-mentioned options depends on the host county’s laws. However, the best option is to follow the norms and regulations of the host country and thereby show the respect to it (Mujih, 2016, n.p.).
However, multinational companies often face political risks. Host country’s political decisions may result in adverse effects on the profits of the company. For example, in 1959 Fidel Castro and his government gain control over Cuba. As a result, of Castro’s politics, many American companies lost millions of dollars (Phung, 2006, n.p.).
Since 1970s, host countries began to intervene more and more in the work of multinational companies that operate on their territory. The conditions they have established for multinational corporations are very demanding. For example, host government has the power to limit the strategic freedom of the multinational corporation. These limitations include the choice of product and market, level of employment and the use of technology (Doz, 1980, n.p.).
References
Alhuwayshan, M. (2016). Should MNCs adopt the regulations in the country of origin or yield to those in the country of operation?. International Journal Of Scientific & Engineering Research, 7(4), 680-684. Retrieved from http://www.ijser.org/researchpaper%5CShould-MNCs-adopt-the-regulations-in-the-country-of-origin-or-yield-to-hose-in-the-country-of-operation.pdf
Doz, Y. (1980). How MNCs Cope with Host Government Intervention. Harvard Business Review. Retrieved 28 May 2016, from https://hbr.org/1980/03/how-mncs-cope-with-host-government-intervention
Mujih, E. (2016). Regulating multinationals in developing countries. London: Routledge.
Phung, A. (2006). What is political risk and what can a multinational company do to minimize exposure? | Investopedia. Investopedia. Retrieved 28 May 2016, from http://www.investopedia.com/ask/answers/06/politicalrisk.asp
Rajagopal,. (2016). Sustainable growth in global markets. Palgrave Macmillan.
Major Dimensions of the Culture
Pr. Geert Hofstede carried out the study to investigate the effects culture has on values at work. According to his definition, culture is the mind’s collective programming. The culture’s dimensions derive from Hofstede’s research ("Dimensions - Geert Hofstede", n.d., n.p.).
Initially there were four Hofstede’s dimensions, but later they were replaced in different studies. Power distance represents inequality in which powerful workers want the power to be distributed unequally. Uncertainty avoidance is a dimension that indicates how culture prepares its members for unusual situations. Individualism indicates the extent of individuals’ integration into groups. Masculinity dimension shows the emotional roles of two genders ("Geert Hofstede | Dimensions of national Cultures", n.d., n.p.).
Speaking about the cultural profile of the USA it should be said that status here is based on wealth. Americans believe in American Dream. Moreover, they are convinced that only their nation can achieve this dream. This is a kind of cultural black hole for them. Americans see themselves as people of action. For all Americans time is money. They as quickly make friends as drop them. American nation is a direct one. Americans do not hesitate to ask personal questions, but this is because they are very open ("National Cultural Profiles - USA", 2006, n.p.).
Originally, a great number of many ethnic groups lived in Mexico. They were Mayas, Aztecs, Zapotecs and others (Smith, 2003, n.p.). In Mexico, people are in the hierarchical society. In addition, this society is a collectivistic one. It is also a masculine society. Mexican culture prefers to avoid uncertainty ("Mexico - Geert Hofstede", n.d., n.p.).
Americans have always placed emphasis on equal rights. Thus, the power distance of this country is very low, while Mexicans are a hierarchical society, so they would like to be said what exactly they have to do. This may be a challenge for Mexican-American interaction, as well as the fact that Mexico is a collectivistic society, and the USA is an individualistic one. However, in both cultures, masculinity prevails and it may assist greatly Mexican managers in the USA, as well as American managers in Mexico.
References
Dimensions - Geert Hofstede. Geert-hofstede.com. Retrieved 28 May 2016, from https://geert-hofstede.com/national-culture.html
Geert Hofstede | Dimensions of national Cultures. Geerthofstede.nl. Retrieved 28 May 2016, from http://geerthofstede.nl/dimensions-of-national-cultures
Mexico - Geert Hofstede. Geert-hofstede.com. Retrieved 28 May 2016, from https://geert-hofstede.com/mexico.html
National Cultural Profiles - USA. (2006). Telegraph.co.uk. Retrieved 28 May 2016, from http://www.telegraph.co.uk/news/uknews/4205567/National-Cultural-Profiles-USA.html
Smith, A. (2003). Mexican Cultural Profile. Ethnomed. Retrieved 28 May 2016, from https://ethnomed.org/culture/hispanic-latino/mexican-cultural-profile
