• More complex issues such as where in the world to site its production activities to minimaze cost (Alstom company set majority of its enterprices in USA and Europe); how best coordinate and control globally dispersed production activities; which foreign markets to enter and which to avoid (Alstom company enter Nort America, Europe and Middle East, avoid-South America)

• International transactions involve money converting into different currencies

• International business must find the ways to work within limitations imposed by government. For example: after revolution on Kuba USA made embargo on conducting trade with it.

6. Define globalization. What are the pros and cons of globalization? Provide examples.

Globalization is integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology (mainly in the areas of information technology, telecommunications, energy, transport, and biotechnology).

The pros of Globalization are:

• There is a worldwide market for the companies and for the people there is more access to products of different countries;

• Increased effciency through competition and specialization of factors of production;

• Free trade allows each country use its competetive advantage (low cost);

• Global markets present greater opportunities for countries to have access to more funds, know-how, cheaper imports, and larger export markets;

• Competition keeps prices relatively low, and as a result, inflation is less likely to occur

• Large frms in a globalized economy have subsidiaries in many countries and compete in global markets rather than in segmented national markets;

• Small and medium enterprises are increasingly taking into account the global opportunities and constraints of their investment decisions. Like China invested in Ukrainian aqua park “Jungles”;

• Socially we have become more open and tolerant towards each other and they who live in the other part of the world are not aliens as we always thought. There are examples like now Indian girls work in call centers and work nights, which was a taboo even two years back. We are celebrating Valentine’s Day, scraping on Orkut, watching the Idol series, Fear factor, the Indian version Big Brother.

There are cons:

• Benefits of globalization are not equally distributed. The gap between rich and poor countries has grown. Rich countries integrated in global economy faster, than poor like Latin America and Africa with such results as high inflation and poverty

• Companies are hunting for cheaper labor force and now they have opportunities to take it abroad. So Europeans are losing jobs and that is posing a problem for them since the companies are outsourcing work to the Asian countries since the cost of labor is low and profits the company considerably

• Developed countries workers (USA) can lose their comparative advantage when companies build advanced factories in low-wage countries (Africa), making them as productive as those at home.

• Free trade hurts certain sectors as they lose market shares from low-cost competitors. There were protests in Washington, Seattle, Prague, that low-cost competitors threat their jobs from countries like China, Pakistan, Malaysia;

• Advanced countries (Australia, Switzerland, Canada) still protect their markets asking developing (England, France, Germany, Belgium, Israel,Cyprys) to open markets for them

• The problem becomes more acute for poor developing countries where unemployment is high and capital scarce. The removal of trade barriers can exacerbate the situation, as the loss of jobs can be rapid and the required investment may be too low to allow them to exploit their comparative advantage.

• leading to appearance of negatives like communicable diseases and social degeneration. Like harm from MacDonald’s