Financial crisis is a bubble created by excessive investor inclination towards a particular market. It shadows the valuations and when the bubble bursts, the investors want to exit and therefore rapidly start selling their stake. Too much of capital led to lower interest rates and this in return forced the investors to look for creative investment platforms where the yield was high. This requirement led to an unprecedented growth in the securitization market as the inclination towards such derivative instruments was high. Investors were willing to take higher risks as compared to the returns they would receive for their investments. Greed for higher returns, excessive leverage and low volatility led to the financial crisis of 2008. This low volatility which was a result of shadowed valuations led the borrowers to borrow over and above what their asset base allowed notwithstanding the criteria of credibility. 1. Low Volatility and High Leverage: Continue reading
Global Business Environment
Technology Transfer in International Business
Technology is a new variable in the equation of economic relations. Traditional theories of international business assumes that all nations have equal access to technology and, therefore, that there is no need to transfer technology from one county to another. Recent research findings have invalidated this assumption. In addition, they point to technology differences as primary cause of international inequalities in economic achievements. To reduce the inequalities, technology capabilities of the backward nations must be strengthened. The quickest way to do so is to transfer technology from the developed to the developing nations. Technology is any device or process used for productive purposes. In its broadest sense, it is the sum of the ways in which a given group provides itself with good and services, the group being a nation, an industry, or a single firm. There is a fundamental characteristic of technology that demands clear recognition. Q unites unlike Continue reading
External Environment Factors of Business
Business involves activities, which links an organization with outside world. Within an organization, a business is governed by the behavior of its employees, management or decision makers. But externally a business is influenced by a score of factors, which range from customers to competitors and government. Therefore, a business cannot be independent of the influence of these external factors. It should also be noted that a business has absolute control over all the internal factors, it has no control over the external factors. So often it becomes necessary for business houses to modify their internal decisions and policies, on the basis of the pressure from external factors. This highlights the need to be ever- cognizant of changes and influences of external factors so as to conduct business on healthy lines. It is in this context that business environment assumes all significance. Business environment therefore refers to the influences and pressures Continue reading
Modes of Entry into International Business with Advantages and Disadvantages
The different types of entry modes, to penetrate a foreign market, arise due to globalization. The latter has drastically changed the way business conduct at international level. Owing to advances in transportation, technology and communications, nowadays practically every business of any size can supply or distribute goods, services, or intellectual property. However, when companies deal with international markets, it is complicated as the companies must be prepared to surmount differences in currency issues, language problems, cultural norms, and legal and regulatory regimes. Only the largest companies have the capital and knowledge to overcome these complications on their own. Many other businesses simply do not have the means to efficiently and affordably deal with all those variables in foreign jurisdictions, without a partner in the host country. Foreign market entry mode has been defined as an institutional arrangement that makes possible the entry of a company’s products, technology, human skills, management, Continue reading
Stagflation and Phillips Curve
Meaning of Stagflation The present day inflation is the best explanation for stagflation in the whole world. It is inflation accompanied by stagnation on the development front in an economy. Instead of leading to full employment, inflation has resulted in un-employment in most of the countries of the world. It is a global phenomenon today. Both developed and developing countries are not free from its clutches. Stagflation is a portmanteau term in macro economics used to describe a period with a high rate of inflation combined with unemployment and economic recession. Inflationary gap occurs when aggregate demand exceeds the available supply and deflationary gap occurs when aggregate demand is less than the aggregate supply. These are two opposite situations. For instance, when inflation goes unchecked for some time, and prices reach very high level, aggregate demand contracts and a slump follows. Private investment is discouraged. Inflationary and deflationary pressures exist Continue reading
Global Supply Chain Management – Drivers and Activities of Global Supply Chain
Nowadays with globalization, global supply chain management is becoming a very important issue for most of businesses. The main reasons of this trend are procurement cost reduction, purchasing risks control, revenues increasing and etc. For instance, companies may set up overseas factories to benefit from tariff and trade concessions, lower labor cost, capital subsidies, and reduced logistics costs in foreign markets. Moreover, easy access to abroad markets and close proximity to customers result better organizational learning. On the other hand, improved reliability can be obtained as a consequence of closer relationship with suppliers. There are some issues that should be considered in managing a global supply chain. First of all, the company should decide about its general outsourcing plan. For whatever reason, businesses may prefer to keep some aspects of supply chain nearer to home. The second issue that must be incorporated into a global supply chain management strategy is Continue reading