Fiscal policy refers to the guiding principles of the financial work which are constituted by the state based on political, economic and social development tasks under a certain period. Its purpose is to regulate aggregate demand through government’s spending and tax policies. On the one hand, an increase in government spending will stimulate aggregate demand and increase the national income. Correspondingly, a decrease will depress aggregate demand and reduce national income. On the other hand, a tax is a kind of contraction strength to national income. Therefore, the aggregate demand and the national income will be restrained though increasing government revenue. And they will be increased due to reducing in government revenue as well. The fiscal policy with a distinct class character is formulated by the state, represents the will and interests of the ruling class, and is subject to a certain level of development of social productive forces and Continue reading
Global Business Environment
Faces of Globalization
A fundamental shift is occurring in the world economy. The world is getting closer in terms of cross border trade and investment, by distance, time zones, languages and by national differences in government regulation, culture and business systems and toward a world in which national economies are merging into one huge interdependent global economic system. Globalization is affecting firms that previously operated in a nice, easy, protected national market. It also illustrates the increasing importance of thinking globally. Globalization is the trend toward a more integrated global economic system. Globalization is also termed as the shrinkage of economic space. The rate at which this shift is occurring has been accelerated recently. Two Faces of Globalization Globalization has two faces: 1. Globalization of Markets Globalization of markets refers to the fact that in many industries historically distinct and separate national markets are merging into one huge global marketplace. There is a Continue reading
Experience Curve
Experience curve is the systematic reductions in the production costs that occur over life of a product. There is a relationship between the scale of production and the size of the unit cost of the product, known as the effect of experience. Graphical representation of experience effect (created on the basis of cumulative production and average cost) is called experience curve. A number of studies show that a product’s production costs decline by some characteristics about each time accumulated output doubles. E.g. in aircraft industry, where each time accumulated output f airframes was doubled, unit costs typically declined to 80 percent of their previous level. That is the production costs of the fourth airframe would be 80 percent less of the production costs for the second airframe, the eighth airframe’s production costs is 80 percent less of he fourth’s, the sixteenth’s airframe costs is 80 percent less of the eighth’s Continue reading
Multinational Corporations Adaptability to Host Environments
All Multinational Corporations (MNCs) are not equally likely to cause friction and tension in their host economies. Some adapt with relative ease and become closely integrated with their host environment, both economically and socio-culturally; others remain isolated and insulated, often forming alien enclaves in the host society. There appears to be a causal relationship between the MNC’s organizational structure that is, its organizational design as well as its underlying objectives and strategies and its capacity for social adaptation to host country conditions. In terms of inducement to social conflict, MNCs fall into three categories: home dominated, host dominated, and internationally integrated. Home or Parent Dominated MNCs These enterprises are organized and managed in such a way that the foreign based subsidiaries and other affiliates, whatever their specific legal form, serve primarily in a complementary support role. Their function is to help the parent company achieve its business objectives in the Continue reading
Case Study: Critical Success Factors of Dell
DELL’s direct-to-customer business model is the key to the company’s dramatic growth and success and has focused on selling directly to customers. This helps eliminate the middleman and offers customers more powerful configured systems than most competitors. The direct model enables DELL to develop a thorough understanding of customer expectations, which strengthens customer relationships and increases customer satisfaction and loyalty. One of the characteristics that distinguishes DELL from its other competitors is that DELL provides the mode to custom the computers of the customers’ choice and taste and deliver the system to the customer as it is the most crucial and critical success factor behind DELL Computers. Therefore, DELL must be aware of the benefits they wish to realize, how it will be realized and ensure only investments of appropriate amounts of resources to obtain benefits. DELL relies on reputation in the US market of award-winning service and a high-quality Continue reading
Internationalization Concept -The Uppsala Internationalization Model
Internationalization consists of standardized products or service through globally standardized marketing and production processes that target standardized customer needs. Internationalization can be described as the process of increasing involvement in international operations. Another definition denotes internationalization as the process of adapting firms’ operations (strategy, structure, resources, etc) to international environments. Both definitions emphasize the crucial fact that internationalization needs an overall support from the organisation as it is changing the environment to expand in various manners the process mostly consists of macro factors to evolve. The Process of Internationalization Internationalization fundamentally alters the price-setting strategies of domestic economic agents. This is true for agents operating in product markets, factor markets and financial markets. At a micro level, internationalization directly alters pricing behavior by deepening product and factor markets. More potential buyers and sellers imply greater competition and a reduction in excess returns. At a macro level, internationalization also has the Continue reading