Transcript Business Cycle

TAMÁS NOVÁK
Global Business Environment
Legal, regulatory and
technological
environment,
business cycles
Basic issues

Confusion and challenge of international
business environment is heightened by
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Differing laws and regulations in MNCs’ global
business operations
Impact of these laws and regulations on ability to
capitalize on economies of scale and scope
MNCs must carefully evaluate legal
framework in each market in which they want
to do business, before doing so
Four Global Foundations of Law
Islamic
Law
• Derived from interpretation of
the Qur’an and teachings of
Prophet Muhammad
• Found in Islamic countries
– Middle East
– Central Asia
Four Global Foundations of Law
Islamic
Law
Socialist
Law
• Comes from Marxist socialist system
• Continues to influence regulations in
former communist countries
– Members of former Soviet Union
– Peoples’ Republic of China
– Vietnam
– North Korea
– Cuba
• Requires most property to be owned by
the state or state enterprises
Four Global Foundations of Law
Islamic
Law
Socialist
Law
Common
Law
• Comes from English law
• Foundation of legal system
– United States
– Canada
– England
– Australia
– New Zealand
Four Global Foundations of Law
Islamic
Law
Socialist
Law
Common
Law
Civil or
Code
Law
• Derived from Roman law
• Found in non-Islamic and
nonsocialist countries
– France
– Some Latin American
countries
– Louisiana in the U.S.
Basic Principles of International
Law
Sovereignty
and Sovereign
Immunity
Sovereignty and
Sovereign
Immunity
An international
principle of law
which holds that
governments have
the right to rule
themselves as they
see fit
Basic Principles of International
Law
Sovereignty
and Sovereign
Immunity
International
Jurisdiction
International
Jurisdiction
A jurisdictional principle of
international law which holds
that every country has
jurisdiction over its citizens
no matter where they are
located
• Nationality principle
• Territoriality principle
• Protective principle
Basic Principles of International
Law
Sovereignty
and Sovereign
Immunity
International
Jurisdiction
Doctrine
of Comity
Doctrine of
Comity
A jurisdictional principle of
international law which holds
that there must be mutual
respect for the laws,
institutions, and government
of other countries in the
matter of jurisdiction over
their own citizens
Basic Principles of International
Law
Sovereignty
and Sovereign
Immunity
International
Jurisdiction
Act of State
Doctrine
Doctrine
of Comity
Act of State
Doctrine
A jurisdictional principle of
international law which holds
that all acts of other
governments are considered
to be valid by courts, even if
such acts are illegal or
inappropriate under the host
county law.
Basic Principles of International
Law
Sovereignty
and Sovereign
Immunity
Treatment
and Rights
of Aliens
Act of State
Doctrine
International
Jurisdiction
Doctrine
of Comity
Treatment and
Rights of Aliens
Countries have the legal
right to refuse admission of
foreign citizens and to
impose special restrictions
on their conduct, right of
travel, where they can stay,
and what business they may
conduct
Nations also can deport
aliens
Basic Principles of International
Law
Forum for Hearing
and Settling
Forum for
Sovereignty
Hearing and
Disputes
and Sovereign
Settling
Disputes
Treatment
and Rights
of Aliens
Act of State
Doctrine
Immunity
International
Jurisdiction
Doctrine
of Comity
Courts can dismiss cases
brought before them by
foreigners; however they are
bound to examine issues such
as
• where the plaintiffs are
located,
• where the evidence must
be gathered
• where property to be used
in restitution is located
Regulation of Trade
and Investment
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Individual countries use legal and regulatory policies to affect
the international management environment
Country is perceived to engage in unfair trade practices (WTO
and similar agreements)
– Government support (subsidies)
– Require MNCs to accept local partners
Response may be
– Tariffs
– Restrictive trade regulations
Business Cycle

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The business cycle occurs when economic
activity speeds up or slows down.
A business cycle is a swing in total national
output, income and employment, usually
lasting for a period of 2 to 10 years, marked
by widespread expansion or contraction in
many sectors of the economy.
Business Cycle
Q
Potential output
Business cycles are the
irregular expansions and
contractions in economic
activity.
Actual output
t (in years)
Three Types of Business Cycle

Economic theory define three types of
business cycle:
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Short-term (Kitchin) cycle: from 2 to 4 years, it
results from the changes in business inventories.
Medium-term (Jouglar) cycle: from 7 to 11 years, it
refers to new business investment.
Long-term (Kondratiev) cycle: from 30 to 50 years,
it results from the technological innovation.
Business Cycle

A business cycle can be divided into four
major phases:
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Recession – the downturn of a business cycle.
This is a period in which real GDP declines for at
least 2 consecutive quarter-years.
Through – the lowest point of real GDP at the end
of a recession.
Business Cycle
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–
Expansion (boom) is a period in which output
increases and approaches potential GDP or
perhaps even overshoots it.
Peak – the point at which recession begins, the
highest point in real GDP before a recession.
Business Cycle Theories

We may classify the different theories into two
categories:
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The external theories find the root of the
business cycles in the fluctuations of something
outside the economic system (wars, revolutions,
elections, economic policy, migrations, discoveries
of new lands and resources).
The internal theories look for mechanism within
the economic system itself (self-generating
business cycles).
Business Cycle Theories

Some of the most important business cycle
theories are:
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Neoclassical theories attribute the business
cycle to the expansion and contraction of money
and credit.
Keynesian theories attribute fluctuations to the
economic system itself. They think that the macro
economy is prone to extended business cycles,
with high levels of unemployed resources for long
period of time. They further hold that the
government can stimulate the economy.
Business Cycle Theories
–
Political theories of business cycle attribute
fluctuations to politicians who manipulate fiscal
and monetary policies in order to be reelected.
Technological Environment and Global
Shifts in Production
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Biotechnology
Nanotechnology
Satellites
Artificial intelligence and embedded learning technology
Advancements in computer chip technology
Supercomputers
E-business
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Business-to-business (B2B)
Business to consumer (B2C) transactions
Financial services (e-cash)
Technological Environment and Global
Shifts in Production
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Telecommunications
– Wireless or mobile telephone service
 Economic growth hampered by poor communication
services
 Wireless is more affordable than installed phone lines
 Some governments recognize the need to privatize this
service
Technology, outsourcing and offshoring
– Technology has reduced and eliminated some work in
middle management and white-collar jobs
– Global competition has forced some MNCs to outsource
jobs to offshore productions (lower labor and other costs)
– Emerging technology makes work more portable
Expected Winners
in Selected Occupations
Computer software engineers,
applications
100
Computer support
specialists
97
Computer software engineers,
systems software
90
Network and computer
systems administrators
82
Personal and home care aids
62
Medical assistants
-80
-60
-40
-20
52
0
20
40
60
Percentage change for 2000-2010
80
100
Expected Losers
in Selected Occupations
Railroad brake, signal,
and switch operators
Telephone
operators
-61
-35
Loan interviewers and clerks
-28
-80
-60
-26
Meter readers,
utilities
-25
Farmers and ranchers
-20
Order clerks
-20
Insurance claims and policy
processing clerks
-40
-20
0
20
40
60
Percentage change for 2000-2010
80
100