CHAPTER 4 International politics.
1. Political ideologies and economic systems are interwoven. Democracies tend to have market-driven economies; totalitarian governments tend to have centrally determined economies. However, there are a few nations that fit totally into one of these two paradigms. Most use a mixed economic model such as that of the United States, which is mainly a market-driven economy with some central planning, or China, which still relies on central planning but has incorporated elements of a free market.
2. Another current economic development is the trend towards privatization. Many countries are selling state-owned enterprises. There are a variety of reasons that can be cited for these actions. In most cases these are economic in nature, including: (a) increased efficiency;
(b) Reduction in government outlays; and (c) generation of funds for the national treasury.
3. Economic integration is the establishment of transnational rules and regulations that permit economic trade and cooperation among countries.
Effective integration brings about trade creation, although in some cases these efforts have resulted in trade diversion. There are five levels of regional economic trade integration: free trade areas, customs unions, common markets, economic unions and political unions. The most successful examples have been the EU and the North American Free Trade area. NGOs criticize such trade and investment agreements.
4. Non-governmental organizations (NGOs) are an important new actor on the stage of international business and MNEs need to take account of the civil society in their strategies.
5. Multinational enterprises (MNEs) use a variety of strategies to benefit from integration efforts. One is strategic alliances and acquisitions by which they are able to surmount the economic wall and gain an inside position in the economic alliance or free trade area. The other strategy is through the localization of operations by focusing on products,