The World Economy

OVERVIEW

Preparation to enter into international business requires managers to develop an understanding of the country’s political, legal, and economic system, as well as its infrastructure, technological, and communication capabilities.

Political systems have two dimensions: the degree of collectivism versus individualism, and the degree of democracy versus totalitarianism. Collectivism stresses collective goals over individual goals, while individualism is defined by individual economic and political freedoms. Democracy is based on citizens being directly involved in decision making, while totalitarianism consists of one person or political party exercising absolute control over all spheres of human life. These dimensions are interrelated; systems that emphasize collectivism tend toward totalitarianism, while systems that place a high value on individualism tend to be democratic. However, it is possible for democratic societies to emphasize a mix of collectivism and individualism, and for totalitarian societies to not emphasize collectivism.

Political ideology and economic systems are connected. In collectivism-based societies, the government may control enterprises, and markets are likely to be restricted. In individualism-based societies, free market economic systems are likely to exist. The three broad types of economic systems are market economy, command economy, and mixed economy. Classifications commonly used to define a country’s development are gross domestic product (GDP), the human development index (HDI), and the human poverty index (HPI).

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TOPICS

Module 2 covers the following topics:

• Political systems of countries
• Legal systems of countries
• Economic development of countries
• Technological systems in countries
• Transition economies 
• Market-based economies
• Worldwide political and economic changes

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OBJECTIVES

After successfully completing Module 2, you should be able to:

MO 2.1    Explain in detail why and how the political and legal systems of countries differ.

MO 2.2    Analyze the classifications which determine the level of economic development of nations.

MO 2.3    Discuss how developing countries transition into emerging markets.

MO 2.4    Analyze the impact of international economic cooperation among nations and the role of the World Trade Organization (WTO).

MO 2.5    Assess the main types and major geographic areas of regional economic integration.

Course objectives covered in this module include CO 2

STUDY MATERIALS

Textbook Readings

• Chapters 4 and 5 in International Business

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ACTIVITIES

Module 2 has two activities. Please consult the Course Calendar for the due dates.

Reflection Assignment 2

Write a 2-page double-spaced paper (no less than 500 words) responding to any two of the following questions. When citing research and journal articles, be sure the full reference is added at the end of your paper in APA format. Do not use examples provided in the required course materials; you must research your own examples and provide citations.

1. Choose two countries with different political, legal, and technological systems. Compare and contrast these countries from a political, legal, and technological perspective. Then, discuss the impact from these systems on the corporate environment in each country. [MO 2.1]

2. Choose one country within the top 25 and one country ranked from 100 to 229 from the World Factbook and follow these steps:
   1. Provide a brief synopsis of the economy in both countries.
   2. Click on “Communications” and note the percent of the population that uses the Internet.
   3. View the Human Development Reports and indicate the human development index (HDI) and provide the life expectancy, education level, and world rank of both countries.

Analyze your forecast for the economic growth of each country. [MO 2.2]

3. The textbook defines an emerging market as “a society transitioning from a centrally managed economy to a free-market-oriented economy, with increasing economic freedom, gradual integration within the global marketplace, an expanding middle class, and improving standards of living, social stability, and tolerance, as well as increase in cooperation with multilateral institutions.” Using the CIA’s website, choose a developing country that is transitioning into an emerging market and describe its growth. What do you project for the level of future economic growth in this country? For additional information, please view the Organisation for Economic Co-operation and Business Insights on Emerging Markets 2019. [MO 2.3]

4. The textbook states, “Global companies also recognize that in many developing countries, the local government is the buyer—particularly for higher value-added products and services such as high-tech items, equipment, and infrastructure development.” Choose a developing country where an international firm could seek market entry with first-mover advantage. Then, describe a product that would benefit the country and how the firm could be successful there. Include an assessment of the country’s political environment and economic development to evaluate the risks and opportunities. [MO 2.3]

5. Analyze the impact of international economic cooperation among nations. What effect has COVID-19 had on the world economy and international economic cooperation? What is your forecast for a global economic recovery? [MO 2.4]

6. What would be some of the economic ramifications of China overtaking the United States as the world’s main superpower? Support your analysis with at least two sources related to international trade and the global economy. [MO 2.4]

7. The World Trade Organization (WTO) serves to mitigate bilateral and multilateral trade disputes related to, for example, agriculture, textiles, dumping products at low prices, and intellectual property rights. Using the World Trade Organization website, under “Agreement” choose any category and then select a case. Describe the complaint and the WTO ruling. Alternatively, using the Office of the United States Trade Representative website, discuss a WTO dispute settlement with the United States. [MO 2.4]

8. Should all countries strive to join a regional economic bloc? Why or why not? Focus on a particular country and be sure to support your ideas with evidence. You might want to consider the following article as reference: The argument for and against a divided European Union. [MO 2.5]  

Submit your paper to the mentor for grading. Consult the Course Calendar for due dates.

WRITING AND RESEARCH RESOURCES

The following links provide online writing and research aids to help you with your paper assignments.

OWL (Online Writing Lab) at Purdue University

Writer’s Handbook, the Writing Center at the University of Wisconsin–Madison

APA Guidelines

Information Literacy for TESU Students (an online guide from the New Jersey State Library to assist you in starting your research, searching databases for articles, citing sources, using ILLiad to request books or articles, etc.)