1. In this section:
A global economy is an economy in which companies compete actively with businesses from all over the world. This section discusses:
The Rise of the Global Economy
Doing Business Globally

2. What You’ll Learn
How NAFTA has increased international trade within North America.
How managers decide how to get involved in the global economy.
How managers deal with the challenges they face when working in a different culture.

3. Why It’s Important
Business managers must understand how to function in the global economy.

4. Key Terms
global economy
free trade area
multinational corporation

5. The Rise of the Global Economy
Many factors have led to the rise of the global economy.
Improvements in Telecommunications Technology
Political Changes
Free Trade Areas

6. NAFTA The largest free trade area in the world is in North America.
NAFTA stands for North American Free Trade Agreement.
Businesses in the United States, Mexico, and Canada can sell their products anywhere in North America without facing major trade restrictions.

7. Forms of International Operations
Working through a foreign intermediary
Signing a licensing agreement with a foreign company
Forming a strategic alliance
Becoming a multinational corporation

8. Multinational Companies
There are many ways for companies to do business globally.
Use imported materials.
Produce goods in other countries.
Sell products in other countries.

9. Challenges of Working in an International Environment
Managers must learn to:
work with customers, producers, suppliers, and employees from different countries
become familiar with and show respect for local laws and customs
be aware of different cultural attitudes
Fig 2-1

11. Fact and Idea Review 1. What is NAFTA?
2. What is a multinational corporation?
3. What are some of the challenges business managers who work in foreign countries face?
4. Give two examples of foreign business customs that differ from customs in the United States.