Managing in the Global Economy

Week 3 Discussion 2

Managing in the Global Economy

Evaluate the relationship between the European Euro crisis in 2012 and the American economy. Assess how this affects American businesses and decisions made by mangers related to sustainable profitability. Provide examples with your response.

In this generation of global economy and multicultural enterprise where goods and services are changing hand from continent to continent involving currency conversion and exchange there is no thought that countries that engages exchange of goods and service will suffer from the other economy failure example is the global melt down 2008. Also dollar is the measure of other currency I mean is use by World Bank. European and American trade is carried on a large scale.

Because there are many interlinks between European and American transactions due to exchange rates, Interest rates, and trade. If the Euro is devalued then it means that US dollars are going to look expensive in front of European exporters deterring them from buying US imports. As it's a fact that US GDP account for most of the European exports. Banks in US which have lent money to borrowers in Europe and if this crisis Persist, there will be no time before they bankrupt on their loans. As the banks might need to increase their credit spread and the cost of borrowing to US borrowers, the asset value of the bank's investment would decrease as a result. In addition it is certain that stock prices would reduce and the business confidence in the US would eventually be lost.

So if the Europe is in her way going down, so do the US economy as they are tied in this crisis together. As you can see this will negatively affect US business confidence but still Managers in US would try to sustain profitability through taking cost cutting measures such as reducing the labor, Purchasing low cost material and even try to cut their overheads in order to sustain their profitability level but the After all this it would result in low employment, deteriorating GDP and low investment crisis as we have seen before. Since the IMF and member nations accepted the dollar as equal to gold, the growing number of dollars in their central bank reserves, especially after 1958 and in turn the consequence of chronic U.S. government deficits, stimulated worldwide inflation. The gold exchange standard broke down in 1968-1971, notably after the United States ceased redeeming dollars in gold on 15 August 1971, thereby severely damaging the prestige of the IMF (IMF, 2009).

Aside from maximizing profits, assess the factors that managers must consider when making the decision to outsource or integrate forwards or backwards considering which factor would be most influential for decision-making.

* Companies need to consider the reaction