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| Global Finance Environment Essay

Globalization has given rise to the emergence of the many global organizations like General Electric (Kiggundu, 2002). General Electric has evolved from the national to the international then multinational and now global organization. As it is the case with many global corporations General Electric differs from other forms of organizational forms because it operates with a single global strategy with a worldwide system and a plan of products, marketing, manufacturing, logistics, and research and development (Kiggundu 2002).

There are several drivers of globalization which have affected global organizations and they include: changes in restrictions, privatization, potential for economic growth, tax rates, factors affecting international portfolio investments and exchange rates. In this context General Electric is mostly affected by changes in restrictions, exchange rates and tax rates.

Changes in restrictions

According to Madura (2009) changes in restrictions have been significant in the global growth of General Electric. He continues to say that during the 1990s many countries lowered their restrictions on international trade and global investments hence opening way to more international companies to invest in their countries. Madura (2009) continues to say that after these changes in restrictions many U.S based countries including General Electric have been penetrating in less developed countries such as Argentina, Chile, Mexico, India and china. The new opportunities in these countries have risen from the removal of government barriers and they have been the key driver for globalization for General Electric.

Exchange Rates

Madura (2009) says that global firms typically prefer to pursue in countries where the local currency is expected to strengthen against their own. Under this condition General Electric has invested funds to establish operations in a particular country while that country’s currency is relatively weak (Madura, 2009). Madura (2009) argues that the earnings from General Electric new operations can be converted back to the firm’s currency at a more favorable exchange rate. For example if the home currency of the country in which General Electric is situated is expected to strengthen, this means that foreign investors may be willing to buy shares in that company in order to benefit from the currency movement (Madura, 2009).

Tax rates

General Electric is located in countries which impose low tax rates. This has attracted relatively a considerable number of investors in this organization. According to Madura (2009) countries that impose relatively low tax rates on corporate organizations for example General Electric in U.S are likely to attract international investors. Madura (2009) continues to say that investors normally prefer to invest in countries where the taxes on interest or dividend income are relatively low. This factor has been significant to the growth of General Electric globally.

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