Business Models Have Be Changing  Essay

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As, it declined from: 24% (in 1994) to 16% (by 2008). While at the same time, wage increased from $3,814 in 1996 to $7,870 in 2009. The below table is illustrating the overall scope of these changes in income during this time. (Villareal, 2010)

Annual Income Levels in Mexico from 1996 to 2009


Annual Income









(Villareal, 2010)

These different figures are important, because they are showing how once NAFTA was ratified, is when it would slowly address inequalities inside Mexico. This is an indication that the abandoning of the classical model would have a positive impact on the country. (Villareal, 2010)

Therefore, this is highlighting how there is a causal relationship between the low wages and lack productivity in Mexico in comparison with the U.S. Once the views on trade began to change, is when there was a transformation in these disparities with: many foreign-based firms relocating to Mexico to increase their productivity and profit margins. This is the point that there was a change in the business model of many multinational organizations. (Villareal, 2010)

These elements are important, because they are showing how there was a causal relationship between: income and productivity under the Classical Model of Trade. Once these views began to change is when many of these ideas were abandoned. This is because, there were vast divisions in society and firms were having trouble in remaining competitive. When NAFTA was enacted, is when these disparities began to disappear. Over the course of time, this created a transformation in the Mexican economy and the standard of living. (Villareal, 2010) This is when there was a change in: the income levels and the standard of living

Your company is about to take a team into Beijing, China to negotiate a 3-year supply contract. What should you know about advantages and disadvantages of negotiating terms of a contract in China?

The Chinese negotiating process is less transparent and clear in comparison with other Western practices. This is because in the West, there is focus on having all negotiations work towards achieving an end to a means. In China, there are different phases of the process that all parties must go through when conducting any kind of business transaction. These include: the pre-negotiation, the actual discussion and the post negotiation process. During pre-negotiation, is when the different parties will meet to go over formalities, legal issues and financial aspects of the deal. However, there are no agreements that are made during this phase, as everyone is being introduced to one another and needs a chance to consider their options. (Boden 2008, pp. 202 -- 205) (Brahm, 2007, pp. 107 -- 115)

The decision making process is when all of the different parties will meet to discuss the transaction. During this phase of the project is when, there is the possibility that business executives will have to work with government officials. As they more than likely, will want to see the impact of the transaction on the economy and those who are involved. Once this occurs, is when detailed negotiations will take place with an initial agreement proposed during the process. (Boden 2008, pp. 202 -- 205) (Brahm, 2007, pp. 107 -- 115)

The post negotiation phase is when the final details of the project are agreed upon. This is when there will be the actual signing of the agreement with: all parties understanding and acknowledging the different provisions. This is important, because it is illustrating how the process of negotiating in China everyone must follow more formal (yet less concrete steps). During this process, all executives need to understand these provisions and how they are applied to all negotiations. (Boden 2008, pp. 202 -- 205) (Brahm, 2007, pp. 107 -- 115)

The advantages of using this system include: you will know the various parts of the agreement and there are adjustments that can be made. This helps to give both parties time to: think about how this impacting them and if this is something they want to become involved in over the long-term. Once this occurs, it means that the negotiations are more transparent and will produce the best results for all parties. This is when the agreement will be able to benefit everyone. (Boden 2008, pp. 202 -- 205) (Brahm, 2007, pp. 107 -- 115)

The disadvantages of using this system, is that the process can often be long and tedious. This is troubling for most executives, because they are used to all negotiations being driven towards achieving the final objectives of the firm. The problem with the Chinese approach is it makes it appear, as if no one is serious in dealing with the issue. Instead, everyone wants to have a series of meetings that will bring in new parties and change the terms of the proposal. Once this occurs, is when executives will become frustrated with process and will often have lower level employees handle these negotiations. This is the point that they are not as effective in dealing with these issues. (Boden 2008, pp. 202 -- 205) (Brahm, 2007, pp. 107 -- 115)

As a result, the benefits and drawbacks of the Chinese system are illustrating how executives must understand that they have to follow select procedures. While at the same time the process will be slow and cumbersome, due to the fact that everyone wants to make an informed decision (versus moving towards an agreement). If managers can take these variables into account, this will help them to be able to more effectively negotiate with Chinese officials about a host of different issues.


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Brahm, L. (2007). The Art of the Deal in China. Tokyo: Tuttle

Boden, J. (2008). The Wall Behind China's Open Door. Brussels: Academic and Scientific Publishers.

Gerkin, G. (2008). The Constitution of Liberty in the Open Economy. New York, NY: Routledge…

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