International

Business
Environments & Operations
14e
Daniels

Radebaugh

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publishing as Prentice Hall

Sullivan

Case 4-1

Case Four
Causes and
Consequences of the
Global Credit Crisis
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Case 4-2

What Caused
the Global Credit Crisis?

Three possible scenarios

Leaky pipes
Broken pumps
The house is collapsing

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Case 4-3

Scenario One: Leaky Pipes

What is the problem?
Liquidity
What is the solution?
Inject capital

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Case 4-4

Scenario Two: Broken Pumps

What is the problem?
Balance sheets and solvency
What is the solution?
Overhaul legislation

Dodd-Frank

legislation

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Case 4-5

Scenario Three:
The House is Collapsing
What is the problem?
The Western economic system is
fundamentally flawed
What is the solution?
This is a systemic crisis with too much
leverage exposure

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Case 4-6

Concerns, Precedents,
and Questions

Concerns

Historical precedents

Printing money to solve problems

Debt is always dangerous
Financial recoveries are often followed by deep
recessions

Questions

Deep structural problems

State capitalism
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Case 4-7

Which Scenario?

Gloomy view
Escalating U.S. government debt is a
problem
Will monetary union in Europe survive?
Political turmoil in the Middle East
creates uncertainty
Natural disasters have slowed growth in
Japan
Rising food priced are plaguing Asia and
Africa
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Case 4-8

Which Scenario?

Optimistic view
Loose monetary policy may be working
Signs of economic growth in the U.S.
Economic stability in Sweden, Great
Britain, and France

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Case 4-9

Questions
1.
2.

3.
4.

Which scenario do you think best explains

the global financial crisis? Why?
How does each scenario influence the
policies that governments adopt, the
strategies that companies pursue, and
the choices that consumers make?
How might the various scenarios
influence economic freedom?
The case points out that the crisis
produces winners and losers. Who are
the winners and losers for Scenario 1?
Scenario 2? Scenario 3?
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Case 4-10

Questions
4.

5.

Say you were asked which economic indicator

would confirm the end of the crisis. Which would
you nominate? Reverse your logic and identify
the indicator that confirms the crisis continues.
Interpreting economic environments, estimating
scenarios, and positioning the firm to prosper
are the jobs of managers worldwide. How would
you advise one to do so with respect to the
global financial crisis?

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Case 4-11

All rights reserved. No part of this publication may

be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise,
without the prior written permission of the publisher.
Printed in the United States of America.

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publishing as Prentice Hall

Case 4-12